MONIR DEEPAK DOSHI, MUMBAI V. ITO 16(3)(1), MUMBAI

ITA 1963/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7804 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: S C TIWARI
• Keywords: Gross profit estimation; Unexplained cash credit; Business income; Additional evidence
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI R. V. EASWAR, PRESIDENT AND SHRI RAJEN DRA SINGH(AM) ITA NO.1963/M/2010 ASSESSMENT YEAR 2005-06 SHRI MONIR DEEPAK DOSHI THE ITO 16(3)(1), 322, PAREKH MARKET, OPERA HOUSE MATRU MANDIR, GRA NT ROAD MUMBAI 400 004. MUMBAI 400 007. PAN : ADGPD 6937 J APPELLANT RESPONDENT ASSESSEE BY : MR. S.C. TIWARI REVENUE BY : MS. ASHIMA GUPTA O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 24.12.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-0 6. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON FIVE DIFFERENT GROUND S. 2. THE FIRST DISPUTE IS REGARDING ADDITION OF RS.7. 50 LACS ON ACCOUNT OF GROSS PROFIT. BRIEFLY STATED THE FACTS OF THE CASE ARE TH AT THE ASSESSEE WHO WAS DOING BUSINESS OF EXPORT OF DIAMONDS HAD DECLARED THE EXP ORT TURNOVER AT RS.17.65 CRORES AND THE GROSS PROFIT AT RS.10.19 LACS WHICH CAME TO 0.57 PERCENT OF TURNOVER. THE AO OBSERVED THAT THE ASSESSEE HAD NOT SUBMITTED ANY WORTHWHILE DETAILS EXCEPT STATEMENT OF PURCHASES AND TOTAL SAL ES WHICH DID NOT CONTAIN THE ADDRESS AND PAN OF THE CONCERNED PARTIES. THE AO TH EREFORE ESTIMATED THE GP AT 10% OF THE TURNOVER LEADING TO THE ADDITION OF R S.1,66,31,123/-. THE 2 ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE AO HAD NOT GIVEN ANY BASIS FOR ESTIMATING GP AT 10%. T HE ASSESSEE IT APPEARS FILED SOME MORE DETAILS BEFORE THE CIT(A) WHO REMANDED TH E MATTER TO THE AO. THE ASSESSEE SUBMITTED THAT DURING THE REMAND PROCEEDIN G THE ASSESSEE FILED FULL DETAILS OF SALES AND PURCHASES ALONG WITH NAMES OF THE PARTIES AND CARAT AND QUANTITY OF DIAMONDS EXPORTED, THE NAME OF PARTIES TO WHOM EXPORTS WERE MADE ALONG WITH INVOICES WHICH HAD BEEN CHECKED BY THE AO IN THE REMAND PROCEEDINGS AND NO MISTAKES WERE POINTED OUT. THE G ROSS PROFIT WAS LOW BECAUSE OF RECESSION IN THE EXPORT TRADE. THE ASSES SEE HAD FILED DETAILS OF SALES AND PURCHASES TO JUSTIFY LOW GP RATE. ON CONSIDERIN G THE SUBMISSION OF THE ASSESSEE CIT(A) OBSERVED THAT ESTIMATION OF GP RATE AT 10% WAS VERY HARSH. CIT(A) FURTHER OBSERVED THAT GP AT 0.57% DECLARED B Y THE ASSESSEE ALSO APPEARED VERY LOW. CIT(A) NOTED THAT THERE WAS FORC E IN THE ARGUMENT OF THE ASSESSEE THAT DUE TO RECESSIONARY TREND PROFIT MARG IN WAS LOW. HOWEVER, TO COVER UP OF LOW GP RATE AND OTHER LEAKAGES CIT(A) E STIMATED THE GP AT 1% OF THE TOTAL SALES AND UPHELD THE ADDITION AT RS.7.5 L ACS. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBU NAL. 2.1 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBM ITTED THAT THE ASSESSEE HAD GIVEN ALL THE DETAILS OF SALES AND PURCHASES IN CLUDING QUANTITATIVE DETAILS AND NO DEFECTS WERE POINTED OUT BY THE AO. THE GP R ATE WAS LOW BECAUSE OF RECESSION IN THE EXPORT MARKET WHICH WAS EVEN ACCEP TED BY THE CIT(A). UNDER THESE CIRCUMSTANCES ADDITION ON ACCOUNT OF GP RATE ON ESTIMATE BASIS WAS NOT JUSTIFIED. THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT(A). 3 2.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE ASSESSEE IS AN EXPORTER IN DIAMONDS AND HAD DECLARED GP RATE OF 0.57 % OF TURNOVER OF RS.17.65 CRORES. THE AO HAD E STIMATED THE GP RATE AT 10% ON THE GROUND THAT THE ASSESSEE HAD NOT GIVEN F ULL DETAILS OF PURCHASES AND SALES. HOWEVER, IT IS CLEAR FROM THE ORDER OF C IT(A) THAT FULL DETAILS OF PURCHASES AND SALES INCLUDING NAMES OF THE PARTIES AS WELL AS QUANTITATIVE DETAILS HAD BEEN SUBMITTED BEFORE THE AO DURING THE REMAND PROCEEDINGS AND THE AO HAD NOT POINTED OUT ANY DEFECTS. THE CIT(A) ALSO ACCEPTED THE CLAIM OF THE ASSESSEE THAT THERE WAS RECESSIONARY TREND IN T HE EXPORT MARKET. THERE IS NO COMPARATIVE CASE ON RECORD PLACED BY THE REVENUE SHOWING BETTER GP. THERE IS ALSO NO DEFECT FOUND IN THE BOOKS OF ACCOUNT. UN DER THESE CIRCUMSTANCES IN OUR VIEW BOOK RESULT CANNOT BE REJECTED. WE ARE THE REFORE UNABLE TO SUSTAIN THE ORDER OF CIT(A) ESTIMATING THE GP AT 1%. THE ORDER OF CIT(A) IS THEREFORE SET ASIDE AND THE ADDITION IS DELETED. 3. THE DISPUTES RAISED IN GROUNDS NOS.2 TO 4 RELATE TO ADDITION OF RS.50,75,000/- MADE BY THE AO UNDER SECTION 68 OF T HE INCOME-TAX ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT. THE AO NOTED TH AT IN THE CAPITAL ACCOUNT OF THE ASSESSEE THERE WAS CREDIT ENTRY OF RS.50,75,000 /- WITH NARRATION BY STAR MONIR. AO THEREFORE CONCLUDED THAT THE PROPRIETOR OF THE BUSINESS SHRI MONIR P. DOSHI HAD INTRODUCED FRESH CAPITAL OF RS.50,75,000/ - WHICH REMAINED UNEXPLAINED. HE THEREFORE MADE ADDITION OF RS.50,75 ,000/- UNDER SECTION 68 OF THE INCOME-TAX ACT. THE ASSESSEE DISPUTED THE DECIS ION OF THE AO AND SUBMITTED BEFORE CIT(A) THAT THERE WERE DEPOSITS OF RS.50,75,000/- IN THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE EXPLAINED THE SOURCE OF DEPOSITS AS UNDER : 4 (I) OPENING BALANCE RS.4,46,000/- (II) DIVIDEND FROM SHARES RS.1,32,292/- (III) INTEREST ON LOAN RECEIVED RS. 42,960/- (IV) REFUND OF SHARE APPLICATION MONEY RS.12,15,550 /- (V) SALE PROCEEDS OF SHARES RS.12,17,727/- (VI) CASH DEPOSIT OUT OF WITHDRAWALS FROM BANKS RS.28,66,000/- (VII) LOANS FROM PARTIES RS.42,28,801/- (VIII) LOANS FROM INDIAN BANK RS.6,86,000/- 3.1 CIT(A) AFTER EXAMINING THE CLAIM OF THE ASSESSE E NOTED THAT THE TOTAL CASH WITHDRAWN FROM THE BANK ACCOUNT AS PER THE CAP ITAL ACCOUNT WAS ONLY RS.8.64 LACS IN PLACE OF RS.28,66,000/- CLAIMED BY THE ASSESSEE. THEREFORE THE CIT(A) TREATED ONLY A SUM OF RS.8.64 LACS AS EXPLAI NED ON ACCOUNT OF CASH DEPOSITED OUT OF WITHDRAWAL FROM THE BANK. CIT(A) A LSO ACCEPTED THE CLAIM OF OPENING BALANCE OF RS.5 LACS AND TOTAL AMOUNT EXPLA INED WAS THUS TAKEN AT RS.13.64 LACS. THEREFOE A SUM OF RS.15.02 LACS (28. 