ITO, Ward - 36(1), Kolkata, Kolkata V. Shri Rakesh Agarwal, Kolkata

ITA 2008/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9524 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 08-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MONDAL
• Keywords: Income from undisclosed sources; Principle of natural justice; Onus to prove
• Section: 143(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S. S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.2008/KOL/2017 ( / ASSESSMENT YEAR: 2013-14) ITO, WARD-36(1), KOLKATA 110, SHANTIPALLY, KOLKATA 700 107. VS. SHRI RAKESH AGARWAL 7, MANGOE LANE, 1 ST FLOOR, ROOM NO.103, KOLKATA-1. ./ ./PAN/GIR NO.: ADLPA 6462 E (APPELLANT) .. (RESPONDENT) APPELLANT BY :SHRI K. MONDAL, SR. DR RESPONDENT BY :NONE / DATE OF HEARING : 25/09/2018 /DATE OF PRONOUNCEMENT : 19/12/2018 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINI NG TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST AN ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA IN APPEAL NO.83/CIT(A)-10 /WARD-36(1)/2016-17/KOL DATED 14.06.2016, WHICH IN TURN ARISES OUT OF AN AS SESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 04.03.2016. 2. THE GRIEVANCES RAISED BY THE REVENUE ARE AS FOLL OWS: I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. CIT(A) HAS ERRED IN DECIDING THE ASSESSMENT ORDER PASSED WAS IN VIOLATI ON OF PRINCIPLES OF NATURAL JUSTICE & HENCE BAD IN LAW AND BE QUASHED. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 2 22 2 II) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS UNDER THE HEAD LOANS &ADVAN CES. III) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF EXPENSES MADE ON AC COUNT OF EXPENSES CLAIMED IN EARNING INCOME FROM OTHER SOURCES INVOK ING U/S 57 OF THE I.T. ACT, 1961. IV) THE DEPARTMENT CRAVES LEAVE TO ADD, ALTER OR MO DIFY THE GROUNDS OF APPEAL. 3. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F ASSESSEE IN SPITE OF ISSUANCE OF NOTICE FOR HEARING MORE THAN ONE OCCASI ON AND LD. DEPARTMENTAL REPRESENTATIVE(DR), WAS PRESENT FOR THE APPELLANT R EVENUE. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE, THE APPEAL IS BEING DIS POSED OF EX PARTE QUA THE ASSESSEE, AFTER HEARING LD. DR FOR THE REVENUE ON M ERITS IN TERMS OF RULE 24 OF THE INCOME TAX APPELLATE, TRIBUNAL RULES, 1963. 4. GROUND NO.1 AND 2 RAISED BY THE REVENUE PERTAIN S TO DISALLOWANCE OF LOANS AND ADVANCES TO THE TUNE OF RS.75,75,260/-. 5. THE BRIEF FACTS QUA THE ISSUE ARE THAT GROUND NO .1 AND 2 RAISED BY THEREVENUE ARE AGAINST TREATING UNSECURED LOANS RS. 43,83,994/- AND CURRENT LIABILITY & ADVANCES RS.31,97,266/- TOTALLING TO RS .75,75,260/- AS APPEARING IN ASSESSEES BALANCE SHEET AS AT 31.03.2013, AS NOT P ROVED, AS GENUINE AND ADDITION OF SAID SUM WAS MADE BY ASSESSING OFFICER, THOUGH N OT SO STATED, BUT LD CIT(A) PRESUMED U/S.68 OF THE I.T, ACT, 1961. AS PER ASSES SING OFFICER, HE GAVE VARIOUS OPPORTUNITIES BUT ASSESSEE FAILED TO COMPLY WITH A. O'S REQUIREMENT, HENCE AO MADE ADDITION TO THE TUNE OF RS.75,75,260/- 6. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION OBSERVING THE FOLLOWING: I HAVE CAREFULLY CONSIDERED THE ACTION OF THE LD. AO IN MAKING THE IMPUGNED ADDITION OF RS.75,75,260/-, TREATING THE UNSECURED LOANS AS NOT GENUINE, AND ADDING THE SAME PRESUMABLY U/S 68 OF THE INCOME TAX ACT, 1961. IN THE ASSESSMENT ORDER, THE LD. AO HAS OBSERVED THAT FROM THE BALANC E SHEET AS ON 31.03,2013 FILED ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 3 33 3 BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDING, THE ASSESSEE- INDIVIDUAL HAD DISCLOSED CERTAIN LIABILITY AMOUNTIN G TO RS.43,83,994/- ON ACCOUNT OF UNSECURED LOAN. SIMILARLY, A LIABILITY OF RS.31, 91,266/- WAS SHOWN ON ACCOUNT OF ADVANCES. THE LD. AO HAS RECORDED THAT THE APPEL LANT WAS REQUIRED TO FURNISH THE PARTY-WISE DETAILS OF LOANS AND ADVANCES, WHICH HOWEVER, ACCORDING TO THE LD. AO WERE NOT PRODUCED. AS PER THE LD. AO, THE SAME W ERE REQUISITIONED BY ORDER SHEET ENTRY OF DATED 29.01.2016. IN RESPECT OF THE ENTRIES RELATING TO LOANS AND ADVANCES, ACCORDING TO THE LD. AO, THE ASSESSEE WAS REQUIRED TO PRODUCE DOCUMENTS SUCH AS THE P & L ACCOUNT AND BALANCE SHE ET, THE ITR AND COMPUTATION, PROPERTY-WISE INCOME DETAILS, DETAILS OF DATE WISE LOAN TAKEN AND ITS UTILIZATION. AND THE UTILIZATION OF FUND RECEIVED A S ADVANCE. ACCORDING TO THE LD. AO, DURING THE SCRUTINY, THE APPELLANT WAS UNABLE T O PRODUCE ANY OF THE AFOREMENTIONED DOCUMENTS, DESPITE SEVERAL OPPORTUNI TIES. IN THE RECKONING OF THE LD. AO, IN ORDER TO VERIFY THE LOAN TRANSACTION, TH REE CONDITIONS NEEDS TO BE FULFILLED I.E. THE IDENTITY OF THE CREDITOR, CREDIT WORTHINESS OF SUCH CREDITOR TO ADVANCE MONEY AND GENUINENESS OF THE TRANSACTION. I N THIS CASE, AS PER THE REASONS RECORDED BY THE LD. AO, THE ONUS TO FULFIL THE AFOR ESAID CONDITIONS LAY UPON THE ASSESSEE AND SINCE HE HAS DEFAULTED ON HIS PART TO CONFIRM THE SAID TRANSACTIONS, THE ENTIRE AMOUNT OF LOANS AND ADVANCES TOTALLING T O RS.75,75,260/- (43,83,994 + 31,91,266) WAS TO BE TREATED AS BOGUS LIABILITY, AN D TREATED AS SUCH. 2. DURING THE COURSE OF THE APPEAL, THE LD. A.R FOR THE ASSESSEE-INDIVIDUAL CLAIMED THAT THE APPELLANT HAD OFFERED THE NECESSARY INFORM ATION AS CALLED FOR DURING THE SCRUTINY PROCEEDINGS BEFORE THE LD. AO. ACCORDINGLY , THE SAID DETAILS WERE PRODUCED IN THE COURSE OF THE APPEAL. THESE WERE AS UNDER: A. DETAILS OF UNSECURED LOANS WITH FULL NAME AND AD DRESS OF UNSECURED LOAN (RS.43,83,994/-) AND CURRENT LIABILITIES AND ADVANC ES (RS.31,91,266/-) (ANNEXURE- 'B'-PAGE NOS,6 & 7). ALSO GIVEN PAN NOS. IN EACH CA SE (TWO PAGES). B. LOAN CONFIRMATION AND COPY OF B/S IN CASE ALL 9 PARTIES COLLECTIVELY MARKED AS ANNEXURE C' (PAGE NOS. 8 TO 30). C. CONFIRMATION WITH BALANCE SHEET OF TWO CREDITOR (SRI SAI DURGA STEEL ENTERPRISE AND KAILASH STEEL ENTERPRISES (FOR YARD ADVANCES). (COLLECTIVELY MARKED AS ANNEXURE-'D'-(PAGE NOS. 31 TO 40) AND CONFIRMATION FOR TWO HOSTEL ADVANCES AND AGRICULTURAL ADVANCES (COLLECTIVELY MARKED AS A NNEXURE-'E'-PAGE NOS.41- 43). 3. IT WAS SUBMITTED THAT FROM SUCH DETAILS, IT COUL D BE APPRECIATED THAT ALL THE LOANS ARE BROUGHT FORWARD FROM EARLIER YEAR AND AFT ER SOME REPAYMENT AND INTEREST, CLOSING BALANCE IS AT RS.43,83,999/-. IN THE MATTER OF THE CURRENT LIABILITIES, IT WAS SUBMITTED THAT THESE ADVANCES A RE RAISED DURING THE YEAR UNDER REFERENCE AND THAT THESE HAD BEEN CONFIRMED FROM TH E PARTIES, WHO WERE ALL ASSESSED TO TAX TOO WITH PAN AND OTHER DETAILS RELA TING TO IDENTITY AND OTHER FACTUAL PARAMETERS. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 4 44 4 4. THE MATTER WAS REMANDED TO THE LD. AO THEREAFTER , WITH A DIRECTION TO VERIFY THE CLAIMS OF THE APPELLANT, AND ALSO TO OFFER AN OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE-APPELLANT. IN THE REMAND REPORT, THE LD AO HAS SUBMITTED AS UNDER: THE ASSESSEE WAS ASKED TO PRODUCE THE COPY OF THE I TR FOR THE A.Y. IN WHICH LOAN WAS TAKEN FROM THE CREDITORS ALONG WITH THE COPY OF THE RELEVANT BANK STATEMENTS, P & L A/C, BALANCE SHEETS AND DOCUMENTS, PROOF OF I DENTITY AND ADDRESS AND COPY OF PAN CARD DULY SIGNED BY THE LOAN CREDITORS IN RE SPECT OF OUTSTANDING UNSECURED LOAN BALANCES AND ADVANCES AS ON 31.03.2013. THE CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST PAID IS ALLOWABLE SUBJECT TO FULFILMENT OF TWO CONDITIONS:- FIRSTLY THE LOAN SHO ULD BE GENUINE AND SECONDLY THE LOAN SHOULD BE UTILIZED FOR THE PURPOSE OF BUSINESS . IN RESPECT OF LOAN TAKEN DURING THE YEAR FROM ONE RAKESH AGARWAL HUF THE ASSESSEE F ILED COPY OF LOAN CONFIRMATION, P & L ACCOUNT, BALANCE SHEET, COMPUTA TION OF INCOME AND BANK STATEMENT. HOWEVER, IN RESPECT OF OUTSTANDING LOAN AS ON 31.03.2012 THE ASSESSEE STATED THAT NO NEW LOAN TAKEN DURING THE YEAR AND O NLY INTEREST PROVIDED /PAID. THE ASSESSEE ONLY FILED COPY OF LOAN CONFIRMATIONS, P & L A/C, BALANCE SHEETS AND COMPUTATION OF INCOME. NONE OF THE DOCUMENTS FILED ARE FOUND TO BE SIGNED BY THE LOAN CREDITORS. AS THE ASSESSEE FAILED TO FURNISH A LL THE DETAILS IN RESPECT OF BROUGHT FORWARD LOAN THE GENUINENESS OF THE SAME COULD NOT BE VERIFIED. AS REGARDS ADVANCES AS ON 31.03.2013 THE ASSESSEE F URNISHED COPY OF P & L A/C AND BALANCE SHEET OF SRI SAI DURGA STEEL ENTERPRISE S AND KAILASH STEEL ENTERPRISES BUT WITHOUT ANY ANNEXURE FORMING THE PA RT OF THE BALANCE SHEET. AS A RESULT, WHETHER ADVANCES SHOWN IN THE RESPECTIVE BA LANCE SHEET OF THE AFORESAID PARTIES INCLUDE ADVANCES GIVEN TO THE ASSESSEE COUL D NOT BE ASCERTAINED. 5. THE SAID REMAND REPORT WAS ALSO OFFERED TO THE A PPELLANT / LD. A.R FOR REBUTTAL, AND IN THE REBUTTAL, THE APPELLANT-ASSESSEE / LD. A .R HAS SUBMITTED AS UNDER: KINDLY REFER TO ABOVE APPEAL. YOU HAVE BEEN KIND EN OUGH TO SUPPLY A COPY OF REMAND REPORT DATED 18-05-2017 OF LT,O. WD-36(1) ON 30-05-2017. I AM PLEASED TO OFFER MY COMMENTS ON SAID REPORT AS UNDER. 2. IN RESPONSE TO A CALL FROM I.T.O, VIDE LETTER DA TED 18-04-2017 ENCLOSED- ANNEXURE-A (PAGE NOS. 1 & 2), UNDERSIGNED PERSONALL Y APPEARED BEFORE HIM ON 01-05-2017 AND FURNISHED THEN AND THERE, WHATEVER E VIDENCES WERE NOT AVAILABLE ON HIS RECORD VIDE LETTER DATED 29-04-2017 (ENCLOSE D) AND EXPLAINED THE EVIDENCES FORWARDED TO HIM FROM YOUR OFFICE. FEW MORE DETAIL / EXPLANATION WERE NEEDED BY I.T.O. WHICH WERE FURNISHED VIDE LETTER DATED 05-05 -2017, COPIES OF BOTH THE LETTERS ARE ENCLOSED (PAGES NOS. 3 TO 5 AND 6 TO 8). 3. HOWEVER, ON GOING THROUGH THE REMAND REPORT I WA S DEEPLY DISAPPOINTED RATHER HURT. GENTLEMAN NOT EVEN ONCE EXPRESSED HIS DISSATI SFACTION AS TO EVIDENCES PRODUCED AND EXPLANATION OFFERED. IN HIS REPORT HE HAS ALLEGED NONE SUBMISSION OF SOME DETAILS BUT HE NEVER INFORMED ON 01-05-2017. I F HE WOULD HAVE SO INFORMED ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 5 55 5 THERE WAS NO DIFFICULTY FOR ME TO ARRANGE FOR THE S AME AND FURNISHED ALONG WITH LETTER DATED 05-05-2017 AS ABOVE WITH WHICH I FURNI SHED WHATEVER FURTHER DETAILS HE ASKED ME TO FURNISH. 4. ISSUE NO. 1 - UNSECURED LOAN - (A) I.T.O.'S KIND ATTENTION WAS DRAWN TO ANNEXURE -'B' (PAGE NO. 6 AND 7) OF THE ORIGINAL SUBMISSION GIVING ORIGINAL DATE OF EACH LO AN OUTSTANDING ON 31-03-2013 AND LENDERS FULL NAME AND PAN NOS. HIS KIND ATTENTI ON WAS ALSO DRAWN TO PAGE NOS. 8 TO 30 WHICH CONTAINS LOAN CONFIRMATION, AND ACCOUNTS OF EACH LENDER. JUST FOR SAKE OF CLARITY I AM PLEASED TO ENCLOSE A STATE MENT OF UNSECURED LOANS SHOWING OPENING BALANCE, REPAID, DURING THE YEAR WITH INTER EST IN SOME CASES, RECEIVED DURING THE YEAR, INTEREST PAID AND CLOSING BALANCE ON 31-03-2013. YOUR LD. SELF WILL APPRECIATE THAT THERE WAS AN OPENING BALANCE O F RS.56,74,962/- AND CLOSING BALANCE OF RS.43,83,994/-. ONLY TWO SUMS OF RS.89,0 00/- AND RS.5,11,700/- (EXCLUDING INTEREST CREDITED TO THESE ACCOUNTS) WER E RECEIVED FRESH LOAN DURING THE YEAR. IT IS HUMBLY SUBMITTED THAT LOANS RECEIVED IN PAST AND BEING CARRIED OVER TILL THIS YEAR CANNOT BE ADDED U/S. 68. ONLY NEW LOAN CA N BE A SUBJECT MATTER OF SECTION 68. (B) TWO NEW LOANS WERE RECEIVED AND EXPLAINED AS UN DER : (I) MEENA KOTHARI RS. 89,000/-. CONFIRMATION IS DUL Y SIGNED, PAN : QUOTED AND BALANCE SHEET DISCLOSING LOAN ATTACHED TO CONFIRMAT ION. (PAGE NOS. 8 & 9). LOAN AMOUNT IS REFLECTED IN HER BALANCE SHEET. (II) RAKESH AGARWAL (HUF) (ASSESSEE'S OWN HUF) : RS. 511,700/- WAS RECEIVED. HIS CONFIRMATION, ACCOU NTS ARE AT PAGE 25 TO 27. LOANS & ADVANCES SHOWN IN BALANCE SHEET RS. 10,91,7 00/- WHICH INCLUDE LOAN RS.7,91,700/- LO KARTA. DETAILS AND COPY OF ACKNOWL EDGEMENT OF RETURN ARE ENCLOSES. I.T,O. NEVER ASKED FOR COPIES OF I.T. RETURNS OF AN Y PARTY. ALL OTHERS ARE AN OLD LOANS AND CONFIRMATIONS HAVE BEEN FILED WITH PAN. (C) PAN NOS. OF EACH PARTY IS THERE ON CONFIRMATION S WHICH ARE ALL SIGNED BY EACH PARTY. WHY PHOTO COPY OF PAN CARD NEEDED IS NOT CLE AR. (D) A CHART SHOWING UNSECURED LOAN POSITION TO FURT HER CLARIFY POSITION IS ENCLOSED WITH PARTY WISE DETAILS OF INTEREST FOR THE YEAR. (E) I.T.O. HAS MADE NO ADVERSE REMARK ABOUT FRESH L OAN TAKEN THIS YEAR. HIS ONLY GRIEVANCE IS AGAINST B/F LOANS ON 31-03-2012 WHICH IS IRRELEVANT. (F) ADVANCES I.T.O. NEVER RAISED THE POINT THAT SCHEDULES TO BAL ANCE SHEET OF SAI DURGA STEEL ENTERPRISES AND KAILASH STEEL ENTERPRISES ARE NEEDE D. HOWEVER SAME ARE ENCLOSED CLEARLY SHOWING ADVANCES IN ASSESSEE'S NAMES. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 6 66 6 6. I HAVE CAREFULLY EXAMINED THE ISSUES AT HAND, AN D CAREFULLY PERUSED ALL THE DOCUMENTS SUBMITTED BY THE ASSESSEE, THE REMAND REP ORT OF THE LD. AO AS WELL AS THE VARIOUS POINTS RAISED BY THE ASSESSEE-APPELLANT IN THE COUNTER TO THE REMAND REPORT. 7. FROM THE DETAILS BROUGHT ON RECORD, I FIND THAT THE APPELLANT HAS SUBMITTED NECESSARY DOCUMENTS BEFORE THE LD. AO, AND THE POSI TION IN RESPECT OF THE UNSECURED LOANS APPEARS TO BE THE FOLLOWING: A. THE PARTIES WHO HAVE GIVEN LOANS TO THE ASSESSEE ARE MS MEENA KOTHARI, MSMRIDULA DEVI KOTHARI, SHRI P C KOTHARI, MASTER DA KSH AGARWAL (MINOR) SHRI KAILASH CHANDRA AGARWAL, SMT. NARMADA DEVI AGARWAL, MSPREETIAHARWAL, M/S RAKESH AHARWAL (HUF) AND MSSWETA AGARWAL. IN THE IN FORMATION PROVIDED TO THE LD. AO, THE FULL NAMES AND ADDRESSES OF THE PARTIES , THE RESPECTIVE PANS AS WELL AS THE AMOUNTS LOANED TO THE APPELLANT-ASSESSEE WERE P ROVIDED BY THE APPELLANT. I ALSO FIND THAT THE APPELLANT HAS PROVIDED COPIES OF THE CONFIRMATIONS AS WELL AS COPIES OF THE BALANCE SHEET OF EACH OF THESE ENTITI ES. THE COPIES OF THE CONFIRMATIONS OF LOANS PROVIDED TO THE APPELLANT HA VE BEEN SIGNED BY THE LOAN CREDITORS, AND THEREFORE I FIND THAT THE OBSERVATIO NS OF THE LD. AO ARE NOT CORRECT IN THE MATTER. I FIND THAT THE APPELLANT HAS ALSO E NCLOSED THE STATEMENT OF UNSECURED LOANS SHOWING OPENING BALANCE, REPAID, DU RING THE YEAR WITH INTEREST IN SOME CASES, RECEIVED DURING THE YEAR, INTEREST PAID AND CLOSING BALANCE ON 31.03.2013, THE RELEVANT YEAR FOR CONSIDERATION. FR OM SUCH DOCUMENTS, IT EMANATES THAT THERE WAS AN OPENING BALANCE OF RS.56 ,74,962/- AND CLOSING BALANCE OF RS.43,83,994/-. IT IS ALSO FOUND TO BE C ORRECT THAT ONLY TWO AMOUNTS OF RS.89,000/- AND RS.511,700/- (EXCLUDING INTEREST CR EDITED TO THESE ACCOUNTS) WERE RECEIVED FRESH LOAN DURING THE YEAR. THEREFORE, ON FACTS ALONE I FIND ADEQUATE MERIT IN THE CONTENTION OF THE APPELLANT / LD. A,R THAT THE LOANS HAD BEEN RECEIVED IN PAST AND BEING CARRIED OVER TILL THIS YEAR, AND THEREFORE THEY CANNOT BE ADDED U/S. 68., WHICH WOULD BE APPLICABLE, IF AT ALL TO N EW LOANS. B. IT IS ALSO OBSERVED THAT THERE WERE ONLY TWO NEW LOANS IN THE YEAR UNDER CONSIDERATION, NAMELY THE CASE OF MEENA KOTHARI RS, 89,000/- , IN WHICH CASE SIGNED CONFORMATION, THE PAN, AND THE BALANCE SHEET DISCLOSING THE LOAN WERE ALSO PRODUCED BEFORE THE LD. AO. SIMILAR WAS THE CA SE OF THE OTHER NEW LOAN NAMELY M/S RAKESH AGARWAL (HUF), WHICH IS THE ASSES SEE'S OWN HUF. THIS HUF HAD GIVEN A LOAN OF RS. 511,700/- TO THE APPELLANT- INDIVIDUAL. FROM THE DOCUMENTS SUBMITTED, WHICH WERE ALSO AVAILABLE TO THE LD. AO, IT IS SEEN THE APPELLANT HAS PRODUCED THE CONFIRMATION OF ACCOUNTS AS WELL AS TH E BALANCE SHEET AND THE IT RETURN. C. I ALSO FIND STRENGTH THAT THE LD. AO DID NOT MAK E ANY SPECIFIC REQUISITION FOR THE OTHER DETAILS FROM ALL PARTIES SUCH AS THE INCOME T AX RETURNS COPIES AND OTHER RELATED DOCUMENTS. IN ANY CASE HE LOANS FROM THESE PARTIES ARE OLD LOANS, AND THE NECESSARY CONFIRMATIONS HAVE BEEN PRODUCED. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 7 77 7 D. I FIND THAT THE LD. AO HAS MADE ABSOLUTELY NO EF FORTS TO VERIFY THE GENUINENESS OF THE LOANS IN A SITUATION WHERE HE WAS NOT SATISFIED WITH THE DOCUMENTS AND SUBMISSIONS OFFERED BY THE APPELLANT. HE HAS NEITHE R WRITTEN TO THE PARTIES CONCERNED NOR TO THE ASSESSING AUTHORITY OF THE LOA N CREDITORS WHO HAD OFFERED THE NECESSARY DETAILS RELATING TO PAN AND BALANCE S HEET. WITHOUT DOING SO, I FIND THAT THE LD. AO WAS NOT JUSTIFIED IN UNILATERALLY R EACHING THE EXTREME CONCLUSION THAT THE LOANS WERE NOT GENUINE. 8. IN RESPECT OF THE ADVANCES AMOUNTING TO RS.31,91 ,266/-, IT IS SEEN THAT ORIGINALLY THE LD. AO HAS TREATED THE SAME AS BOGUS. IN THE RE MAND, THE LD. AO HAS MENTIONED THAT THE ASSESSEE PRODUCED THE COPY OF PR OFIT & LOSS ACCOUNTS AS WELL AS THE BALANCE SHEET OF THE PARTIES NAMELY M/S SRI SAI DURGA STEEL ENTERPRISES AND M/S KAILASH STEEL ENTERPRISES. THE LD. AO HAS OBSER VED IN THE REMAND REPORT THAT THE APPELLANT HAD NOT SUBMITTED ANY ANNEXURES WHICH WERE TO FORM PART OF THE FINANCIAL DOCUMENT ALONG WITH THE BALANCE SHEET. AC CORDING TO THE LD. AO, ON ACCOUNT OF THE LACK OF THE REQUISITE DOCUMENTS, IT COULD NOT BE ASCERTAINED WHETHER ADVANCES SHOWN IN THE RESPECTIVE BALANCE SHEETS OF THE AFORESAID PARTIES INCLUDES THE IMPUGNED ADVANCES OFFERED TO THE APPELLANT. HOW EVER, IT IS CLEAR THAT THE LD. AO HAS NOT SPECIFICALLY REQUIRED THE APPELLANT TO S UBMIT THE NECESSARY DOCUMENTS, AND IN ANY CASE, IT IS NOT KNOWN AS TO WHAT PREVENT ED THE LD. AO FROM REQUISITIONING THE SAME. IN THE COUNTER TO THE OBSE RVATIONS OF THE LD. AO, IT HAS BEEN SUBMITTED BY THE APPELLANT THAT DURING THE REM AND PROCEEDINGS, THE LD. AO DID NOT RAISE THE POINTS REGARDING THE BALANCE SHEE T OF THE TWO FIRMS M/S SAI DURGA STEEL ENTERPRISES AND M/S KAILASH STEEL ENTER PRISES, AND WHETHER THEY WERE REQUIRED. IN THIS FORUM ALONG WITH THE COUNTER TO T HE REMAND REPORT, THESE DOCUMENTS HAVE BEEN FURNISHED. BEFORE THIS FORUM, T HE APPELLANT HAS FURNISHED THE FULL RETURN COPIES OF THE TWO FIRMS IN QUESTION, AL ONG WITH THE FINANCIAL STATEMENTS SUCH AS P&L ACCOUNT AND BALANCE SHEETS. THE ADVANCE S MADE TO THE APPELLANT, IT IS OBSERVED HAVE BEEN DULY DISCLOSED IN THE SCHEDUL E -4 AS WELL AS SCHEDULE -6 OF THE LOANS AND ADVANCES OF THE PARTIES. IN SUCH SITU ATION, I FIND THAT THE CONCLUSIONS OF THE LD. AO WERE NOT JUSTIFIED, AND THERE HAS BEE N DUE DISCLOSURE OF THE FIGURES IN THE FIRMS' BOOKS. IN ANY CASE, IN A SITUATION WH ERE THE LD. AO DID NOT BELIEVE ANY OF THE SUBMISSIONS / DOCUMENTS, IT WAS INCUMBEN T UPON HIM TO MAKE NECESSARY ENQUIRIES FROM THE FIRMS OR EVEN BETTER FROM THE AS SESSING AUTHORITY OF THE FIRMS. THIS HE HAS CLEARLY FAILED TO DO, AFTER THE APPELLA NT HAD DULY DISCHARGED ITS DUTY AND PROVIDED THE PAN, COPIES OF RETURNS AND FINANCI AL STATEMENTS OF THE TWO FIRMS WHICH HAD ADVANCED CERTAIN SUMS TO THE APPELL ANT-ASSESSEE. IN THE CIRCUMSTANCES, IT IS TO BE MENTIONED THAT SOME OF T HE SITUATIONS IN WHICH SECTION 68 WOULD BE APPLICABLE ARE AS UNDER: A. IF A CASH CREDIT ENTRY IS FOUND IN THE BOOKS OF ACCOUNT OF THE FIRM NO DISTINCTION IS MADE FOR APPLICATION OF SECTION 68 EVEN IF SUCH ENTRY IS FOUND IN A PARTNER'S ACCOUNT OR A THIRD PARTY'S ACCOUNT, AND THE BURDEN THEN LIES ON THE ASSESSEE FIRM TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF SUC H PARTY AND OF THE TRANSACTION RELATING TO IT. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 8 88 8 B. IN CASE WHERE THERE IS FAILURE OF THE ASSESSEE T O OFFER SATISFACTORY EXPLANATION TO THE ASSESSING OFFICER THE SAME WOULD JUSTIFY THE AD DITION MADE BY THE ASSESSING OFFICER TREATING IT AS INCOME FROM UNDISCLOSED SOUR CE. C. IF A CASH CREDIT ENTRY IS FOUND IN THE FIRMS BOO KS, THE BURDEN PRIMARILY LIES ON THE FIRM TO ESTABLISH THAT THE AMOUNT WAS IN FACT G IVEN BY A LENDER. D. IT IS INCUMBENT ON THE PART OF THE TAXING AUTHOR ITIES TO CAREFULLY EXAMINE AND TAKE INTO CONSIDERATION ALL THE FACTORS LEADING TO GENUINENESS AND REGULARITY IN THE MAINTENANCE OF ACCOUNTS. E. THE EXPLANATIONS OFFERED ARE REQUIRED TO BE SUPP ORTED BY DOCUMENTARY EVIDENCE OR OTHER EVIDENCE. FAILURE TO DO SO INVITED THE DEE MING FICTION CREATED U/S 68 OF THE ACT. 9. IN THE CASE OF CIT VS. SHIV SHAKTI TIMBERS (1997 ) 229 ITR 505 (MP), THE LD. AO FOUND CREDITS RECORDED IN THE ASSESSEE'S BOOKS IN T HE NAMES OF PARTNERS, AND ADDITION WAS MADE IN ASSESSMENT OF THE FIRM UNDER S ECTION 68. THE TRIBUNAL ALLOWED APPEAL BY THE ASSESSEE. THE HON'BLE HIGH CO URT, HOWEVER, HELD THAT THE ASSESSEE'S CASE IS GOVERNED BY SECTION 68 IN VIEW O F THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE INCOME IS THAT OF T HE ASSESSEE FIRM. IT WAS HELD THAT WHERE THERE IS A CREDIT ENTRY IN THE ASSESSEE'S BOO KS AND THERE IS NO SATISFACTORY EXPLANATION, THEN IT WILL BE DEEMED TO BE THE INCOM E OF THE FIRM. IN THE CASE OF CIT VS. BHADRA ENTERPRISES (1997) 228 ITR 645 (KER), A CASH CREDIT ENTRY WAS FOUND IN THE BOOKS OF THE ASSESSEE-FIRM, WHICH CAME INTO EXI STENCE ON 1-3-1977 IN ACCORDANCE WITH THE DEED OF PARTNERSHIP EXECUTED ON 1-3-1977. BUT THE FIRM STARTED ITS BUSINESS ON 1-4-1978. THE ASSESSING OFF ICER MADE ADDITION OF CASH CREDIT WHICH WAS DELETED BY THE TRIBUNAL. IT WAS HE LD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE INCO ME TAX OFFICER ON THE GROUND THAT THE BUSINESS OF THE FIRM WAS STARTED ON 1-4-19 78, EVEN THOUGH THE FIRM PARTICIPATED IN A BID ON 10-3-1978 THAT IS AFTER CO MING INTO EXISTENCE ON 1-3-1977. THIS IS SO BECAUSE THE LAW IS CLEAR ON THE POINT WH ICH SAYS THAT THE FIRM COMES INTO ITS LEGAL EXISTENCE ON EXECUTION OF THE AGREEMENT, IT CANNOT BE SAID THAT IT IS NOT EXISTENCE BECAUSE IT HAD NOT STARTED ITS BUSINESS A CTIVITY. IN THIS VIEW OF THE MATTER, THE TRIBUNAL WAS NOT RIGHT IN TAKING A VIEW THAT TH E BUSINESS OF THE FIRM HAD NOT COMMENCED PRIOR TO 1-4-1978 IN RELATION TO THE ASSE SSMENT YEAR 1978-79. DISTINCTION HAS ALSO TO BE MADE BETWEEN THE BOOKS O F ASSESSEE AND ITS CREDITORS. IN OTHER WORDS, SUCH BOOKS HAVE TO BE THE BOOKS OF THE ASSESSEE HIMSELF AND NOT OF ANY OTHER ASSESSEE, AS WAS OBSERVED IN 171 ITR 532 (P AND H). 10. IN THE MATTER OF THE SHIFTING OF THE BURDEN OF PROOF, IT HAS BEEN HELD IN 212 ITR 199 (ORISSA), THAT WHERE THE ASSESSEE FILED CONFIRM ATION LETTERS FROM THE CREDITORS TO EXPLAIN AND ESTABLISH THE SOURCE OF CREDITS, AND THE ASSESSING OFFICER DOES NOT CALL UPON THE ASSESSEE TO ADDUCE ANY FURTHER EVIDEN CE IN SUPPORT OF THE LETTERS, THE ASSESSEE CAN BE SAID TO HAVE DISCHARGED THE ONUS CA ST ON HIM AND THE ONUS NOW SHIFT ON THE DEPARTMENT. UNDER SECTION 68, THE ONUS IS ON THE ASSESSEE TO OFFER EXPLANATION WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF ACCOUNT AND IF THE ASSESSEE OFFERS NO EXPLANATION OR THE EXPLANATION O FFERED IS NOT IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THEN SUCH CASH CREDIT IS LIABLE TO BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF THAT RELEVA NT PREVIOUS YEAR. WHERE THE ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 9 99 9 ASSESSEE FAILS TO PROVE TO THE SATISFACTION OF THE ASSESSING OFFICER, THE SOURCE AND NATURE OF THE AMOUNT OF CASH CREDITS, HE IS ENTITLE D TO DRAW AN INFERENCE THAT THE RECEIPTS ARE OF AN INCOME NATURE (140 ITR 151). IT IS NOT THE DUTY OF THE ASSESSING OFFICER TO LOCATE THE EXACT SOURCE OF THE CASH CRED ITS (72 ITR 807 (SC). THE BURDEN TO LOCATE THE SOURCE LIES UPON THE ASSESSEE AND HE IS REQUIRED TO EXPLAIN THE GENUINENESS OF THE CREDIT ENTRY. HOWEVER, IN CERTAI N CIRCUMSTANCES, THIS ONUS MIGHT SHIFT ON THE ASSESSING OFFICER (98 ITR 337), IN 171 ITR 373 (MADRAS) IT WAS HELD THAT THE PRODUCTION OF DISCHARGED HUNDIES AND UNDER SECTION 68. THEREUPON THE BURDEN SHIFTED TO THE DEPARTMENT TO EXAMINE CRE DITORS AND TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THEIR BANKERS. IN THE MATTER OF THE FURNISHING OF THE NAMES AND ADDRESSES OF THE CREDIT ORS, IT HAS BEEN HELD IN CASE REPORTED IN 759 ITR 78 (SC) THE ASSESSEE FURNISHED NAMES AND ADDRESSES OFTHE ALLEGED CREDITORS AS ALSO THEIR GIR NUMBERS. NOW TH E BURDEN, IS SHIFTED TO THE DEPARTMENT TO ESTABLISH REVENUE'S CASE; AND IN ORDE R TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS. MERE ISSUE OF NOTICES UNDER SECTION 131 OF THE INCOME TA X ACT, IS NOT ENOUGH. THE ASSESSEE HAVING DISCHARGED THE INITIAL BURDEN, BY G IVING COMPLETE NAME AND ADDRESS OF THE BANKERS AND CONFIRMATION LETTERS, IT WAS FOR THE INCOME-TAX OFFICER TO SHOW THAT THE EXPLANATION RENDERED BY THE ASSESS EE WAS NOT TRUE 190 ITR 396 (BOM). 11.THE HON'BLE JURISDICTIONAL CALCUTTA HIGH COURT H AS LAID DOWN IN 208 ITR 465 THAT THE ASSESSEE IS EXPECTED TO ESTABLISH:- A. PROOF OF IDENTITY OF HIS CREDITORS; B. CAPACITY OF CREDITORS TO ADVANCE MONEY; C. GENUINENESS OF TRANSACTION AS FOR THE GENUINENESS, IT IS FOR THE ASSESSEE TO P ROVE THAT THE ENTRY FOUND IS GENUINE. IN 208 ITR 465 (CAL) IT WAS HELD THAT THE TRANSACTION IS NOT GENUINE, SIMPLY BECAUSE SOME, OUT OF MANY, OF THE TRANSACTIO NS ARE BY CHEQUE. CONVERSELY, IT IS NOT OPEN FOR THE ASSESSING OFFICER TO ADD TOK EN AMOUNT MERELY FOR THE PURPOSE OF MAKING THE RETURNED INCOME INTO A ROUND FIGURE. WHERE CERTAIN SUM OF MONEY CLAIMED BY THE ASSESSEE TO HAVE BEEN BORROWED FROM CERTAIN PERSONS, IT IS FOR THE ASSESSEE TO PROVE BY COGENT AND PROPER EVIDENCE THA T THEY ARE THE GENUINE BORROWINGS FOR THE REASON THAT THE FACTS ARE EXCLUS IVELY WITHIN THE ASSESSEE'S KNOWLEDGE. WHERE THE CREDITOR APPEARS BEFORE THE IN COME TAX OFFICER BUT IF HE IS UNABLE TO EXPLAIN THE SOURCE OF CREDIT IN HIM HAND, THERE CANNOT BE ADDITION IN THE HANDS OF THE ASSESSEE, BECAUSE THE ASSESSEE HAS SAT ISFACTORILY EXPLAINED THE SOURCE OF CREDIT SHOWN IN HIS BOOKS AS ALSO THE IDENTITY O F THE CREDITOR HAS ALSO BEEN ESTABLISHED (103 ITR 344 (PAT) AND 49 ITR 723 (BOM) . 12. HON'BLE COURTS HAVE OPINED THAT WHEN THERE IS F AILURE OF THE LD. AO TO ISSUE SUMMONS TO THE CREDITORS WHOSE NAMES AND ADDRESSES HAVE BEEN FURNISHED BY THE ASSESSEE ABSOLVE THE ASSESSEE FROM ANY FURTHER LIAB ILITY. IN AN INTERESTING JUDGMENT, THE HON'BLE JURISDICTIONAL CALCUTTA HIGH COURT IN CASE OF CIT VS. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 KAMDHENU VYAPAR CO, REPORTED IN 263 ITR 692 HAS HEL D THAT THERE IS AN INBUILT DUTY OF THE LT.O. TO HELP THE ASSESSEE BY ISSUING S UMMONS TO THE DEPOSITORS TO JUSTIFY OR OTHERWISE CONFIRM THE CREDITWORTHINESS O F DEPOSITORS. IN THE CIRCUMSTANCES, IT IS TO BE STATED THAT SECTION 68 I S A CHARGING SECTION AND IT APPLIES WHEN THE ASSESSEE'S EXPLANATION WITH RESPECT TO THE CASH CREDIT IS REJECTED AS BEING UNSATISFACTORY AND ALSO WHERE THE ASSESSEE DOES NOT RENDER ANY EXPLANATION. THE ASSESSING OFFICER IS TO STATE HOW HE HAS FORMED HIS OPINION THAT THE EXPLANATION IS UNSATISFACTORY. HON'BLE COURTS HAVE HELD THAT IT IS THE BOUNDEN DUTY OF THE LD. AO AND THE AUTHORITIES UP TO AND INCLUDING THE HON'BLE TRIBUNAL TO CONSIDER ALL THE FACTS AND RECORD WHICH IS BEFORE THEM AND WHICH IS IN ITS COMMAND (WHICH CAN BE MADE AVAILABLE BY HIM BY EXERCISING HIS AUTHORITY) AND THEN RECORD ITS FINDINGS ON ALL CONTENTIONS. THE ENQUIRY TOO MUST BE CONDUCTED IN ACCORDANCE WITH THE RULES OF NATURAL JUSTICE. ALL THE MATERIAL WHETHER FOR OR AG AINST THE ASSESSEE MUST BE SHOWN TO THE ASSESSEE AND AFFORD HIM OPPORTUNITY TO REBUT , WHERE NECESSARY, AND MEET THE CASE OF THE DEPARTMENT. IN 87 ITR 395 (SC), THE HON 'BLE SUPREME COURT DISMISSED THE APPEAL MADE BY REVENUE ON THE GROUND THAT THE T RIBUNAL, WHICH IS THE FINAL FACT FINDING AUTHORITY, HAD ARBITRARILY REJECTED THE ASS ESSEE'S EXPLANATION WITHOUT EXAMINING THE MERIT OF THE ASSESSEE'S CASE. CONSIDERING ALL THE DIFFERENT PRINCIPLES LAID DOWN BY HON'BLE COURTS IN SUCH MATTERS AS ELUCIDATED IN THE FOREGOING PARAGRAPHS, AND THE FACTUAL MATRIX APPARENT IN THE CASE, I AM OF THE CONSIDERED VIEW T HAT THE DISALLOWANCE MADE BY THE LD. AO OF AN AMOUNT OF . RS.75,75,260 (RS.43,83 ,994/-, BEING RELATABLE TO UNSECURED LOANS, AND RS.31,91,266/- BEING RELATABLE TO ADVANCES) WAS NOT JUSTIFIED, AND THEREFORE I AM UNABLE TO SUSTAIN SUC H DISALLOWANCE. THE GROUND OF APPEAL IS THEREFORE ALLOWED IN FAVOUR OF THE ASSESS EE- APPELLANT. 7.THE CLINCHING FACT HAS GONE UNREBUTTED FROM THE R EVENUE SIDE. IT IS THEREFORE CLEAR THAT LD CIT(A) HAS PASSED A REASONED ORDER CO NSIDERING ALL THE FACTS OF THE ASSESSEE AND THE APPLICABLE PRECEDENTS TO THE FACTS OF THE ASSESSEE, AS NOTED ABOVE. THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND THE GROUND S OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NO.3 RAISED BY THE REVENUE RELATES TO DIS ALLOWANCE OF EXPENSES TO THE TUNE OF RS.7,85,425/-, ON ACCOUNT OF 'EXPENSES CLAIMED IN EARNING INCOME FROM OTHER SOURCES'. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 9. THE BRIEF FACTS QUA THE ISSUE ARE THAT GROUND NO .3 RAISED BY THE REVENUE RELATES TO THE ACTION OF LD. AO IN DISALLOWING RS.7 ,85,425/- ON ACCOUNT OF 'EXPENSES CLAIMED IN EARNING INCOME FROM OTHER SOUR CES'. THE AO, ON PERUSAL OF THE COMPUTATION OF INCOME FURNISHED BY THE ASSESSEE , IT WASNOTED BY HIM THAT THE ASSESSEE HAS SHOWN RS.7,88,918/- UNDER THE HEAD 'IN COME FROM OTHER SOURCES' AND CLAIMED CORRESPONDING EXPENDITURE OF RS.7,85,425/- IN EARNING THAT INCOME. THE INCOME FROM OTHER SOURCE MAINLY CONSISTED OF COMMOD ITY PROFIT OF RS. 4.89 LAKHS, AGRICULTURE INCOME OF RS.2.15 LAKHSAND MISCELLANEOU S INCOME OF RS. 0.73 LAKHS. THE ASSESSEE WAS ASKED AS TO WHY SUCH DEDUCTION CLA IMED U/S.57 (1) OF THE ACT SHOULD NOT BE DISALLOWED AS THE EXPENDITURE IS NOT RELATED TO EARNING THAT INCOME. IN RESPONSE, THE ASSESSEE FILED A WRITTEN REPLY ON 29.02.2016, THE RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER:- 'IN CONNECTION TO THE ABOVE MATTER, I WANT TO CLARI FY YOU THAT DURING THE YEAR MY CLIENT HAS PURCHASE SO MANY PROPERTIES FROM VENDORS , AGAINST THIS PURCHASE OF PROPERTIES MY CLIENT HAS REPAYMENT THE AMOUNT TO VE NDOR AS TAKEN A LOAN FROM LOCAL PARTY ON INTEREST BASIS. DURING THE YEAR THE MAJOR ALLOWABLE EXPENSES HAS CLAIMED AS INTEREST PAID ON LOAN.' THE AO NOTED THAT THE SUBMISSION OF THE ASSESSEE WA S FOUND TO BE DEVOID OF FACTS AND NOT TENABLE AND HE MADE ADDITION OF RS.7,85,425 /-. TO THE TOTAL INCOME OF THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES FOR THE PRESENT YEAR UNDER CONSIDERATION. 10. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSIN G OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION OBSERVING THE FOLLOWING: 1. IN THIS MATTER, IT IS TO BE OBSERVED THAT THIS ISSUE WAS ALSO REMANDED TO THE LD. AO FOR VERIFICATION AND FORWARDING HIS COMMENTS AND OBSERVATIONS. THE LD. AO IN THE REMAND REPORT, ON THIS DISPUTED ISSUE HAS SUBMI TTED AS UNDER: ISSUE NO. 3) INTEREST ON LOAN: THE ASSESSEE WAS ASKED TO FURNISH EVIDENCE OF UTI LIZATION OF BORROWED FUND IN FIRMS AND THE BASIS OF CLAIM OF IN TEREST OF RS. 7,71,892/- AGAINST RS. 98,572/- RECEIVED ON ACCOUNT OF INTEREST ON CAP ITAL AND REMUNERATION. ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 IN SUPPORT OF CLAIM OF DEDUCTION ON ACCOUNT OF IN TEREST ON LOAN THE ASSESSEE FURNISHED STATEMENT OF LOAN TAKEN A UTILIZ ED DURING THE YEAR. THE ASSESSEE HAD TAKEN FRESH LOAN OF RS. 5,00,000/- FORM RAKESH AGARWAL HUF AND PAID INTEREST OF RS.1,03,367/- ON FRESH AS WELL AS BROUG HT FORWARD LOAN. AS PER THE STATEMENT RS.2,10,000/- WAS INVESTED IN KAILASH STE EL ENTERPRISES AS PARTNER, RS.2,00,000/- WAS UTILIZED FOR REPAYMENT OF LOAN TO SMT. N.D.AGARWAL, RS.25,000/- WAS INVESTED TOWARDS PURCHASE OF LAND, RS.50,000/- WAS INVESTED IN TAX SAVINGS SCHEME AND RS.15,000/- TOWARDS OTHERS. THE ASSESSEE DID NOT FURNISH ANY DETAILS REGARDING UTILIZATION OF LOAN ORIGINALLY TAKEN FROM SMT. N.D.AGARWAL. THE ASSESSEE EARNED INTEREST OF RS.34,617/- FROM CAPITA L INVESTED IN KAILASH STEEL ENTERPRISE. FROM THE BALANCE SHEET AS AT 31.03.2013 IT IS SEEN THAT UNSECURED LOAN IS PRIMARILY INVESTED IN LAND A LAND & BUILDING AND IN KAILASH S TEEL ENTERPRISE. 'INTEREST ON LOAN UTILIZED FOR INVESTMENT IN LAND & BUILDING CAN NOT BE ALLOWED AS DEDUCTION AS PER THE LT. ACT, 1961. HOWEVER, SINCE, INVESTMENT I N KAILASH STEEL ENTERPRISES GENERATED INTEREST INCOME OF RS.34,617/- IN THE HAN DS OF THE ASSESSEE ADJUSTMENT TO THAT EXTENT WITH TOTAL INTEREST CLAIM OF RS.7,71,89 2/- CAN BE ALLOWED. IN FINE, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION OF RS.7 ,37,275/- (RS.7, 71,892 - RS.34,617) ON ACCOUNT OF INTEREST PAID. 2. THE SAID REMAND REPORT WAS ALSO OFFERED TO THE A PPELLANT / LD. A.R FOR REBUTTAL AND IN THE REBUTTAL, THE APPELLANT-ASSESSEE / LD. A .R HAS SUBMITTED AS UNDER: ISSUE NO. 3 - INTEREST ON LOAN NATURALLY UTILIZATION OF LOAN RECEIVED DURING THE Y EAR IS TO BE FURNISHED. FROM PAGE 6 OF ENCLOSURES WITH SUBMISSION YOUR LD. SELF CAN SEE THAT MAJOR ITEMS WERE TAKEN IN 2010 TO 2012. MORE THAN 5 YEARS HAS PASSED . IN ALL EARLIER YEAR INTEREST WAS CLAIMED AND ALLOWED. TO LINK EACH LOAN RECEIVED TO UTILIZATION ALL PAST RECORD WILL HAVE TO BE GONE THROUGH. HE HAS INCOME FROM HO USE PROPERTY RS.8,97,700/- (PAGE 3 OF ANNEXURE) RECEIVED REMUNERATION AND INTE REST FROM THREE FIRM RS.60,000/- AND RS.35,572/- (PAGE-3 OF ANNEXURE). H IS OWN CAPITAL IS RS.38,94,343/- ON 01-04-2012. ALL THESE POINTS HAVE BEEN IGNORED BY I. T.O. PARTICULARLY INCOME FROM HOUSE PROPERTY. CONFIRMATI ONS OF TWO SQUARED UP LOAN A/C FOR INTEREST PAYMENT ARE ENCLOSED - K.C. AGARWA L (HUF) & V. LAKSHMI. 3. I HAVE CAREFULLY EXAMINED THE MATTER OF THE DISA LLOWANCE OF THE CLAIM OF INTEREST, AN AMOUNT OF RS.7,85,425/-. I HAVE ADJUDICATED THE MATTER OF THE LOANS IN THE EARLIER PARAGRAPHS AND HELD THE SAME TO BE GENUINE IN THE FACTS OF THE CASE. THE QUESTION TO BE ADDRESSED IN THIS GROUND IS WHETHER THE APPELLANT WOULD BE ELIGIBLE FOR THE CLAIMS OF EXPENDITURE MADE AGAINST THOSE LO ANS. THERE CAN BE NO DOUBT THAT THE ASSESSEE HAS RECEIVED INCOME FROM HOUSE PROPERT Y, A MATTER WHICH APPEARS TO HAVE BEEN OVERLOOKED BY THE LD. AO. I FIND THAT THE LD. AO HAS' ACCEPTED A SMALL PORTION OF THE CLAIM OF EXPENDITURE, BEING RS34,617 /-. THE LD. AO HAS OBSERVED THAT AS THE INVESTMENT IN M/S KAILASH STEEL ENTERPR ISES GENERATED INTEREST INCOME OF RS.34,617/-, IN THE HANDS OF THE ASSESSEE ADJUST MENT TO THAT EXTENT WITH TOTAL INTEREST CLAIM OF RS.7,71,892/- CAN BE ALLOWED. FOR THE BALANCE INTEREST AMOUNT, ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 1 11 13 33 3 THE LD. AO HAS NOT FOUND THE CLAIMS OF THE APPELLAN T TO BE ACCEPTABLE. THERE CAN BE NO GAINSAYING THAT WHEN THE LOANS HAVE BEEN FOUN D TO BE ACCEPTABLE, THE INTEREST COMPONENT ALSO OUGHT TO BE HELD AS ALLOWAB LE. HOWEVER, IN THE PRESENT CASE, THE LOANS RELATE TO EARLIER YEARS AND THE APP ELLANT HAS, BY HIS OWN ADMISSION BEEN UNABLE TO OFFER A CLEAR PICTURE IN TERMS OF TH E FIGURES WHICH RELATE TO INTEREST OF EARLIER YEARS AND INTEREST OF THE CURRENT YEAR O F ASSESSMENT. IT WAS FOR THE APPELLANT TO JUSTIFY THE CLAIM FULLY WITH FACTS AND FIGURES. CONSIDERING THE OVERALL FACTS OF THE CASE, AND THE CAPITAL WHICH HAS BEEN E XPLAINED IN THE HANDS OF THE APPELLANT, HOWEVER, IT APPEARS IN MY CONSIDERED MIN D THAT THERE HAS TO BE AN ALLOWANCE FOR THE INTEREST COMPONENT. IN MY VIEW OF THE MATTER, IT WOULD MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED T O RS. 3,00,000/- AND THE ASSESSEE- APPELLANT IS RELIEVED OF THE BALANCE DISALLOWANCE. I AM AWARE THAT THERE IS AN ELEMENT OF SUBJECTIVITY IN THE MATTER; HOWEVER GIVE N THE DEARTH OF FIGURES, I AM OF THE CONSIDERED VIEW THAT THIS IS ONE OPTION AVAILAB LE FOR ADJUDICATING THE ISSUE. THIS GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWE D. 11.THE CLINCHING FACT HAS GONE UNREBUTTED FROM THE REVENUE SIDE. IT IS THEREFORE CLEAR THAT LD CIT(A) HAS PASSED A REASONED ORDER CO NSIDERING ALL THE FACTS OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THELD CIT(A). THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASS ED BY THE LD CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND THE GROUNDS OF APPE AL RAISED BY THE REVENUE IS DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER IS PRONOUNCED IN THE OPEN COURT ON 19.12.2018 . SD/- (S. S. GODARA) SD/- (A.L.SAINI) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /KOLKATA; / DATE: 19/12/2018 ( RS, SR.PS ) ITA NO.2008/KOL/2017 ASSESSMENT YEAR: 2013-14 SHRI RAKESH AGARWAL P PP PA AA AG GG GE EE E | || | 1 11 14 44 4 / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. /THE APPELLANT- ITO, WARD-36(1), KOLKATA 2. ! / THE RESPONDENT- SHRI RAKESH AGARWAL 3. ' ( ) / THE CIT(A), 4. ' / CIT 5. #$% &&'( , '( , / DR, ITAT, KOLKATA 6. %)*+ / GUARD FILE. !# &