The DCITSabarkantha Circle, Himatnagar V. Shri Mehulkumar M.Kothari, Himatnagar

ITA 1854/AHD/2009

• Counselvise Citation: 185420514 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-01-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 04-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMIR TIKRIWALA SRDR
• Assessee Lawyers: S N DEVATIYA
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Salary income; Corroborative evidences
• Section: 143(3); 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.1854/AHD/2009 & C.O.138/AHD/2009 (ARISING OUT ITA NO.1854/AHD/2009) ASSESSMENT YEAR:2001-02 DCIT, SABARKANTHA CIRCLE, HIMATNAGAR MEHULKUMAR M KOTHARI PROP M/S RAJSHREE AUTO ENTERPRISES, MOTIPURA, HIMATNAGAR PAN NO.ABDPK9474G / V/S . / V/S . SHRI MEHULKUMAR M KOTHARI, PROP.OF M/S RAJSHREE AUTO ENTERPRISES, MOTIPURA, HIMATNAGAR DCIT, SABARKANTA CIRCLE, HIMATNAGAR / APPELLANT .. / RESPONDENT ITA NO.2251/AHD/2008 & C.O. NO.178/AHD/2008 (ARISING OUT ITA NO.2251/AHD/2008) ASSESSMENT YEAR: 2004-05 DCIT, SABARKANTHA CIRCLE, HIMATNAGAR MEHULKUMAR M KOTHARI PROP M/S RAJSHREE AUTO ENTERPRISES, MOTIPURA, HIMATNAGAR PAN / V/S . / V/S . SHRI MEHULKUMAR M KOTHARI, PROP. OF M/S RAJSHREE AUTO ENTERPRISES, MOTIPURA, HIMATNAGAR DCIT, SABARKANTA CIRCLE, HIMATNAGAR ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 2 NO.ABDPK9474G / APPELLANT .. / RESPONDENT ITA NO.1943/AHD/2009 ASSESSMENT YEAR: 2005-06 MEHULKUMAR M KOTHARI M/S RAJSHREE AUTO ENTERPRISES, MOTIPURA, HIMATNAGAR PAN NO.ABDPK9474G / V/S . DCIT, SABARKANTA CIRCLE, HIMATNAGAR / APPELLANT .. / RESPONDENT / ASSESSEE BY: SHRI S.N.DEVATIYA, AR / REVENUE BY SHRI SAMIR TIKRIWALA, SR-DR ! / DATE OF HEARING 16-01-2012 '#$% ! / DATE OF PRONOUNCEMENT 20-01-2012 &'( &'( &'( &'( / / / / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THESE APPEALS OF THE REVENUE ARISE FROM TWO DIFFERE NT ORDERS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-X, AHMEDABAD D ATED 10-02-2009 AND 31-03-2008 FOR THE ASSESSMENT YEARS 2001-02 AND 200 4-05. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION (CO) AGAINST THE REV ENUES APPEALS. THE ASSESSEE HAS ALSO FILED APPEAL FOR THE ASSESSMENT Y EAR 2005-06 AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-X , AHMEDABAD DATED 20- 03-2009. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR A.Y. 2 004-05 AND CO OF THE ASSESSEE FOR THE SAID ASSESSMENT YEAR. 2. THE REVENUE HAS RAISED THE GROUNDS OF APPEAL AS UNDER:- ITA NO.2251/AHD/2008 ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 3 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE ADDITION TO THE EXTENT OF RS.3,83,725/ - OUT OF THE TOTAL ADDITION OF RS.4,93,138/- MADE U/S. 68 OF THE I.T A CT ON ACCOUNT OF NON GENUINE CASH CREDIT INTRODUCED AS CAPITAL. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.9,52,445/- MADE U/S.68, BEING NON GENUINE CASH CREDIT IN THE NAME OF SHRI MAHENDRASINGH B DHA BI. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.15,76,500/- PERTAINING TO NON GENUINE CREDITORS UNDER THE HEAD SALES PROMOTION SCHEME-2 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. THE ASSESSEE HAS RAISED THE GROUND IN THE CO AS UND ER:- CO. NO.178/AHD/2008 (A/O ITA NO.2251/AHD/2008) 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING ADDITION TO THE EXTENT OF RS.1,09,413/- OUT OF THE TOTAL ADDITI ON OF RS.4,93,138/- MADE U/S.68 OF THE ACT ON ACCOUNT OF NON-GENUINE CA SH CREDIT BY THE AO. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.2,40,010/- AS PRIOR PERIOD ITEM. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT RS.2,40,010/- WERE NOT PR IOR PERIOD ITEMS IN VIEW OF LIABILITY ACCRUED OR ARISEN IN THIS YEAR OR IN ALTERNATIVE AO SHOULD HAVE BEEN DIRECTED TO ALLOW THE SAME IN THE EARLIER YEAR. 2. AS REGARDS GROUND NO.1 OF THE REVENUE AND GROUND NO.1 CO OF THE ASSESSEE. THE BRIEF FACTS ARE THAT THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAS INTRODUCED CAPITAL OF RS.5,83,138/-. T HE AO ASKED THE ASSESSEE TO FURNISH THE SOURCES FOR THE CAPITAL INT RODUCED AND ASSESSEE FILED DETAILS OF RS.90,000/- OUT OF THE TOTAL CAPITAL OF RS.5,83,138/-. THE ASSESSEE SHOWED INABILITY TO FURNISH ANY REPLY OR SOURCE FOR THE BALANCE CAPITAL INTRODUCED. THEREFORE, THE AO TREATED THE CASH CRED ITS OF RS.4,93,138/- IN HIS ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 4 CAPITAL AS NON-GENUINE CASH CREDITS AND ADDED TO TH E INCOME OF THE ASSESSEE U/S 68 OF THE INCOME-TAX ACT, 1961. 3. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED REP LY DATED 04-05-2007 WHICH IS AVAILABLE IN PARA-4.1 OF LD. CIT(A)S ORDE R. THE ASSESSING OFFICER WAS ASKED TO GIVE A REMAND REPORT WHO IN TURN SUBMITTED THE REMAND REPORT DATED 06-12-2007 WHICH IS AVAILABLE IN PARA-4.2 OF LD. CI T(A)S ORDER. THE ASSESSEE HAS SUBMITTED THE REPLY IN VIEW OF THE SAID REMAND REPORT AND CONSIDERING THE SAME, LD. CIT(A) VIDE PARA-4.4 OF HIS ORDER WAS OF THE VIEW THAT THE ASSESSEE HAS PROVED IDENTITY, CREDITWORTHINESS AND GENUINENE SS OF TRANSACTION BY FURNISHING AFFIDAVITS AND CONSIDERING THE FACT THAT NINE CREDITORS HAVE BEEN EXAMINED BY THE AO AND THEY HAVE NOT DENIED HAVING ADVANCED THE CREDITS AND THEREFORE HE DELETED THE ADDITIONS OF CASH CRED ITS OF RS.3.15 LAKHS ALONG WITH ADDITION OF RS.25,000/- AND RS.43,725/-, WHICH ARE CONTRA-ENTRIES AND NOT THE CASH CREDITS. THE ASSESSEE WAS ALLOWED THE RELI EF OF RS.3,83,725/-. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEW OF THE LD. CIT(A) IN PARA-4 .4 OF HIS ORDER THAT TWO CREDIT ENTRIES OF RS.25,000/- AND RS.43,725/- ARE S AME CONTRARY-ENTRIES AND NOT THE CASH CREDITS AND THEREFORE THE SAME CANNOT BE SUBJECT-MATTER OF ADDITION TO THE INCOME OF THE ASSESSEE. AS REGARDS THE ENTRIES OF RS.3.15 LAKH RECEIVED FROM VARIOUS PERSONS, THE ASSESSEE HAD SUB MITTED CONFIRMATION LETTERS. THE CREDITS ARE ALL SMALL AMOUNT RANGING F ROM RS.15,000/- TO RS.20,000/- EXCEPT ONE CREDIT OF RS.1.10 LAKH FROM DAHYABHAI PATEL. DURING REMAND PROCEEDINGS THE ASSESSEE PRODUCED NINE PARTI ES BEFORE THE ASSESSING OFFICER FOR EXAMINATION AND THE A.O RECOR DED THEIR STATEMENTS. THE AO COULD NOT EXAMINE DAHYABHAI PATEL AS HE WAS OUT OF STATION FOR TWO MONTHS. HOWEVER, THE ASSESSEE HAS FURNISHED PROOF O F HIS AGRICULTURAL LAND HOLDING IN FORM OF 7/12 AND 8A DOCUMENTS. THE OTHER TWO CREDITORS BABUBHAI DOSHI AND HIRALAL BHAVSAR HAVE EXPIRED. FROM THE ST ATEMENT RECORDED BY THE A.O, IT WAS FOUND THAT ALL THE CREDITORS HAVE CONFI RMED HAVING MADE THE ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 5 ASSESSEE. THE A.O HOWEVER, HAS REPORTED IN THE REMA ND REPORT THAT ALTHOUGH THE CREDITORS HAVE ADVANCED THE MONEY SHOWN AGAINST THEIR NAMES, THEY COULD NOT SUBSTANTIATE THEIR CLAIM BY GIVING THE SO URCES OF THEIR ADVANCE WITH SUPPORTING EVIDENCE. ALL THE 9 CREDITORS WHO WERE E XAMINED BY THE A.O HAVE CONFIRMED HAVING GIVEN THE CREDITS TO THE ASSESSEE. THE CREDITOR, IMTIA MARFATIA HAS CONFIRMED THE CREDIT AND HE HAS EXPLAI NED THE SOURCE OF CREDIT TO BE OUT OF HIS SALARY AND AGRICULTURAL INCOME AND HE HAS FURNISHED PROOF OF AGRICULTURAL LAND HOLDING IN FORM OF 7/12 AND 8A DO CUMENTS. PALLAVIBEN SHAH IS A TEACHER AND SHE HAS MADE THE DEPOSIT OUT OF HE R SALARY INCOME AND SAVINGS. SHRI DIPAK J RAVAL HAS CONFIRMED THAT HE H AS GIVEN RS.20,000/- TO THE ASSESSEE AND THAT HE HAS MADE THE DEPOSIT FROM OUT OF HIS AGRICULTURE INCOME AND HE HAS FURNISHED PROOF OF AGRICULTURAL L AND HOLDING IN FORM NO.7/12 AND 8A. KIRIT B JOSHI HAS CONFIRMED THAT HE HAS GIVEN RS.15,000/- TO THE ASSESSEE AND THAT HE IS A SURVEYOR IN GENERAL I NSURANCE CO AND FROM HIS SAVINGS HE HAS GIVEN THE DEPOSIT. KANUBHAI D PATEL HAS CONFIRMED THAT HE HAS GIVEN RS.20,000/- TO THE ASSESSEE OUT OF HIS AGRICU LTURE INCOME. HE HAS FILED COPIES OF FORM NO.7/12 BEFORE THE AO. RAMJIBHAI M P ATEL HAS ALSO CONFIRMED THE DEPOSIT AND HAS STATED THAT HE WORKED AS A COMP UNDER IN THE DISPENSARY OF DR. PARIKH AND FROM HIS SALARY HE HAS GIVEN THE DEPOSIT. BHARATBHAI H PATEL HAS CONFIRMED THE DEPOSIT AND STATED THAT HE IS SER VING AS A DOCTOR (DHMS) IN THE DISPENSARY OF DR. ARUN PARIKH SINCE FIVE YEARS AND FROM HIS SAVINGS HE HAS GIVEN THE DEPOSIT GIRISH C BHAVSAR HAS STATED THAT HE WAS WORKING IN HARISRI CHEMIST FOR THE LAST SEVEN YEARS AND HIS GROSS INCO ME IS RS.65,000/- AND FROM HIS SALARY INCOME AND SAVINGS HE HAS GIVEN THE ABOV E DEPOSIT. ASHWIN B JOSHI HAS SATED THAT HE IS PROPRIETOR OF HARIOM MED ICAL STORES AND HE IS FILING HIS INCOME-TAX RETURN AND HAS GOT PAN NO. AS REGARD S CREDITOR, DAHYABHAI, HE WAS OUT OF STATION FOR TWO MONTHS, THEREFORE, TH E ASSESSEE COULD NOT PRODUCE HIM BEFORE THE A.O WHILE THE REPORT WAS GIV EN IN OCTOBER, 2007. THEREAFTER, THE A.O WAS ASKED TO EXAMINE HIM IN MAR CH, 2008, AND THE A.O GAVE AN OPPORTUNITY TO THE ASSESSEE AND THE ASSESSE E COULD NOT PRODUCE SHRI DAHYABHAI. THEREFORE, THE ASSESSEE HAS SUBMITTED AN AFFIDAVIT FROM SHRI ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 6 JAYESHKUMAR PATEL, SON OF DAHYABHAI PATEL STATING T HAT HIS FATHER DAHYABHAI WAS NOT KEEPING WELL AND THAT HE WAS HANDLING THE F INANCIAL AFFAIRS OF HIS FATHER AND HE HAS CONFIRMED THAT DAHYABHAI WAS HAVI NG 7 ACRES OF LAND IN HIS OWN NAME AND 13 ACRES OF LAND JOINTLY WITH HIS BROT HER AND HE HAS FURNISHED COPIES OF FORM 7/12 BEFORE THE A.O AND THAT THE DEP OSIT HAS BEEN MADE OUT OF HIS FATHERS AGRICULTURAL INCOME. THUS, THE ASSESSE E HAS ESTABLISHED THE IDENTITY OF THE CREDITORS AND THE CREDITORS HAVE GI VEN STATEMENTS BEFORE THE A.O ON OATH CONFIRMING THAT THEY HAVE GIVEN THE MON EY AND IN MOST OF THE CASES THEY HAVE EXPLAINED THE SOURCES LIKE AGRICULT URE INCOME, SALARY INCOME ETC. AND THEY HAVE SUBMITTED THE PROOF OF OWNING AG RICULTURAL LAND AND SALARY CERTIFICATE. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). THUS, GROUND NO.1 OF THE R EVENUE AND GROUND NO.1 OF THE CO OF ASSESSEE ARE DISMISSED. 5. AS REGARDS GROUND NO.2 OF THE REVENUE, THE BRIEF FACTS ARE THAT ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS MAINT AINED A LEDGER ACCOUNT IN THE NAME OF MAHENDAINH B DABHI AND THE ASSESSEE HAS SHOWN CASH RECEIPTS FROM THE SAID PERSON ON VARIOUS DATES AND TOTAL OF SUCH CASH RECEIPT WORKED OUT TO RS.9,52,445/-. THEREFORE THE A.O ASKED THE A SSESSEE TO FURNISH THE CONFORMATION FROM SAID PERSON IN ORDER TO PROVE THE CASH CREDIT AS GENUINE. THE ASSESSEE REPLIED BEFORE THE A.O SAYING THAT MR. MAHENDRASSINH B DABHI HAS PURCHASED SECOND-HAND SCOOTERS AND SOLD THE SAM E TO DIFFERENT CUSTOMERS. THE ASSESSEE HAS MADE PAYMENTS TO MR. M. B. DABHI AND DEBITED IN HIS ACCOUNT. THE SALE PRICE OF SAME HE HAS DEPOS ITED IN HIS ACCOUNT WITH THE ASSESSEE. THE ASSESSEE FURNISHED SOME VOUCHERS AND RECEIPTS OF MONEY RECEIVED FOR EXAMPLE. THE A.O HOWEVER NOTED THAT IN THE CASE OF THE ASSESSEE IN A.Y. 2001-02 IT WAS FOUND THAT THE ASSE SSEE HAD INTRODUCED CASH IN HIS CASH BOOK AGAINST THE NAMES OF VARIOUS CASH CREDITORS. THOSE CASH CREDITORS WERE SHOWN AS CUSTOMERS WHO HAD BOOKED VE HICLES BUT WITHOUT TAKING DELIVERY, TOOK THE AMOUNT BACK. THE ASSESSEE COULD NOT PRODUCE THE IDENTITY AND GENUINENESS OF SUCH CREDITS. MOREOVER, THE PREPAYMENTS WERE ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 7 MADE BY THE ASSESSEE TO SUCH PERSONS THROUGH BEARER CHEQUES WHICH WERE ENCASHED BY HE ACCOUNTANT OF THE ASSESSEE. THEREFOR E, ADDITION OF RS.27,29,610/ MADE U/S.68 OF THE ACT. WAS CONFIRMED BY THE LD. CIT(A) AND THE MATTER WAS PENDING BEFORE THE TRIBUNAL. THE ASS ESSEE HAS IN THE YEAR UNDER CONSIDERATION MAINTAINED THE ACCOUNT IN THE N AME OF MANHARSIINH B DABHI WHO IS AN EMPLOYEE OF THE ASSESSEE AND WAS RE CEIVING SALARY OF RS.21300/- PER MONTH. HOWEVER, THE SAID PERSON WAS NOT PRODUCED FOR IDENTIFICATION OR VERIFICATION. FOR A PERSON HAVING SALARY OF RS.2300/- PER MONTH IT WAS HIGHLY IMPOSSIBLE TO ADVANCE CASH OF RS. 10 LAKH DURING THE YEAR UNDER CONSIDERATION. THIS FACT, ITSELF PROVED THAT THE AS SESSEE HAS INTRODUCED THE UNACCOUNTED MONEY UNDER THE NAME OF SHRI MANHARSINH B DABHI. THE ASSESSEE HAD ALSO FURNISHED COPIES OF SOME ACCOUNT FROM WHOM CASH HAS BEEN RECEIVED AND IT HAS BEEN CLAIMED THAT SCOOTER WAS SOLD TO THEM. THIS ACCOUNT APPEARS TO BE OF THE SAME NATURE AS FOUND I N THE A.Y 2001-02 AS NARRATED IN COL. NO. 1 FROM THE SUBMISSION IT APPEA RS THAT THE MODUS OPERANDI OF THE ASSESSEE WAS INTRODUCTION OF UNACCOUNTED MON EY IN THE BOOKS UNDER THE CONTEXT OF ADVANCE RECEIPT FROM CUSTOMERS. THIS MODUS OPERANDI WAS BROKEN AND UNACCOUNTED INCOME WAS TAXED IN A.Y 2001 -02. THEREFORE, THE ASSESSEE IN THE YEAR UNDER CONSIDERATION I.E. A.Y. 2004-05, INSTEAD OF SHOWING ADVANCE RECEIPT FROM CUSTOMERS HAS SHOWN A SINGLE ACCOUNT IN THE NAME OF HIS EMPLOYEE SHRI MANHARSINH B DABHI. FURTH ER, THE A.O NOTED THAT THE RECEIPT FURNISHED BY THE ASSESSEE WAS FOR S.1,8 1,830/- AS AGAINST TOTAL OF RS.9,52,445/-. FURTHER, THE RECEIPTS ARE THE AMOUNT RECEIVED FROM VARIOUS PEOPLE IN M/S. RAJSHREE AUTO ENTERPRISE AND THERE I S NO MENTION OF SHRI M.B. DABHI. THEREFORE, THE SAID RECEIPT CAN NEVER BE CON SIDERED AS RECEIPT FROM SHRI MANHARSINH B DABHI. FURTHER, THE ASSESSEES PL EA THAT MR. M.B. DABHI WAS PURCHASING AND SELLING THE OLD SCOOTER IS ALSO NOT TRUE BECAUSE OF THE FACT THAT THE PERSON IS NOT IDENTIFIED, NO RECORDS SHOWI NG THE SCOOTER NO PURCHASE AND SOLD AND THE NAME AND ADDRESS FOR THE PERSONS F ROM WHOM SCOOTERS WERE PURCHASED AND SOLD ARE NOT AVAILABLE. THEREFORE, TH IS IS A MERE STORY FABRICATED BY THE ASSESSEE IN ORDER TO EVADE THE TA X LIABILITY ON RS.9,52,445/- ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 8 FABRICATED BY THE ASSESSEE IN ORDER TO EVADE THE TA X LIABILITY ON RS.9,52,445/- THUS, THE ASSESSEE FAILED TO PROVE THE IDENTITY, GE NUINENESS AND CREDIT WORTHINESS OF M.B. DABHI, THE SUM OF RS.9,52,445/- WAS ADDED U/S.68 OF THE ACT. 6. BEFORE LD. CIT(A) THE ASSESSEE SUBMITTED THE LET TER DATED 04-05-2007 AND ACCORDINGLY ASSESSING OFFICER WAS ASKED TO GIVE A REMAND REPORT, WHICH WAS SUBMITTED ON 26-06-2007 AVAILABLE AT PARA-7.2 O F LD. CIT(A)S ORDER. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT AND THE COUNTER REPLY IN RESPONSE TO THE REMAND REPORT VIDE PARA-74 OF HIS O RDER DELETED THE ADDITION. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEW OF LD. CIT(A) THAT ASSESSEE HAS CONTENDED THAT SHRI MANHARSINIH B DABHI ALIAS MAHENDASINH B DABHI (SHRI M.B.DABHI) WAS PURCHASING OLD TWO WHEELER VEHICLES FROM VARIOUS CU STOMERS AND HE HAD AN ARRANGEMENT WITH THE ASSESSEE ACCORDING TO WHICH TH E ASSESSEE USED TO ADVANCE MONEY TO M.B.DABHI SO THAT HE COULD PURCHAS E OLD VEHICLES FROM THE CUSTOMERS. OWNERS OF OLD VEHICLES WHO WANTED TO PUR CHASE NEW VEHICLES BY TAKING LOAN FROM BANK OR FINANCIERS HAD TO MAKE DOW N PAYMENT TO THE ASSESSEE FOR BOOKING OF NEWS VEHICLES. AS THE ASSES SEE WOULD GET NEW CUSTOMERS, IN THIS ARRANGEMENT, HE USED TO ADVANCE MONEY TO M.B. DABHI TO THE EXTENT OF COST OF OLD VEHICLE FOR EACH CUSTOMER , AS INITIALLY MONEY WAS REQUIRED BY SHI DABHI TO PURCHASE OLD VEHICLES BEFO RE THE SAME COULD BE SOLD AND PROCEEDS COULD BE REALIZED. AFTER THE LOAN WAS SANCTIONED AND THE NEW VEHICLE WAS SOLD TO THE CUSTOMER, THE AMOUNT WAS SE TTLED WITH SHRI M.B. DABHI. SHRI M.B.DABHI AFTER SELLING THE OLD VEHICLE S HAS DEPOSITED THE SALE PROCEEDS OF THE OLD VEHICLES IN THE ACCOUNT OF THE APSE. AS REGARDS THE OBSERVATION OF THE A.O THAT THE ASSESSEE WAS NOT ME NTIONING THE SCOOTER NUMBERS IN THE VOUCHERS WHICH WERE PRODUCED BY HIM. IT WAS FOUND TO BE NOT CORRECT AS IT HAS BEEN SUBMITTED BY THE A.R HAS FIL ED SPECIMEN VOUCHERS IN 18 CASES. THE LD. COUNSEL FOR THE ASSESSEE HAS MENTION ED NAME OF THE PARTY ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 9 M.B.DABHI IN THE SAID STATEMENT. THUS, IT IS FOUND THAT IT IS A BUSINESS TRANSACTION ENTERED INTO WITH SHRI M.B. DABHI AND A DVANCE HAS BEEN GIVEN TO HIM AT THE TIME OF PU8RCHASE OF OLD VEHICLES AND RE PAYMENT OF AMOUNT ADVANCE HAS BEEN RECEIVED WHEN SCOOTERS WERE SOLD B Y SHRI M.B. DABHI. THUS, IT IS NOT A TRANSACTION OF CREDITS. AS REGARD S IDENTIFICATION OF SHRI M.B. DABHI, THE ASSESSEE HAS FURNISHED AN AFFIDAVIT FROM DABHI CONFIRMING THE ABOVE TRANSACTIONS ENTERED INTO WITH THE ASSESSEE. HENCE, THE OBSERVATION OF THE AO THAT THE ASSESSEE HAS NOT PROVED THE IDENTIF ICATION OF SHRI M.B. DABHI IS NOT CORRECT. FURTHER, THE AO HAS OBSERVED THAT S HRI DABHI WAS GETTING SALARY OF RS.2,300/- PER MONTH SO THE CREDIT IN THE NAME O F SHRI DABHI IS NOT GENUINE. OBJECTING TO THE SAID OBSERVATION THE LD. AR HAS CO NTENDED THAT THE FACT THAT SHRI DABHI WAS GETTING SALARY WOULD NOT BE A BAR FO R MAKING SUCH TRANSACTION WITH HIM BY GIVING MONEY IN ADVANCE TO HIM. IN THE REMAND REPORT, THE AO HAS STATED THAT THE NEW ARGUMENT ADVANCED IS AN AFTER-T HOUGHT. HOWEVER, IT WAS SUBMITTED IN THE STATEMENT OF SALE OF NEW VEHICLES AND THE PURCHASE OF OLD VEHICLES BY SHRI DABHI ALONG WITH EIGHTEEN SPECIMEN VOUCHERS FOR MAKING PAYMENT TO SHRI DABHI AND THE VOUCHERS CONTAINED DE TAILS LIKE NUMBER OF VEHICLE, NAME OF THE PARTY WHO HAS PURCHASED THE NE W VEHICLE, SALE BILL NO. PRICE OF OLD VEHICLE, RECEIPT NO. ETC. IN THE CIRCU MSTANCES AND FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT( A) WHO HAS RIGHTLY DELETED THE ADDITION MADE BY ASSESSING OFFICER. THUS, GROUND NO .2 OF THE REVENUE IS DISMISSED. 8. AS REGARDS GROUND NO.3 OF REVENUE. THE BRIEF FAC TS ARE THAT ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN SUNDRY CR EDITORS OF RS.22,06,826/- UNDER THE HEAD SALES PROMOTION SCHEME-2 AND AO ASKED THE ASSESSEE TO FURNISH CONFIRMATION OF THE SAID CREDITORS. THE ASS ESSEE FURNISHED A REPLY DATED 01-08-2006, FURNISHING THEREWITH A COPY OF SA LES PROMOTION SCHEME-2 ACCOUNT, HOWEVER, HE FAILED TO FURNISH ANY CONFIRMA TION. FURTHER, THE ASSESSEE REPLIED SAYING THAT AS REGARDS CASH DEPOSITED IN BA NK OF SALES PROMOTION SFCHEME-2 OF RS.22,06,826/-, THE OPENING BALANCE IN THE ACCOUNT WAS RS.6,63,826/- HENCE THE BALANCE AMOUNT WHICH PERTAI NED TO THE CURRENT YEAR ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 10 WAS OF RS.15.43 LAKH ONLY. IT WAS REPLIED BY THE AS SESSEE THAT HE HAS LAUNCHED RAJSHREE SALES PROMOTION SCHEME- AND AS PE R THE SAID SCHEME CUSTOMERS HAD TO PURCHASE 3 COUPONS (EACH OF RS.500 /-) OF TOTAL AMOUNT OF RS.1,500/- AND THE ASSESSEE HAS EXECUTED DRAW OF CO UPONS AND LUCKY WINNER WAS GIVEN ONE TWO WHEELER VEHICLE. IN CASE OF NON-W INNER CUSTOMERS, THE ASSESSEE HAD REFUNDED THEIR AMOUNT AFTER THE DRAW W AS OVER. THUS, AMOUNT RECEIVED BY SALE OF COUPONS WERE CREDITED IN RAJSHR EE SALES PROMOTION SFSCHEME-2, HENCE, IT WAS GENUINE RECEIPT AND SHOUL D NOT BE ADDED. THE ASSESSEE FURNISHED SOME VOUCHERS OF SUCH SCHEME BEF ORE THE AO. THE AO HOWEVER NOTED THAT THE ASSESSEE COULD NOT FURNISH T HE NAMES OR ANY SUPPORTING DOCUMENTS TO PROVE THAT MONEY WAS ACTUAL LY RECEIVED. THE ASSESSEE ONLY FURNISHED SOME COUPONS OF RS.5000/- W ITHOUT NAMES AND ADDRESS OF THE PERSONS WHO HAD PURCHASED SAID COUPO NS. FURTHER, THE AO OBSERVED THAT IF COUPONS WERE PURCHASED BY CUSTOMER S THEN THE SAME WOULD HAVE BEEN WITH THE SAID PERSONS AND NOT WITH THE AS SESSEE. MOREOVER, THE ASSESSEE COULD NOT FURNISH ANY DOCUMENT TO PROVE TH AT THE ASSESSEE HAD CONDUCTED ANY DRAW FOR SUCH COUPONS. THEREFORE, ACC ORDING TO THE AO IT WAS CLEARLY PROVED THAT THE ASSESSEE HAD INTRODUCED HIS OWN UNACCOUNTED INCOME UNDER THE SALES PROMOTION SCHEME-2. THEREFORE, THE AO ADDED SUM OF RS.15,76,500/- TO THE INCOME OF THE ASSESSEE U/S. 6 8 OF THE ACT. 9. BEFORE ASSESSING OFFICER ASSESSEE SUBMITTED VIDE LETTER DATED 04-05- 2007 AND THE SAID SUBMISSION WAS SENT FOR REPORT TO THE AO WHO SUBMITTED THE REPORT DATED 26-06-2007 AVAILABLE AT PARA-8.2 OF LD . CIT(A)S ORDER. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT DATED 26 -06-2007 AND COUNTER REPLY OF THE ASSESSEE AND FURTHER REMAND REPORT DAT ED 25-03-2008 VIDE PARA- 8.6 OF HIS ORDER DELETED THE ADDITION MADE BY AO. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE FINDINGS OF THE LD. CIT(A) ARE REASONED ONE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE ASSESSEE HAS ISSUED COUPONS UNDER THE RAJSHREE THE ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 11 LD. CIT(A) THAT THE ASSESSEE HAS ISSUED COUPONS SUN DER THE RAJSHREE SALES PROMOTION SCHEME-II FOR INCREASING SALE OF BOXER MO TOR CYCLES AND AS PER THE TERMS OF THE SCHEME THREE COUPONS OF RS.500/- EACH WERE ISSUED TO EACH CUSTOMER WHO WANTED TO PARTICIPATE IN THE SCHEME, A ND A LUCKY DRAW WAS CONDUCTED BY THE ASSESSEE EVERY YEAR AND THE LUCKY WINNER WAS GIVEN A TWO WHEELER VEHICLE AND IN CASE OF NON-WINNER, THE ASSE SSEE HAS REFUNDED THEIR COUPON AMOUNT AFTER THE DRAW WAS OVER. FOR SELLING THE COUPONS, THE ASSESSEE HAD APPOINTED VARIOUS SUB-DEALERS. THE SCH EME WAS STARTED IN THE PRECEDING YEAR I.E. A.Y 2003-04 AND THE FIRST ADVER TISEMENT WAS GIVEN IN NEWS PAPER BY PERFECT PUBLICITY DATED -8-07-2002 AS PE R PAGE-90 OF THE PAPER BOOK SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE . THE A.R HAS SUBMITTED A COPY OF THE ADVERTISEMENT. THE TERMS OF THE COUPON ARE THAT THE COUPONS WERE VALID FOR THREE YEARS AND ONLY ONE COUPON COULD BE ENCASHED IN ONE YEAR AGAINST THE PURCHASE OF BAJAJ VEHICLE AND COUPON WA S TRANSFERABLE TO ANYONE WHO PURCHASED BAJAJ VEHICLE AND NO ONE COULD GET MO NEY BACK DURING THE VALIDITY OF THE COUPON AND ONE COULD ENCASH THE VOU CHER AT ANY OF THE AUTHORIZED DEALERS AGAINST THE PURCHASE OF BAJAJ VE HICLE AND ONLY ONE VOUCHER COULD BE ENACSHED IN ONE YEAR. THE FIRST DRAW WAS C ONDUCTED ON 15-07-2002 AND THE ADVERTISEMENT WAS GIVEN BY PERFECT PUBLICIT Y IN NEWS PAPER ON 18-07- 2002 MENTIONING THE LUCKY WINNER NO. AS 3237 AS PER PAGE-91 OF THE PAPER BOOK SUBMITTED BY THE LD. AR. FROM THESE ADVERTISEM ENT AND DETAILS OF SALE OF COUPONS FURNISHED BY THE LD. AR AT PAGES-92 TO 1 25 OF THE PAPER BOOK. IT HAS BEEN ESTABLISHED THAT COUPONS WERE SOLD AND DRA W WAS CONDUCTED BY THE ASSESSEE IN THE REAL SENSE. UNDER THIS SCHEME, THE ASSESSEE HAS SOLD COUPONS AMOUNTING TO RS.15,76,500/- DURING THE YEAR UNDER CONSIDERATION AND THE AMOUNT WAS CREDITED BY SUB-DEALERS APPOINTED FO R THIS SCHEME AND STAFF MEMBERS OF THE ASSESSEE DURING THE YEAR UNDER CONSI DERATION ON 13-10-2003 AND 14-10-2003 AND THE CASH WAS DEPOSITED AND CREDI TED IN THE BANK ACCOUNT OF THE ASSESSEE. IN SUPPORT OF THE SAID CREDITS IN THE BANK ACCOUNT, THE A.R HAS SUBMITTED THAT FOLLOWING SALES OF COUPONS WERE MADE. ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 12 DATE PARTICULARS AMOUNT (RS) 14.10.2003 AMIN AUTO AND OTHER PARTIES 3,60,000/- 14.10.2003 VIRAL AUTO AND OTHER PARTIES 3,90,000/- 13.10.2003 VARIOUS PARTIES 3,00,000/- 14.10.2003 DIVYA AUTO &AMIN AUTO 2,38,500/- 14.10.2003 PARAS AUTO, YOGESHWAR AUTO & SSHRI GEETA AUTO 2,88,000 TOTAL 15,76,500 THE ASSESSEE HAS REFUND COUPONS OF RS.500/-EACH AMO UNTING TO RS.38,021/- DURING THE YEAR UNDER CONSIDERATION TO VARIOUS CUST OMERS. THE AR HAS SUBMITTED THAT THE COUPONS ARE ONE KIND OF LOTTERY TICKET AND SALES WERE MADE THROUGH VARIOUS AGENTS AND STAFF MEMBERS AND IT WAS VERY DIFFICULT TO KEEP THE NAMES AND ADDRESSES OF THE PERSONS WHO HAVE PURCHAS ED THE COUPONS. HOWEVER, THE ASSESSEE HAS MAINTAINED A REGISTER OF SALE OF COUPONS ADDITION APART FROM THE COUPONS GIVEN TO THE SUB-DEALERS, TH E NAMES HAD BEEN MENTIONED IN THE REGISTER. THE AR FILED A COPY OF R EGISTER ALONG WITH SUBMISSION DATED 04-05-2007 AS PER PAGES 126 TO 188 OF THE PAPER BOOK. THE AR ALSO FURNISHED CONFIRMATION LETTERS FROM 11 SUB- AGENTS IN THIS REGARD ALONG WITH SUBMISSION DATED 04-05-2007. IN VIEW OF THE AB OVE FACTS, IT HAS BEEN STRONGLY CONTENDED THAT THE AO IS WRONG IN CONCLUDI NG THAT THE ASSESSEE HAS NOT CONDUCTED ANY DRAW OF SUCH COUPONS, WHEREAS THE DETAILS OF THE DRAW AND THE LUCKY WINNER NO HAVE BEEN PUBLISHED IN THE ADVE RTISEMENT IN NEWSPAPER. IT IS ALSO FOUND THAT THE ASSESSEE HAS REFUNDED THE COUPON AMOUNTS IN THE SUBSEQUENT YEARS AND THE BALANCE AMOUNT AS ON 31-10 -2006 IS AT RS.9,40,898/-. THE PRINTING OF COUPONS, PUBLISHING OF ADVERTISEMENT AND SALE OF COUPONS WERE MADE IN THE FINANCIAL YEAR 2002-03 AND NOT IN THE YEAR UNDER CONSIDERATION. SUBSEQUENTLY, THE AO HAS CONFIRMED I N REMAND REPORT DATED 06-12-2007 THAT FOLLOWING PARTIES HAVE SOLD COUPONS AS UNDER:- ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 13 SHRI PRAKASH L PATEL PROP. VIRAL AUTO AGENCY RS.75,000/- SHRI KIRITBHAI J PATEL PROP. DIVYA AUTO AGENCY RS.75,000/- SHRI VASANTBHAI P DOSHI PROP PARAS AUTO AGENCY R S.75,000/- IN RESPECT OF THE PARTIES, I.E. AMIN AUTO AND YOGES HWAR AUTO, THE A.O WAS ASKED TO INQUIRE AND REPORT VIDE LETTER DATED 04-03 -2008, THE A.O GAVE AN OPPORTUNITY TO THE ASSESSEE, BUT THE ASSESSEE COULD NOT PRODUCE THEM IN THE SCHEDULE TIME. THEREFORE, THE AR HAS FURNISHED THE AFFIDAVITS OF THE TWO PARTIES I.E PROPRIETOR OF AMIN AUTO ENTERPRISE AND YOGESHWAR AUTO ENTERPRISE CONFIRMING THAT THEY HAVE SOLD COUPONS ON BEHALF OF THE ASSESSEE TO THE EXTENT OF RS.2.25 LAKH AND RS.63,000/- RESPECTIVELY . IT CANNOT BE SAID THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED INCOME UNDER THE SALES PROMOTION SCHEME AS THE SCHEME WAS LAUNCHED IN FINA NCIAL YEAR 2002-03 AND DURING A.Y 2003-04 ALSO MONEY HAS BEEN RECEIVED BY THE ASSESSEE AND PRINTING OF COUPONS WAS MADE IN THE A.Y 2003-04. FU RTHER, THE ASSESSEE HAS REFUNDED THE COUPON AMOUNTS TO THE PARTIES AS CAN B E SEEN FROM THE ACCOUNTS OF FINANCIAL YEARS 2003-04 TO 2005-06 SUBMITTED BY THE A.R AT PAGES 189 TO 222 OF THE PAPER BOOK AND IT IS SEEN THAT THE ASSES SEE HAS REFUNDED THE COUPON AMOUNT AND THE BALANCE OUTSTANDING AS ON 31- 10-2006 IS OF RS.9,40,898/-. IN VIEW OF THE FINDINGS OF THE LD. C IT(A) THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION AND WE FIN D NO INFIRMITY IN THE ORDER OF LD. CIT(A). THUS, GROUND NO.3 OF THE REVENUE IS DIS MISSED. 11. ASS REGARDS GROUND NO.4 AND 5 OF THE REVENUE TH E SAME ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATE. 12. AS REGARDS GROUND NO.2 AND 3 IN THE CO OF THE A SSESSEE. THE BRIEF FACTS AS APPEARING IN ASSESSING OFFICERS ORDER AT PAGE-4 ARE AS UNDER:- DISALLOWANCE OF PRIOR EXPENDITURE. REFERENCE IS INVITED TO THIS OFFICE LETTER DATED 0 6/12/2006 (PARA NO.3) WHEREIN YOU WERE REQUESTED TO SHOW CAUSE WHY RS.2,4 0,010/- DEBITED IN YOUR P & L A/C. HOWEVER THE SAME PERTAINS TO PRI OR PERIOD SHOULD NOT BE DISALLOWED AND ADDED BACK TO YOUR INCOME. IN YOU R REPLY DATED ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 14 SUM OF RS.2,40,010/- SHOULD NOT BE DISALLOWED AND A DDED BACK TO YOUR INCOME. THE ASSESSEE FAILED TO FURNISH ANY REPLY THUS CONFI RMING THE FINDING OF THE UNDERSIGN THAT THE ASSESSEE HAS DEBITED EXPENDI TURE IN THE P & L A/C WHICH ACTUALLY PERTAINS TO PRIOR PERIOD AND HEN CE CAN NOT BE ALLOWED FOR THE A.Y 2004-05.THEREFORE THE SAME I.E. RS.2,40 ,010/- IS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSIN G OFFICER. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE HAS DEBITED EXPENSES OF RS.2,40,010/- IN PROFIT AND LOSS ACCOUNT WHICH PERTAINS TO EARLIER YEARS AND THE ASS ESSEE HAS FAILED TO FURNISH ANY REPLY WITH REGARD TO THE SAID EXPENDITURE. THE EXPLANATION SUBMITTED BEFORE THE LD. CIT(A) IS ALSO NOT FOUND SATISFACTOR Y IN RESPONSE TO THE FACTS OF THE CASE. WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THUS , GROUND NO.2 AND 3 IN THE CO OF ASSESSEE ARE DISMISSED. 14. IN THE RESULT, APPEAL OF REVENUE IN ITA NO.2251 /AHD/2008 AND CO 178/AHD/2008 OF ASSESSEE BOTH ARE DISMISSED. NOW WE TAKE UP THE APPEAL FILED BY REVENUE IN ITA N O.1854/AHD/09 & CO FILED BY ASSESSEE NO.138/AHD/2009. 15. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- ITA NO.1854/AHD/2009. 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DELETING PENALTY OF RS.9,66,181/- LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT, WITHOUT CONSIDERING THE FACTS THAT THE QUANTUM HAD NOT BEEN REACHED ITS FINALITY AS THE REVENUES APPEAL WAS PENDING BEFORE THE ITAT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN HI S CO. ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 15 CO.NO.138/AHD/2009. 1. THE LD. CIT(A) HAS ERRED IN LAW AND OR ON FACTS IN CONFIRMING PENALTY OF RS.1,68,725 LEVIED U/S. 271(1)(C) BY AO. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED PENALTY OF RS.1, 68,725 LEVIED BY AO. 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF DEALERSHIP IN BAJAJ AUTO . FOR THE ASSESSMENT YEAR UNDER APPEAL, HE FILED THE RETURN OF INCOME ON 30-1 0-2001 DECLARING NET LOSS OF RS.2,83,630/-. THIS RETURN WAS PROCESSED U/S. 14 3(1) OF THE ACT. THEREAFTER A NOTICE U/S 148 OF THE ACT WAS ISSUED ON 15-07-200 4. THE ASSESSMENT WAS FRAMED ON 10-02-2005 U/S 143(3) R.W.S 147 AT A TOTA L INCOME OF RS.30,38,750/- . IN THIS ASSESSMENT ORDER, THE ASSESSING OFFICER T REATED THE CASH CREDIT OF RS.27,95,610/- AS NON-GENUINE AS DISCUSSED IN PARA- 3.2 OF THE ASSESSMENT ORDER IN THE CASH BOOK AND ALSO MADE THE FOLLOWING ADDITIONS:- 1. UNEXPLAINED CASH CREDIT IN CASH BOOK AS DISCUSSED IN PARA-4 RS.1,43,000/- 2. UNEXPLAINED INCOME INTRODUCED IN CAPITAL AS DISCUSSED IN PARA-5 RS.3,33,725/- 3. UNEXPLAINED INVESTMENT U/S.69 OF THE I.T. ACT DISCUSSED IN PARA-6 RS. 51,037/- ON APPEAL, THE LD. CIT(A) VIDE ORDER DATED 08-07-20 05 CONFIRMED ALL THE AFORESAID ADDITIONS. ON FURTHER APPEAL BEFORE THE T RIBUNAL D BENCH VIDE ORDER DATED 08-02-2008 IN ITA NO.1868/AHD/2005 , SET ASIDE THE ORDER OF THE LD. CIT(A) FOR FRESH ADJUDICATION, IN ACCORDANCE WI TH LAW, BY PASSING A SPEAKING ORDER, AFTER AFFORDING REASONABLE OPPORTUN ITY OF HEARING. WHILE DIRECTING SO, THE TRIBUNAL HAS ALSO OBSERVED THAT T HE LD. CIT(A) IS AT FULL LIBERTY TO CONSIDER ALL THE MATERIALS ADDUCED BY BOTH THE S IDES. IN PURSUANCE OF THE ABOVE DIRECTION OF TRIBUNAL, THE LD. CIT(A) PASSED A FRESH ORDER VIDE ORDER DATED 27-06-2008 WHEREIN THE LD. CIT(A) DELETED THE ADDITION OF RS.27,95,610/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNEXPLAINED CASH CREDIT INTRODUCED AS BOOKING ADVANCE. THE LD. CIT(A) ALSO DELETED THE ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 16 ADDITION OF RS.1.43 LAKH ON ACCOUNT OF DIFFERENCE I N DATES AS UNEXPLAINED CASH CREDITS. AS OUT OF THREE ADDITIONS OF RS.3,33,725/- MADE BY AO LD. CIT(A) DELETED THE ADDITION OF RS.50,000/- AND CONFIRMED T HE ADDITION OF RS.1,39,747/- AND DIRECTED THE AO TO VERIFY THE SOU RCE OF DEPOSIT BY CHEQUE AMOUNT OF RS.1,43,978/-. THE LD. CIT(A) DELETED THE ADDITION OF RS.43,019/- OUT OF TOTAL ADDITION OF RS.51,037/-. 17. AGGRIEVED WITH THE ORDER OF LD. CIT(A) REVENUE WENT IN APPEAL BEFORE TRIBUNAL FOR DELETION OF ADDITION OF RS.27,95,610/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT, DELETION ADDITION OF RS.1.43 LAKH AS U NEXPLAINED CASH CREDIT IN THE CASH BOOK, AGAINST THE DELETION OF ADDITION OF RS.1 ,96,178/- OUT OF ADDITION OF RS.S3,33,925/- BEING UNEXPLAINED CASH INTRODUCED IN CAPITAL ACCOUNT AND DELETION OF DISALLOWANCE OF RS.51,037/-. THE ITAT A HMEDABAD D BENCH VIDE ITS ORDER DATED 22-07-2011 UPHELD THE VIEWS OF THE ASSESSING OFFICER WITH REGARD TO THE DELETION OF ADDITION OF RS.27,95,610/ - BY THE LD. CIT(A) AND ALLOWED THE APPEAL OF THE REVENUE. THE ITAT IN ITS ORDER REJECTED REVENUES APPEAL WITH REGARD TO CASH DEPOSIT OF RS.1.43 LAKH AND RESTORED THE ADDITION OF RS.1,96,178/- WHICH WAS DELETED BY THE LD. CIT(A). AS REGARDS TO ADDITION OF RS.43,019/- THE ITAT DID NOT INTERFERE IN THE ORDER OF LD. CIT(A). 18. IN THE MEANTIME, THE ASSESSING OFFICER LEVIED T HE PENALTY VIDE ORDER DATED 13-03-2007 AMOUNTING TO RS.10,36,181/-. 19. LD. CIT(A) CANCELLED THE PENALTY AMOUNTING TO R S.9,66,181/- FOR THE REASONS MENTIONED IN PARA-5.5 OF HIS ORDER. SINCE T HE ADDITIONS WERE DELETED BY LD. CIT(A)-X AHMEDABAD VIDE ITS ORDER DATED 26-0 7-2008 WITH REGARD TO THE ADDITION OF RS.27,95,610/-, RS.1.43 LAKH AND RS .51,037/-. THE LD. CIT(A) CONFIRMED THE PENALTY WITH RESPECT TO ADDITIONS OF RS.1,39,747/- AND RS.26,978/- VIDE PARA-5.7 OF HIS ORDER. ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 17 20. BEFORE US LEARNED COUNSEL FOR THE ASSESSEE ARGU ED THAT THE ASSESSEE HAD BEEN ALLOWED RELIEF IN THE QUANTUM APPEAL BEFOR E LD. CIT(A) AND THE ITAT AHMEDABAD D BENCH VIDE ITS ORDER DATED 22-07-2011 HAS ALLOWED THE REVENUES APPEAL AND THEREFORE THE ASSESSEE DID NOT GET ANY OPPORTUNITY TO SUBMIT ANY EXPLANATION IN THE PENALTY PROCEEDINGS. SINCE THE PENALTY PROCEEDINGS ARE SEPARATE THAN THE ASSESSMENT PROCEE DINGS AND THEREFORE ADEQUATE OPPORTUNITY OF SUBMITTING THE EXPLANATION SHOULD BE PROVIDED TO THE ASSESSEE. 21. LD. SR-DR ON THE OTHER HAND SUPPORTED THE ORDER S OF AUTHORITIES BELOW. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE ARE CONVINCED WITH THE ARGUMENT MADE BY THE LEAR NED COUNSEL FOR THE ASSESSEE THAT THE PENALTY PROCEEDINGS AND THE ASSES SMENT PROCEEDINGS ARE SEPARATE PROCEEDINGS AND THE ASSESSEE CAN SEPARATEL Y SUBMIT THE EXPLANATION IN THE PENALTY PROCEEDINGS. SINCE THE A SSESSEE HAD BEEN ALLOWED THE RELIEF BY THE LD. CIT(A) IN THE QUANTUM PROCEED INGS AND THE TRIBUNAL HAD ALLOWED THE REVENUES APPEAL, THEREFORE THE ASSESSE E DID NOT GET ANY OPPORTUNITY TO SUBMIT THE EXPLANATION IN THE PENALT Y PROCEEDINGS. IN THE INTEREST OF JUSTICE THE ASSESSEE HAS TO BE PROVIDED AN OPPORTUNITY TO SUBMIT AN EXPLANATION AND THEREFORE WHOLE MATTER IS SET ASIDE TO THE FILE OF ASSESSING OFFICER WHO WILL DECIDE THE ISSUE DE NOVO, KEEPING INTO CONSIDERATION THE DECISION OF THE ITAT AHMEDABAD D BENCH IN ITA NO.3122/AHD/2008 (SUPRA) AND THE EXPLANATION SUBMITTED BY THE ASSESSEE AND D ECIDE THE ISSUE DE NOVO. 23. IN THE RESULT, APPEAL OF REVENUE IN ITA NO.1854 /AHD/2009 AND CO NO. 138/AHD/2009 OF THE ASSESSEE ARE ALLOWED FOR STATIS TICAL PURPOSES. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO.1943/AHD /2009 (A.Y 2005- 06). 24. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 18 [1] THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN ACCEPTING THE ORDER OF THE LD. A.O AND CONFIRMED THE ADDITION OF RS.6,15,000/- U/S 68 OF THE I.T ACT WITHOUT CONSIDERING THE FACTS SUBMIT TED BY THE APPELLANT. [2] THE LD. C.I.T(A) HAS NOT APPRECIATED THE FACT T HAT THE APPELLANT HAS TRIED TO ESTABLISH THE CREDIT WORTHINESS AND IDENTI TY OF THE PARTIES FROM WHOM THE LOAN WAS TAKEN BY THE APPELLANT. [3] THE HON. TRIBUNAL MAY, THEREFORE, BE PLEASED TO DELETE THE ADDITION CONFIRMED BY THE LD. C.I.T.(A) IN HIS ORDER. 25. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD INTRODUCED RS.8,04,787/- AS CAPITAL IN HIS BOOK S OF ACCOUNT. AO ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE SAID CAPITAL SO INTRODUCED BY ASSESSEE DURING THE RELEVANT PERIOD. IN RESPONSE TO SUCH QUE RIES, THE ASSESSEE DID NOT FILE SATISFACTORY REPLY WITH REGARD TO SOURCES OF F UND AMOUNTING TO RS.6.15 LAKH. IN VIEW OF THIS THE AO ADDED THE AMOUNT IN THE INCO ME OF THE ASSESSEE UNDER THE PROVISIONS OF SEC. 68 OF THE ACT. DURING THE AP PELLATE PROCEEDINGS LEARNED COUNSEL FOR THE ASSESSEE OBJECTED TO THE SAID ADDIT ION AND CONTENDED THAT THE AO HAD ASKED FOR INFORMATION REGARDING AMOUNT OF RS .4,93,136/-. HOWEVER, WHILE FINALIZING THE ORDER UNDER REFERENCE HE MADE THE ADDITION OF RS.6.15 LAKH. IT WAS ALSO POINTED OUT BY THE LD. AR THAT DU RING THE ASSESSMENT PROCEEDINGS, SHRI M.K. PATEL, CA APPEARED BEFORE TH E ASSESSING OFFICER, HOWEVER, THE PERSONS FROM WHOM LOAN WAS SHOWN BY TH E ASSESSEE COULD NOT BE PRODUCED FOR VERIFICATION ON ACCOUNT OF GENUINE DIFFICULTIES. THE LD. AR DURING THE APPELLATE PROCEEDINGS FILED THE CONFIRMA TION ACCOUNT FROM SUCH PERSONS. THE LD. CIT(A) REFERRED THE MATTER BACK TO THE FILE OF AO FOR RE- EXAMINATION OF THE ASSESSEES CLAIM WHO SENT THE RE PORT DATED 21-11-2008. AFTER CONSIDERING THE FACTS OF THE CASE AND THE REM AND REPORT AND SUBMISSION OF THE ASSESSEE LD. CIT(A) CONFIRMED THE ACTION OF AO. 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT H E HAS RECEIVED RS.6.15 LAKH FROM THIRTEEN PERSONS DETAILS OF WHICH IS AVAI LABLE IN PARA-6.4 OF LD. ITA NO.1854/A/09 & CO 138/A/092251/A/08 & CO 178/A/08 & ITA 1943/A/09 A.YS. 01-02, 04-05 & 05-06 DCIT SK CIR V. MEHULKUMAR M KOTHARI PAGE 19 CIT(A)S ORDER. THE STEREO TYPE THE CONFIRMATION LE TTER FROM EACH ALLEGED CREDITORS HAVE BEEN FILED AND IDENTITY OF THESE PER SONS HAVE NOT BEEN PROVED DURING THE PROCEEDINGS CARRIED OUT BY THE ASSESSING OFFICER I.E. IN THE REMAND PROCEEDINGS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF AO. THUS, GROUND NO .1 OF ASSESSEES APPEAL IS DISMISSED. 27. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. 28. IN THE RESULT, ITA NO.2251/AHD/2008 OF THE REVENUE IS DISMISSED CO NO.178/AHD/2008 OF THE ASSESSEE IS DISMISSED ITA NO.1854/AHD2009 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES CO NO.138/AHD/2009 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ITA NO.1943/AHD/2009 OF THE ASSESSEE IS DISMISSED ) &'( '#$% *'+, 20 / 01 /201 2 # ! 0 1 2 3 THIS ORDER PRONOUNCED IN OPEN COURT ON 20/01/ 201 2. SD/- SD/- ( MUKUL KUMAR SHRAWAT ) ( B.P. JAIN ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *'+,- 20/01/2012 5'' 3 DKP* &'( &'( &'( &'( 6 6 6 6 76$ 76$ 76$ 76$ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ++ & &: / CONCERNED CIT 4. & &:- / CIT (A) 5. 6=2 , & %, 5'' / DR, ITAT, AHMEDABAD 6. 2@ A) / GUARD FILE. BY ORDER/ &'( , /TRUE COPY/ B/5 + & %, 5'' 3