66 13.64) STILL REMAINED UNEXPLAINED. CIT(A) ALSO NOTED THAT THE ASSESSEE HA D EXPLAINED A SUM OF RS.12,17,727/- AS SALE PROCEEDS OF SHARES BUT NO DE TAILS OF SHARES PURCHASED AND SOLD WERE GIVEN AND THEREFORE THE SAID EXPLANAT ION WAS ALSO NOT ACCEPTED. CIT(A) WAS HOWEVER SATISFIED REGARDING THE DEPOSITS OF RS.12.15 LACS, DIVIDEND INCOME OF RS.1,30,292/-, INTEREST ON LOAN OF RS.42, 960/- AND LOAN OF RS.6,86,000/- FROM THE INDIAN BANK FULL DETAILS IN RESPECT OF WHICH WERE FILED. CIT(A) OBSERVED THAT THE ASSESSEE HAD EXPLAINED ALL THE DEPOSITS EXCEPT A SUM OF RS. 1,24,000/- RECEIVED FROM M/S. LEELA TUBE. CI T(A) THEREFORE CONFIRMED ADDITIONS OF RS.15.02 LACS, RS.12,17,727/- AND RS.1 ,24,000/- TOTALLING RS.28.43 5 LACS (WRONGLY MENTIONED AS 28.41 LACS). AGGRIEVED B Y THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.2 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMI TTED THAT A SUM OF RS.15.02 LACS WAS THE AGGREGATE SUM OF SEVERAL LOAN S OBTAINED BY THE ASSESSEE FROM DIFFERENT PARTIES. THE ASSESSEE COULD NOT FILE THE CONFIRMATIONS EARLIER DUE TO SOME MISUNDERSTANDING AND THE SAME WAS NOW BEING FILED AS ADDITIONAL EVIDENCE. IT IS ALSO SUBMITTED THAT THE ASSESSEE HA D SINCE OBTAINED THE CONTRACT NOTE CUM SALE BILL FOR M/S.NAMAN SECURITIES AND FIN ANCE PVT. LTD. REGARDING SALE OF SHARES TO THE TUNE OF RS.12,17,727/- WHICH BEING FILED AS ADDITIONAL EVIDENCE. IT WAS ALSO SUBMITTED THAT CONFIRMATION F ROM M/S. LEELA TUBES PVT. LTD. HAD NOT BEEN FILED AS NO CONFIRMATION HAD BEEN ASKED FOR. THE SAME WAS NOW BEING FILED AS AN ADDITIONAL EVIDENCE. THE LEAR NED AR SUBMITTED THAT THE ADDITIONAL EVIDENCES FILED MAY BE ADMITTED FOR PROP ER ADJUDICATION OF THE GROUND OF APPEAL. THE LEARNED DR ON THE OTHER HAND STRONGLY OBJECTED TO THE ADMISSION OF THE ADDITIONAL EVIDENCES. IT WAS SUBMI TTED THAT THE ADDITIONS HAD BEEN MADE UNDER SECTION 68 OF THE INCOME-TAX ACT AN D ONUS WAS ON THE ASSESSEE TO EXPLAIN THE CASH CREDIT SATISFACTORILY BY PRODUCING THE NECESSARY EVIDENCES. THE ASSESSEE HAD ALSO BEEN ALLOWED SUFFI CIENT TIME TO FILE THE NECESSARY EVIDENCES. THE ASSESSEE COULD FILE THE EV IDENCES BEFORE THE CIT(A) WHICH WAS ALSO NOT DONE. IT WAS ALSO POINTED OUT TH AT CONFIRMATIONS FILED IN THE FORM OF ADDITIONAL EVIDENCE DID NOT CONTAIN THE PAN . THOUGH THE ASSESSEE HAD FILED THE SALE BILLS IN RESPECT OF SALE OF SHARES D ETAILS REGARDING CORRESPONDING PURCHASES WERE NOT AVAILABLE. IT WAS SUBMITTED THAT NO SUFFICIENT CAUSE HAD BEEN SHOWN FOR NOT FILING THE DETAILS AND EVIDENCES BEFORE THE LOWER AUTHORITIES AND IT WAS ACCORDINGLY URGED THAT THE ADDITIONAL EV IDENCES SHOULD NOT BE 6 ADMITTED. RELIANCE WAS PLACED ON THE FOLLOWING JUDG MENTS IN SUPPORT OF THE CASE. (I) 227 ITR 345 (RAJ) IN CASE OF CIT VS JAIPUR UDYOG LT D. (II) 68 ITR 708 (BOM) IN CASE OF VELJI DEORAJ & CO. (III) 102 ITR 757 (AP) IN CASE A.K.BABUKHAN VS CWT (IV) 61 ITD 139 (DELHI) IN CASE OF MS. JYOTSNA SURI VS D CIT 3.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITIONS OF RS .15.02 LACS, RS.12.17,727/- AND RS.1,24,000/- UNDER SECTION 68 OF THE INCOME-TA X ACT. THE AO FOUND DURING THE ASSESSMENT PROCEEDINGS THAT THE CAPITAL ACCOUNT OF THE ASSESSEE HAD BEEN CREDITED BY A SUM OF RS.50,75,000/-. NO EXPLAN ATION WAS GIVEN REGARDING THE SOURCE OF CREDIT BEFORE THE AO WHO MADE ADDITIO N UNDER SECTION 68 AMOUNTING TO RS.50,75,000/-. IN APPEAL CIT(A) NOTED THAT THE ASSESSEE HAD EXPLAINED THE CAPITAL ADDITION TO THE EXTENT OF RS. 28.66 LACS OUT OF CASH WITHDRAWN FROM THE BANK. IT WAS HOWEVER FOUND THAT THE TOTAL CASH WITHDRAWN FROM BANK WAS ONLY RS.8.64 LACS AND THERE BEING OPE NING BALANCE OF RS.5 LACS, EXPLANATION REGARDING THE CASH WITHDRAWN FROM THE B ANK WAS SUBSTANTIATED ONLY TO THE TUNE OF RS.13.64 LACS. CIT(A) THEREFORE CONFIRMED THE ADDITION OF RS.15.02 LACS ON THIS ACCOUNT. THE ASSESSEE HAD ALS O EXPLAINED THAT HE HAD RECEIVED A SUM OF RS.12,17,727/- FROM THE SALE PROC EEDS OF SHARES BUT NO DETAILS OF PURCHASE AND SALE OF SHARES WERE GIVEN A ND THEREFORE THE EXPLANATION REMAINED UNSUBSTANTIATED AND THE ADDITION TO THE TU NE OF RS.12,17,727/- WAS ALSO CONFIRMED. THE BALANCE CAPITAL ADDITION HAD B EEN PROPERLY EXPLAINED BY THE ASSESSEE EXCEPT THE AMOUNT OF RS.1,24,000/- CLA IMED TO HAVE BEEN 7 RECEIVED FROM M/S. LEELA TUBE. CIT(A) THEREFORE CON FIRMED THE ADDITIONS OF RS.15.02 LACS, RS.12,17,727/- AND RS.1,24,000/- AGG REGATING TO RS.28.43 LACS. 3.4 THE ASSESSEE HAS NOW SUBMITTED BEFORE THE TRIBU NAL THAT SOURCE OF RS.15.02 LACS WAS CASH LOANS RECEIVED FROM SEVERAL PARTIES CONFIRMATIONS FROM WHOM WAS FILED AS ADDITIONAL EVIDENCE. THE ASSESSEE HAS ALSO FILED CONTRACT NOTE CUM SALE BILLS FROM M/S.NAMAN SECURITIES AND F INANCE PVT. LTD. EXPLAINING THE SOURCE OF RS.12,17,727/- FROM SALE OF SHARES. C ONFIRMATION FROM LEELA TUBES HAS ALSO BEEN FILED. REQUEST HAS BEEN MADE FO R ADMISSION OF ADDITIONAL EVIDENCES UNDER RULE 29 OF THE ITAT RULES. IT HAS B EEN SUBMITTED BY THE LEARNED AR THAT SUCH EVIDENCES COULD NOT BE FILED B EFORE THE AUTHORITIES BELOW DUE TO SOME MISUNDERSTANDING AND THEREFORE THE SAME SHOULD BE ADMITTED IN THE INTEREST OF JUSTICE. THE LEARNED DR HAS HOWEVER OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCE. 3.5 WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPECT S RELATING TO ADMISSION OF ADDITIONAL EVIDENCE. UNDER RULE 29 OF THE ITAT RUL ES THE TRIBUNAL CAN ADMIT THE ADDITIONAL EVIDENCE TO ENABLE IT TO PASS AN ORDER O R FOR ANY SUBSTANTIAL CAUSE OR IF THE I.T AUTHORITIES HAD DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE. IN THIS CASE WE FIND THAT NO CASE HAS BEEN MADE THAT THE ASSESSEE HAD NOT BEEN PROVIDED SUFFIC IENT OPPORTUNITY TO ADDUCE EVIDENCE. NO GROUND OF APPEAL RELATING TO LACK OF A DEQUATE OPPORTUNITIES HAD ALSO BEEN RAISED BEFORE US. THERE WERE ADDITIONS TO THE CAPITAL ACCOUNT OF THE ASSESSEE AND THEREFORE BURDEN WAS ON THE ASSESSEE T O EXPLAIN THE CREDIT SATISFACTORILY BY PRODUCING PROPER EVIDENCE UNDER S ECTION 68 OF THE INCOME-TAX ACT. THE ASSESSEE HAD SUFFICIENT TIME FOR PRODUCING THE SAME BEFORE CIT(A) IN CASE HE FAILED TO DO SO BEFORE THE AO. THEREFORE IN OUR VIEW THE ADDITIONAL 8 EVIDENCE COULD NOT BE ADMITTED ON THE GROUND THAT T HE ASSESSEE HAD NOT BEEN PROVIDED SUFFICIENT OPPORTUNITIES BY THE AUTHORITIE S BELOW. IT IS ALSO NOT THE CASE THAT THE ADDITIONAL EVIDENCE IS NECESSARY FOR DECID ING THE ISSUE BY THE TRIBUNAL. UNDER SECTION 68 OF THE INCOME-TAX ACT THE BURDEN W AS ON THE ASSESSEE TO PRODUCE EVIDENCE TO EXPLAIN THE CREDIT ENTRIES WHIC H THE ASSESSEE HAD FAILED TO DO SO AND IN SUCH CASE THE CREDIT HAS TO BE TREATED AS INCOME OF THE ASSESSEE. THEREFORE UNDER THE PROVISIONS OF LAW AND ON THE BA SIS OF MATERIAL AVAILABLE ON RECORD ADDITIONS HAVE TO BE CONFIRMED AND ADDITIONA L EVIDENCE CANNOT BE ADMITTED ON THE GROUND THAT THE SAME IS NECESSARY F OR PASSING THE ORDER BY THE TRIBUNAL. THE ONLY OTHER SITUATION IN WHICH ADDITIO NAL EVIDENCE CAN BE ADMITTED IS FOR ANY SUBSTANTIAL CAUSE. WE HAVE PERUSED THE A DDITIONAL EVIDENCE FILED I.E. CONFIRMATIONS FROM SEVERAL PARTIES REGARDING CASH L OANS OF RS.15.02 LACS AND CONTRACT CUM SALE BILLS FOR SALE OF SHARES FOR THE AMOUNT OF RS.12,17,727/-. THESE ADDITIONAL EVIDENCES EVEN IF CONSIDERED DO NO T EXPLAIN THE CREDIT SATISFACTORILY. ALL THE LOANS ARE IN CASH AND THE P ARTIES ARE NOT ASSESSED TO TAX AND THERE IS NO EVIDENCE FILED TO SUBSTANTIATE THE SOURCE OF THEIR INCOME. SIMILARLY THE CONTRACT CUM SALE BILLS OF THE BROKER ONLY SHOW THE SALE OF SHARES BUT THERE IS NO EVIDENCE TO SUBSTANTIATE THE SOURCE OF PURCHASES. WE ALSO NOTE THAT AFTER A LAPSE OF SEVERAL YEARS IT IS DIFFICULT TO EXAMINE THE GENUINENESS OF SHARE TRANSACTIONS IN CASE SUCH EVIDENCES ARE ADMIT TED. EVEN THE ADDITIONAL EVIDENCES FILED AT THIS STAGE DO NOT EXPLAIN THE SO URCE OF THE CREDIT SATISFACTORILY. THEREFORE IN OUR VIEW NO CASE HAS B EEN MADE OUT FOR ADMISSION OF THE ADDITIONAL EVIDENCES FOR SUBSTANTIAL CAUSE. THE ADDITIONAL EVIDENCES RELATING TO THE CASH LOANS AND SALE OF SHARES ARE T HEREFORE NOT ADMITTED AND THE ADDITIONS OF RS.15.02 LACS AND RS.12,17,727/- ARE C ONFIRMED. AS REGARDS THE SUM OF RS.1,24,000/- CLAIMED TO HAVE BEEN RECEIVED FROM M/S. LEELA TUBES, THE ASSESSEE HAS FILED A COPY OF CONFIRMATION FROM M/S. LEELA TUBES GIVING THE 9 PAN OF THE PARTY WHICH HAS BEEN PLACED AT PAGE 39 O F THE PAPER BOOK. THE CONFIRMATION SHOWS THAT THE TRANSACTIONS HAD BEEN M ADE THROUGH BANK ACCOUNT AND THE PARTY IS ASSESSED TO TAX. THERE IS THEREFOR E A PRIMA FACIE CASE MADE REGARDING THE EXPLANATION TO THE TUNE OF RS.1,24,00 0/-. WE THEREFORE ADMIT THE ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION FRO M M/S. LEELA TUBES, FOR SUBSTANTIAL CAUSE AND RESTORE THE ISSUE OF ADDITION OF RS.1,24,000/- TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER CONSIDERING T HE CONFIRMATION FILED BY THE ASSESSEE. THE GROUND IS ALLOWED TO THAT EXTENT FOR STATISTICAL PURPOSE. 4. THE FIFTH DISPUTE IS REGARDING ADDITION OF RS.9, 59,000/- ON ACCOUNT OF CESSATION OF LIABILITY. THE AO NOTED THAT THE ASSES SEE IN THE BALANCE SHEET HAD SHOWN A SUM OF RS.9,56,891/- UNDER THE HEAD CURRE NT ASSETS AND ADVANCES IN THE NAME OF M/S.PINKUDIAM EXPORTS BUT THE AMOUNT WAS INSERTED IN BRACKET SHOWING THAT IT WAS A NEGATIVE ENTRY. THE AO THUS C ONCLUDED THAT AMOUNT WAS RECEIVABLE FROM M/S. PINKUDIAM EXPORTS WHICH WAS A PROPRIETARY CONCERN OF MR.PINKESH D. DOSHI THE BROTHER OF THE ASSESSEE OPE RATING FROM THE SAME ADDRESS AND DOING THE SAME BUSINESS. THE AO SCRUTI NIZED THE BALANCE SHEET OF M/S. PINKUDIAM EXPORTS AND NOTED THAT THE BALANCE S HEET DID NOT SHOW ANY AMOUNT PAYABLE TO M/S. STAR MONIR DIAMOND, THE PROP RIETARY CONCERN OF THE ASSESSEE OR MR. MONIR DOSHI. THE AO THEREFORE DREW THE INFERENCE THAT NO AMOUNT WAS DUE AND TREATED THE SUM OF RS.9,56,891/- AS INCOME UNDER SECTION 41(1) ON ACCOUNT OF CESSATION OF LIABILITY. IN APPE AL THE ASSESSEE SUBMITTED BEFORE CIT(A) THAT ONCE IT WAS FOUND BY THE AO THAT THE AMOUNT WAS RECEIVABLE FROM HIS BROTHER, IT COULD NOT BE CONSIDERED AS CES SATION OF LIABILITY UNDER SECTION 41(1). IT COULD BE CONSIDERED AS A CESSATIO N OF LIABILITY IN CASE OF THE BROTHER OF THE ASSESSEE. CIT(A) HOWEVER OBSERVED TH AT THE ASSESSEE HAD NOT FILED ANY COPIES OF ACCOUNT TO SHOW AS TO WHEN THES E AMOUNTS WERE TRANSFERRED 10 OR RECEIVED FROM HIS BROTHER. HE THEREFORE SUSTAINE D THE ADDITION OF RS.9,59,000/- AS UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.1 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE HAD NOT BEEN ALLOWED ANY DEDUCTION ON ACCOUNT OF SU M OF RS.9,59,000/- IN THE EARLIER YEARS AND THEREFORE THE PROVISIONS OF SECTI ON 41(1) COULD NOT BE APPLIED. HE REFERRED TO THE CONFIRMATION FILED AT PAGES 63 A ND 64 OF THE PAPER BOOK TO POINT OUT THAT THE ASSESSEE HAD CREDITED PINKHODIUM EXPORTS BY A SUM OF RS.11,07,191/- ON 23.9.2003 AND AFTER PAYMENT OF RS .20,000/- ON 11.11.2003 A SUM OF RS.9,56,891/- REMAINED OUTSTANDING AS THER E WAS OPENING BALANCE OF RS.1,30,300/-. THERE WERE NO CREDITS DURING THE YEA R AND THEREFORE NO ADDITION COULD BE MADE UNDER SECTION 68 OF THE INCOME-TAX AC T. IT WAS ALSO POINTED OUT THAT THE AUTHORITIES BELOW HAD NOT SPECIFICALLY ASK ED FOR CONFIRMATION FROM PINKODIUM EXPORTS WHICH WAS THE PROPRIETARY CONCERN OF HIS BROTHER AND THERE COULD HAVE BEEN NO DIFFICULTY IN FILING THE CONFIRM ATION. IT WAS ACCORDINGLY REQUESTED THAT THE ADDITION MADE SHOULD BE DELETED. THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORI TIES BELOW. 4.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS. 9,59,000/- ON ACCOUNT OF ENTRY IN THE NAME OF THE M/S.PINKUDIAM EXPORTS. THE AO NOTED THAT AMOUNT WAS SHOWN UNDER THE HEAD CURRENT ASSETS AND ADVANC ES BUT SINCE THE ENTRY WAS INSERTED UNDER BRACKET AO CONCLUDED THAT AMOUNT WAS RECEIVABLE FROM M/S. PINKUDIAM EXPORTS (PE). HE VERIFIED THE BALANC E SHEET OF M/S.PE AND NOTED THAT THE SAME DID NOT SHOW ANY AMOUNT PAYABLE TO TH E ASSESSEE. HE THEREFORE ADDED THE AMOUNT UNDER SECTION 41(1) ON ACCOUNT OF CESSATION OF LIABILITY. 11 CIT(A) OBSERVED THAT WHEN THE AMOUNT WAS RECEIVABLE FROM M/S.PE THE SAME COULD NOT BE ADDED ON THE GROUND OF CESSATION OF LI ABILITY UNDER SECTION 41(1). BUT SINCE THE ASSESSEE HAD NOT FILED COPIES OF ACCO UNT SHOWING THE ENTRIES RELATING THERE TO, HE CONFIRMED THE ADDITION UNDER SECTION 68 OF THE INCOME-TAX ACT. THE LEARNED AR HAS SUBMITTED THAT NO CONFIRMAT ION FROM M/S. PE HAD BEEN SPECIFICALLY ASKED FOR BY THE AUTHORITIES BELOW. IT IS ALSO SUBMITTED THAT M/S.PE IS A PROPRIETARY CONCERN OF HIS BROTHER AND THEREFO RE IF ASKED FOR THERE WOULD HAVE BEEN NO DIFFICULTY IN PRODUCING THE SAME. CONF IRMATION HAS NOW BEEN FILED SHOWING THAT THE SUM OF RS.9,56,891/- WAS OUTSTANDI NG SINCE 11.11.2003. IT IS ALSO SUBMITTED THAT THIS AMOUNT HAD NOT BEEN CLAIME D AS DEDUCTION IN THE EARLIER YEAR AND THEREFORE NO ADDITION COULD BE MAD E UNDER SECTION 41(1). THERE WERE ALSO NO CREDITS DURING THE YEAR AND THER EFORE NO ADDITION COULD BE MADE UNDER SECTION 68 OF THE INCOME-TAX ACT. WE FIN D THAT THE AO HAS GIVEN A CLEAR FINDING THAT AMOUNT WAS NOT APPEARING IN THE BALANCE SHEET OF M/S.PE AND NO COPY OF ACCOUNT OR CONFIRMATION HAD BEEN FILED B EFORE THE LOWER AUTHORITIES. IN OUR VIEW THE MATTER REQUIRES FRESH CONSIDERATION AFTER TAKING INTO ACCOUNT THE CONFIRMATION FILED AND THE BALANCE SHEET OF M/S . PE. WE THEREFORE SET ASIDE THE ORDER OF CIT(A) ON THIS POINT AND RESTORE THE I SSUE TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION A ND AFTER HEARING TO THE ASSESSEE. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED IN TERMS OF THE ORDER ABOVE. 6. ORDER WAS PRONOUNCED IN THE OPEN COURT 29.03.20 11. SD/- SD/- ( R. V. EASWAR ) (RAJENDR A SINGH) PRESIDENT ACCOUNTANT MEMBER DATE : 29.03.2011 AT :MUMBAI 12 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR G BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK