DCIT, Central Circle, Kolhapur V. M/s. M.D. Properties Pvt. Ltd., Bangalore

ITA 1898/PUN/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93696 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Gift; Loose papers; Document seized; Wholly owned subsidiary; Valuation report; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA. NOS.1896 TO 1898/PN/2012 (ASSESSMENT YEARS : 2007-08 TO 2009-10) ACIT, CENTRAL CIRCLE, KOLHAPUR .. APPELLANT VS. M/S. M.D. PROPERTIES PVT. LTD., IST FLOOR, EMBASSY POINT, 150, INFANTARY ROAD, BANGALORE 560 001 .. RESPONDENT PAN NO.AACCM 6628B ASSESSEE BY : SHRI BHARAT SHAH DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 29-04-2015 DATE OF PRONOUNCEMENT : 30-04-2015 ORDER PER R.K. PANDA, AM : THE ABOVE 3 APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE COMMON ORDER DATED 03-07-2012 OF THE CIT(A) KOLHAPU R RELATING TO ASSESSMENT YEARS 2007-08 TO 2009-10 RESPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ALL T HE 3 APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP ITA NO.1896/PN/2012 FOR A.Y. 2007-08 AS THE LEAD CASE. FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY AND DERIVES INCOME FROM HOUSE PROPERTY. IT FILED ITS ORIGINA L RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29-10-200 7 DECLARING TOTAL INCOME OF RS.2,27,64,910/-. THE ASSESSEE COM PANY BELONGS TO SHRI SANJAY GHODAWAT GROUP. IN THE GROUP C ASES, A SEARCH ACTION U/S.132/133A OF THE I.T. ACT WAS CARRIED O UT ON 04- 02-2009. HOWEVER, NO SEARCH WAS CARRIED OUT IN THIS PA RTICULAR 2 CASE. THE AO ISSUED NOTICE U/S.153C OF THE I.T. ACT ON 0 6-09-2010, IN RESPONSE TO WHICH THE ASSESSEE VIDE LETTER DATED 1 3-10-2010 REQUESTED THE AO TO CONSIDER THE REGULAR RETURN FILED FOR ALL THE 3 ASSESSMENT YEARS AS RETURN FILED IN RESPONSE TO NOTICE U/S.153C. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT A SEARCH OPERATION WAS CARRIED OUT ON 04.02.2009 A T THE BUSINESS PREMISES OF M/S GHODAWAT INDUSTRIES (INDIA) PVT LTD, CORPORATE OFFICE AT 438-CHIPRI, DIST KOLHAPUR. A GROUP OF GHODAWAT INDUSTRIES IS OWNED AND CONTROLLED BY SHRI SANJ AY GHODAWAT OF JAYSINGPUR. DURING THE COURSE OF SEARCH OP ERATION AT THE ABOVE PREMISES LOOSE PAPER WERE SEIZED AS PER PANC HANAMA DATED 06.02.2009. VIDE LOOSE PAPER BUNDLE NO. 2, PAPER SER IAL NO. 94 TO 101 A COPY OF VALUATION REPORT IN RESPECT OF PROP ERTY OWNED BY M.D.PROPERTIES PVT. LTD VIZ GOLFLINK SOFTWARE BUSINESS PARK - TOWER A, SITUATED AT BANGALORE WAS SEIZED. THE SAID PAPERS ARE VALUATION REPORT OF COMMERCIAL PROPERTY NAMELY GOLFLINK SOFTWARE BUSIN ESS PARK - TOWER A, OWNED BY THE ASSESSEE M.D.PROPERTIES PV T LTD., BANGLORE PREPARED BY DESHMUKH & ASSOCIATES, 20 SHEELAKA NT, MAHALAXMI SOCIETY, LAXMINAGAR, KUPWAD ROAD, SANGLI-416416. AS PER THE SAID VALUATION REPORT THE VALUE OF THE PROPERTY AS ON 19.04.2008 IS AT RS. 250,00,00,000/- (RS. TWO HUNDRED FIFTY C RORES ONLY). 3. THE AO NOTED THAT THE PROPERTY NAMELY GOLFLINK -SOFT WARE BUSINESS PARK - TOWER A, AT SURVEY NO. 6, CHALLAGHATTA, BA NGLORE WAS ORIGINALLY CONSTRUCTED BY M/S. GOLFLINK SOFTWARE PARK P VT. LTD. BELONGING TO VIRWANI GROUP. OCCUPATION CERTIFICATE WAS RECEIV ED ON 16.04.2004. AT THE STAGE OF CONSTRUCTION ITSELF M/S. GSPPL H AD ENTERED INTO A LEASE AGREEMENT WITH M/S. FIDELITY INFORMATIO N SYSTEMS (I) CO. P LTD , (FISCPL) FOR A MONTHLY RENT OF RS. 72.5 LACS 3 FOR A PERIOD OF FIVE YEARS. HENCE PROCEEDINGS WERE INITIATE D U/S. 153C OF THE I.T. ACT, 1961. 4. THE AO FURTHER NOTED THAT DURING COURSE OF SEARC H ACTION AT THE RESIDENTIAL PREMISES OF SHRI SANJAY D . GHODAWAT BOOKS OF ACCOUNT & DOCUMENTS AS PER ANNEXURE 'A' (SR NO 1) TO PANCHANAMA DATED 05/02/2009 (PARTY NO. KR-2) HAS BEE N SEIZED. PAGE NO. 1 & 2 - IS A CALCULATION SHEET PREP ARED BY SANJAY GHODAWAT, WHICH SHOWS THE WORKING OF INTERES T CALCULATION AND AMOUNT PAYABLE TO AND RECEIVABLE FRO M EMBASSY GROUP OF BANGLORE AS ON 31-01-2009. AS PER THIS PAPER THE NET AMOUNT RECEIVABLE BY GHODAWAT GROUP F ROM EMBASSY GROUP AS ON 31/01/2009 IS RS. 13,86,46,673/ -. THE DETAILS ON THIS LOOSE PAPERS AS REPRODUCED BY THE AO IN T HE BODY OF THE ASSESSMENT ORDER IS AS UNDER : PAPER NO. 1 : DATE AMOUNT RECEIVED INTEREST CALCULATION INTEREST @8% 04-JAN-06 100,000,000.00 8,000,000.00 31-DEC-07 8,000,000.00 31-DEC-08 8,000,000.00 31-JAN-09 666,667.00 TOTAL INTEREST PAYABLE 24,666,667.00 ADD PREVIOUS PAYABLE 791,884.00 ------------------- TOTAL AMOUNT PAYABLE 125,458,551.00 -------------------- MONTHS AMOUNT RECEIVABLE MONTHS INTEREST @8% TOTAL NOV - 06 7250000 27 1305000 8555000 DEC - 06 7250000 26 1256667 8506667 JAN - 07 7250000 25 1208333 8458333 FEB - 07 7250000 24 1160000 8410000 MAR - 07 7250000 23 1111667 8361667 APR - 07 7250000 22 1063333 8313333 MAY - 07 7250000 21 1015000 8265000 JUN - 07 7250000 20 966667 8216667 JUL - 07 7250000 19 918333 8168333 4 AUG - 07 7448790 18 893855 8342645 SEP - 07 7612500 17 862750 8475250 OCT - 07 7612500 16 812000 8424500 NOV - 07 7612500 15 761250 8373750 DEC - 07 7793750 14 727417 8521167 JAN - 08 7793750 13 675458 8469208 FEB - 08 7793750 12 623500 8417250 MAR - 08 7793750 11 571542 8365292 APR - 08 7793750 10 519583 8313333 MAY - 08 7793750 9 467625 8261375 JUN - 08 7975000 8 425333 8400333 JUL - 08 7975000 7 372167 8347167 AUG - 08 7975000 6 319000 