SHRI BHARAT KUMAR M. DATTANI, JAMNAGAR V. THE ITO, WD-1(5), JAMNAGAR

ITA 222/RJT/1999

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2986 (ITAT-RAJKOT)
• Duration Of Justice: 11 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 1991-1992
• Appeal Filed On: 26-05-1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GB PARIKH
• Assessee Lawyers: JAI RAJ KUMAR
• Keywords: Reopening of assessment; Opportunity of being heard; Principle of natural justice; Proportionate interest; Question of law
• Section: 143(3); 234B; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 222/RJT/1999 - AY 1991-92 I.T.A. NO. 223/RJT/1999 - AY 1992-93 SHRI BHARATKUMAR M DATTANI VS ITO, WD.5 GRAIN MARKET JAMNAGAR JAMNAGAR PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) I.T.A. NO. 227/RJT/1999 (ASSESSMENT YEAR 1991-92) ITO, WD.5 VS SHRI BHARATKUMAR M DATTANI JAMNAGAR JAMNAGAR (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GB PARIKH ASSESSEE BY : SHRI JAI RAJ KUMAR O R D E R A.L. GEHLOT : APPEALS IN ITA NO 222/RJT/1999 AND IT A NO 227/RJT/1999 FOR ASSESSMENT YEAR 1991-92 ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF CIT(A)- II, RAJKOT DATED 31-03-1999 AND WHEREAS APPEAL FOR ASSESSMENT 1992-93 IN ITA NO.223/RJT/1999 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, RAJKOT DATED 31-03-1999. SINCE ALL THE THREE APPEA LS PERTAIN TO THE SAME ASSESSEE, FOR THE SAKE OF CONVENIENCE, THEY ARE DIS POSED OFF BY THIS COMMON ORDER. 2. BRIEF FACTS : ASSESSEE FILED RETURN OF INCOME ON 26-08-1991 FOR ASSESSMENT YEAR 1991-92 AND 31-08-1992 FOR ASSESSME NT YEAR 1992-93. THE RETURN FOR ASSESSMENT YEAR 1991-92 PROCESSED U/S 14 3(1)(A) ON 16-10-1991. ON 21-03-1994, ONE SHRI PD. DOSHI OF M/S DRUPAD INDUST RIES, VIDE HIS LETTER DATED 17-03-1994 HAS WRITTEN TO THE ASSESSING OFFICER THA T HE IS DEALING WITH THE ASSESSEE FOR FINANCIAL TRANSACTIONS. THE ASSESSING OFFICER NOTICED DURING THE ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 2 ASCCOUNTING PERIOD 1991-92 RELEVANT TO THE A.Y. 199 2-93, MR DOSHI HAS GIVEN LOANS OF RS.1 LAKH ON 18/12/1991 BY CHEQUE FROM M/S MRUNAL & CO, AN AMOUNT OF RS.7 LAKHS ON THREE OCCASIONS ON 20/11./91, 28/11/9 1 AND 13/12/1991 AMOUNTING TO RS.4 LAKHS, 2 LAKHS AND RS.1 LAKH RESPECTIVELY F ROM MRUNAL ENTERPRISES WHICH REMAINED OUTSTANDING AS ON 31/3/1992 AS EVIDENT FRO M THE CONTRA ACCOUNT / CONFIRMATION SIGNED BY THE ASSESSEE ON 31/3/1993. THE AO STATED THAT IN OTHER WORDS, THE AMOUNT OF RS.8 LAKHS SHOWN OUTSTANDING I N THE NAME OF THE ASSESSEE IN THE BOOKS OF M/S MRUNAL & CO, AND MRUNAL ENTERPR ISES AS ON 31/3/92 CONFIRMED ON 31/3/1993. THE AO FURTHER STATED THAT IMILARLY, THE ASSESSEE ALSO SHOWN RECEIPT OF RS.16,25,000/- AS LOAN OBTAINED FR OM M/S DRUPAD INDUSTRIES AS UNDER: 2/4/1990 RS. 3,00,000 3/4/1990 RS. 2,75,000 4/4/1990 RS. 2,50,000 5/4/1990 RS. 1,75,000 5/4/1990 RS. 3,00,000 6/4/1990 RS. 1,50,000 9/4/1990 RS. 25,000 5/9/1990 RS. 1,50,000 ----------------- RS.16,00,000 ------------------ THE AO HAS ALSO NOTED THAT THE SAID AMOUNT REMAINED OUTSTANDING AT THE END OF THE ACCOUNTING YEAR 1990-91 AND THE SAID AMOUNT WAS FURTHER INCREASED BY AN AMOUNT FO RS.8,25,000/- BY WAY OF CHEQUES RECEIVED BY THE ASSESSEE ON FOLLOWING DATES: 27/5/1991 RS. 1 LAKH 27/5/1991 RS. 50,000 10/7/1991 RS. 1 LAKH ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 3 1/10/1991 RS. 1 LAKH 1/10/1991 RS. 1 LAKH 1/10/1991 RS. 1 LAKH 16/10/1991 RS. 50,000 4/10/1991 RS.3,25,000 THUS, THE TOTAL AMOUNT OUTSTANDING AS ON 31-03-1992 IS CONFIRMED BY THE ASSESSEE AS PER CONTRA / CONFIRMATION SIGNED BY THE ASSESSEE AND PLACED ON THE RECORDS. THE CONFIRMATION WAS SIGNED BY THE ASSESS EE ON 31/3/1993. IN OTHER WORDS, THE ASSESSEE CONFIRMED OUTSTANDING LOAN OF R S.24.5 LAKHS AS ON 31-03- 1993 AS EVIDENT FROM THE CONFIRMATION PLACED ON THE RECORDS. IN THIS CONNECTION, THE AO STATED THAT SHRI PL DOSHI, HAS SUBMITTED THA T THE ANMOUNT OF RS.1 LAKH AND RS.7 LAKHS OUTSTANDING FROM SHRI DATTANI ARE HI S OWN MONEY AND REMAINED OUTSTANDING TILL DATE. SO FAR AS THE BALANCE AMOUN T OF RS.24.50 LAKHS IS CONCERNED, IT IS SUBMITTED THAT SHRI PL DOSHI HAS I NDULGED IN HAVALA ENTRY BUSINESS AND HAS GIVEN HAVALA TO SHRI DATTANI OF TH E SAID AMOUNT. IN THIS CONNECTION, SHRI PL DOSHI DEPOSIED HIMSELF BEFORE T HE ADIT, UNIT-II(4), BOMBAY AND CATEGORICALLY CONFESSED THAT HE HA STARTED THE BUSINESS OF GIVING HAVALA ENTRIES FROM 30 FICTITIOUS ACCOUNTS OPENED BY HIM I N THE NAME OF VARIOUS PERSONS. THE HAVALA ENTRIES HAVE BEEN ROUTED THROUGH THESE F ICTITIOUS ACCOUNTS. 3. THE ASSESSING OFFICER ISSUED NOTICE U/S 148 ON 0 1-01-1996. THE RELEVANT ABSTRACT OF AOS ORDER PARAGRAPH 8 ARE REPRODUCED A S BELOW: 8. IN ORDER TO VERIFY THE ENTIRE EPISODE OF GENUIN E AND NON- GENUINE TRANSACTION AND THAT TOO IN THE ABSENCE OF ANY SCRUTINY ASSESSMENT FINALIZED IN THE CASE OF THE ASSESSEE, A SSESSMENT FROM A.Y. 1989-90 TO 1994-95 HAVE BEEN REOPENED BY ISSUE OF A NOTICE U/S 148 OF THE ACT. THE SAID NOTICES WERE ISSUED O N 1/12/1996 FOR A.Y. 91-92 TO 1994-95 AND ON 9/2/1996 FOR A.Y. 89-9 0 AND 90-91 ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 4 AFTER OBTAINING NECESSARY PREVIOUS APPROVAL OF THE DECIT, JR, JAMNAGAR AND HENCE THESE PROCEEDINGS. 4. ON VERIFICATION, THE ASSESSING OFFICER NOTED DET AILS OF ACCOUNT OF PL DOSHI IN PARAGRAPH 9, THE RELEVANT DETAILS ARE AS UNDER: 9. ON PERUSAL OF THE SAID WRITTEN SUBMISSION, IT IS NOTICED THAT SO FAR AS THE ACCOUNTS OF M/S DRUPAD INDS., AR E CONCERNED, THE ASSESSEE IN HIS BOOKS OF ACCOUNTS HAS SHOWN RECEIPT OF RS.16,25,000/- FROM THE SAID SHRI PL DOSHI AS UNDER : 4/4/90 RS. 3,00,000/- 5/4/90 RS.10,00,000/- 4/5/90 RS. 1,75,000/- 5/9/90 RS. 1,50,000/- ------------------ RS.16,25,000/- 31/3/91 ENTRY OF INTEREST RS. 1,86,300/- AS AGAINST THIS, THE ASSESSEE HAS SHOWN DEBITS AS U NDER: 20/3/91 RS. 1,86,300/- 7/3/91 RS. 3,00,000/- RS. 3,00,000/- 8/3/91 RS. 1,50,000/- RS. 1,50,000/- RS. 1,25,000/- 12/3/91 RS. 1,00,000/- RS. 2,50,000/- 13/3/91 RS. 2,50,000/- ACCORDINGLY, THE ASSESSEE HAS SQUARED UP THE ACCOUN T WITH THE SAID M/S DRUPAD INSTRIES OF SHRI PL DOSHI. WHEREAS, THE CON FIRMATION SIGNED BY THE ASSESSEE ON 31/3/1993 WHICH IS MADE A PART OF T HIS ORDER (ANNEXURE- ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 5 A), SHOW THAT THE AMOUNT OF RS.16,25,000/- REMAINED OUTSTANDING ON THE SAID DATE. THUS, PRIMA FACIE, THERE IS AMBIGUITY B ETWEEN THE ACCOUNTS FILED WITH THE WRITTEN SUBMISSION DT. 30/9/97 AND C ONFIRMATION SIGNED BY THE ASSESSEE ON 31/3/1993. 5. THE ASSESSING OFFICER, AFTER A DETAILED DISCUSSI ON HELD, AS UNDER: 16. IN THIS CASE, THE ISSUE INVOLVED IS GIVING OF HAVALA ENTRIES BY SHRI DOSHI OF EQUIVALENT CASH PAID BY SHRI DATTANI TO ACCOMMODATE HIM. SINCE THE HAVALA ENTRY BUSINESS IS NOTHING BU T A SCANDAL OF CONVERSION OF BLACK MONEY INTO WHITE MONEY FOR TIME -BEING FOR THE PURPOSE OF THE BUSINESS. WHEN THE PERSON IS IN NEE D OF MONEY IN THE BOOKS, HE HAS TO TAKE HELP FROM 3 RD PARTY WHO CAN SHOW A GENUINE LOAN IN HIS BOOKS AND THE ASSESSEE PAYS A P ART OF INTEREST. IN OTHER WORDS, A COMMISSION IN SUCH ACCOMMODATIVE ENTRIES. FOR THIS PURPOSE, THERE CANNOT BE ANY EVIDENCE TO THE E FFECT THAT CASH IS GIVEN BY SHRI DATTANI WHICH WAS DEPOSITED IN DOSHI S ACCOUNT AND PAID CHEQUE FROM IT. BUT CIRCUMSTANTIAL ENTRIES IN BANK ACCOUNT AND BOOKS OF ACCOUNTS SHOW THAT THEY ARE OF UNUSUAL NAT URE. IN THIS CONNECTION, IT IS PERTINENT TO NOTE THAT SUCH TYPE OF TRANSACTIONS ARE3E BEING CARRIED OUT WHEN THERE IS A COMPLETE TR UST BETWEEN THE TWO PARTIES. HOWEEVER, WHEN THE AMOUNT INCREASED A ND TO AVOID ANY FUTURE LOSS OF MONEY IN THE HANDS OF THE SAID H AVALA OPERATOR, THE PERSON WHO TAKES THE LOANS FROM THE SAID HAVALA OPERATOR BY PAYING CASH, EITHER GETS UNDATED BEARER CHEQUES FRO M THE SAID HAVALA OPERATOR OR HE GETS AN UNDATED ADVANCED STAM P RECEIPTS. THIS IS BEING DONE SO TO SAFE-GUARD HIS INTEREST AG AINST FUTURE LITIGATIONS, IF ANY. IN THIS WAY HAVALA TRANSACTIO NS ARE BEING CARRIED. 17. IN THE LIGHT OF THE ABOVE, I AM SATISFIED THAT THE LOANS OF RS.16,25,000/- INTRODUCED BY THE ASSESSEE IN HIS BO OKS OF ACCOUNTS ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 6 ARE NOTHING BUT HIS BLACK MONEY BROUGHT TO THE BOOK S THROUGH M/S DRUPAD INDUSTRIES, A CONCERN OF SHRI PL DOSHI. SIN CE THE PRINCIPLE AMOUNT IS HELD TO BE LONGING TO THE ASSESSEE ITSELF , INTEREST PAYMENT OF RS.1,86,300/- CLAIMED BY THE ASSESSEE IS ALSO DISALLOWED. HOWEVER, A COMMISSION OF ABOUT 25% IS PAYABLE TO SUCH HAWALA OPERATOR FROM THE INTERET DEBITED. AS SUCH INTEREST OF RS.139725 (186300 46575) IS DISALLOWED. 6. CONSEQUENT TO THE ADDITION MADE, THE ASSESSING O FFICER ALSO DISALLOWED RELATED INTEREST OF RS.1,39,725. 7. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSI ON, DELETED ADDITION OF RS.11,75,000 IN ASSESSMENT YEAR 1991-92. IN ASSESS MENT YEAR 1992-93 THE CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER AND SUSTAINED ADDITION OF RS. 8,25,000. THE CIT(A) ALSO ALLOWED CONSEQUENTIAL RE LIEF IN ADDITION MADE ON ACCOUNT OF INTEREST. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT(A) IN ASSESSMENT YEAR 1991-92 WHERE THE CIT(A) SUSTAINED ADDITION OF RS.4 .50 LAKHS AND REVENUE IS IN APPEAL AGAINST DELETING ADDITION OF RS.11,75,000. THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN HIS APPEALS ARE ON LY FOUR GROUNDS WHICH ARE AS UNDER: (1) THAT THE LEARNED C.I.T.(APPEALS)-II, RAJKOT OU GHT TO HAVE HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 147 DATED 31.3.1998 IS CONTRARY TO FA CTS AND LAW AND AGAINST THE RULES OF NATURAL JUSTICE AND EQ UITY AND HENCE THE SAME IS BAD-IN-LAW AND VOID-AB-INITIO ON THE FACTS AND CIRCUMSTANCES OF THE CASE. (2)(A) THAT THE LEARNED C.I.T.(APPEALS)-II, RAJKOT ERRED AND WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.4.50 LAK HS OUT OF TOTAL LOAN OF RS.16.25 LAKHS TAKEN FROM M/S DUPAD I NDUSTRIES AS HAVALA ENTRIES ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 7 3(B) THAT THE LEARNED CIT(A)-II, RAJKOT OUGHT TO HA VE HELD THAT NO PART OF THE INTEREST OUT OF TOTAL INTEREST PAID TO SHRI P.L. DOSHI AMOUNTING TO RS.186300/- CAN BE DISALLOWED ON THE F ACTS AND CIRCUMSTANCES OF THE CASE. 3(C) ALTERNATIVELY WITHOUT PREJUDICE TO THE ABOVE G ROUNDS AND WITHOUT ADMITTING THAT THE LEARNED C.I.T.(APPEALS) HAS CORRECTLY SUSTAINED THE ADDITION OF RS.450000/- OUT OF TOTAL LOAN OF RS.1625000/- FROM MR. PO.L. DOSHI THEN ALSO THE LEARNED C.I.T. (APPEALS) OUGHT TO HAVE ALLOWED ATLE AST 50% DEDUCTION OF THE PROPORTIONATE INTEREST PAYMENT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4(A) THAT THE LEARNED C.I.T.(APPEALS)-II, RAJKOT ER RED AND WAS NOT JUSTIFIED IN NOT PASSING ANY ORDER REGARDING CH ARGEABILITY OF INTEREST U/S 234B OF THE I.T. ACT ON THE FACT AN D CIRCUMSTANCES OF THE CASE. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF THE PARTIES, RECORD PERUSED. THE FIRST LEGAL GROUND RAISED BY THE ASSESSEE IS IN RESPECT OF REOPENING OF ASSESSMENT. THE LD.AR SUBMITTED THAT INSPITE OF RE PEATED REQUESTS REASONS FOR REOPENING WERE NOT PROVIDED TO THE ASSESSEE. HE FU RTHER SUBMITTED THAT THE REASONS RECORDED FOR REOPENING WAS NOT PROPER. THE RELEVANT SUBMISSIONS OF LD.AR FROM WRITTEN SUBMISSIONS FILED BY THE LD.AR A RE REPRODUCED AS UNDER: PART A OF ABOVE GROUND REGARDING NOT PROVIDING PR OPER OPPORTUNITY OF BEING HEARD AND SUPPLYING THE REASONS RECORDED F OR REOPENING OF ASSESSMENT, HENCE THE ORDER PASSED BY HIM IS WITHOU T OBSERVING THE RULES OF NATURAL JUSTICE AND EQUITY AND HENCE B AD-IN-LAW AND VOID-AB-INITIO WAS BEFORE CIT(A), BUT HAS CIT(A) NO T EXPRESSED HIS VIEW, WHEREAS PART B OF THE GROUND OF APPEAL REGA RDING REASONS RECORDED FOR REOPENING OF ASSESSMENT IS TAKEN FIRST TIME BEFORE YOUR HONOURS PER SUBMISSION DATED 12-04-2005. ABOVE GROUND IS A PURE QUESTION OF LAW NOT REQUIRED INVESTIGATION INTO FACTS THROUGH THE FIRST APPELLATE AUTHORITY AN D ISSUE INVOLVED IS ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 8 CLOSELY LINKED TO THE CLAIM RAISED IN GROUNDS OF AP PEAL THE ISSUE CAN BE DECIDED AT THIS STAGE. 10. THE LD.AR IN SUPPORT OF HIS CONTENTIONS HAS REL IED UPON THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF SRF LTD VS CIT (1993) 47 ITD 504 (DEL). 11. ON MERITS, THE LD.AR APART FROM OTHER SUBMISSIO NS, SUBMITTED THAT THE CIT(A) DID NOT CONSIDER THE SUBMISSIONS DATED 01-02 -1999 AND SOME PART OF THE FACTS HAVE PARTLY CONSIDERED. THE LD.AR FURTHER SU BMITTED THAT THE FINDINGS OF CDIT(A) IS AGAINST THE FACTS, HE REFERRED TO PARAGR APH 12 ON PAGE15 OF CIT(A)S ORDER. 12. WE FIND THAT THE CIT(A) DID NOT GIVE HIS FINDIN GS ON LEGAL ISSUE REGARDING REOPENING OF ASSESSMENT. THE ISSUE OF REOPENING NE ITHER HAS BEEN CONSIDERED BY AO NOR BY THE CIT(A), THOUGH THE ASSESSEE HAS RA ISED SPECIFIC GROUND BEFORE CIT(A). CONSIDERING THE PRINCIPLE OF NATURAL JUSTI CE, WE ARE OF THE VIEW THAT THE DEPARTMENT SHOULD BE GRANTED OPPORTUNITY TO DECIDE THE LEGAL ISSUE. BEFORE DECIDING LEGAL ISSUE, DECIDING MATTER ON MERIT IS N OT FAIR, REASONABLE AND JUST. ON CONSIDERATION OF SUBMISSIONS OF LD.AR THAT ON MERIT S THE FINDINGS OF CIT(A) ARE AGAINST FACTS. THE CIT(A) DID NOT CONSIDER CERTAIN FACTS ALSO. WE, THEREFORE, THINK PROPER TO SEND BACK THIS MATTER TO THE FILE O F CIT(A) TO DECIDE FIRST THE LEGAL ISSUE OF REOPENING THEN DECIDE THE ISSUE AFRESH ON MERIT IF SO REQUIRES AFTER PROVIDING OPPORTUNITY OF HEARING TO BOTH SIDES. WE MAY MENTIONED THAT WE ARE NOT EXPRESSING ANY OPINION ON MERIT. 13. BEFORE PARTING FROM THE MATTER, WE MAY STATE TH AT SINCE IT IS OLD CASE, THEREFORE, THE ASSESSEE WILL CO-OPERATE IN PROCEEDI NGS. IN CASE FAILURE ON PART OF ASSESSEE, THE CIT(A) IS AT LIBERTY TO REPEAT THE AD DITIONS IN ACCORDANCE WITH LAW. 14. THE LEARNED REPRESENTATIVES OF THE PARTIES SUBM ITTED THAT FACTS IN THE CASE FOR ASSESSMENT YEAR 1992-93 ARE IDENTICAL, WE THERE FORE SEND BACK THIS MATTER ITA NO.222 & 223/RJT/1999 ITA NO. 227/RJT/1999 9 ALSO TO THE FILE OF THE CIT(A) WITH SAME DIRECTIONS AS GIVEN IN PARAGRAPH 12 OF THIS ORDER. 15. IN VIEW OF THE ABOVE FINDINGS, BOTH THE APPEALS OF ASSESSEE AND THE CROSS APPEAL OF REVENUE ARE ALLOWED, FOR STATISTICAL PURP OSE. ORDER PRONOUNCED IN THE OPEN COURT ON 10-12-2010 . SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 10 TH DECEMBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-II, RAJKOT 4. THE CIT-I, RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT