The ITO,Vapi Ward-4, Nani Daman V. Shri Sanjay Singh Surendra Singh, Nani Daman

ITA 1734/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76886 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-06-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: S KALARA
• Keywords: Additional evidence; Onus to prove
• Section: 143(3); 80IB; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 1734 /AHD/2010 (ASSESSMENT YEAR: 2006-07) THE I.T.O., VAPI WARD-4, DAMAN V/S SHRI SANJAY SINGH SURENDRA SINGH PROP. SHIV OM PACKAGING, GALA NO. 6, PLOT NO. 10, PREMIER INDUSTRIAL ESTATE, KACHIGAN, NANI DAMAN. (APPELLANT) (RESPONDENT) PAN: AVTPS 3813K APPELLANT BY : SHRI B.L. YADAV, SR. D.R. RESPONDENT BY : SHRI S. KALARA ( )/ ORDER DATE OF HEARING : 30-06-2014 DATE OF PRONOUNCEMENT : 11-07-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A), VALSAD ORDER DATED 15.01.2010 FOR A.Y. 2006-07. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF SHIV OM PACKAGING AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND PRINTI NG OF PACKING MATERIAL LIKE CORRUGATED BOX, SHEET, ETC AT ITS MAN UFACTURING UNIT LOCATED AT DAMAN. ASSESSEE FILED THE RETURN OF INCOME FOR A .Y. 06-07 ON ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 2 06.11.2006 DECLARING TOTAL INCOME OF RS. NIL AFTER CLAIMING DEDUCTION OF RS. 4,82,477/- U/S. 80IB OF THE ACT. THE CASE WAS S ELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECT ION 143(3) VIDE ORDER DATED 19.12.2008 AND THE TOTAL INCOME WAS DETERMINE D AT RS. 12,96,356/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A), CIT(A) VIDE ORDER DATED 15.01.2010 PARTLY A LLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB OF THE ACT STATING THAT DISA LLOWANCE OF CLAIM OF DEDUCTION U/S.80IB OF THE ACT ON THE SOLE GROUND THAT THE ASSESSEE WAS NOT HAVING FA CTORY LICENSE BEFORE IT STARTED MANUFACTU RING ACTIVITIES IS WITHOUT ANY MERITS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE POINT THAT THE ASSESSEE HAS FAILED TO PROVE THAT IT HAS COMMENCED THE MANUFACTURING ACTIVITY ON OR BEFORE 31.03.2004, AS STIPULATED IN SECTION 80IB OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED C1T(A) HAS ERRED IN ALLOWING THE CAPITAL INTRODUCED BY THE ASSESSEE AS THE CREDI T WORTHINESS AND GENUINENESS OF CASH INTRODUCTION I S NOT PROVED BY THE ASSESSEE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) HAS ERRED IN DELETING THE ADDITION MADE OF RS. 1,37,280/- ON ACCOUNT OF U NSECURED LOAN AS THE ONUS TO PROVE THE GENUINENESS OF THE TRANSACTION LIES ON THE ASSESSEE BUT IT HAS FAILED TO DISCHARGE THE SAME. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED C1T(A) HAS ERRED IN ALLOWING THE PRIOR PERIOD EXPENSES AS THE ASSESSEE FOLLOWS T HE MERCANTILE SYSTEM OF ACCOUNTS. GROUND NO. 1 AND 2 ARE IN CONNECTION WITH CLAIM OF DEDUCTION U/S. 80IB. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS. 4,82,477/- U/S. 80IB O F THE ACT. ASSESSEE WAS ASKED TO FURNISH THE COPY OF PERMANENT DIC CERT IFICATE, POWER RELEASE ORDER AND THE FIRST LIGHT BILL. ASSESSEE FI LED PROVISIONAL DIC CERTIFICATE BUT FAILED TO FURNISH THE PERMANENT DIC CERTIFICATE. A.O NOTED THAT AS PER THE POWER RELEASE ORDER, POWER WAS RELE ASED ON 29.12.2004 AND THEREFORE HE WAS OF THE VIEW THAT IN THE ABSENC E OF POWER, THE PRODUCTION CANNOT BE STARTED AND THEREFORE THE ASSE SSEE COULD NOT HAVE STARTED PRODUCTION BEFORE 31.03.2004 WHICH WAS THE STIPULATED DATE AS PER ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 3 THE PROVISIONS OF SECTION 80IB SO AS TO BE ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80IB. A.O ALSO NOTED THAT THE ASSESSEE WAS NEI THER HAVING ANY FACTORY PREMISES NOR HAD PAID ANY RENT FOR HIRED PR EMISES. A.O WAS THEREFORE OF THE VIEW THAT MANUFACTURING WAS NOT PO SSIBLE WITHOUT EXISTENCE OF PREMISES. IN THE ABSENCE OF JUSTIFICAT ION OF ITS CLAIM OR PROOF IN SUPPORT OF ITS CONTENTION, THE CLAIM OF DEDUCTIO N U/S. 80IB WAS DENIED BY THE A.O. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE DELETED THE DISALLOWANCE OF DEDUCTION UNDER 80IB MA DE BY THE A.O BY HOLDING AS UNDER:- L.IN GROUND NO.1 THE APPELLANT HAS RAISED ITS CONTE NTION THAT THE ASSESSING OFFICER HAS ERRED IN DISALLOWING THE DEDUCTION U/S. 80IB ON VARIOUS BASI S VIZ. THE PERMANENT DIC REGISTRATION CERTIFICATE WAS NOT BEEN OBTAINED, UNAVAILABILITY OF POWER RELE ASE FROM THE ELECTRICITY DEPARTMENT AND ALSO THE NON PAYMENT OF RENT OF THE PREMISES INTERPRETED AS NON AVAILABILITY OF THE FACTORY PREMISES FOR THE COMMENCEMENT AND CONTINUATION OF THE MANUFACTURING ACTIVITIES AND OPERATIONS OF THE UNIT. 1.1) AS REGARD THE SAID GROUND, ON PERUSING THE O RDER ISSUED BY THE AO, STATED THAT; THOUGH THE PROVISIONAL DIC WAS AVAILABLE AND PRESENTED BEFORE THE AO; THE SAME NOT BEING PERMANENT IN NATURE, THE DEDUCTION SHALL NOT BE ELIGIBLE FOR CLAIMING AS THE SAME WILL NOT BE CONSIDERED AS A SUBSTANTIATE PROOF AND EVIDENCE AS REQUIRED TO BE ELIGIBLE FOR C LAIMING SUCH A DEDUCTION. 1.2) THE AO ALSO STATED THAT PROVISIONAL CERTIFICAT E ISSUED BY THE DIC FOR THE PURPOSE TO COMPLETE TH E FORMALITIES BEFORE SETTING UP THE INDUSTRY AND COMM ENCEMENT OF PRODUCTION. THEREBY THE PERMANENT DIG CERTIFICATE IS AN AUTHENTIC DOCUMENT ON THE BAS IS OF WHICH THE DEDUCTION COULD BE CLAIMED. 1.3) ON THIS, THE APPELLANT HAS SUBMITTED THAT THE RE IS NO SPECIFICATION UNDER ANY LAW MAKING A MENTION FOR THE REQUIREMENT OF A PERMANENT REGISTRA TION IN ORDER TO CLAIM 80IB DEDUCTION. THE PURPOSE OF PROVISIONAL CERTIFICATE IS THE MEET THE REQUIREM ENTS AND OTHER LEGAL COMPLIANCES FROM VARIOUS AUTHORITIES ALONG WITH THE COMMENCEMENT OF THE PROD UCTION ACTIVITIES OF THE UNIT AND THE SAME SHALL CONTINUE FOR A PERIOD OF 5 YEARS SUBJECT TO THE DIS CRETIONARY POWERS OF THE DICAUTHORITY FOR THE SAME. 1.4) THEREBY ON PROPER ANALYSIS OF THE CASE, IT CAN BE OBSERVED THAT THE CONTENTION OF THE APPELLANT HOLDS GOOD AND THAT THE SAID GROUND RAISED BY THE A O CANNOT BE HELD AS A BASIS OF DISALLOWANCE. 1.5) FURTHER, THE AO HAS STATED IN THE ORDER THAT POWER WAS RELEASED ON 29.12.2004 AS MENTIONED IN THE POWER RELEASE ORDER. WITHOUT POWER, PRODUCTION CANNOT BE STARTED AND THE SAME SHALL BE TAKEN IN THE MEANING THAT THE PRODUCTION HAD ACTUALLY COMMEN CED ON AND AFTER 29.12.2004 AND NOT BEFORE 13.03.2004 AS STIPULATED IN THE PROVISIONS OF SECTI ON 80IB. ALSO, ON PERUSAL OF THE ORDER OF THE AO IT IS SEEN THAT THE ASSESSEE HAS NEITHER OWNED HIS OWN FA CTORY PREMISES NOR HAS PAID RENT FOR THE HIRED PREMISES. THEREFORE NON OWING OF THE FACTORY PREMIS ES AND ALSO NON PAYMENT OF THE RENT SUPPORTS THE FACT THAT THE ASSESSEE HAD NO FACTORY PREMISES ON W HICH THE UNIT CAN START ITS BUSINESS OPERATIONS 1.6) ON THIS, THE APPELLANT HAS SUBMITTED IN THE HEARING THE FACTS IN WRITING THAT, IN THE ABSENCE T HE TIMELY AVAILABILITY OF POWER CONNECTION IN THE UNIT AND THE NEED FOR COMMENCEMENT OF PRODUCTION ACTIVITIES; THE REQUIREMENTS OF POWER CONNECTION WA S MET BY HIRING A DG SET IN THE UNIT. THE RELATED EXPENSES FOR RUNNING THE DG SET WERE ALSO INCURRED IN THE RELEVANT PERIOD. POWER RELEASE ORDER WAS OBTAINED ON 29.12.2004 AND THE SAME WAS PRODUCED BE FORE THE AO, UNTIL THEN THE WORK WAS CONTINUED BY USING THE DG SET. FURTHER FOR THE MATTER BASED ON THE AVAILABILITY OF THE FACTORY PREMISES FOR THE COMMENCEMENT OF THE PRODUCTION ACTIVITIES, THE APPELLANT HAS RAISED HIS CONTENTION THAT THE INDEBTEDNESS DOES NOT OVER RID E THE FACTS AND THE LEGAL AGREEMENT UNDERGONE. THE AP PELLANT HAD ENTERED INTO AN AGREEMENT FOR HIRING ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 4 THE PREMISES ON RENT. A COPY OF THE SAME WAS PRODUC ED BEFORE THE AO. THE ONLY MATTER WAS THE NON PAYMENT OF THE RENT TO THE AGREED PARTY. THIS IS UN PAID, AS THERE WAS A MUTUAL UNDERSTANDING WITH THE OWNER ON THE FACT THAT THE OWNER WAS A KNOWN PARTY AND THEY RELIED ON THE CREDIBILITY OF THE APPELLANT . ALSO, IT WAS AGREED MUTUALLY THAT IN ORDER TO REGIS TER A GOOD PROFITABILITY; THE OWNER WOULD SUPPORT T HE APPELLANT BY WAIVING THE RENT FOR CERTAIN TERM OF T IME PERIOD. ALSO, THE APPELLANT HAD HEALTHY BUSINESS RELATIONS WITH THE OWNER OF THE PREMISES AND THE SAME WERE MADE STRONGER BY PASSING ON THE CONSIDERATION BY WA Y OF PROVIDING CLIENTAL ORDERS TO THE OWNER ON OUR CREDIT. ALL THIS FORMS A PART OF CONSIDERATION IN KIND AND ON THE BASIS OF GOOD CREDIBILITY AND STRONG BUSINES S RELATIONS. THE SAME WAS ALL BACKED BY THE REGISTERE D RENT AGREEMENT UNDERGONE AND WAS THEREBY NOT VAGUE. 1.7) ANALYZING THE FACTS AND POINTS PRESENTED IN THE HEA RING, THE CONTENTION OF THE APPELLANT SEEMS TO BE CORRECT. AND I HEREBY DELETE THE DISALLOWANCE MADE BY THE AO OF THE DEDUCTION U/S. 80IB OF THE IT ACT. 1.8) AS A RESULT, AS REGARD GROUND NO. 1, THE APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O AND FURTHER SUBMITTED THAT THE POWER WAS RELEASED TO THE ASSESSEE ON 29.12.200 4 AND HENCE IT WAS NOT POSSIBLE FOR THE ASSESSEE TO START PRODUCTION B EFORE 31.03.2004 AS STIPULATED BY THE PROVISIONS OF SECTION 80IB OF THE ACT. HE FURTHER SUBMITTED THAT ASSESSEE GOT DIC CERTIFICATE ON 29.1 2.2004 AND THE ASSESSEE DID NOT HAVE FACTORY LICENCE AS ON 31.03.2 004. HE THUS SUBMITTED THAT A.O WAS FULLY JUSTIFIED IN DISALLOWI NG THE CLAIM OF THE ASSESSEE. THE LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE YEAR UNDER APPEAL WAS THIRD YEAR OF MANUFACTURING ACTIVITY. IN THE EARLIER 2 ASSESSMENT YEARS THE CLAIM OF ASSESSEE OF DEDUCTION UNDER 80IB WAS ALLOWED IN APPEAL BY CIT(A). HE ALSO PLACED ON RECO RD THE COPY OF THE ORDER CIT(A) IN THE ASSESSEES OWN CASE FOR A.Y. 04 -05 & 05-06 TO DEMONSTRATE THAT ASSESSEE HAS ALREADY BEEN GRANTED DEDUCTION UNDER 80IB IN EARLIER YEARS AND THEREFORE DEDUCTION CANNO T BE DENIED IN THE THIRD YEAR. THE LD. A.R. ALSO SUBMITTED THAT IN TH E ABSENCE OF THE POWER CONNECTION, THE REQUIREMENT OF POWER CONNECTION WAS MET BY HIRING D.G SET. HE THUS SUPPORTED THE ORDER OF CIT(A). ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 5 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE YEAR UNDER APPEAL IS THE THIRD YEA R WHERE THE ASSESSEE HAS CLAIMED DEDUCTION UNDER 80IB OF THE ACT. IT IS ALSO A FACT THAT FOR A.Y. 04-05 & 05-06 THE ASSESSEES CLAIM FOR DEDUCTI ON UNDER 80IB HAS BEEN ALLOWED BY CIT(A) AND THE COPY OF THE AFORESAI D ORDERS ARE PLACED ON RECORD. NOTHING HAS BEEN BROUGHT ON RECORD BY R EVENUE TO DEMONSTRATE THAT AGAINST THE ORDER OF CIT(A) FOR A. Y. 04-05 & 05-06, REVENUE HAD PREFERRED APPEAL BEFORE TRIBUNAL AND TH E ORDER OF A.O WAS UPHELD. WITH RESPECT TO THE SUBMISSION OF THE A.O T HAT IN THE ABSENCE OF POWER IT CANNOT BE SAID THAT ASSESSEE COULD HAVE ST ARTED MANUFACTURING PROCESS, THE ASSESSEE HAS SUBMITTED THAT ITS REQUIR EMENT OF POWER WAS MET THROUGH D.G SETS. THE AFORESAID SUBMISSIONS OF THE ASSESSEE HAS ALSO NOT BEEN CONTROVERTED BY REVENUE BY BRINGING A NY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A). IN THE RESULT, THIS GROUN D OF REVENUE IS DISMISSED. GROUND NO. 3 IS WITH RESPECT TO THE ADDITION MADE O N ACCOUNT OF CAPITAL INTRODUCTION. 8. A.O NOTICED THAT ASSESSEE HAD INTRODUCED CAPITAL OF RS. 5,40,376/-. THE ASSESSEE WAS ASKED TO SUBMIT EVIDENCE IN RESPECT OF CAPITAL INTRODUCTION. IN THE ABSENCE OF ANY EXPLANATION OR DOCUMENTARY EV IDENCE. A.O CONCLUDED THAT ASSESSEE HAS FAILED TO PROVE THE SOU RCE OF CAPITAL INTRODUCTION AND THEREFORE THE CAPITAL OF RS. 5,40, 376/- INTRODUCED DURING THE YEAR WAS TREATED AS UNEXPLAINED UNDER SECTION 6 8 OF THE ACT. ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 6 AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITION BY HOLDING AS U NDER:- 2.IN GROUND NO. 2, THE APPELLANT HAS RAISED THE CON TENTION THAT THE CAPITAL INTRODUCED DURING THE YEAR BY THE PROPRIETOR IS FROM THE PAST SAVINGS OF THE A PPELLANT AND FROM THE FINANCIAL SUPPORT OF THE FAMI LY ACTING AS SUPPORT SOURCES FOR THE INVESTMENTS SO MA DE IN THE FIRM. THE FACT THAT CASH WAS BEEN DEPOSITED IN THE BANK AND THE SAME WAS BEEN WITHDRA WN CANNOT RULE OUT THE EXISTENCE OF THE FUNDS AVAILABLE. THE DIRECT DEPOSITION OF CASH INTO FIRM' S ACCOUNT OR OTHERWISE WOULD NEVER CHALLENGE THE COLOR OF THE MONEY AND THE CHARACTER OF THE TRANSAC TION. 2.1) FURTHER, THE APPELLANT IS WITH THE ARGUMENT T HAT THE AO CANNOT PUT HIMSELF IN THE ARM OF THE BUSINESSMEN TO DECIDE THE MOBILIZATION OF THE FUNDS /OR ORGANIZATION OF THE PROFITS; AS; HE MAY HAVE THOUSANDS OF REASONS FOR THE SAME. IN THE INSTANT CASE OF THE APPELLANT, MOBILIZING CASH THROUGH TRANSFER TO A BANK ACCOUNT CANNOT BE THE ISSUE FOR MAKING ANY ADDITION U/S. 68 OF THE I.T ACT. 2.2) ALSO THAT, A QUESTION AS TO THE INTRODUCTION O F CASH VIS-A-VIS THE NEXUS OF THE PAST SAVINGS AND CREDIBILITY OF THE BUSINESSMEN DOES NOT HOLD GOOD; OUT OF THE FACT THAT; A PRUDENT BUSINESSMAN HAS A RIGHT TO MOBILIZE HIS FUNDS IN A MANNER TO HIS CHOI CE AND THEREFORE, THE ADDITION ON THE BASIS OF SUCH REASONING IS UNWARRANTED. 2.3) WHEREAS ON PERUSAL OF THE ORDER ISSUED BY THE AO, THE AO HAS TREATED SUCH A CAPITAL INFUSION AS UNEXPLAINED U/S. 68 OF THE IT ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE AO HAS SUPPORTED HIS JUDGMENT WITH THE FACT THAT NEITHER PROPER SATI SFACTORY JUSTIFICATION NOR EXPLANATION WERE GIVEN, NOR ANY DOCUMENTARY EVIDENCE OR STATEMENT WAS BEEN PROD UCED. 2.4) ON OBSERVING THE FACTS OF THE CASE AND THE CON TENTION PUT FORTH, IT CAN BE PERCEIVED THAT THE CONTENTION OF THE APPELLANT STANDS GENUINE. AND THE REBY AS A RESULT OF WHICH, THE APPEAL OF THE APPELLANT STANDS ALLOWED. 2.5) AS A RESULT, WITH REGARD TO GROUND NO. 2, THE APPEAL IS ALLOWED. 9. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 10. BEFORE US LD. D.R. SUBMITTED THAT DURING THE ASSESS MENT PROCEEDINGS ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN RESPECT OF CAPITAL INTRODUCTION NOR GAVE ANY EXPLANATION TO SUPPORT THE SAME. HE TH EREFORE SUBMITTED THAT IN SUCH CIRCUMSTANCES THE A.O WAS FULLY JUSTIF IED IN MAKING THE ADDITION. HE FURTHER SUBMITTED THAT CIT(A) DID NOT CALL FOR ANY REMAND REPORT FROM A.O AND DECIDED THE ISSUE ON THE BASIS OF SUBMISSION OF THE ASSESSEE. HE THEREFORE SUBMITTED THAT THE INTEREST OF JUSTICE, A.O BE ALLOWED AN OPPORTUNITY TO EXAMINE THE FACTS. HE THE REFORE SUBMITTED THAT THE MATTER MAY BE REMITTED TO A.O FOR VERIFICATION. THE LD. A.R. ON THE OTHER HAND SUPPORTED THE ORDER OF CIT(A). ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 7 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT DURING THE YEAR ASSESSEE HAD INTRODUCE D FRESH CAPITAL OF RS. 5,40,376/-. THE ASSESSEE WAS ASKED TO GAVE EXPLANAT ION IN SUPPORT OF THE SOURCE OF CAPITAL TO WHICH A.O HAS NOTED THAT ASSES SEE NEITHER GAVE ANY EXPLANATION NOR FURNISHED ANY DOCUMENTARY EVIDENCE NOR THE BANK BOOK OR STATEMENT WAS MADE AVAILABLE TO A.O. WE ALSO FIN D THAT CIT(A) BY A CRYPTIC ORDER HAS ALLOWED THE CLAIM OF ASSESSEE. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE MATTER NEEDS RE- EXAMINATION AT THE END OF A.O. WE THEREFORE REMIT THE ISSUE TO THE FILE OF A.O TO EXAMINE THE ISSUE AFRESH AND DECIDED IT AS PER LAW. THE ASSESSE E SHALL BE FREE TO PRODUCE THE NECESSARY EVIDENCE IN SUPPORT. NEEDLESS TO STATE THAT A.O SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL P URPOSES. GROUND NO. 4 IS WITH RESPECT TO DELETION OF ADDITIO N MADE ON ACCOUNT OF UNSECURED LOAN. 12. ON SCRUTINY OF THE AUDIT REPORT A.O NOTICED THAT BA LANCE OF UNSECURED LOAN HAD INCREASED BY RS. 1,37,280/-. THE ASSESSEE WAS ASKED TO CONFIRM THE GENUINENESS OF TRANSACTION AND SUBMIT THE CONFI RMATION, IDENTITY, CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TION. A.O NOTED THAT ASSESSEE FAILED TO SUBMIT THE CONFIRMATION AND IN T HE ABSENCE OF CONFIRMATION THE IDENTITY, CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION COULD NOT BE PROVED AND HE ACCORDINGLY TREATED THE UNSECURED LOAN OF RS. 1,37,280/- AS UNEXPLAINED U/S. 68 OF TH E ACT. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CI T(A). CIT(A) DELETED THE ADDITION MADE BY A.O BY HOLDING AS UNDER:- ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 8 6. WITH REGARD TO GROUND NO. 6, THE APPELLANT RAISED H IS CONTENTION THAT THE AO HAS ERRED IN LEVYING PENALTY U/S. 271(1)(C) FOR THE ADDITION TO THE UNSE CURED LOAN AMOUNTING TO RS. 1,37,280/-. 6.1) ON PERUSAL OF THE ORDER AS ISSUED BY THE AO, IT IS OBSERVED THAT THE AO HAS IMPOSED PENALTY PROCEEDINGS U/S. 271(1)(C) QUESTIONING THE GENUINENESS OF THE TRANSACTION SO UNDERGONE BY WAY OF ADDITION TO UNSECURED LOAN. 6.2) ON THE OTHER HAND; THE APPELLANT HAS STATED THE FAC T THAT THE APPELLANT COULD NOT PRODUCE THE CONFIRMATION OF THE PARTY FROM WHOM THE ADDITIO NAL LOAN WAS BEEN TAKEN AT THE TIME OF SCRUTINY AND HAD ASSURED THE AO FOR ADDENDUM SUBMIS SION OF THE SAME ON RECEIPT OF THE SAME. BUT THE SAME WAS NOT TAKEN INTO CONSIDERATION AND THE WHOLE AMOUNT WAS ADDED BACK. 6.3) FURTHER, THE LENDER OF THE AMOUNT IS THE FATHER OF THE PROPRIETOR AND THE AMOUNT IS OBTAINED AS UNSECURED LOAN. TAKING INTO CONSIDERATI ON THE EXPERIENCE IN SERVICE INDUSTRY AND THE PERIOD OF SERVICE OF SHRI SURENDRA SINGH, F ATHER OF THE APPELLANT, IT IS ONLY A PART AMOUNT FROM HIS SAVINGS EARNED THROUGHOUT HIS SPAN OF LIFE. THEREFORE THE FACT IN ITSELF SUFFICES THE GENUINITY AND JUSTIFIES THE LENDINGS. HAVING SERVED FOR QUIET A CONSIDERABLE NUMBER OF YE ARS OF SERVICE, THERE IS NO POINT OF SUSPECT ON THE PERSONAL SAVINGS MADE BY THE LENDER OF THE APPELLANT. 6.4 REFERRING TO THE FACTS OF THE CASE AND ANALYZING T HE CONTENTIONS OF THE APPELLANT, THE CONTENTION OF THE APPELLANT SEEMS TO BE CORRECT, AN D THUS, THE APPEAL IS WHOLLY ALLOWED. 6.5 AS A RESULT, WITH REGARD TO GROUND NO. 6 THE APPEAL STANDS ALLOWED. 13. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 14. BEFORE US, LD. D.R. POINTED TO THE FINDINGS OF A.O THAT ASSESSEE DID NOT FILE ANY CONFIRMATION TO PROVE THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION AND THEREFORE THE A.O WA S FULLY JUSTIFIED IN MAKING THE ADDITION. HE FURTHER SUBMITTED THAT THE SUBMISSION THAT THE LENDER WAS THE FATHER OF THE ASSESSEE WAS NOT MADE BEFORE A.O AND CIT(A) ALSO DID NOT CALL FOR ANY REMAND REPORT FROM THE A.O. HE THEREFORE SUBMITTED THAT THE SUBMISSIONS MADE BY TH E ASSESSEE BEFORE CIT(A) NEEDS TO BE EXAMINED AND THE A.O BE GRANTED AN OPPORTUNITY TO EXAMINE THE FACTUAL POSITION. THE LD. A.R. ON THE O THER HAND RELIED ON THE ORDER OF CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT BEFORE A.O ASSESSEE DID NOT FILE ANY C ONFIRMATION TO PROVE THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF TH E TRANSACTION. BEFORE ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 9 CIT(A) ASSESSEE SUBMITTED THAT THE LENDER OF THE AM OUNT WAS THE FATHER OF THE ASSESSEE. TO EXAMINE THE AFORESAID SUBMISSIO N NO REMAND REPORT WAS CALLED BY CIT(A) FROM A.O. WE ARE THEREFORE OF THE VIEW THAT THE A.O BE GRANTED AN OPPORTUNITY TO EXAMINE THE SUBMIS SION OF THE ASSESSEE. WE THEREFORE REMIT THE ISSUE TO THE FILE OF A.O TO VERIFY THE FACTUAL POSITION AS SUBMITTED BY THE ASSESSEE BEFOR E CIT(A) AND THE A.O SHALL THEREAFTER DECIDE THE ISSUE AS PER LAW. THE A SSESSEE SHALL BE FREE TO FURNISH ADDITIONAL EVIDENCE IN ITS SUPPORT. NEEDLE SS TO STATE THAT A.O SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL P URPOSES. 5 TH GROUND IS WITH RESPECT TO DELETION OF PRIOR PERIOD EXPENSES. 16. A.O NOTICED THAT ASSESSEE HAD DEBITED PRIOR PERIOD EXPENSES OF RS. 40,093/-. IN THE ABSENCE OF JUSTIFICATION FROM ASSE SSEE, A.O DISALLOWED EXPENSES. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE C ARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITION BY HOLDI NG AS UNDER:- 4. WITH REGARD TO GROUND NO. 4; THE APPELLANT HAS RAIS ED HIS CONTENTION THAT THE ASSESSING OFFICER HAS ERRED IN DISALLOWING THE EXPENSES TO THE EXTENT OF RS. 40,093/- TREATING THE SAME TO BE A PRIOR PERIOD EXPENSE. 4.1) ON PERUSING THE ORDER GIVEN BY THE AO, IT IS OBSERV ED THAT THE EXPENSES AMOUNTING TO THE RS. 40,093/- IS DISALLOWED AS THE SAME IS RELATED TO TH E PRIOR PERIOD AND DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS THE SA ME ARE NOT PERTAINING TO THE BUSINESS ACTIVITIES OF THE YEAR UNDER CONSIDERATION. 4.2) ON THE OTHER HAND, THE APPELLANT HAS SUBMITTED THE FACT OF THE CASE THAT THESE EXPENSES ARE INCURRED AS ELECTRICITY EXPENSES AND THE SAME ARE P AID IN THE YEAR UNDER CONSIDERATION OUT OF THE FACT THAT THE BILLS ISSUANCE IS VERY MUCH UNCER TAIN. SO IN SUCH CASES, PAYMENT BASIS OF ACCOUNTING IS MUCH SUITABLE AND APPROPRIATE. THIS S CENARIO IS MORE SO PREVAILING IN WHOLE OF THE DAMAN AREA, WHEREIN THE RECEIPT OF BILLS IS NOT REGULAR. THEREFORE SINCE IT IS NOT POSSIBLE TO ACCURATELY ASCERTAIN THE AMOUNT OF ELECTRICITY B ILLS, THE SAME IS PAID AS AND WHEN THE BILLS ARE RECEIVED BY US. 4.3) THEREFORE THE ASSESSEE HAS TREATED SUCH EXPENDITURE ON CASH BASIS OF ACCOUNTING DUE TO ITS IRREGULAR BILL ISSUANCE. THUS, CONSIDERING THE GENU INENESS OF THE FACTS AND CONSTRAINTS AS FACED BY THE APPELLANT; THE APPEAL STANDS TO BE ALL OWABLE. 4.4) HENCE, WITH REGARD TO GROUND NO. 4, THE CONTENTION OF THE APPELLANT SEEMS TO BE CORRECT. I HEREBY DELETE THE ADDITIONS MADE IN THIS CONTEXT ON THE PRIOR PERIOD ELECTRICITY EXPENSES. 4.5) THEREFORE ON GROUND NO. 4 OF THE APPEAL, THE APPEAL IS WHOLLY ALLOWED. ITA NO 1734/ AHD/2010 . A.Y. 2006- 07 10 17. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US . 18. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O AND ON THE OTHER HAND, LD. A.R. RELIED ON THE ORDER OF CIT(A). 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND, THAT CIT(A) AFTER CONSIDERING THE FACTUAL POSITION ALLOWED THE CLAIM OF ASSESSEE. BEFORE US, LD. D.R. COULD NOT CO NTROVERT THE FINDINGS OF CIT(A). WE APART FROM CONSIDERING THE AMOUNT OF DISALLOWANCE TO BE SMALL FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A). THUS THIS GROUND OF REVENUE IS DISMISSED. 20. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 11 - 07 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD