M/s Farrukhabad Investment India Ltd., Farrukhabad V. ACIT, Farrukhabad

ITA 164/AGR/2009

• Counselvise Citation: 16420314 RSA 2009
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-05-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 24-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Keywords: Business income; Business expenditure; Onus to prove
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NOS.164 & 165/AGR/2009 ASSESSMENT YEARS : 2002-03 & 2004-05 FARRUKHABAD INVESTMENT (INDIA) LTD., VS. ASSTT. CO MMISSIONER OF INCOME TAX, C/O. HOTEL HINDUSTAN, CIRCLE 2(1), AGRA. BARPUR, FARRUKHABAD. (PAN: AACCT 0563 G). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANURAG SINHA, ADVOCATE RESPONDENT BY : SHRI A.K. SHARMA, JR. D.R. DATE OF HEARING : 08.05.2012 DATE OF PRONOUNCEMENT OF ORDER : 22.06.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO DIFFERENT ORDERS BOTH DATED 02.02.2009 PASSED BY THE LD. CIT(A), GHAZIABA D FOR THE ASSESSMENT YEARS 2002-03 & 2003-04 RESPECTIVELY. ITA NO.164/AGR/2009 FOR A.Y. 2002-03 BY THE ASSESSE E 2. THE GROUNDS RAISED BY THE ASSESSEE IN THE ABOVE APPEAL ARE AS UNDER :- ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 2 1. A) BECAUSE THE ASSESSMENT IS BAD IN LAW AS THE P ROCEEDINGS INITIATED UNDER SECTION 147 WERE NOT VALID AS THERE WERE NO VALID REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. B) BECAUSE THE ASSESSMENT MADE ON THE BASIS OF NON- EST RETURN IS BAD IN LAW. 2. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN MAKI NG DISALLOWANCES OUT OF EXPENSES ON AD HOC BASIS IN AS SESSMENT UNDER SECTION 147: GENERATOR EXPENSES 31,741/- GENERAL EXPENSES 15,000/- REPAIRS & MAINTENANCE 15,000/- 3. BECAUSE THE AUTHORITIES BELOW HAVE CARRIED ON IR RELEVANT EXERCISE OF ATTRIBUTING CERTAIN EXPENSES AND THEN R EDUCING HIM IN RESPECT OF BUSINESS WHICH DID NOT EXIST: IMAGINARY REDUCED CLAIM BY COMMISSION 68,00,000 54,40,500 INTEREST 1,11,12,000 44,12,000 MANAGEMENT & 54,20,000 35,40,000 STAFF EXPENSES 4. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN TAKI NG INCOME FROM NON-EXISTENT BUSINESS AT RS.46,60,000/- BY APPLYING STRANGE FORMULA. 5. BECAUSE THE AUTHORITIES HAVE ERRED IN MAKING SEP ARATE ADDITION OF RS.1,17,600/- FOR PROPERTY INCOME AS THE SAME HA D BEEN SHOWN IN THE P/L ACCOUNT OF HOTEL BUSINESS. ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 3 3. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED REOPENING OF COMPLETED ASSESSMENT UNDER SECTION 147 OF THE INCOM E TAX ACT, 1961 (THE ACT HEREINAFTER). 4. AT THE TIME OF HEARING, THE LD. AUTHORISED REPRE SENTATIVE HAS NOT PRESSED THIS GROUND OF APPEAL, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 5. GROUND NOS. 2 & 3 PERTAIN TO DISALLOWANCE OF EXP ENSES AS DETAILED IN GROUNDS OF APPEAL. 6. THE BRIEF FACTS OF THE GROUND NO.2 ARE THAT THE ASSESSEE COMPANY DERIVES INCOME FROM THE UNIT HOTEL HINDUSTAN AS ROOM RENT/H ALL AND OTHER MISCELLANEOUS RECEIPTS. DURING THE ASSESSMENT PROCEEDINGS, THE A .O. NOTICED THAT THE ASSESSEE HAS SHOWN HIRE EXPENSES UNDER THE HEAD GENERATOR EX PENSES, GENERAL EXPENSES AND REPAIR & MAINTENANCE EXPENSES. THE A.O. DISALLOWED 20% OF GENERATOR EXPENSES OF WHICH CALCULATION OF THE AMOUNT COMES TO RS.31,7 41/- TO COVER UP THE DEFICIENCIES AND LEAKAGES. SIMILARLY, THE A.O. DIS ALLOWED RS.15,000/- EACH IN RESPECT OF GENERAL EXPENSES AND REPAIRS & MAINTENAN CE EXPENSES. THE A.O. NOTED THAT SIMILAR DISALLOWANCE WERE MADE IN EARLIER YEAR S ALSO. ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 4 7. THE BRIEF FACTS OF GROUND NOS.3 & 4 NOTED FROM T HE ORDER OF A.O. AT PAGE NOS. 5 TO 7 ARE AS UNDER :- 10. IT IS SUBMITTED THAT A BALANCE SHEET AS ON 31. 03.1998 FILED BY THE ASSESSEE SHOWS LIABILITIES AT RS.13,05,80,546/- WHEREAS ASSETS ARE SHOWN AT RS.5,55,27,647/-. PROFIT & LOSS ACCOUNT S HOWS LOSS OF RS.6,39,81,408/-. HOWEVER FOR A.Y. 1997-98, THE FI GURE OF LOSS DISALLOWED ON INFLATION OF EXPENSES, EMBEZZLEMENT M ONEY SIPHONED OFF STAND AT RS.2.00 CRORE. THUS STRAIGHTWAY THE PROFI T & LOSS ACCOUNT WOULD STAND REDUCED TO RS.4,39,81,408/-. FURTHER I T IS SUBMITTED THAT MAJOR EXPENDITURE WERE IN THE A.Y. 1998-99 AS UNDER : (I) COMMISSION RS. 68,00,000 (II) INTEREST RS.1,11,12,000 (III) MANAGEMENT EXPENSES RS. 73,00,000 FOR THIS YEAR, AS IS EVIDENT, COMMISSION PAID IN VI OLATION OF PRESCRIBED RBI GUIDELINES IS DISALLOWABLE AS ALSO A CERTAIN AMOUNT IS DISALLOWABLE ON ACCOUNT OF THE FACT THAT NEITHER TH E PARTIES TO WHOM SUCH COMMISSION HAS BEEN PAID ARE IDENTIFIABLE NOR AS THERE ANY PROOF OF THE SERVICE SO RENDERED, ON RECORD,. FURTHER FO R A.Y. 1998-99, AT LEAST RS.8.00 LAC OUT OF RS.13.00 CRORE WERE NEW DE POSITS, WHICH IS NOT THE CASE IN THIS YEAR. THUS, NEW SUBSCRIPTION COMM ISSION, WOULD BE DISALLOWABLE, WITH 60% OF NEW DEPOSITS, A SUBSTANTI AL PORTION OF COLLECTION COMMISSION WOULD NOT BE PAYABLE IN THIS YEAR. THUS THE COMMISSION WOULD STAND REDUCED BY AT LEAST 80% AND ONLY 20% WOULD REMAIN AS GENUINE BUSINESS EXPENDITURE I.E. ALLOWAB LE EXPENSES WORKS OUT AT RS.13,60,000 (I.E. 68,00,000 X 20%). AGAINST INTEREST INCOME, GIVEN THE REASONS, ONLY AT LEAST 40% WOULD BE NON-GENUINE AND CONSEQUENTLY OTHER ALLOWANCE INC LUSIVE OF THE PART RELATABLE TO OWN DEPOSITS OR CASH CREDITS CHAN NELED BACK IN THE COMPANY SINCE SIPHONED OFF EMBEZZLEMENT ACCOUNT FOR 20% OF THE FUNDS. THE A.O. IN HIS ORDER DATED 10.30.2006 FOR A.Y. 2001-02 HAS ALLOWED EXPENSES OF RS.67,20,000/-. ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 5 MANAGEMENT EXPENSES: WITH VIRTUALLY NO ACTIVITY OF SECURING FRESH DEPOSITS, THE AGENTS WOULD BE DISPENSABLE AS ALSO L OST OF COLLECTION EXPENSES AND RELATED PAPER WORK. THE REQUIREMENTS OF AGENTS, ACCOUNTANTS AND FIELD STAFF WOULD REDUCE AS WOULD B E A NUMBER OF BRANCHES AND RELATED EXPENSE. IN FACT, AFTER THE P OLICE ACTION, THERE WERE NO IDENTIFIABLE OPERATIVE BRANCHES. THUS EXPE NSES LIKE PRINTING AND STATIONERY AT RS.3,68,797, TRAVELING AND CONVEY ANCE AT RS.4,12,797 AND ADVERTISEMENT AT RS.4,56,148 AND RE NT ACCOUNT AT RS.5,92,194 WOULD BE REDUCED TO VIRTUALLY NIL. T HUS OUT OF TOTAL OF RS.20,12,518/- ONLY 10% WOULD BE INCURRED IN THE YE AR, I.E. DISALLOW 90% ON THESE HEADS = RS.18,20,000/-. FURTHER STAFF EXPENSE AT RS.45.00 LAC WOULD BE DRAS TICALLY REDUCED AND AS THE EVIDENCE WOULD INDICATE THE COMPANY AFTE R THE POLICE ACTION IS ON MAINLY SKELETAL STAFF. THUS 80% OF THE EXPENSES ON THIS HEAD TOO WOULD BE DISALLOWABLE. THE DISALLOW IN THIS HEAD (36.00 LAC + 18.20 LAC) = 54,20,000 ALLOWABLE EXPENSES = (73 LAC MINUS 54.20 LAC) 18,80 ,000 THUS TOTAL ALLOWABLE EXPENSES WILL BE AS UNDER : INTEREST 67,00,000 ADMINISTRATIVE/MANAGEMENT EXPENSE 18,80,000 COMMISSION 13,60,000 99,40,000 THUS, ALLOWABLE EXPENSES STAND AT RS.99.40 LAC WHIL E INCOME WOULD BE AS UNDER : (A) AS PER RECOGNIZED ACCOUNTING PRACTICE ON ACTUAR IES 6.5% OF DEPOSITS MOBILIZED BY ASSESSEE FORFEITED (6.5% X 13,05,000) 84,00,000 (B) INTEREST INCOME AS SHOWN IN EARLIER YEARS 62,0 0,000 146,00,000 LESS ALLOWABLE EXPENSES AS WORKED OUT ABOVE 99,40, 000 INCOME FOR THE YEAR 46,60,000 ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 6 8. THE CIT(A) CONFIRMED THE ORDER OF THE A.O. AS UN DER :- (CIT(A) PARAGRAPH NOS.7 & 7.2) 7. THE REMAINING GROUNDS NO.2 TO 5 ARE AGAINST THE FOLLOWING DISALLOWANCES/ADDITIONS MADE BY THE ASSESSING OFFIC ER : GENERATOR EXPENSES RS.31,741/- GENERAL EXPENSES RS.15,000/- REPAIR & MAINTENANCE RS.15,000/- ESTIMATED BUSINESS INCOME RS.84,00,000/- INTEREST INCOME RS.62,00,000/- INCOME FROM RENT RS.1,17,600/- 7.2 THE SUBMISSIONS OF THE LEARNED AR HAVE BEEN CON SIDERED ALONG WITH THE FACTS BROUGHT OUT BY THE AO IN THE ASSESSM ENT ORDER. THE AO HAS OBSERVED THAT THE ASSESSEE FAILED TO FURNISH CO MPLETE DETAILS OF THE SUNDRY CREDITORS AND SUNDRY DEBTORS AND HENCE THE R ESULTS DECLARED ARE NOT VERIFIABLE. THE REASONS STATED BY THE ASSE SSEE FOR NOT FURNISHING COMPLETE DETAILS ARE THAT AFTER THE FINA NCE BUSINESS HAS BEEN TOTALLY DISCONTINUED DUE TO TERMINATION OF LIC ENSE AS INVESTMENT COMPANY BY RBI AND THE SAID NEWS OF CANCELLATION OF LICENSE WAS PUBLISHED IN THE NEWSPAPERS, THE DEPOSITORS GHERAOE D THE OFFICE PREMISES AT HO AND BRANCHES IN LARGE NUMBERS; THE D IRECTORS OF THE COMPANY FLED FROM FARRUKHABAD FOR THEIR PERSONAL SA FETY. THE MOB RANSACKED THE OFFICES OF HO AND BRANCHES, DAMAGED T HE OFFICE EQUIPMENTS, FURNITURE AND FIXTURES AND DESTROYED TH E RECORDS KEPT THERE. THE AO HAS, HOWEVER, NOTICED THAT THE ASSES SEE DID NOT CARE TO LODGE AN FIR FOR THE DESTRUCTION OF BOOKS OF ACCOUN TS, AS CLAIMED AND THAT NO EVIDENCE OF ANY KIND COULD BE PRODUCED. EV EN DURING APPELLATE PROCEEDINGS ALSO THE APPELLANT HAS NOT BE EN ABLE TO FURNISH ANY EVIDENCE TO SUPPORT HIS CLAIM. THE AO HAS FURT HER BROUGHT ON RECORD THAT THE VARIOUS EXPENSES CLAIMED ARE NOT SU PPORTED BY PROPER VOUCHERS. THE AO HAS DISCUSSED IN DETAIL ON EACH I SSUE BEFORE MAKING THE DISALLOWANCES/ADDITIONS. DURING APPELLA TE PROCEEDINGS, THE LEARNED AR HAS NOT BEEN ABLE TO FURNISH ANY COG ENT EVIDENCE/EXPLANATION/ARGUMENTS TO CONTROVERT THE FINDINGS/OBSERVATION OF THE AO. THE WRITTEN SUBMIS SION FILED DURING ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 7 APPELLATE PROCEEDINGS ARE GENERAL IN NATURE, WHICH IS MORE OR LESS NARRATION OF EVENTS WHICH HAS NO BEARING ON THE MER ITS OF THE CASE. THE BURDEN OF PROOF COULD NOT BE DISCHARGED BY THE APPELLANT ON ANY ISSUE. IT IS PERTINENT TO MENTION HERE THE DURING APPELLATE PROCEEDINGS, THE LEARNED AR HAS FILED A WRITTEN SUB MISSIONS THROUGH POST REQUESTING TO DECIDE THE APPEAL ON THE BASIS O F SAID WRITTEN SUBMISSIONS. HOWEVER, THE SAID WRITTEN SUBMISSION IS NOT FOLLOWED OR SUPPORTED BY ANY EVIDENCE OR MATERIAL TO SUBSTANTIA TE THE VARIOUS PLEAS TAKEN IN THE GROUNDS OF APPEAL/WRITTEN SUBMIS SIONS. IT IS ALSO TO MENTION HERE THAT SIMILAR ISSUES WERE ALSO INVOLVED IN APPELLANTS CASE FOR ASSESSMENT YEAR 1999-2000, 2000-01 & 2001- 02 AND IN APPEAL, MY LEARNED PREDECESSOR VIDE HIS ORDER DATED 5.10.2005 IN APPEAL NO.20/05-06/GZB/FBD, 22/05-06/GZB-FBD & 21/0 5- 06/GZB-FBD, HAS DISMISSED ASSESSEES APPEAL. SINCE THE FACTS OF THE CASE IN ASSESSMENT YEAR UNDER CONSIDERATION ARE IDE NTICAL TO THAT OF A.Y. 1999-2000 TO 2001-02, AND, THEREFORE, CONSIDER ING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, AND FOLLOWING THE ORDER PASSED BY MY LEARNED PREDECESSOR, REFERRED TO ABOVE, THE ADDITIONS/DISALLOWANCES MADE BY THE AO IN THE ASSES SMENT YEAR UNDER CONSIDERATION ARE, HERBY CONFIRMED. THE GROUNDS TA KEN BY THE APPELLANT ON THIS SCORE ARE ACCORDINGLY DISMISSED. 9. AT THE OUTSET, THE LD. AUTHORISED REPRESENTATIVE IN RESPECT OF GROUND NO.2 SUBMITTED THAT IN EARLIER YEARS, A.Y. 1999-2000, 20 00-01, 2001-02 & 2003-04 I.T.A.T VIDE ORDER DATED 20.07.2010 IN ITA NOS.489 TO 491/AGR/2005 & 444/AGR/2006 HAS CONFIRMED THE DISALLOWANCE MADE BY THE A.O. IN RESPECT OF GENERATOR EXPENSES, GENERAL EXPENSES AND REPAIR & M AINTENANCE. HOWEVER, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT GENERATOR EXPENSES WERE CLAIMED IN RESPECT OF EXISTING HOTEL BUSINESS AND THE A.O. HIM SELF ADMITTED IN THE ASSESSMENT ORDER AT PAGE NO.4 VIDE PARA NO.6 THAT THE DETAILS OF EXPENSES WERE FILED BUT NO LOG ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 8 BOOK WAS PRODUCED. THE LD. AUTHORISED REPRESENTATI VE SUBMITTED THAT THE ADHOC DISALLOWANCE CANNOT BE MADE. 10. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATI VE, WE NOTICED THAT IN EARLIER YEARS THE DISALLOWANCE ON ACCOUNT OF GENERAL EXPENS ES AND OTHER EXPENSES WERE CONFIRMED BY THE I.T.A.T. AS NO DETAILS WERE FURNIS HED. THE DISALLOWANCE IN THAT YEAR WAS RS.10,000/- OUT OF STAFF WELFARE AND GENER AL EXPENSES. IN THE CASE UNDER CONSIDERATION, THE A.O. HIMSELF ADMITTED IN HIS ORD ER THAT THE DETAILS OF EXPENSES HAS BEEN FILED BUT THE LOG BOOK WAS NOT FILED BY TH E ASSESSEE. THEREFORE, HE DISALLOWED 20% OF THE GENERATOR EXPENSES. THE GENE RATOR EXPENSES CLAIMED IN THE EXISTING HOTEL BUSINESS AND THE ASSESSEE HAS FURNIS HED DETAILS OF GENERAL EXPENSE AND REPAIR AND MAINTENANCE. UNDER THE CIRCUMSTANCE S, WE FIND THAT NO SUCH ADHOC DISALLOWANCE IS WARRANTED ON ACCOUNT OF GENERAL EXP ENSES AND REPAIR AND MAINTENANCE EXPENSES. IN RESPECT OF GENERATOR EXPE NSES THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DOCUMENTS, LOG BOOK AND OTHERS, TH EREFORE, THE A.O. HAS RIGHTLY DISALLOWED 20% OF THE EXPENSES. IN THE LIGHT OF TH E FACT, WE DELETE THE ADDITION OF RS.15,000/- ON ACCOUNT OF GENERAL EXPENSE AND RS.15 ,000/- ON ACCOUNT OF REPAIR AND MAINTENANCE, HOWEVER, THE DISALLOWANCE ON ACCOU NT OF GENERATOR EXPENSES OF RS.31,741/- IS CONFIRMED. ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 9 11. IN RESPECT OF GROUND NO.3 & 4, THE LD. AUTHORIS ED REPRESENTATIVE SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER DATED 20.07. 2007 OF I.T.A.T., AGRA BENCH IN ASSESSEES OWN CASE (SUPRA) FOR EARLIER YEARS WHERE IN THE I.T.A.T. HAS DELETED THE ADDITION OF RS.84,00,000/- VIDE PARAGRAPH NOS.26 TO 28 AT PAGE NOS.9 & 10. SIMILARLY, ADDITION OF RS.62,00,000/- WAS DELETED B Y THE I.T.A.T. VIDE PARAGRAPH NOS.20 TO 23 AT PAGE NO.8. THE ESTIMATED INCOME/EX PENSES OF RS.18,80,000/- IN RESPECT OF NON-EXISTING BUSINESS WAS ALSO DELETED B Y THE I.T.A.T. VIDE PARAGRAPH NOS.38 TO 39 AT PAGE NO.11. THE AFORESAID RELEVANT FINDINGS OF THE I.T.A.T. ARE REPRODUCED AS BELOW:- (ITAT ORDER PAGE NOS.9 & 10) 26. THE NEXT ISSUE RELATES TO CONFIRMING THE ADDIT ION OF RS.84,00,000/- ON ACCOUNT OF ESTIMATED BUSINESS INC OME. 27. THE AO HAS ESTIMATED THE EXPENSES AT RS.99.50 L ACS. FURTHER HE HAS ESTIMATED AN INCOME OF RS.84,00,000/- BY OBS ERVING THAT AS PER RECOGNIZED ACCOUNTING PRACTICE ON ACTUARIES 6 .5% OF DEPOSITS MOBILIZED BY ASSESSEE FORFEITED (6.5 X 13,05,000) 8 4,00,000/-. THE LD. CIT(A) HAS CONFIRMED THIS ACTION OF THE AO. 28. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE ORDERS OF THE AUTHORITIES BELOW, WE ARE NOT ABLE TO UNDERSTAN D HOW THIS INCOME HAS BEEN ARRIVED AT BY THE AO. WITHOUT BRINGING AN Y MATERIAL ON RECORD OR WITHOUT ANY DISCUSSION IN THE BODY OF THE ORDER THE AO HAS OBSERVED THAT THERE MAY BE INCOME OF RS.84,00,000/- ON ACCOUNT OF FORFEITURE OF DEPOSITS. DISPUTE IS GOING ON, FIR H AS BEEN LODGED BY THE DEPOSITOR, THERE IS NO QUESTION OF FORFEITURE O F ANY DEPOSIT AND FROM THE MATERIAL AVAILABLE ON RECORD, IT IS SEEN T HAT THE COMPANY IS REPAYING THE DEPOSITORS YEAR AFTER YEAR. THEREFORE , WE ARE NOT ABLE TO UNDERSTAND HOW THE AO HAS MADE THIS ADDITION OF RS. 84,00,000/-. THE AO HAS NOT DISCUSSED IN HIS ORDER THAT IN WHAT TYPE OF BUSINESS AND ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 10 HOW THERE WILL BE A BUSINESS YIELD @ 6.5 TIMES. TH ERE IS NO INDICATION IN THE ASSESSMENT ORDER AS TO FORM WHERE THE FIGURE OF FORFEITURE DEPOSITS AMOUNTING TO RS.13.05 LACS HAS BEEN WORKED OUT. THERE IS NO INFORMATION EVEN IN THE ACCOUNTS FOR THE PERIOD END ING ON 31.3.1998. IT IS ALSO BEYOND UNDERSTANDING AS TO HOW INCOME CA N BE 6.5 TIMES OF THE FORFEITED AMOUNT AND FURTHER THERE IS NO FORFEI TURE OF ANY DEPOSITS REFLECTED IN THE AUDITED ACCOUNTS FOR THE PREVIOUS YEAR ENDING 31.3.1998. ON PAGE 6, SUB-PARA-3 OF PARA 5 OF THE ASSESSMENT ORDER THE AO HAS STATED THAT THERE IS EVIDENCE THAT OUT O F THE TOTAL DEPOSITS, MONEY SIPHONED OFF AND EMBEZZLED WHICH HAS BEEN BRO UGHT BACK. ON PAGE 8 OF THE SAID ORDER SUCH AMOUNT WHICH HAS BEEN BROUGHT BACK HAS BEEN STATED TO BE RS.13.05 LACS. ON THIS AMOUN T THE INCOME HAS BEEN WORKED OUT ACCORDING TO RECOGNIZED ACCOUNTING PRACTICE AT 6.5 TIMES I.E. OF RS.13.05 LACS WHICH IS EQUIVALENT TO RS.84,00,000/-. IN OUR CONSIDERED VIEW, THIS HYPOTHETICAL PRESUMPTION OF AO CANNOT BE SUSTAINED EITHER ON FACTS OF THE CASE OR IN THE EYE S OF LAW. THERE MUST BE SOMETHING ON RECORD THAT ASSESSEE IN FACT HAD FO RFEITED ANY AMOUNT. AS STATED ABOVE, THERE IS NO MATERIAL OR EVIDENCE O N RECORD EITHER IN THE YEAR UNDER CONSIDERATION OR IN THE PAST THAT AS SESSEE HAD SIPHONED ANY INCOME BY EMBEZZLEMENT. THEREFORE, IN OUR CONS IDERED VIEW, THE ADDITION MADE ON PRESUMPTION BASIS CANNOT BE SUSTAI NED. ACCORDINGLY THE ADDITION OF RS.84,00,000/- STANDS D ELETED. *** *** *** (ITAT ORDER PAGE NO.8) 20. GROUND NO.2(D) RELATE TO ADDITION OF RS.62 LAC S ON ACCOUNT OF INTEREST INCOME. 21. THE AO BY OBSERVING THAT IN THE EARLIER YEAR I. E. A.Y. 1998-99 THERE WAS INTEREST INCOME OF RS.62 LACS,. THEREFORE , HE ADOPTED THE SAID INCOME FOR THE YEAR UNDER CONSIDERATION ALSO. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. 22. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED I N THIS GROUND ALSO. 23. IT IS SEEN THAT NEITHER ANY DISCUSSION HAS BEE N MADE IN THE BODY OF THE ORDER OF THE AO NOR ANY VALID REASON HAS BEE N GIVEN FOR ADOPTING THE INTEREST INCOME SHOWN IN LAST YEAR. A NY INCOME CAN BE ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 11 ADDED ON THE BASIS OF ANY POSITIVE EVIDENCE. SINCE THERE WAS NO INTEREST INCOME DURING THE YEAR UNDER CONSIDERATION NEITHER THERE WAS ANY EVIDENCE THAT ASSESSEE HAD INTEREST INCOME DURI NG THE YEAR UNDER CONSIDERATION, THEREFORE, WE HOLD THAT AO AND LD. C IT(A) WERE NOT JUSTIFIED IN MAKING AND CONFIRMING THIS ADDITION. *** *** *** (ITAT ORDER PAGE NO.11) 38. FOR A.Y. 2003-04 THERE IS ONE MORE ADDITION I. E. MAKING IMAGINARY DISALLOWANCES OUT OF EXPENSES OF NON EXIS TENT BUSINESS AT RS.18,80,000/-. 39. NO REASON WHATSOEVER HAS BEEN GIVEN BY THE AO W HILE DISALLOWING ADMISSIBLE EXPENSES ON ADHOC BASIS. TH E INCOME HAS BEEN ESTIMATED ON IMAGINARY BASIS WHICH WE HAVE ALR EADY DELETED. THEREFORE, WITHOUT ANY BASIS ANY IMAGINARY DISALLOW ANCE OF ANY EXPENDITURE CANNOT BE SUSTAINED. THEREFORE, THE AD DITION OF THIS AMOUNT OF RS.18,80,000/- ALSO STAND DELETED. 12. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATI VE, WE FIND THAT DURING THE YEAR UNDER CONSIDERATION, THE CIT(A) FOLLOWED HIS P REDECESSORS ORDER FOR EARLIER YEARS. WE ALSO FIND THAT ON IDENTICAL SET OF FACTS , I.T.A.T. IN EARLIER YEARS 1999- 2000 & OTHERS ORDER DATED 20.07.2010 HAS DELETED TH E ADDITION. SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING THE ABOVE ORDER O F I.T.A.T. OF EARLIER YEARS, TO MAINTAIN CONSISTENCY, WE DECIDE GROUND NO 3 & 4 IN FAVOUR OF THE ASSESSEE AND ON MERIT OF THE CASE ALSO GROUND NOS.3 & 4 ARE DECIDED IN FAVOUR OF THE ASSESSEE BY DELETING THE ADDITIONS. ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 12 13. THE BRIEF FACTS OF GROUND NO.5 ARE THAT THE A.O . MADE ADDITION ON ACCOUNT OF RENT RECEIVED RS.1,17,600/-. THE CIT(A) CONFIRMED THE ORDER OF A.O. AS PER DETAILS REPRODUCED IN THE ORDER OF CIT(A) WHILE DECIDING GR OUND NOS.2 & 3. 14. AT THE OUTSET, THE LD. AUTHORISED REPRESENTATIV E SUBMITTED THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF I.T.A.T., AGRA BENCH I N ASSESSEES OWN CASE FOR EARLIER YEARS 1999-2000 TO 2003-04 VIDE ORDER DATED 20.07.2010. THE I.T.A.T. DELETED THE ADDITION AS PER PAGE NO.8, PARAGRAPH NO S.24 TO 25 OF THE ORDER. THE RELEVANT FINDING OF THE I.T.A.T. POINTED OUT BY THE LD. AUTHORISED REPRESENTATIVE IS REPRODUCED AS UNDER :-. 24. NEXT GROUND RELATES TO ADDITION OF RS.1,54,000 /- ON ACCOUNT OF RENT AS OTHER INCOME. 25. THE AO IN THE COMPUTATION OF INCOME AT PAGE 8 M ADE ADDITION OF RS.1,54,000/- BY MENTIONING RENT AS OTHER INCOME . NO DISCUSSION HAS BEEN MADE IN THE BODY OF THE ORDER THAT HOW THI S RENT INCOME IS OTHER INCOME. IN FACT, THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT OF THE HOTEL BUSINESS HAD SHOWN RENTAL INCOME OF RS.1,68,6 50/- AND IT SEEMS; THAT AO HAD TREATED THE RENTAL INCOME OF HOT EL AS INCOME FROM OTHER SOURCES. HOWEVER, NO FINDING HAS BEEN GIVEN BY THE AO THAT HOW THE RENTAL INCOME OF HOTEL CAN BE TREATED AS IN COME FROM OTHER SOURCES. WITHOUT GIVING ANY FINDING, IN OUR CONSID ERED VIEW, ANY ADDITION MADE BY THE AO WHICH IS CONFIRMED BY LD. C IT(A) IS NOT JUSTIFIED. ASSESSEES NET RESULT IS OF LOSS. WHIL E COMPUTING THE TOTAL INCOME, THE INCOME HAS TO BE REDUCED FROM THE LOSSE S. THEREFORE, THERE WILL BE NO IMPACT ON THE REVENUE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DELETE THIS ADDITION OF RS.1,54,0 00/-. ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 13 15. SINCE THE FACTS ARE IDENTICAL, WE RESPECTFULLY FOLLOWING THE ORDER OF I.T.A.T. AGRA BENCH IN ASSESSEES OWN CASE FOR EARLIER YEARS AND ALSO TO MAINTAIN CONSISTENCY WE DELETE THE ADDITION AND DECIDE THE G ROUND IN FAVOUR OF THE ASSESSEE. ITA NO.165/AGR/2009 FOR A.Y. 2004-05 BY THE ASSESSE E 16. THE GROUNDS RAISED BY THE ASSESSEE IN THE ABOVE APPEAL ARE AS UNDER :- 1. BECAUSE THE ASSESSMENT IS BAD IN LAW HAVING BEEN MADE ON THE BASIS OF RETURN FILED BEYOND THE PRESCRIBED TIME UN DER SECTION 139(3) OF THE ACT. 2. BECAUSE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE AUTHORITIES HAVE ERRED IN MAKING FOLLOWING DISALLOW ANCE OF EXPENSES: GENERATOR EXPENSES 44,934/- GENERAL EXPENSES 15,000/- REPAIRS & MAINTENANCE 15,000/- 3. BECAUSE THE AO HAS ERRED IN REDUCING FOLLOWING I MAGINARY EXPENSES IN RESPECT OF BUSINESS WHICH DID NOT EXIST : IMAGINARY REDUCED CLAIM BY COMMISSION 68,00,000 54,40,500 INTEREST 1,11,12,000 44,12,000 MANAGEMENT & 45,00,000 27,00,000 STAFF EXPENSES 4. BECAUSE THE AO HAS ERRED IN ESTIMATING INCOME FR OM NON- EXISTENT BUSINESS AT RS.46,60,000/- BY APPLYING AN UNKNOWN FORMULA. 5. BECAUSE THE AO HAS ERRED IN MAKING SEPARATE ADDI TION OF RS.25,000/- AS PROPERTY INCOME. ITA NOS.164 & 165/AGR/2009 A.YS. 2002-03 & 2004-05 . 14 6. BECAUSE THE AO HAS ERRED IN HOLDING THAT LOSS WI LL NOT TO CARRIED OVER. 17. THE LD. REPRESENTATIVES SUBMITTED THAT ALL THE GROUNDS ARE IDENTICAL TO THE GROUNDS RAISED IN A.Y. 2002-03. AS PER THE DETAILE D DISCUSSIONS MADE IN A.Y. 2002-03 ABOVE, WE CONFIRM THE ADDITION ON ACCOUNT O F GENERATOR EXPENSES RS.44,934/- AND DELETE OTHER ADDITIONS. 18. GROUND NO.1 HAS NOT BEEN PRESSED IN THIS YEAR A LSO, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. THUS, THE APPEAL IS PART LY ALLOWED. 19. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY