Shri Karim K.Lakhani, Surat V. The ACIT.,Cent.Circle-1, Surat

ITA 1363/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50786 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 28-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AND ONE
• Keywords: Reopening of assessment; Unexplained cash credit; Opportunity of being heard; Additional evidence; Difference of opinion; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 147; 131; 68; 148; 37

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND A.K. GARODIA, A.M . KARIM K. LAKHANI, 51, KARIMABAD SOC., GHODDOD ROAD, SURAT. V/S . ASSTT. CIT, CC-1, SURAT. (APPELLANT) .. (RESPONDENT) ITA NO. ASST. YEAR 2086/AHD/2009 2005-06 DATE OF HEARING 8/9/2011. DATE OF PRONOUNCEMENT -21.10.2011. O R D E R PER D.K. TYAGI, JUDICIAL MEMBER . OUT OF THESE THREE APPEALS TWO APPEALS HAVE BEEN F ILED BY THE ASSESSEE AND ONE BY THE REVENUE, AGAINST TWO SEPARA TE ORDERS OF LD. CIT(A) FOR ASST. YEARS 2004-05 AND 2005-06 DATED 0 3.03.2009. SINCE ALL ITA NOS. ASST. YEAR 1363/AHD/2009 2004-05 1364/AHD/2009 2005-06 INCOME-TAX OFFICER, WARD-3(2), SURAT. V/S . KARIM K. LAKHANI, 51, KARIMABAD SOC., GHODDOD ROAD, SURAT. (APPELLANT) .. (RESPONDENT) ITA NOS. ASST. YEAR 1363/AHD/2009 2004-05 1364/AHD/2009 2005-06 ASSESSEE BY :- SHRI D. K. PARIKH, AR REVENUE BY:- SHRI S.S. JHA, SR.DR ITA NOS. ASST. YEAR 1363/AHD/2009 2004-05 1364/AHD/2009 2005-06 ITA NOS. ASST. YEAR 1363/AHD/2009 2004-05 1364/AHD/2009 2005-06 ITA NOS. ASST. YEAR 1363/AHD/2009 2004-05 1364/AHD/2009 2005-06 ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 2 THESE APPEALS PERTAIN TO THE SAME ASSESSEE AND THE ISSUES ARE COMMON, THESE ARE TAKEN UP TOGETHER FOR DISPOSAL BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1363/AHD/2009 ASST. YEAR 2004-05 (ASSESSEES APPEAL) 2. IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS :- (1) THAT THE CIT(A) ERRED IN CONFIRMING THE REOPENING O F THE CASE U/S 147. (2) THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.9,85,500/- U/S 68. ITA NO.1364/AHD/2009 ASST. YEAR 2005-06 (ASSESSEES APPEAL) 3. IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS :- (1) THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.56,500/- RS.56,000/-, RS.55,000/-, RS.56,500 & RS.55,000/- & RS.57,000/- RESP. FROM PRIYA STEEL, SANIYA STEEL, SULEMAN ENT., VIJAY TRADERS, MANSOOR METAL & JAYBHARAT STEEL CO. (2) THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,50,000/-, RS,6,00,000/-, RS.14,25,000/- & RS.9,00,000/- RESP. FROM FASHAT ALI, G.V. KATWALA, J.K. & CO. & MAYUR M. PATEL. (3) THAT THE CIT(A) THAT THE CIT(A) ERRED IN NOT TAKING COGNIZANCE OF THE PAN & CONFIRMATION PRODUCED OF FASHAT ALI, G .V. KATWALA, J.K. & CO., MAYUR M. PATEL. (4) THAT THE CIT(A) ERRED IN NOT APPLYING THE RATIO OF ROHINI BUILDERS 256 ITR 360. (5) THAT THE ADDITION OF RS.56,500/-, 56,000/-, RS.55,0 00/-, RS.56,500/- & RS.55,000/- & RS.57,000/- SHOULD BE DELETED. (6) THAT THE ADDITION OF RS.1,15,000/-, RS.6,00,000/-, RS.14,25,000/- & RS.9,00,000/- SHOULD BE DELETED. ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 3 (7) THAT THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF KHARAJAT EXPENSES OF RS.99,833/-. ITA NO.2086/AHD/2009 ASST. YEAR 2005-06 (REVENUES APPEAL) 4. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.16, 75,000/- ON ACCOUNT OF UNEXPLAINED ADVANCES CLAIMED TO HAVE BEE N BORROWED BY THE ASSESSEE FROM M/S A.V. CORPORATION AND MEGH MAYUR MALHAR CO-OP. SOC. RELYING UPON MERELY ON COP Y OF ACCOUNTS OF THE SO CALLED CREDITORS AS APPEARING IN HIS BOOKS OF ACCOUNTS AND WITHOUT ANY CONFIRMATORY LETTERS FROM THEM. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MADE BY TH E AO OF RS.16,75,000/-. ITA NO.1363/AHD/2009 ASST. YEAR 2004-05 (ASSESSEES APPEAL) 5. FIRST WE TAKE UP ASSESSEES APPEAL FOR ASST. YEA R 2004-05. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS R ETURN OF INCOME FOR ASST. YEAR 2004-05 ON 1.11.2004 SHOWING TOTAL INCOME OF R S.4,66,590/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE AC T ON 18.03.2005. ASSESSMENT U/S 143(3) OF THE IT ACT, 1961 WAS COMPL ETED ON 28.12.2006 AT RS.6,20,570/-DURING THE COURSE OF ASSESSMENT PRO CEEDINGS IT WAS NOTICED BY THE AO THAT ASSESSEE CLAIMED TO HAVE REC EIVED LOANS FROM VARIOUS PARTIES AS UNDER:- 1. S. N. TRADERS 2,07,500/- 2. SULLEMAN ENTERPRISES 1,51,500/- 3. VIJAYA TRADERS 2,23,500/- 4. SANIYA STEEL 1,70,000/- 5. SHARMA TRADING CO. 2,33,000/- ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 4 THE AO FOUND THAT IDENTITY, CAPACITY AND GENUINENES S OF THE LOANS WERE NOT PROVED. ACCORDINGLY HE ISSUED NOTICE U/S 148 O N 29.8.2007. IN RE- ASSESSMENT PROCEEDINGS, THE AO HELD THAT THESE CASH CREDITS WERE NOT GENUINE AND MADE THE ADDITION U/S 68 OF IT ACT FOR RS.9,85,500/- ON THE GROUND THAT THESE LOANS WERE RECEIVED IN CASH, THE ASSESSEE COULD NOT GIVE PANS AND OTHER DETAILS, COPY OF BANK ACCOUNTS AND N OT ABLE TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE LOANS. 6. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY T HE ASSESSEE SUBMITTED THAT REOPENING OF ASSESSMENT U/S 147 OF THE ACT WAS BAD IN LAW AND NEEDED TO BE CANCELLED. THE AO HAS NOT COME ACROSS ANY NEW DETAILS AND CASE HAS BEEN REOPENED ONLY TO MAKE FURTHER INQUIRY . THIS IS A CASE OF CHANGE OF OPINION. HENCE PROCEEDINGS U/S 147 SHOULD BE QUASHED. ASSESSEE RELIED ON THE FOLLOWING DECISIONS :- ACIT VS. MUTHOOT LEASING & FINANCE LTD. (2008) 21 S OT 281 (COCHIN) STAR FERRO ALLOYS (P) LTD. (2004) 90 ITD 63 (DELHI (THIRD MEMBER) SHRI SHAH UNMESH INDRAVADAN VS. ITO IN ITA NO.3489/ A/07 ITAT, BENCHD AHMEDABAD.. ON MERITS THE ASSESSEE SUBMITTED THAT HE HAD FILED COPY OF LEDGER ACCOUNTS. THE PARTIES ARE SMALL TRADERS, HENCE PAN PROOF WAS NOT THERE BUT THE LOAN IS GENUINE AND ACCEPTED. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E THE LD. CIT(A) HELD AS UNDER :- ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 5 4.1 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS. I DO NOT AGREE WITH THE APPELLANTS VIEW. IN THE ORIGINAL ASSESSMENT PR OCEEDINGS NO INQUIRY WAS MADE REGARDING GENUINENESS OF THE LOANS. AS PER THE AUDIT REPORT LOAN WAS TAKEN IN CASH. PENALTY PROCEEDINGS U/S 271 (D) WAS INITIATED. DURING THE PENALTY PROCEEDINGS, IT WAS FOUND THAT I DENTITY, CAPACITY AND GENUINENESS OF THE LOANS ARE NOT PROVED. HENCE, SEC TION 68 OF IT ACT IS ATTRACTED. ACCORDINGLY, THE AO ISSUED NOTICE U/S 14 8 OF IT ACT ON 29.08.2007. REGARDING GENUINENESS OF THE LOAN, NO O PINION WAS FORMED IN ORIGINAL PROCEEDINGS, HENCE THERE IS NO QUESTION OF CHANGE OF OPINION. HENCE IT IS NOT A CASE OF CHANGE OF OPINION AND THE CASE LAWS RELIED ON BY THE APPELLANT IS NOT APPLICABLE. THE NOTICE U/S 148 OF IT ACT IS ISSUED WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND REOPENING WAS PROPERLY MADE AND APPELLANTS FIRST GROUND IS REJECTED. 4.2 AS THE LOAN WAS TAKEN IN CASH, THE PARTIES ARE NOT INCOME-TAX PAYEES AND THE APPELLANT HAS NOT PROVED IDENTITY, G ENUINENESS AND CREDITWORTHINESS OF THE CREDITORS, THE AOS ACTION IN TREATING IT AS NOT GENUINE IS JUSTIFIED AND THE ADDITION IS CONFIRMED. AGGRIEVED WITH THIS ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. AS REGARDS THE FIRST GROUND OF APPEAL, THE LD. C OUNSEL OF THE ASSESSEE SUBMITTED THAT ORIGINAL ASSESSMENT WAS FRAMED UNDER SECTION 143(3) ON 21.22.2006. DURING ORIGINAL ASSESSMENT, THOROUGH SC RUTINY WAS MADE AND DETAILS OF UNSECURED LOANS, CONFIRMATION DULY SIGNE D INCLUDING SQUARED UP LOAN AND ALSO CREDITORS DEBTORS WERE CALLED FOR. TH E SAME WERE FURNISHED AS STATED IN LETTER ADDRESSED TO THE AO WHICH IS AT PAGE 11 AND 12 OF PAPER BOOK. THE ASSESSEE HAD FURNISHED CONFIRMATIONS OF P ERSONS IN PROCEEDINGS U/S 271D. A STATEMENT OF MAYUR RANA PROP. OF S. N. TRADERS WAS ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 6 RECORDED WHEREIN HE COMMITTED TO HAVE GIVEN THE ADV ANCE FOR PURCHASE OF SCRAP. IN THE ORIGINAL ASSESSMENT ORDER FRAMED U/S 143(3), NO SUCH ADDITION OF CASH CREDIT WAS MADE. NOTICE U/S 148 WA S ISSUED. IN THE REASONS RECORDED (AT PAGE 9 OF PAPER BOOK) IT IS ST ATED THAT NO ENQUIRY HAD BEEN MADE TO EXAMINE THE GENUINENESS OF LOANS. ASSE SSEE FILED OBJECTIONS (PLACED AT PAGES 11 & 12 OF PAPER BOOK) STATING THA T AS ASSESSEE FILED CONFIRMATIONS, ADDRESSES AND IDENTITY OF PERSONS, P ENALTY PROCEEDINGS WERE DROPPED. IT WAS OBJECTED THAT THERE BEING CHAN GE OF OPINION, REOPENING WAS NOT VALID. IN THE SPEAKING ORDER DEAL ING WITH OBJECTIONS (AT PAGES 13 TO 18 OF PAPER BOOK) THE AO HAS REPRODUCED THE PORTION FROM 271D PROCEEDINGS THAT IN THE STATEMENT RECORDED OF MAYUR INSHWARBHAI RANA, THOUGH HE CONFIRMED TO HAVE GIVEN ADVANCE FOR PURCHASE OF SCRAP FROM ASSESSEE, BECAUSE MAYUR RANA COULD NOT FURNISH DETAILS OF PARTIES FROM WHOM HE TOOK MONEY FOR PAYMENT TO ASSESSEE, TH E TRADE ADVANCES APPEAR TO BE BOGUS. AT PAGE 14 OF PAPER BOOK THE AO STATED THAT NO ACTION WAS INITIATED TO SEE WHETHER THE LOANS WERE GENUINE OR NOT. HOWEVER, THIS IS NOT CORRECT AS ORIGINAL ORDER WAS PASSED U/S 143 (3) AFTER CALLING FOR DETAILS AS ABOVE HENCE PRESUMPTION IS THAT THERE WA S APPLICATION OF MIND. NO NEW MATERIAL WAS THERE HENCE S.147 IS NOT PERMIS SIBLE. THE AO FURTHER DEALT WITH THE OBJECTION ON CHANGE OF OPINI ON AT PAGE 17 OF PAPER BOOK WHERE HE STATED THAT ERSTWHILE AO HAD NOT TAKE N AMPLE NOTE OF THE CREDITORS IN HER ASSESSMENT ORDER AND THEREFORE IT CAN BE SAID THAT THERE ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 7 WAS CERTAIN NON-APPLICATION OF MIND OF THE PART OF THE THEN AO. IN THIS REGARD HE RELIED ON THE DECISION OF THE DELHI HIGH COURT (FB) IN THE CASE OF CIT VS. KELVINATOR OF INDIA 256 ITR 1(DELHI)(FB) AFFIRMED BY HONBLE SUPREME COURT IN 320 ITR 561, WHEREIN THE HONBLE D ELHI HIGH COURT HAS HELD AS UNDER :- 23. WE ALSO CANNOT ACCEPT SUBMISSION OF MR. JOLLY TO THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REAS ONS HAVE NOT BEEN RECORDED ON ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY JUSTIFY THE AO TO INITIATE A PROCEEDING UNDER SECTION 147. THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASSESSMENT CAN BE PASSED EI THER IN TERMS OF SUB- SECTION (1) OF SECTION 143 OR SUB-SECTION (3) OF SE CTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF T HE SAID SUB-SECTION (3) OF SECTION 143, A PRESUMPTION CAN BE RAISED THAT SU CH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL-KNOWN THA T A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUS E (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT THE JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BE EN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JUR ISDICTION UPON THE AO TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING PREMIUM TO AN AUTHORITY EXECISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. THE LD. COUNSEL OF THE ASSESSEE ALSO RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NIRMA CHE MICAL WORKS 309 ITR 67 (GUJ) WHEREIN IT IS HELD THAT MERELY BECAUSE ASSESSMENT ORDER DOES NOT MENTIONS ITEMS NOT ADDED TO INCOME, IT CAN NOT BE SAID THAT THERE WAS NON-APPLICATION OF MIND. THE HONBLE GUJARAT HI GH COURT IN THAT CASE HAS OBSERVED AS UNDER :- 22. THE CONTENTION ON BEHALF OF THE REVENUE THAT T HE ASSESSMENT ORDER DOES NOT REFLECT ANY APPLICATION OF MIND AS TO THE ELIGIBILITY OR OTHERWISE UNDER SECTION 80-I OF THE ACT REQUIRES TO BE NOTED TO BE REJECTED. AN ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 8 ASSESSMENT ORDER CANNOT INCORPORATE REASONS FOR MAK ING/GRANTING A CLAIM OF DEDUCTION. IF IT DOES SO, AN ASSESSMENT OR DER WOULD CEASE TO BE AN ORDER AND BECOME AN EPIC SOME. THE REASONS ARE N OT FOR TO SEEK. FINALLY, IT WOULD CAST AN ALMOST IMPOSSIBLE BURDEN ON THE AO, CONSIDERING THE WORKLOAD THAT HE CARRIES AND THE PE RIOD OF LIMITATION WITHOUT WHICH AN ORDER IS REQUIRED TO BE MADE, AND, SECONDLY, THE ORDER IS AN APPEALABLE ORDER. AN APPEAL LIES, WOULD BE FI LED, ONLY AGAINST DISALLOWANCES WHICH AN ASSESSEE FEELS AGGRIEVED WIT H. THE LD. COUNSEL ALSO RELIED ON THE DECISION IN THE CASE OF JET ELECTRONICS VS. ACIT 116 TTJ 225 (AHD) WHEREIN IT HAS BEEN HELD THAT WHERE AO IS SATISFIED FOR NOT MAKING ADDITION, THE ORDER WILL N OT DISCUSS THE ISSUE AND DOES NOT BECOME ERRONEOUS. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED T HAT RE-ASSESSMENT WITHIN FOUR YEARS IS ALSO NOT PERMITTED WHERE THERE IS CHANGE OF OPINION AS HELD IN (I) HYNOUP FOOD & OIL INDUSTRIES VS. ACIT (2008) 219 CT R (GUJ) 124 (II) VIKAS PRINTERY VS. ACIT 270 ITR 68 (GUJ) (III) CIT VS. KELVINATOR OF INDIA 256 ITR 1 (DELHI (FB) ( AFFIRMED BY SUPREME COURT IN 320 ITR 561 THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT RE-A SSESSMENT IS NOT PERMITTED FOR MAKING ROVING INQUIRIES AND MAKE INVE STIGATION AS PER DECISION OF THE TRIBUNAL REPORTED IN (2004) 90 ITD 63 (DELHI)TM. THE DUTY OF THE ASSESSEE IS TO FURNISH PRIMARY DETAILS ONLY. AS HELD IN 199 TAXMAN 342 & 106 ITR 1(SC) PARSHURAM POTTERY. ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 9 ON MERITS, HE SUBMITTED THAT AS THE ONE PERSON WAS EXAMINED IN 271-D PROCEEDING, WHO CONFIRMED DEPOSIT, MERELY BECAUSE H IS SOURCES WERE NOT PROVED, ADDITIONS COULD NOT BE MADE U/S 68 AND ALL OTHER CREDITS BE ADDED IN SUSPICION. 9. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF AUTHORITIES BELOW AND SUBMITTED THAT DURING THE PENALTY PROCEED INGS INITIATED U/S 271D IT WAS FOUND BY THE AO THAT IDENTITY, CAPACITY AND GENUINENESS OF THE LOANS WERE NOT PROVED AND THEREFORE THE PROVISI ONS OF SECTION 68 WERE ATTRACTED. NO OPINION WAS FORMED AT THE TIME OF INI TIAL ASSESSMENT. ACCORDINGLY, THE AO ISSUED NOTICE U/S 148 OF THE IT AND THE CASE WAS REOPENED. THE IDENTITY OF THE CREDITORS, CREDIT-WOR THINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS OF THE LOANS WE RE NOT PROVED THEREFORE, THE LD. CIT(A) HAS RIGHTLY UPHELD THE AC TION OF THE AO. HIS ORDER MAY KINDLY BE UPHELD. 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT THE AO DID RAISE THE QUERY AB OUT THE CASH CREDIT IN RESPONSE TO WHICH THE ASSESSEE FILED CONFIRMATORY L ETTERS OF THE CASH CREDITORS. IT IS ALSO NOT IN DISPUTE THAT NO FURTHE R ENQUIRY WAS MADE BY THE AO. AS THE ASSESSEE HAD RECEIVED CASH LOANS THE AO INITIATED PENALTY PROCEEDINGS U/S 271D OF THE ACT. DURING THE PENALTY PROCEEDINGS ONE OF ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 10 THE CASH CREDITOR SHRI MAYUR RANA, PROPRIETOR OF S. N. TRADERS APPEARED AND HIS STATEMENT WAS ALSO RECORDED. BUT MR. RANA F AILED TO SUBSTANTIATE THE FACT THAT MONEY WAS ADVANCED TO THE ASSESSEE FO R PURCHASE OF SCRAP MATERIAL AS CLAIMED BY HIM IN HIS STATEMENT THAT HE USED TO TAKE ADVANCES FROM THE PROSPECTIVE BUYERS AND IN TURN THE SAME WA S GIVEN TO THE ASSESSEE. HE WAS ALSO NOT ASSESSED TO TAX. THE AO A LSO FOUND THAT THE CONFIRMATORY LETTERS WERE NOT SIGNED BY THE PARTIES AND NO ADDRESSES AND PANS WERE MENTIONED IN THOSE LETTERS AND THUS THE A O DURING PENALTY PROCEEDINGS U/S 271D CAME TO THE CONCLUSION THAT CA SH LOANS RECEIVED BY THE ASSESSEE WERE BOGUS AND THEREFORE, HIT BY THE P ROVISIONS OF SECTION 68 OF THE ACT. HE, THEREFORE, INITIATED THE RE-ASSESSM ENT PROCEEDINGS ON THE BASIS OF THIS ENQUIRY AND DID NOT IMPOSE PENALTY UN DER SECTION 271D. THUS IT CANNOT BE SAID THAT AO WAS NOT HAVING ANY M ATERIAL BEFORE HAVING REASONS TO BELIEVE THAT ASSESSEES INCOME HAD ESCAP ED ASSESSMENT DURING THE PROCEEDINGS U/S 143(3). IT ALSO CANNOT BE SAID THAT THERE WAS CHANGE OF OPINION ON THE PART OF AO AS ARGUED BY THE LD. COUN SEL OF THE ASSESSEE WHICH IS CLEAR FROM THE FACT THAT DURING THE ASSESS MENT PROCEEDINGS U/S 143(3) NO OPINION WAS FORMED BY HIM OF THE GENUINEN ESS OF THE CASH CREDITS. HAD IT BEEN SO AO WOULD HAVE STRAIGHTWAY I MPOSED PENALTY U/S 271D. THE SAME WAS NOT DONE. IT WAS ONLY DURING THE PENALTY PROCEEDINGS THAT HE FOUND THAT CASH LOANS WERE IN FACT BOGUS AN D, THEREFORE, THERE WAS ESCAPEMENT OF INCOME ON THE PART OF ASSESSEE. SINCE THE NOTICE U/S 148 ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 11 WAS ISSUED WITHIN FOUR YEARS FROM THE END OF THE AS SESSMENT, WE ARE OF THE CONSIDERED OPINION THAT RE-OPENING WAS PROPERLY MADE AND THE RATIO AS LAID DOWN IN THE CASE LAWS RELIED UPON BY THE LD. C OUNSEL OF THE ASSESSEE IS NOT APPLICABLE TO THESE PECULIAR FACTS OF THIS CASE . WE FURTHER FIND THAT THIS VIEW OF OUR GETS SUPPORT FROM THE FOLLOWING CASE LA WS :- PHOOL CHAND BAJRANG LAL VS. ITO (1993) 203 ITR 456 (SC) WHEREIN THE HONBLE APEX COURT HAS HELD AS UNDER :- HELD, AFFIRMING THE DECISION OF THE HIGH COURT, TH AT SUBSEQUENT TO THE COMPLETION OF THE ORIGINAL ASSESSMENT PROCEEDINGS, ON MAKING ENQUIRY, THE INCOME-TAX OFFICER CAME TO KNOW THAT THE CALCUT TA COMPANY FROM WHOM THE APPELLANT CLAIMED TO HAVE BORROWED THE LOA N OF RS.50,000/- IN CASH HAD NOT REALLY LENT ANY MONEY BUT ONLY ITS NAM E TO COVER UP A BOGUS TRANSACTION. THIS WAS NOT A CASE WHERE THE INCOME-T AX OFFICER SOUGHT TO DRAW ANY FRESH INFERENCE, WHICH COULD HAVE BEEN RAI SED AT THE TIME OF THE ORIGINAL ASSESSMENT ON THE BASIS OF THE MATERIALS P LACED BEFORE HIM BY THE APPELLANT RELATING TO THE LOAN FROM THE CALCUTTA CO MPANY AND WHICH HE FAILED TO DRAW AT THAT TIME. ACQUIRING FRESH INFORM ATION, SPECIFIC IN NATURE AND RELIABLE IN CHARACTER, RELATING TO A CONCLUDED ASSESSMENT WHICH WENT TO EXPOSE THE FALSITY OF THE STATEMENT MADE BY THE ASSESSEE AT THE TIME OF THE ORIGINAL ASSESSMENT WAS DIFFERENT FROM DRAWING A FRESH INFERENCE FROM THE SAME FACTS AND MATERIAL AVAILABLE WITH THE INCO ME-TAX OFFICER AT THE TIME OF THE ORIGINAL ASSESSMENT PROCEEDINGS. THE TW O SITUATIONS WERE DISTINCT AND DIFFERENT. WHERE THE TRANSACTION ITSEL F, ON THE BASIS OF SUBSEQUENT INFORMATION WAS FOUND TO BE A BOGUS TRAN SACTION, THE MERE DISCLOSURE OF WHAT TRANSACTION AT THE TIME OF THE O RIGINAL PROCEEDINGS COULD NOT BE SAID TO BE A DISCLOSURE OF TRUE AND FULL FACTS AND THE OFFICER WOULD HAVE JURISDICTION TO REOPEN THE CONCL UDED ASSESSMENT IN SUCH A CASE. THE AO COULD HAVE DEFERRED THE COMPLET ION OF THE ORIGINAL ASSESSMENT PROCEEDINGS FOR FURTHER ENQUIRY AND INVE STIGATION INTO THE GENUINENESS OF THE LOAN TRANSACTION, BUT HIS FAILUR E TO DO SO THEN AND COMPLETE THE ORIGINAL ASSESSMENT PROCEEDINGS DID NO T TAKE AWAY HIS JURISDICTION TO ACT UNDER SECTION 147, ON RECEIPT O F THE INFORMATION SUBSEQUENTLY. THE SUBSEQUENT INFORMATION ON THE BAS IS OF WHICH THE OFFICER ACQUIRED REASONS TO BELIEVE THAT INCOME CHA RGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF THE OMISSION OF TH E APPELLANT TO MAKE A FULL AND TRUE DISCLOSURE OF THE PRIMARY FACTS WAS R ELEVANT, RELIABLE AND SPECIFIC. THEREFORE, THE INCOME-TAX OFFICER IN THIS CASE RIGHTLY INITIATED ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 12 THE RE-ASSESSMENT PROCEEDINGS ON THE BASIS OF SUBSE QUENT INFORMATION WHICH WAS SPECIFIC, RELEVANT AND RELIABLE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F SHETH BROS. VS. JT. CIT (2001) 251 ITR 2702 (GUJ) POINTED OUT THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF CALCUTTA DISCOUNT CO. LTD. VS. ITO (1961) 41 ITR 191 (SC) WHEREIN IT WAS POINTED OUT AS UNDER :- THERE ARE THREE STAGES INVOLVED IN EVERY ASSESSME NT, (I) DISCLOSURE OF PRIMARY FACTS, (II) INFERENCES OF FACTS TO BE DRAWN FROM THE PRIMARY FACTS DISCLOSED AND (III) LEGAL INFERENCES TO BE DRAWN FR OM THE PRIMARY FACTS DISCLOSED AND THE INFERENCES OF FACTS DRAWN FROM TH EM. THE DUTY OF THE ASSESSEE RELATES TO DISCLOSURE OF PRIMARY FACTS ALO NE. THE DUTY TO FIND THE INFERENTIAL FACTS FROM THE FACTS DISCLOSED AS WELL AS THE DUTY OF DRAWING INFERENCES OF LAW FROM THE FACTS FOUND ARE BOTH ON THE AO. THE DISCLOSURE WHICH IS REQUIRED TO BE MADE BY THE ASSESSEE SHOULD NOT ONLY BE FULL BUT ALSO TRUE. THE CONJUNCTION AND IS AN IMPORTANT ON E AND HAS BEEN INTERPRETED AS A STRICT PRESCRIPTION OF LAW. IN CAS E OF ABSENCE OF ONE OF THE ELEMENTS, EITHER IN PART OR IN WHOLE, IT WILL GRANT JURISDICTION TO THE OFFICER. IN VIEW OF THE ABOVE, WE FEEL NO NEED TO INTERFERE WITH THE ORDER OF LD. CIT(A). THIS GROUND OF THE ASSESSEE IS DISMISSED. 11. THE SECOND GROUND OF THIS APPEAL RELATES TO CON FIRMATION OF ADDITION OF RS.9,85,500/- MADE U/S 68. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUESTED TO FURNISH T HE DETAILS OF LOANS AND ADVANCES TAKEN DURING THE YEAR INCLUDING TRADE ADVA NCES FOR SUPPLY OF GOODS AND SCRAP MATERIAL ALONG WITH THE NAME AND AD DRESS, PAN DETAILS, COPY OF BALANCE SHEET, CAPITAL ACCOUNT AND COPY OF ROI FILED BY THE ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 13 PARTIES. THE ASSESSEE VIDE HIS LETTER DATED.FILED THE FOLLOWING SUBMISSION :- THE ASSESSEE HAS TAKEN ADVANCES FOR SUPPLY OF GOOD S FROM FOLLOWING PARTIES :- 1. S. N. TRADERS RS.2,07,500/- 2. SULEMAN ENTERPRISES RS.1,51,500/- 3. VIJAYA TRADERS RS.2,23,500/- 4. SANIYA STEEL RS.1,70,000/- 5. SHARMA TRADING CO. RS.2,33,000/- THE CONFIRMATIONS OF THE PARTIES ARE NOW ENCLOSED H EREWITH. THE ASSESSEE WHEN APPROACHED THE ABOVE PARTIES TO CONFIRM THEIR TRANSACTIONS BEFORE THE ACIT, THEY REFUSED TO ATTEND BEFORE YOUR HONOUR DUE TO FEAR OF INCOME-TAX. DURING THE COURSE OF PENALTY PROCEEDINGS U/S 271D D ATED 31.07.07 FOR ASST. YEAR 2004-05 THE ASSESSEE DID PRODUCE ALL THE FIVE PARTIES FOR THAT YEAR BUT IT SO HAPPENED THAT ALL THE PARTIES, LEFT THE AYKAR BHAVAN IMMEDIATELY AFTER THE STATEMENT OF ONE PARTY WAS RE CORDED AND THEY NEVER TURNED BACK INSPITE OF REPEATED REQUEST BY THE ASSE SSEE. NOW AT THIS STAGE, AGAIN WE ARE HELPLESS AND SHOW O UR INABILITY TO PRODUCE AGAIN ALL PARTIES. MADAM, ALL THESE PARTIES ARE EITHER SMALL TRADESMEN OR ARE ROADSIDE HAWKERS, AS THE BUSINESS OF ASSESSEE IS SUCH THAT H E HAS TO SELL THE SCRAP TO SMALL PERSONS ALSO, AS THEIR LIVELIHOOD ARE FROM SCRAP PURCHASE AND SALE. THE ASSESSEE COULD NOT EVEN ASCERTAIN THE PAN OR OTHER DETAILS ALSO FROM THESE PARTIES. THE ASSESSEE HAS TRIED HIS LEVE L BEST TO PROVE THESE CREDITS U/S 68. ALL THE VALID INGREDIENTS OF CASH C REDITS ARE PROVED TO THE BEST EVIDENCE AVAILABLE WITH THE ASSESSEE. IN THE CIRCUMSTANCES, IT IS OUR REQUEST TO YOUR HON OUR TO CONSIDER THESE CREDITS AS GENUINE AND NO ADDITION SHOULD BE MADE F OR ALLEGED UNEXPLAINED CASH CREDITS AS ULTIMATELY THE AMOUNT H AS BEEN RETURNED TO THE PARTIES AS THE TRANSACTIONS IS NOT MATERIALIZE ANY HOW. DURING THE PENALTY PROCEEDINGS U/S 271D THE ADDITIO NAL COMMISSIONER CONCLUSIVELY PROVED THAT THE TRANSACTIONS WERE BOGU S BY RECORDING THE STATEMENT OF ONE SHRI MAYUR ISHWARBHAI RANA OF 4/19 7, PLOT NO.6, ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 14 BEGAMPURA, SURAT, PRODUCED AS PROPRIETOR OF S. N. T RADERS. THE PERSON COULD NOT ANSWER THE QUESTIONS DIRECTED TO HIM PROP ERLY. THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTABLE TO THE AO AS HE WAS OF THE OPINION THAT ASSESSEE HAS FAILED TO PROVE TH E IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTION AND CREDI TWORTHINESS OF THE CREDITORS. THEREFORE, PLACING RELIANCE ON SOME JUDI CIAL PRONOUNCEMENTS ON THE ISSUE ADDED A SUM OF RS.9,85,500/- AS UNEXPL AINED CASH CREDIT. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APPELL ATE AUTHORITY, WHO CONFIRMED THE ACTION OF THE AO. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 12. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT DURING THE PENALTY PROCEEDINGS U/S 271D ONE OF THE CASH CREDIT ORS HAD CONFIRMED THAT HE HAD GIVEN LOAN TO THE ASSESSEE, THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY LD. CIT(A) DESERVES TO BE DELET ED. 13. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF LOWER AUTHORITIES. 14. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THE STATEMENT OF ONE PERSON SHRI MAYUR RANA WAS REC ORDED DURING PENALTY PROCEEDINGS U/S 271D. HOWEVER, HE COULD NOT SUBSTANTIATE THAT HE HAD GIVEN LOAN TO THE ASSESSEE, THEREFORE, THE AO H ELD THIS LOAN TO BE BOGUS AND HAD INITIATED REASSESSMENT PROCEEDINGS IN THIS CASE WHICH WE ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 15 HAVE ALREADY UPHELD, THEREFORE, ASSESSEE DOES NOT G ET ANY SUPPORT FROM THE STATEMENT OF MR. MAYUR RANA IN RESPECT OF THIS GROUND REGARDING CASH CREDIT OF RS.9,85,500/- ALSO. SINCE AT NO STAGE THE ASSESSEE HAS BEEN ABLE TO PROVE THE IDENTITY OF THE CREDITORS, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PERSONS, WE CONFIRM THE ORD ER OF LD. CIT(A) ON THIS ISSUE. THE APPEAL FILED BY THE ASSESSEE IS DIS MISSED. ITA NO.1364/AHD/2009 ASST. YEAR 2005-06 (ASSESSEES APPEAL) ITA NO.2086/AHD/2009 ASST. YEAR 2004-05 (REVENUES APPEAL) 15. GROUND NOS.1 TO 6 OF ASSESSEES APPEAL IN ITA N O.1364/AHD/2009 AND THE ONLY EFFECTIVE GROUND IN REVENUES APPEAL I N ITA NO.2086/AHD/2009 RELATE TO ADDITION OF RS.50,51,000 /- MADE BY AO ON ACCOUNT OF CASH CREDIT. THE FACTS OF THE CASE ARE THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSEE CLAIMED TO HAVE RECEIVED F OLLOWING LOANS: SL.NO. NAME OF PARTY AMOUNT TAKEN AMOUNT REPAID 1 PRIYA STEEL RS.56,500/- RS.56,500/- 2 SANIYA STEEL RS.56,000/- RS.56,000/- 3 SULEMAN ENTERPRISES RS.55,000/- RS.55,000/- 4 VIYA TRADERS RS.56,500/- RS.56,500/- 5 MANSOOR METAL RS.55,000/- RS.55,000/- 6 JAYBHARAT STEEL CO. RS.57,000/- RS.57,000/- 7 A.V. CORPORATION RS.2,00,000/- RS.2,00,000/- 8 FASHAT ALI RS.1,15,000 RS.1,15,000/- 9 MEGH MAYUR MALLHAR CO- OP. SOC. RS.14,75,000/- - 10 G.V. KATWALA RS.6,00,000/- - 11 JK & CO. RS.14,25,000/- - 12 MAYUR M.PATEL RS.9,00,000/- - ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 16 THE AO TREATED THE ABOVE CASH CREDITS AS NON-GENUIN E ON THE GROUND THAT THE ASSESSEE HAD NOT PRODUCED THE CREDITORS, SOME L OANS WERE ACCEPTED IN CASH, ASSESSEE HAD NOT FILED CONFIRMATION WITH PANS , ASSESSEE HAD NOT PROVED IDENTITY, GENUINENESS AND CREDITWORTHINESS O F THE CREDITORS. DURING APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) THE ASS ESSEE FILED PAPER BOOK WHICH CONTAINS SOME ADDITIONAL EVIDENCE AND ASSESSE E REQUESTED TO CONSIDER THESE EVIDENCES AS THESE COULD NOT BE FILE D BEFORE THE AO DUE TO SHORTAGE OF TIME. THE SAME WERE FORWARDED TO AO AND THE AOS REPORT DATED 15.01.2009 WAS RECEIVED ON 28.01.2009. THE RE PORT OF AO WAS GIVEN TO THE ASSESSEE AND THE REPLY WAS CONSIDERED. THE ASSESSEE HAD SUBMITTED THAT COPY OF ACCOUNT AND THE CONFIRMATION HAD BEEN FILED. COPIES OF BANK ACCOUNTS WERE GIVEN. PARTY NO.1 TO 6 WERE EITHER SMALL TRADERS OR WERE ROAD SIDE HAWKERS. AS REGARDS PARTI ES LISTED AT SL.NO.7 TO 12, MONEY WAS RECEIVED BY ACCOUNT PAYEE CHEQUES. AL L THE PARTIES WERE TRADE CREDITORS. WHEN ASSESSEE COULD NOT PRODUCE TH EM, AS THEY WERE NOT READY TO APPEAR, THE AO HAD NOT ISSUED SUMMONS U/S 131 OF THE ACT. THE ASSESSEE RELIED ON THE DECISION OF PATNA HIGH COURT IN THE CASE OF ZAVERBHAI BIHARILAL & CO. 154 ITR 591. THE ASSESSEE ALSO RELIED ON THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF ROHINI BUILDERS 256 ITR 360. ACCORDINGLY, THE ASSESSEE SUBMITTED THAT T HE ADDITION MAY BE DELETED. 16. THE LD. CIT(A) CONSIDERED THE FACTS AND SUBMISS IONS AND OBSERVED AS UNDER :- 2.5 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS. (A) REGARDING CASH CREDITS FROM SL.NOS.1 TO 6 IT IS OBS ERVED THAT ALL THE AMOUNTS HAVE BEEN RECEIVED IN CASH. THE AMOUNT HAS BEEN RETURNED LATER ON WHICH SHOWS THAT IT WAS NOT FOR S UPPLY OF GOODS. PARTIES WERE NOT PRODUCED. THEY ARE NOT INCO ME-TAX ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 17 PAYEES. THE APPELLANT HAS NOT GIVEN COMPLETE ADDRES S AND THEIR CREDIT WORTHINESS IS NOT PROVED. HENCE, AOS ACTION FOR TREATING THESE AS NOT GENUINE IS CONFIRMED. (B) REGARDING CASH CREDIT AT SL.NO.7 A.V. CORPORATION RS.2,00,000/- THE APPELLANT HAS FILED CONFIRMATION ALONG WITH BANK STATEMENT AND COPY OF IT ACKNOWLEDGEMENT FOR T HE RELEVANT ASST. YEAR. HENCE CREDIT WORTHINESS IS PRO VED AND THIS SHOULD BE TREATED AS EXPLAINED. AO IS DIRECTED TO D ELETE THIS ADDITION. (C) AS REGARDS ITEM AT SL.NO.9 MAGH MAYUR MALLHAR CO-OP . SOC. RS.14,75,000/-, THE APPELLANT HAD FILED THE COPY OF ACCOUNT AND CONFIRMATION, WHICH SHOWS THAT APPELLANT HAD SOLD G OODS TO THE PARTY IN THE NEXT YEAR. HENCE THE AMOUNT WAS FOR SU PPLY OF GOODS ONLY WHICH WAS DONE IN THE NEXT YEAR. THE APP ELLANT HAS ALSO FILED COMPLETE ADDRESS, PAN ETC. AS THE AMOUNT WAS TRADE ADVANCE AND IT WAS VERIFIABLE, THE RATIO OF THE CAS E ZAVERBHAI BIHARILAL & CO. 154 ITR 591 IS APPLICABLE. THE AOS ACTION IN TREATING IT AS UNEXPLAINED CASH CREDIT IS NOT JUSTI FIED. HENCE THIS ADDITION IS DELETED. (D) AS REGARDS ITEM NOS.8 AND 10 TO 12, FASHAT ALI RS.1 ,15,000/-, G.V. KATWALA RS.6,00,000/-, JK & CO. RS.14,25,000/- AND MAYUR M. PATEL RS.9,00,000/- IT IS SEEN THAT APPELL ANT HAS RETURNED THE MONEY IN THE NEXT YEAR AND NOT SUPPLIE D ANY GOODS. HENCE, THESE WERE NOT TRADE ADVANCES BUT WAS LOAN T AKEN. THEREFORE, ONUS WAS ON THE APPELLANT TO PROVE THE I DENTITY, GENUINENESS AND CREDIT WORTHINESS. THE APPELLANT HA S FILED ONLY COPY OF ACCOUNTS AND CONFIRMATION BUT NOT THE COPY OF IT RETURN FOR RELEVANT PERIOD AND NO COPY OF BANK ACCOUNTS OF THE CONCERNED PARTIES. THEREFORE, CREDIT WORTHINESS OF THE PARTIES ARE NOT PROVED. THE CASE LAW RELIED ON BY THE APPEL LANT IN THE CASE OF ZAVERBHAI BIHARILAL & CO. 154 ITR 591 IS NO T APPLICABLE AS THESE WERE NOT THE TRADE ADVANCES AND NO GOODS WERE SUPPLIED FOR MONEY RECEIVED. FURTHER THE CASE LAW RELIED ON BY THE APPELLANT IN THE CASE OF ROHINI BUILDERS 258 ITR 360 IS NOT APPLICABLE AS APPELLANT HAS NOT FILED ANY EV IDENCE REGARDING IT ACKNOWLEDGEMENT AND COPY OF BALANCE SH EET OF CONCERNED PARTIES FOR RELEVANT YEAR. HENCE IT IS NO T PROVED THAT THEY WERE INCOME-TAX PAYEES IN THAT YEAR. THEREFORE , CREDIT WORTHINESS IS NOT PROVED AND THE AOS ACTION IN TRE ATING IT AS ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 18 UNEXPLAINED CASH CREDIT IS JUSTIFIED. HENCE THESE A DDITIONS ARE CONFIRMED. AGGRIEVED BY THE ORDER OF LD. CIT(A) THE ASSESSEE H AS COME IN APPEAL AGAINST THE ADDITION SUSTAINED BY THE LD. CIT(A) WH ILE THE REVENUE HAS FILED THE APPEAL AGAINST THE RELIEF GIVEN TO THE AS SESSEE. 17. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED A CHA RT BEFORE US REGARDING THE LOANS TAKEN FROM DIFFERENT PARTIES AS UNDER - SL.NO. NAME OF PARTY AMOUNT TAKEN AMOUNT REPAID 1 PRIYA STEEL RS.56,500/- RS.56,500/- 2 SANIYA STEEL RS.56,000/- RS.56,000/- 3 SULEMAN ENTERPRISES RS.55,000/- RS.55,000/- 4 VIYA TRADERS RS.56,500/- RS.56,500/- 5 MANSOOR METAL RS.55,000/- RS.55,000/- 6 JAYBHARAT STEEL CO. RS.57,000/- RS.57,000/- 7 A.V. CORPORATION RS.2,00,000/- RS.2,00,000/- 8 FASHAT ALI RS.1,15,000 RS.1,15,000/- 9 MEGH MAYUR MALLHAR CO- OP. SOC. RS.14,75,000/- - 10 G.V. KATWALA RS.6,00,000/- - 11 JK & CO. RS.14,25,000/- - 12 MAYUR M.PATEL RS.9,00,000/- - AND SUBMITTED THAT CASH CREDITS FROM SL.NO.1 TO 6 A LL THE AMOUNTS HAD BEEN RECEIVED IN CASH. THE AMOUNTS HAD BEEN REPAID. THEY ARE NOT INCOME-TAX PAYEES. THEY WERE SMALL TRADERS OR WERE ROAD SIDE HAWKERS. THEREFORE THOSE PARTIES WERE NOT PRODUCED. REGARDIN G SL.NO.7 THE LD. COUNSEL SUBMITTED THAT ASSESSEE HAS FILED CONFIRMAT ION ALONG WITH BANK ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 19 STATEMENT AND COPY OF I.T. ACKNOWLEDGEMENT FOR THE RELEVANT ASST. YEAR. HENCE CREDIT WORTHINESS IS PROVED AND THIS SHOULD B E TREATED AS EXPLAINED. AS REGARDS ITEM AT SL.NO.9 MEGH MAYUR MALLHAR CO-OP . SOC. RS.14,75,000/- THE APPELLANT HAD FILED THE COPY OF ACCOUNT AND CONFIRMATION, WHICH SHOWS THAT APPELLANT HAD SOLD G OODS TO THE PARTY IN THE NEXT YEAR. HENCE THE AMOUNT WAS FOR SUPPLY OF G OODS ONLY WHICH WAS DONE IN THE NEXT YEAR. THE APPELLANT HAD ALSO FILED COMPLETE ADDRESS, PAN ETC. AS THE AMOUNT WAS TRADE ADVANCE AND IT WAS VER IFIABLE, THE RATIO OF THE CASE ZAVERIBHAI BIHARILAL & CO. 154 ITR 591 IS APPLICABLE. ACCORDINGLY, IT WAS SUBMITTED THAT THE CASH CREDITS IN RESPECT OF THESE PARTIES MAY BE DELETED. 18. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT SI NCE THE ADVANCES WERE RECEIVED IN CASH, CREDITORS WERE NOT PRODUCED BEFORE THE AO FOR VERIFICATION, NO IDENTITY OF THE CREDITORS, CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS WERE PROVED, NO PANS WERE PRODUCED THE LOWER AUTHORITIES WERE JUSTIFIED IN TR EATED THESE ADVANCES AS NON-GENUINE. THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND, TH EREFORE, THE ORDER PASSED BY HIM MAY KINDLY BE SET ASIDE AND THAT OF THE AO B E RESTORED. ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 20 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. AS REGARDS CASH CREDITS FROM SL.NO.1 TO 6 IT IS OBSERVED THAT ALL THE AMOUNTS HAVE BEEN RECEIVED IN CASH. THE AMOUNT HAS BEEN RETURNED BY THE ASSESSEE LATER ON WHICH SHOWS THAT IT WAS NO T FOR SUPPLY OF GOODS. THE ASSESSEE FAILED TO PRODUCE THE PARTIES BEFORE A O FOR VERIFICATION. THEY ARE NOT INCOME-TAX PAYERS. THE ASSESSEE HAS NO T GIVEN COMPLETE ADDRESSES AND THEIR CREDIT WORTHINESS IS NOT PROVED . THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION IN RESPECT OF THESE PARTIES. WE UPHOLD HIS ORDER ON THIS ISSUE . 19.1 IN RESPECT OF CASH CREDIT OF RS.2,00,000/- BY M/S A.V. CORPORATION WE FIND THAT CONFIRMATION ALONG WITH BANK STATEMENT AND COPY OF ACKNOWLEDGEMENT OF INCOME-TAX RETURN FOR THE RELEVA NT ASST. YEAR WAS FILED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. IN VIEW OF THESE DETAILS FILED BY THE ASSESSEE, LD. CIT(A) WAS SATISFIED THA T THE CREDITWORTHINESS OF THE CREDITOR IS PROVED AND, THEREFORE, HE WAS RIGHT IN DELETING THE ADDITION MADE BY THE AO. THE ORDER PASSED BY THE LD. CIT(A) IS HEREBY UPHELD ON THIS ISSUE. 19.2 NOW COMING TO CASH CREDIT OF RS.14,75,000/- BY MEGH MAYUR MALLHAR CO-OP. SOC., WE FIND THAT ASSESSEE HAS FILE D A COPY OF ACCOUNT AND THE CONFIRMATION WHICH SHOWS THAT THE ASSESSEE SOLD GOODS TO THE PARTY IN THE NEXT YEAR. THEREFORE, AMOUNT WAS FOR S UPPLY OF GOODS ONLY ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 21 WHICH WAS DONE IN THE NEXT YEAR. COMPLETE ADDRESS O F THE PARTY, PAN AND OTHER RELATED DETAILS WERE ALSO FILED BY THE ASSESS EE. TAKING INTO CONSIDERATION THESE DETAILS LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION BY TREATING IT AS EXPLAINED CASH CREDIT FOLLOWING THE CASE OF ZAVERBHAI BIHARILAL & CO. 154 ITR 591. WE FEEL NO NEED TO INT ERFERE WITH THE ORDER PASSED BY HIM ON THIS ISSUE AND THE SAME IS HEREBY UPHELD. 19.3 AS REGARDS ITEM NOS.8 AND 10 TO 12, FASHAT ALI RS.1,15,000/-, G.V. KATWALA RS.6,00,000/-, JK & CO. RS.14,25,000/- AND MAYUR M. PATEL RS.9,00,000/-, IT IS SEEN THAT ASSESSEE HAS RETURNE D THE MONEY IN THE NEXT YEAR AND NOT SUPPLIED ANY GOODS. HENCE, THESE WERE NOT TRADE ADVANCES BUT WERE LOAN TAKEN. THEREFORE, ONUS WAS ON THE ASS ESSEE TO PROVE THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS. THE AS SESSEE HAD FILED ONLY COPY OF ACCOUNTS AND CONFIRMATION BUT NOT THE COPY OF IT RETURN FOR RELEVANT PERIOD AND NO COPY OF BANK ACCOUNTS OF THE CONCERNED PARTIES. WE FEEL THAT ASSESSEE BE GIVEN ONE MORE OPPORTUNITY TO SUBSTANTIATE THE CREDITWORTHINESS OF THE CREDITORS AND FOR THIS PURP OSE THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICAT ION AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. SO THIS GROUND OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 20. THE NEXT GROUND RAISED BY THE ASSESSEE IS CONFI RMATION OF ADDITION OF RS.99,833/- BY DISALLOWING KHARAJAT EXPENSES. ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 22 21. THE AO NOTED THAT ASSESSEE CLAIMED RS.9,98,331/ - AS KHARAJAT EXPENSES. THE ASSESSEE FAILED TO PRODUCE VERIFIABLE DOCUMENTS IN SUPPORT OF HIS CLAIM BUT FILED ONLY LEDGER ACCOUNT. THE AO FOUND FROM THE LEDGER THAT MOST OF THE EXPENSES WERE PAID IN CASH. SECTIO N 37 DEALS WITH VARIOUS OTHER DEDUCTIONS, MANDATES THAT ANY EXPENDITURE, IN ORDER TO BE ALLOWED AS REVENUE EXPENDITURE, NEEDS TO BE (I) PROPERLY VERIFIABLE FOR HAVING BEEN ACTUALLY INCURRED FOR THE PURPOSES OF BUSINESS & (II) PURELY NON- PERSONAL IN NATURE. THE FACT OF ACTUAL INCURRENCE O F THE EXPENDITURE IS CRITICAL TO THE ALLOWABILITY OF ANY CLAIMED EXPENDI TURE. EXPENDITURES UNDERTAKEN IN CASH PRE-EMPT AND PRECLUDE ANY FURTHE R INQUIRY INTO THE FACT OF THE ACTUAL INCURRENCE OF THE EXPENDITURE, GENUIN ENESS OF THE CLAIMED TRANSACTIONS AND IDENTITY OF THE RECIPIENT. UNLIKE EXPENDITURES UNDERTAKEN THROUGH CHEQUE/DRAFT, THE CASH EXPENDITURES DO NOT MAINTAIN ANY TRAIL OF THE TRANSACTION FOR SUBSEQUENT INQUIRY. THEREFORE I N CASE OF THE CLAIM OF CASH EXPENDITURES, THE ONUS ON THE ASSESSEE TO PROV E THE ACTUAL INCURRENCE OF EXPENDITURE IS STRICT. IN SUPPORT OF THE CLAIM O F EXPENDITURE, MERE SELF- GENERATED LEDGER ACCOUNT WAS FILED. THERE WAS LACK OF PROPER EVIDENTIARY VALUE BEING SELF-CREATED IN NATURE HENCE THE AO HAD MADE 10% DISALLOWANCE OUT OF KHARAJAT EXPENSES ON THE GROU ND THAT NO VOUCHERS WERE PRODUCED AND THE EXPENSES WERE INCURRED IN CAS H. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE SUBMITT ED THAT ALL THE EXPENSES ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 23 WERE GENUINE AND SHOULD BE ALLOWED. THE LD. CIT(A) REJECTED THE SUBMISSIONS OF ASSESSEE WITH THE FOLLOWING OBSERVAT IONS :- 3.3 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS. I DO NOT AGREE WITH THE APPELLANTS VIEW. IN THE ABSENCE OF COMPLE TE VOUCHERS, THE AO WAS JUSTIFIED IN DISALLOWING PART OF THE KHARAJA T EXPENSES. HENCE THIS GROUND IS REJECTED. AGGRIEVED WITH THIS ORDER OF LD. CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 22. THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO. THE I MPUGNED ADDITION BE DELETED. 23. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF LOWER AUTHORITIES AND SUBMITTED THAT THE LD. CIT(A) WAS J USTIFIED IN UPHOLDING THE ACTION OF AO SINCE VOUCHERS WERE NOT PRODUCED A ND THE EXPENSES WERE INCURRED IN CASH. THE ORDER OF THE LD. CIT(A) BE UPHELD. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE DID NOT FILE COMPLETE DET AILS OF THE EXPENSES INCURRED BY HIM UNDER THE HEAD KHARAJAT EXPENSES. THEREFORE, THE AO MADE AN ADDITION OF RS.9,98,331/- BY DISALLOWING 10 % OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. SINCE BEFORE THE LD. CIT(A) ALSO THE ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM OF EXPENS ES BY PRODUCING ANY EVIDENCE THE ADDITION MADE BY AO WAS SUSTAINED BY H IM. BEFORE US ALSO THE SITUATION REMAINED THE SAME AND, THEREFORE, WE FEEL NO NEED TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THE ISSUE AND THE ORDER PASSED BY HIM IS HEREBY UPHELD. ITA NOS.1363, 1364 & 2086/AHD/2009 ASST. YEARS 2004-05 & 2005-06 24 26. IN THE RESULT ASSESSEES APPEAL ITA NO.1363/AHD /2009 FOR ASST. YEAR 2004-05 IS DISMISSED, ASSESSEES APPEAL IN ITA NO.1364/AHD/2009 ASST. YEAR 2005-06 IS PARTLY ALLOWED FOR STATISTICA L PURPOSES AND REVENUES APPEAL IN ITA NO.2086/AHD/2009 ASST. YEAR 2005-06 IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 21/10/2011. SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 9/9/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 26/9/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..