8294000 SEP - 08 7975000 5 265833 8240833 OCT - 08 7975000 4 212667 8187667 NOV - 08 7975000 3 159500 8134500 DEC - 08 7975000 2 106333 8081333 JAN - 09 7975000 1 53167 8028167 2O609879 18833980 2249327 RECEIVABLE FROM RENT 224,932,770.00 OTHERS 5,000,000.00 TOTAL PAYABLE 25,458,55.00 NET RECEIVABLE 104,474,219.00 ADD-LOAN AS ON 31/01/2009 250,291,822.00 LESS-TDS UPTO 31 / 01 / 2009 63,417,610.00 BA LANCE RECEIVABLE 291,348,431.00 LESS-RECEIVED EMBASSY BRINDAVAN 109,998,400.00 LESS-RECEIVED DDPL 30,000,000.00 LESS-RECEIVED ADVANCE FOR WINDMILL 50,000,000.00 LESS-RECEIVED FROM UDHYMAN 15,000,000.00 INVESTMENT PVT. LTD., 86,350,031.00 ADD-EMBASSY BRINDAVAN 2,500,000.00 ADD-DDPL 12,500,000.00 ADD-DM ESTATE PVT. LTD., 2,500,000.00 ADD-DDPL-MD PROPERTIES 19,249,304.00 ADD-SERVICE TAX-OCT 07 TO JAN 09 15,547,338.00 NET RECEIVABLE (AS ON 31-01-2009) 138,646,673.00 PAPER NO.2 : PENDING ISSUES WITH EMBASSY GROUP 1. TOPAZ INVESTMENTS PVT. LTD., THERE IS A CREDIT BALANCE OF THE COMPANIES MENTIONED BELOW FOR A LONG TIME AND NEEDS TO BE REPAID IN BOOKS. A. DYNASTY DEVELOPERS PVT. LTD. 13,15,00,000/- B. MORE FINANSHARE INVESTMENTS PVT. LTD., 5,16,77,355 /- C. DYNASTY DEVELOPERS PVT. LTD., (STAR) 40,90,917 /- D. DYNASTY DEVELOPERS PVT. LTD., (ESTATE) 10,72,500 /- TOTAL 18,61,95,772/- 5 2. M.D. PROPERTIES PVT. LTD., FIDELITY IS PAYING MONTHLY RENTALS INCLUDING SERVICE TAX, HOWEVER, THERE IS NO OTHER SOURCE IN M.D. PROPERTIES FROM WHERE WE CAN PAY THE SERVICE TAX. WE REQUIRE SERVICE TAX CHEQUE SEPARATE LY. WE ARE FOLLOWING UP THE MATTER WITH MR. GOPINATH AND EXPEC TING THE SAME IN THIS MONTH. WE HAVE NOT PAID SERVICE TAX FOR THE MO NTH DECEMBER 2008 AND JANUARY 2009. 5. THE AO ON PERUSAL OF PAPER NO.5 AND SUBMISSION OF THE ASSESSEE CAME TO CONCLUSION THAT THE AMOUNT SHOWN IN T ABULAR FORM IS NOTHING BUT THE RENT RECEIVED BY THE M.D. PROPERTIES P VT. LTD., A CONCERN OF THE ASSESSEE GROUP. THE SAME IS OFFERED IN THE RETURN OF INCOME. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PR OCEEDINGS HAS CONFIRMED THE SAME. THE ASSESSEE ALSO CONFESSED THAT THE PAPER IS PREPARED BY EMPLOYEE OF THE GROUP. HOWEVER HE OBSERV ED THAT IN RESPECT OF THE FIGURES SHOWN AS INTEREST RECEIVABLE, THE ASSESSEE DID NOT ACCEPT THE INTEREST CALCULATION SHOWN ON THE SAME P APER AS RECEIVABLE AND STATED THAT IT IS A MISTAKE OF THE EMPLOYEE . THE AO THEREFORE CAME TO THE CONCLUSION THAT THE PARTIAL ACCEPT ANCE OF THE EVIDENCE SEIZED ITSELF SHOWS THAT THE WORKING GIVEN ON TH IS PAGE IS NOTHING BUT A TRUE PICTURE OF THE AFFAIRS OF THE ASSESSEE'S ACTIVITY AND THEREFORE THE INTEREST RECEIVABLE SHOWN ON THIS PAPER IS THE INCOME OF THE ASSESSEE. THE AO ACCORDINGLY MADE ADDITION ON THE BASIS OF ABOVE PAPER FOR THE FOLLOWING 3 ASSESSMENT YEARS, THE DET AILS OF WHICH ARE AS UNDER : A.Y. 2O07-08 RS. 60,41,667/- A.Y. 2008-09 RS. 98,91,105/- A.Y. 2009-10 RS. 28,01,208/- 6. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO FOR ALL THE 3 ASSESSMENT YEARS BY OBSERVING AS UNDER : 8. FIRST OF ALL EVEN IF WE ASSUME THAT THE ASSESSING O FFICER HAS CORRECTLY CONCLUDED ON THE NATURE OF CONTENT OF THE LOOSE PAP ER RELIED UPON FOR MAKING THE ADDITION, THE ADDITION SHOULD HAVE BEEN O F THE AMOUNTS OF RS.7,25,000.00 IN A.Y. 2007-08, RS.74,85,352.13 IN A. Y. 2008-09 AND RS.1,88,33,979.80 IN A.Y. 2009-10. THIS IS FOR THE REA SON THAT IN THE 6 LOOSE PAPER, THE COMPUTATION OF INTEREST IS ON A PARTI CULAR DAY: 31 ST DAY OF JANUARY, 2009. THEREFORE INTEREST IS COMPUTED FOR 27 MONTHS ON ANNUALISED BASIS FOR THE RENT RECEIVED FOR THE MONTH O F NOVEMBER 2006. SIMILARLY INTEREST IS COMPUTED FOR 24 MONTHS FOR THE RENT OF FEBRUARY 2007, 15 MONTHS FOR THE RENT OF NOVEMBER 2007, 1 MON TH FOR THE RENT OF JANUARY 2009, ETC. IF INTEREST INCOME ON RENT RECEIV ED DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08 IS COMPUTED TH EN THE NUMBER OF MONTHS FOR WHICH INTEREST WOULD BE ANNUALISED WOULD HA VE BEEN 5,4,3,2 AND 1 FOR THE MONTHS OF NOVEMBER 2006, DECEMBER 200 6, JANUARY 2007, FEBRUARY 2007 AND MARCH 2007 RESPECTIVELY. SIM ILARLY, FOR THE ASSESSMENT YEAR 2008-09, INTEREST AFTER ANNUALISING WOULD HAVE TO BE COMPUTED FOR PERIOD OF 17, 16, 15, 14 AND 13 MONTHS FOR RENTALS OF NOVEMBER 2006, DECEMBER 2006, JANUARY 2007, FEBRUAR Y 2007 AND MARCH 2007 RESPECTIVELY, RECEIVED DURING THE PREVIOU S YEAR RELEVANT TO A.Y. 2007-08. THUS THE ASSESSING OFFICE HAS COMMITTED AN ELEMENTARY ERROR EVEN IN COMPUTING THE INTEREST FOR ASSESSMENT YEA RS 2007-08, 2008-09 AND 2009-10. 9. THE APPROACH OF THE ASSESSING OFFICER IN MAKING TH E ADDITION IS BASED ON THE ASSUMPTION THAT INTEREST WOULD HAVE BEEN R ECEIVED OR WOULD BE RECEIVABLE AGAINST THE RENTAL INCOME RECEIV ED FROM 'FIDELITY', BUT THERE IS NO BASIS FOR MAKING THIS ASSUMPTION AND THER EFORE THE ADDITION. IT IS NOT AT ALL CLEAR WHETHER THE AMOUNT S WERE ACTUALLY GIVEN OUT ON INTEREST AND IF SO THEN THE IDENTITY OF PERSON S TO WHOM THE LOAN WAS GIVEN OUT IS NOT DISCERNIBLE FROM THE SEIZED MATERI AL. SIMILARLY, THE SEIZED PAPER DOES NOT SPELL OUT AND THE ASSESSING OFFIC ER HAS NOT FOUND OUT THE IDENTITY OF THE PERSON FROM WHOM THE AMOUNT OF RS.10,00,00,000/- WAS RECEIVED. IT IS NOTICEABLE THAT THE PAPER INDICATES THAT SOME AMOUNT AGGREGATING TO RS.2,46,66,667/- WAS C ALCULATED AS INTEREST ON THESE LOANS. IN SUCH SCENARIO, THERE IS NO RE ASON AS TO WHY THE AMOUNT OF RS.2,46,66,667/- SHOWN AS PAYABLE IN THE SAME CALCULATION SHOULD NOT BE ADJUSTED AGAINST THE INTERES T OF RS.1,88,33,980/- SHOWN AS RECEIVABLE. THIS WOULD LEAD T O A NEGATIVE INCOME OR LOSS ON ACCOUNT OF INTEREST PAYMENTS! IN MY O PINION, THE CONTENTS OF THE PAPER APPEAR TO BE A ROUGH CASH FLOW OF THE GHODAWAT GROUP ON A PARTICULAR DAY IN JANUARY 2009. THE CASH FLOW HAS TAKEN INTO ACCOUNT THE NOTIONAL OUTGOING AND INCOMING IN THE F ORM OF INTEREST. THIS TYPE OF WORKING IS MADE TO FIND OUT THE CASH FLOWS AFT ER ADJUSTING FOR THE COST OF CAPITAL EMPLOYED. IT IS USED TO FIND OUT IF TH E CAPITAL IS BEING PRODUCTIVELY EMPLOYED OR NOT. IF THE NET RETURN ON CAPITAL EMPLOYED IS BELOW THE RETURNS FROM FINANCIAL INSTITUTIONS, CORREC TIVE MEASURES CAN BE TAKEN BY THE APPELLANT OR THE PERSON TO MODIFY TH E INVESTMENT PATTERN AND OR TO RECTIFY EXPOSURE INTO A PARTICULAR BUSINESS OR GROUP. 10. THE APPELLANT HAS EXPLAINED THAT THE AMOUNT OF RS.10,00,00,000/-WAS A LOAN TAKE FROM. JITENDRA VIRWA NI BY SANJAY GHODAWAT (INDIVIDUAL) WHICH WAS APPEARING IN THE BAL ANCE SHEET OF SANJAY GHODAWAT (INDIVIDUAL) SINCE A.Y. 2006-07. THE OUTSTANDING BALANCES WERE REDUCED IN F.Y. 2009-10. NO INTEREST WA S PAID TO JITENDRA VIRWANI. THE APPELLANT SUBMITTED THAT THIS FACT IS EVI DENT FROM THE BOOKS OF ACCOUNTS OF SANJAY GHODAWAT (INDIVIDUAL). IT WAS POINTED OUT THAT RENTAL INCOME WAS RECEIVED FROM FIDELITY INFORM ATION SYSTEM (INDIA) LTD., A WHOLLY OWNED SUBSIDIARY OF FIDELITY U SA. THE APPELLANT HAS TAKEN ME THROUGH THE ACCOUNTS OF M.D. PROPERTIES A ND I DO NOT FIND ANY INSTANCE OF LAYING OUT OF THE RENTAL RECEIPTS TOW ARDS EARNING OF INTEREST INCOME. IT WAS EXPLAINED FURTHER THAT THE MO NEY COMING IN AS RENTAL RECEIPTS IN M.D. PROPERTIES WAS SPENT ON REPAYME NT OF LOAN TAKEN FROM HDFC BANK. M.D. PROPERTY FINANCED THE PURCHASE OF THE ASSET 7 'PINEHURST' THROUGH TWO LOANS OF RS.26.41 CRORES AND RS. 11.92 CRORES AGGREGATING TO RS.38.33 CRORES FROM HDFC BANK @ 8% INTEREST. THE SEIZED MATERIAL CANNOT ATTRIBUTE THE CALCULATION OF INTEREST TO ARISE FROM ANY DEALING WITH THE VIRWANIS. THE CALCULATION OF IN TEREST ON LOAN (RS.10,00,00,000/-) AND ON RENTAL INCOMES THEREFORE A PPEARS TO BE NOTIONAL. 11. THE DECISION OF UDHAVDAS KEWALRAM V. CIT [1967] 66 ITR 462 (SC), RELIED ON BY THE APPELLANT LAYS DOWN THE LAW THAT IN PROCEEDING TO DISBELIEVE THE ASSESSEE'S CONTENTIONS, ONE HAS TO CONSIDER ALL THE EVIDENCE WHICH ARE EITHER IN FAVOUR OF OR AGAINST TH E ASSESSEE. IT WAS HELD IT IS FOR THE INCOME-TAX AUTHORITIES TO PROVE THAT A PARTICULAR RECEIPT IS TAXABLE. IN DECIDING WHETHER AN ITEM OF RECEIPT IS T AXABLE AS INCOME, THE TRIBUNAL MAY CONSIDER THE EVIDENCE IN THE LIGHT OF T HE STATEMENTS MADE BY THE ASSESSEE, HIS CONDUCT AND THE PROBABILITIES, BUT I N ARRIVING AT ITS CONCLUSION THERE MUST BE A FAIR AND REASONABLY FULL RE VIEW OF THE EVIDENCE. 12. THE DECISION OF CIT V. SHOORJI VALLABHDAS [1962] 46 ITR 144 (SC) LAYS DOWN THE LAW THAT INCOME TAX IS LEVIED ON INCOME AN D IF INCOME DOES NOT RESULT AT ALL THERE CANNOT BE ANY INCOME. THE DE CISION INCOME-TAX IS A LEVY ON INCOME. NO DOUBT, THE INCOME -TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUB STANCE OF THE MATTER IS THE INCOME. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MADE ABOUT A 'HYPOTHETICAL INCOME', WHICH DOES NOT MATERIALISE. WHERE INCOME HAS, IN FACT, BEEN RECEIVED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTAN CES THAT IT REMAINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIV EN UP, THE TAX MAY BE PAYABLE. WHERE, HOWEVER, THE INCOME CAN BE SAID N OT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL N OR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT EFFECT MIGHT, IN CERTA IN CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. THIS WAS EXACT LY WHAT HAD HAPPENED IN INSTANT CASE. HERE THE AGREEMENTS WITHIN THE PREVIOUS YEAR REPLACED THE EARLIER AGREEMENTS, AND ALTERED THE RAT E IN SUCH A WAY AS TO MAKE THE INCOME DIFFERENT FROM WHAT HAD BEEN ENTERE D IN THE BOOKS OF ACCOUNT. A MERE BOOK-KEEPING ENTRY CANNOT BE INCOME , UNLESS INCOME HAS ACTUALLY RESULTED, AND IN THE INSTANT CASE, BY THE CHANGE OF THE TERMS THE INCOME WHICH ACCRUED AND WAS RECEIVED CONSISTED OF THE LESSER AMOUNTS AND NOT THE LARGER. THIS WAS NOT A GIFT BY THE ASSESSEE FIRM TO THE MANAGED COMPANIES. THE REDUCTION WAS A PART OF TH E AGREEMENT ENTERED INTO BY THE ASSESSEE FIRM TO SECURE A LONG-TERM MANAGING AGENCY ARRANGEMENT FOR THE TWO COMPANIES WHICH IT HA D FLOATED. [EMPHASIS SUPPLIED] 13. THESE DECISIONS ARE APPLICABLE IN THE CASE OF THE APPELLANT. THE SEIZED MATERIAL DOES NOT SHOW IN ANY MANNER THAT THE I NCOME HAS MATERIALISED OR THAT IT HAS ACCRUED AND ARISEN TO THE APPELLANT. A PERUSAL OF THE EVIDENCES AT HAND AND THE DISCUSSION IN THE ASSESSM ENT ORDER SHOWS THAT THE PROBABILITY OF THE IMPUGNED AMOUNTS BEI NG INCOME IN THE HANDS OF THE APPELLANT IS NOT ONLY REMOTE AND IMP ROBABLE, BUT IMPOSSIBLE. THE INFERENCE THAT THE IMPUGNED AMOUNTS RE PRESENT INTEREST INCOME OF THE APPELLANT CANNOT BE DRAWN FRO M SEIZED MATERIAL. 8 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUND : 1. WHETHER ON THE FACTS & CIRCUMSTANCE OF THE CASE & LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST RECEIVED BUT NOT ACCOUNTED IN THE BOOKS TOTALING TO RS.60,41,667/- FOR THE AY. 2007-08. 8. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE FOR THE REMAINING 2 ASSESSMENT YEARS ALSO. 9. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT THE ASSESSEE DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS CONFIRMS THAT PAPER NO.1 CONTA INS THE RENT RECEIVED BY M.D. PROPERTIES PVT. LTD. IT WAS ALSO CO NFESSED THAT THE PAPER IS PREPARED BY AN EMPLOYEE OF THE GROUP. HOW EVER, THE ASSESSEE IN RESPECT OF THE FIGURES SHOWN AS INTEREST REC EIVABLE DID NOT ACCEPT THE INTEREST CALCULATION SHOWN ON THE SAME P APER AS RECEIVABLE AND SAYS IT IS A MISTAKE OF THE EMPLOYEE. HE SU BMITTED THAT THE SEIZED DOCUMENTS HAVE TO BE EITHER ACCEPTED IN TOTO OR TO BE REJECTED. HOWEVER, A PART OF THE SAME CANNOT BE ACCEP TED AS TRUE AND THE OTHER PART AS INCORRECT. HE SUBMITTED THAT TH E LD.CIT(A) WITHOUT APPLYING HIS MIND PROPERLY HAS DELETED THE ADDITIO N FOR ALL THE 3 ASSESSMENT YEARS FOR WHICH THE ORDER OF THE CIT(A ) SHOULD BE SET ASIDE AND THAT OF THE AO BE RESTORED. 10. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE PAPER IS A MERE JOTTING OF FIGURES BY ONE OF THE EMPLOYEES WHICH DID N OT GIVE ANY NAME. THE AO WAS NOT IN A POSITION TO ESTABLISH AS T O WHAT ARE THE ENTRIES AND TO WHOM THE MONEY HAS BEEN GIVEN AND WHO HAS PAID THE INTEREST. THERE WAS NO CORROBORATIVE EVIDENCE. EVEN THE AO HAD NEVER BOTHERED TO EXAMINE SHRI VIRWANI AND THE EMBASSY 9 GROUP OF BANGALORE. HE SUBMITTED THAT THE DECISIONS CITE D BY THE ASSESSEE BEFORE THE LD.CIT(A) ARE SQUARELY APPLICABLE TO T HE FACTS OF THE CASE WHICH HAS BEEN RELIED UPON BY THE LD.CIT(A). HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) SHOULD BE UPHELD AND THE APPEALS FILED BY THE REVENUE SHOULD BE DISMISSED. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE AO HAS NOT EXAMINED SHRI VIRWANI OF EMBA SSY GROUP TO FIND OUT AS TO WHETHER ANY MONEY WAS ADVANCE D BY THE ASSESSEE TO THE SAME GROUP AND WHETHER ANY INTEREST HAS BEEN RECEIVED. THERE IS NO BASIS FOR MAKING THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS RECEIVED OR WOULD HAVE RECEIVED THE INTEREST. THE IDENTITY OF THE PERSON TO WHOM THE SO CALLED AMOUNT HAS BEEN GIVEN IS NOT DISCERNIBLE FROM THE SEIZED PAPER. FURTHER, TH E SUBMISSION OF THE ASSESSEE THAT THE AMOUNT OF RS.10 CROR ES WAS THE LOAN TAKEN FROM SHRI JITENDRA VIRWANI BY SHRI SANJAY GHODA WAT, INDIVIDUAL WHICH WAS APPEARING IN THE BALANCE SHEET OF SHRI SANJAY GHODAWAT SINCE THE A.Y. 2006-07 WHICH HAS BEEN REDUCED IN F.Y. 2009-10 AND NO INTEREST WAS RECEIVED FROM SHRI JITENDRA VIRWANI COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIV E. 11.1 THE HONBLE SUPREME COURT IN THE CASE OF UDHAVDAS KEWALRAM (SUPRA) HAS HELD THAT IT IS FOR THE INCOME-TAX AU THORITIES TO PROVE THAT A PARTICULAR RECEIPT IS TAXABLE. IN DECIDING WHETHER AN ITEM OF RECEIPT IS TAXABLE AS INCOME, THE TRIBUNAL MAY CONS IDER THE EVIDENCE IN THE LIGHT OF THE STATEMENTS MADE BY THE ASSE SSEE, HIS CONDUCT AND THE PROBABILITIES, BUT IN ARRIVING AT ITS CONCLU SION THERE MUST BE A FAIR AND REASONABLY FULL REVIEW OF THE EVIDENCE. 10 11.2 SIMILARLY, THE HONBLE SUPREME COURT IN THE CASE SHOO RJI VALLABHDAS (SUPRA) HAS OBSERVED THAT IF INCOME DOES NOT RE SULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH IN BOOK-KEEPING, AN ENTRY IS MADE ABOUT A HYPOTHETICAL INCOME, WHICH DOES NOT MATERIALIS E. IT HAS BEEN HELD THAT WHERE INCOME HAS IN FACT BEEN RECEIV ED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REM AINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIVEN UP, THE TAX MA Y BE PAYABLE. HOWEVER, WHERE THE INCOME CAN BE SAID NOT TO HA VE RESULTED AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RE CEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT EFFECT MIGHT, IN CERT AIN CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. 11.3 THEREFORE, WHEN THE SEIZED DOCUMENT DO NOT SHOW CLE ARLY AND WITH REASONABLE CERTAINTY AS TO RECEIPT OF THE INTEREST, A ND WHEN THE SEIZED PAPER DOES NOT SPELL OUT AS TO WHETHER AMOUNTS WERE ACTUALLY GIVEN OUT ON INTEREST AND IF SO THEN TO WHOM SUCH LOAN W AS GIVEN, THEN IN THAT CASE THE AO IN OUR OPINION WAS NOT JUSTIFIED IN MAKING THE ADDITION. SINCE THE LD.CIT(A) WHILE DELETING THE ADDITION FO R ALL THE 3 ASSESSMENT YEARS HAS RELIED ON VARIOUS DECISIONS O F THE HONBLE SUPREME COURT AND THE LD. DEPARTMENTAL REPRESE NTATIVE COULD NOT CONTROVERT THE FACTUAL FINDINGS OF THE LD.CIT(A), T HEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY TH E AO. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND THE GROUN D RAISED BY THE REVENUE IS DISMISSED. 12. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ITA NOS. 1897 AND 1898/PN/2012. FACTS BEING SIMILAR, THEREFORE, FOLLO WING THE REASONINGS GIVEN ABOVE, WE UPHOLD THE ORDER OF THE C IT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 11 13. IN THE RESULT, ALL THE 3 APPEALS FILED BY THE REVENUE AR E DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-04-2015. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED: 30 TH APRIL, 2015 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A), KOLHAPUR 4. CIT, KOLHAPUR 5. THE D.R, B BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE