The ITO, Ward-9(2), Surat V. Shri Kantilal Ramjibhai Narkani,HUF, Surat

ITA 2368/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5928 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 23-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: POONAM JO SHI
• Section: 143(3); 133A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : A HMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NO. 2368/AHD./2008 ASSESSMENT YEAR : 2003-2004 INCOME TAX OFFICER, WARD-9(2), SURAT VS.-SHRI KANT ILAL RAMJIBHAI NAKRANI (HUF),SURAT (PAN : AACHK 0744 D) (APPELLANT) (RESPONDENT) & C.O. NO. 201/AHD/2008 (ARISING OUT OF ITA NO. 2368/AHD/2008) ASSESSMENT YEAR : 2003-2004 SHRI KANTILAL RAMJIBHAI NAKRANI (HUF), SURAT VS.- INCOME TAX OFFICER, WARD-9(2), SURAT (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SMT. POONAM JO SHI DEPARTMENT BY : SHRI H.P. MEENA, SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON BY THE ASSESSEE ARE AGAINST THE ORDER DATED 28.04.2008 OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS)-V, SURAT FOR THE ASSESSMENT YEAR 2003-04. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APPEAL IS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A.) HAS ERRED IN DELETING THE ADDITION OF RS.14 ,88,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED OPENING CAPITAL. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE H UF FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 29.03.2004 SHOWING TOTAL INCOME OF RS.59,400/-. THIS RETURN WAS PROCESSED UNDER SECTION 143(1)(A) BY ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT UNDER SEC TION 148. IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148, THE ASSESSEE FILED RETURN OF INCOME DE CLARING TOTAL INCOME AT NIL. THE REASON FOR REOPENING THE ASSESSMENT WAS THAT A SURVEY UNDER SE CTION 133A OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT IN THE CASE OF ONE SHRI PANKAJ DANA WALA (C.A.) BY DDIT (INV.)-II, SURAT ON 11.03.2005. SHRI PANKAJ DANAWALA IS A PRACTICING CH ARTERED ACCOUNTANT. DURING THE COURSE OF SURVEY, HE WAS FOUND TO HAVE CREATED LARGE NUMBER O F CAPITAL BUILD UP CASES. IN THE ASSESSMENT FRAMED UNDER SECTION 143(3) READ WITH SECTION 147 O N 21.08.2007, THE ASSESSING OFFICER AFTER 2 ITA NO. 2368 & CO-201/AHD/2008 CONSIDERING THE STATEMENT OF SHRI PANKAJ DANAWALA, WHICH WAS RECORDED UNDER SECTION 131A OF THE INCOME TAX ACT FRAMED THE ASSESSMENT AT A TOTAL INCOME OF RS.15,47,400/-. THIS COMPRISES OF INCOME AS PER RETURN RS.59,400/- AND RS.14,88,00 0/- IN RESPECT OF ENHANCEMENT IN CAPITAL BALANCE. IN THE ASSESSMENT ORDER, THE ASSESSING OFF ICER HAS STATED THAT BOTH THESE INCOME WILL BE TAXED IN THE HANDS OF SHRI RAGHAVJI PATEL OR ANY OT HER MEMBER OF THE RAGHAVJI PATEL GROUP AS THE ASSESSEE IS BENAMIDAR OF THE SAID GROUP. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), THE ASSESSEE FILED THE WRITTEN SUBMISSIONS, WHICH READS AS UNDER :- 'AN ADDITION OF RS. I4,88,000/- HAS BEEN MADE ON AC COUNT OF JUMPING OF CAPITAL WITHOUT TAKING INTO CONSIDERATION THE SUBMISSIONS F ILED BY THE APPELLANT AND WITHOUT GIVING DUE CONSIDERATION TO THE FACT THAT M R. DANAWALE HAD CREATED LARGE NUMBER OF CAPITA! BUILT UP CASES. THE INVESTIGATION WING OF INCOME TAX DEPARTMENT HAD CONDUCTED SURVEY U/S 133A OF THE IT ACT IN THE CASE OF SHRI PANKAJ DANAWALA (CA.) ON 11-3-2005. SHRI DANAWALA I S A PRACTICING CA. THE INCOME TAX DEPARTMENT HAD NOTICED THAT MR. DANAWALE HAD CREATED LARGE NUMBER OF CAPITAL BUILT UP CASES. THE ASSESSING OFFICER HAS DISCUSSED THE IMPORTANT P OINTS NOTED FROM THE STATEMENT OF SHRI PANKAJ DANAWALA RECORDED DURING THE SURVEY IN THE PARA 5 OF THE ASSESSMENT ORDER. THE APPELLANT HAS CAREFULLY GONE THROUGH THE STATEMENT (MENTIONED IN THE ASSESSMENT ORDER) AND HIS NAME IS NOWHERE DISCUSSED IN THE SAID STATEMENT THE DEPARTMENT HAS ALSO CONDUCTED SU RVEY U/S 133A AT THE PREMISES M.D.PATEL GROUP AND THE STATEMENT OFSHRI K IRIT MOHANBHAI PATEL, SON OF SHRI MOHANBHAI PATEL WAS RECORDED. AS PER PARA 6 OF THE ASSESSMENT ORDER SHRI K.M, PATEL WAS CONFRONTED WITH THE EVIDENCE FOUND R EGARDING THE CREATION OF BOGUS CAPITAL BY SHRI PANKAJ DANAWALA FOR THE BENEF IT OF MOHAN DHANJI GROUP, FROM PARA 6 OF THE ORDER, IT IS SEEN THAT MOHAN DHA NJI GROUP HAS FILED SETTLEMENT APPLICATION U/S 235C(1) OF THE IT ACT . IT MAY BE M ENTIONED HERE THAT APPELLANT DO NOT KNOW ANY PERSON OF SHRI M.D. PATEL GROUP AND IS NOT CONNECTED WITH ANY PERSON IN ANY WAY MENTIONED IN THE ASSESSMENT ORDER . IN PARS 7 OF THE ASSESSMENT ORDER THE LEARNED AO HAS MENTIONED THAT, 'ANOTHER G ROUP WAS ALSO IDENTIFIED AS 'SHRI RAGHAVJI PATEL GROUP' THE ASSESSEE IS ONE OF THE BENAMIDAR OF THE GROUP. THOUGH THIS GROUP HAS NOT BEEN SURVEYED U/S 133A OF THE I.T. ACT, YET THE MODUS OPERANDI OF THIS GROUP WAS NOTICED SIMILAR TO THE O THER GROUPS. HE ALSO STATED THE STATEMENT OF SHRI PANKAJ DANAWALA WHEREIN HE MENTIO NED THAT, HE HAD FILES OF ABOUT 50 GROUPS. IN QUESTION NO,35 OF HIS STATEMENT HE GAVE THE NAMES OF CERTAIN GROUPS. OUT OF THESE GROUPS AS MENTIONED ON PAGE 12 AND 13 OF THE ORDER 'SHRI RAGHAVJI PATEL GROUP CAN BE SEEN AT S.NO.4 AND THAT AROUND 25 LAKHS CAPITAL CREATED WAS ACCEPTED BY SHRI PANKAJ DANAWALA. ON TH E BASIS OF WHICH THE LEARNED AO HAS PROPOSED TO TAX THE CREATED CAPITAL IN THE NAME OF THE APPELLANT SUBSTANTIALLY IN THE HANDS OF SHRI RAGHAVJI PATEL A ND HIS OTHER MEMBERS OF THE GROUP AS HE EXPLAINS IN HIS ASSESSMENT PROCEEDINGS. 3 ITA NO. 2368 & CO-201/AHD/2008 IT IS FURTHER STATED BY THE AO THAT IT WAS ALSO NOT ICED THAT, HE (SHRI PANKAJ DANAWALA) WAS INVOLVED IN CREATING BOGUS CAPITAL AND PROVIDIN G BOGUS CASH CREDIT ENTRIES TO VARIOUS CLIENTS. SHRI DANAWALA HAS ALSO PLAYED SUCH MISCHIE F IN APPELLANT'S CASE AND FILED COPIES OF FINAL ACCOUNTS WHICH HE ENCLOSED WITH THE ORIGIN AL RETURN OF THE INCOME WITHOUT THE KNOWLEDGE OF THE APPELLANT IT IS THE COMMON PRACTIC E THAT, THE RETURN IS FILED FROM THE OFFICE OF THE CA/ADVOCATE AND A CLIENT CAN NEVER TH INK THAT A CA CAN PLAY SUCH A MISCHIEF BEHIND HIS/HER BACK. THE APPELLANT IS QUITE UNAWARE ABOUT THE JUMPING OF CAPITAL OF RS. 14,88,000/- IN THE OPENING BALANCE OF THE CAPITAL A CCOUNT WHICH THE AO HAS ADDED TO THE TOTAL INCOME. IN THIS CONNECTION THE APPELLANT HAD FILED A SUBMISSION ALONG WITH A COPY OF AFFIDAVIT THIS IS DISCUSSED BY THE AO IN PARA 10 OF THE ASSESSMENT ORDER. THE INTENTION OF CREATING SUCH BOGUS CAPITAL BY SHRI DANAWALA WAS TO PROVIDE BOGUS CASH CREDIT ENTRIES TO HIS VARIOUS CLIENTS. IT MAY BE STATED HERE THAT, THE APPELLANT HAS NOT UTILIZED THE SO CALLED INCREASE IN CAPITAL MADE BY SHRI DANAWALA FO R GIVING CASH CREDIT TO ANY OTHER PERSON. THE LD. A.O. VIDE PARA 5 OF HIS FETTER DATED 12.06, 2007 ASKED FOR INFORMATION REGARDING GENUINENESS OF THE ENTRIES SHOWN IN THE BALANCE SHE ET WHICH IS REPRODUCED IN PARA 10 TO 12 OF THE ASSESSMENT ORDER, IN RESPONSE FU WHICH TH E APPELLANT SUBMITTED AN AFFIDAVIT DISOWNING THE CAPITAL AND LOANS AND ADVANCES AS APP EARING IN THE BALANCE SHEET PREPARED AND FILED BY SHRI PANKAJ DANAWALA. THE LEA RNED AO DID NOT ACCEPT THE SUBMISSIONS OF THE APPELLANT THE LEARNED AO SHOULD HAVE ACCEPTED THE AFFIDAVIT AS THE APPELLANT DID NOT HAVE ANY OTHER EVIDENCE, BECAUSE SHRI PANKAJ DANAWALA CREATED/INCREASED THE FUNDS BEHIND THE BACK OF THE APPELLANT. AS PER PARA 12 OF THE ASSESSMENT ORDER ON PAGE NO. 18 THE LEARNED AO NOTI CED THAT, THE CLOSING BALANCE IN THE CAPITAL ACCOUNT FOR AY 2002-2003 IS RS.504785/- BUT THE OPENING BALANCE IN THE CAPITAL ACCOUNT FOR THE AY 2003-04 IS MENTIONED AT RS199278 5/- MAKING ENHANCEMENT BY RS. 1488000/-. THE AO HAS ADDED THIS DIFFERENCE OF RS.L 488000/- TO THE INCOME SHOWN BY THE APPELLANT IN THE ORIGINAL RETURN. IT MAY BE STATED HERE THAT, WE DISOWN THE STATUS OF THE HUF AND THE RETURN INCOME FILED IN RESPONSE TO NOTI CE U/S 148 IS RS. NIL. MOREOVER, THE APPELLANT DID NOT MAKE ANY INVESTMENT IN THE PROPER TIES AS APPEARING IN THE BALANCE SHEET, NOR DOES IT HAS ANY AGRICULTURE DEBTORS 35 THE APPELLANT DOES NOT HAVE ANY AGRICULTURAL LAND. THE QUESTION THEREFORE OF HAVING AGRICULTURE DEBTORS DOES NOT ARISE. IT IS WELL KNOWN FACT: THAT, SHRI PANKAJ DANAWALA HAS PLAYED SUCH TYPE OF MISCHIEF IN NUMBER OF CASES AND FOR THE REASONS BEST KNOWN TO H IM. FURTHER THE ASSESSING OFFICER HAS OBJECTED THAT, AS THERE WAS NO DENIAL IN RESPECT OF THE RETURN OF INCOME FILED ON 29.3.2004 BY THE ASSESSEE FOR THE AY 2003-04 TILL DATE. AND ALSO THAT THE RETURNS FILED ON 29.3.2004 AND THAT ON 11. 06.2007 BEARS THE SAME SIGNATURE. THE APPELLANT DO NOT DENY THAT HE HAS NOT SIGNED THE RE TURN FILED ON 29.3.2004, BUT HE DISOWNS THE CAPITAL ACCOUNT AND BALANCE SHEET ATTACHED TO I T. INFECT, THE KARTA OF THE HUF SHRI KANTILAL R NAKRANI USED TO GET HIS RETURNS IN HIS I NDIVIDUAL CAPACITY PREPARED BY SHRI PANKAJ DANAWALA AND SIGNED PAPERS CONSIDERING THE S AME BEING SIGNED AGAINST HIS INDIVIDUAL INCOME. THE APPELLANT TOTALLY DISOWNS TH E STATUS OF HUF. AND YOUR HONOUR WILL APPRECIATE THAT THE ANNEXURES TO THE RETURN DO NOT BEAR APPELLANT'S SIGNATURE AND ARE THE CREATION OF MR. PANKAJ DANAWALA BEHIND THE APPELLAN T'S BACK. IT IS ONLY THAT WHEN THE APPELLANT RECEIVED THE COPIES OF THE IMPOUNDED MATE RIAL HE CAME TO KNOW ABOUT THE FACT THAT SUCH MISCHIEF HAS BEEN PLAYED BY THEIR CA, SO QUESTION OF DENIAL OF SUCH RETURN PRIOR TO REOPENING OF CASE DOES NOT ARISE. THE COPIES OF ANNEXURE FOR THE ASSESSMENT YEAR 2002- 2003 AND 2003-2004 ATTACHED BY SHRI PANKAJ DANAWALA ARE BEING ENCLOSED HEREWITH AS ANNEXURE-B 4 ITA NO. 2368 & CO-201/AHD/2008 MOREOVER, AS A PART OF JUDICIAL PROCESS THE APPELLA NT SHOULD HAVE BEEN PROVIDED A COPY OF STATEMENT OF SHRI PANKAJ DANAWALA RECORDED BY TH E DEPARTMENT DURING THE SURVEY. IF THIS HAS BEEN DONE BY THE DEPARTMENT WE COULD HAVE EXAMINED/CROSS EXAMINED SHRI PANKAJ DANAWALA, THEREFORE THE ADDITIONS MADE MEREL Y ON THE BASIS OF THE CAPITAL ACCOUNT AND BALANCE SHEET PREPARED BY THE SHRI PANK AJ DANAWALA AND ENCLOSED BY HIM WITH THE ORIGINAL RETURN BEING UNLAWFUL MAY KINDLY BE DELETED AS IT IS A WELL SETTLED LAW THAT, THE ASSESSEE CAN NOT BE PENALIZED FOR THE MIS TAKE/MISCHIEF OF THEIR CONSULTANT. ' 4. AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF T HE LD. COUNSEL OF THE ASSESSEE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IN THE IMPUGNED ORDER, DELETED BOTH THE ADDITIONS FOR THE DETAILED REASONS GIVEN IN THE IMP UGNED ORDER, WHICH ARE EXTRACTED BELOW :- THE MAIN ISSUE RELATES TO ADDITION OF RS,1488000/- AS ENHANCEMENT OF OPENING CAPITAL IN THE CAPITAL ACCOUNT ON PROTECTIVE BASIS. THE AO HAS ALSO ADDED RS.59400/- ON PROTECTIVE BASIS, WHICH WAS SHOWN IN THE ORIGINAL RETURN FILED ON 29,3.2004. THE PAPERS IMPOUNDED FROM THE PREMISES OF SHRI DANA WALA INDICATED AN ENHANCEMENT OF RS.1488000/-IN THE OPENING CAPITAL OF A.Y.2003-04. ACCORDING TO THE AO, THE DIFFERENCE OF RS.1488000/- REPRESENTED THE UNEXPLAINED PORTION OF NEWLY INTRODUCED CAPITAL. MOST IMPORTANTLY, THE CAPITAL SO CREATED BY SHRI DANAWAL A WAS ONLY IN THE FORM OF ROUGH JOURNAL ENTRIES OR ROUGH ACCOUNTS AND HAD NOT BEEN ENTERED INTO THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE. THE AO, HOWEVER, TREATED S UCH ENTRIES AS UNEXPLAINED PORTION OF NEWLY INTRODUCED CAPITAL AND ADDED TO THE TOTAL INC OME OF THE ASSESSEE. AS CAN BE SEEN THAT THE CLOSING BALANCE OF PRECEDIN G YEAR HAS BECOME AN ENHANCED OPENING BALANCE IN THE SUBSEQUENT YEAR. THEREFORE T HE CHARACTER OF THE DIFFERENTIAL AMOUNT IS TO BE ASCERTAINED. IT IS NOT THE CASE OF DEPARTMENT THAT THE UNACCOUNTED FUNDS WERE INTRODUCED IN THE BOOKS OF ACCOUNTS OR BANK AC COUNT UNDER THE GARB OF ENHANCED AND INFLATED OPENING BALANCE- IT HAS BEEN ALSO ASCE RTAINED THAT NO MONIES OUT OF SUCH OPENING BALANCE WERE WHOLLY OR PARTIALLY ADVANCED A S INTEREST BEARING LOANS TO ANY ONE. NOR HAS ANY PARTY UTILIZED SUCH FUNDS FOR ANY BUSIN ESS OR PERSONAL PURPOSES. SO THE APPELLANT HAS NOT DERIVED ANY FINANCIAL BENEFIT FRO M MANIPULATION OF OPENING BALANCE. IN THIS CASE ONLY THE CA OF THE APPELLANT HAS UNILATER ALLY FABRICATED FIGURES OF OPENING BALANCE ON AN UNSIGNED ALLEGED BALANCE SHEET PERHAP S TO BE READY TO GIVE ENTRIES AS AND WHEN THE OPPORTUNITY ARISES IN THE MARKET. BUT IN R EALITY IT COULD ONLY BE A PREPARATORY STEP WITHOUT ANY ACTUAL ENTRY GIVEN OR INCOME DERIV ED THERE FROM, SHRI PANKAJ DANAWALA VIDE HIS STATEMENT DATED 11/3/05 AS REPRODUCED ON P AGE 8 TO 11 OF THE ASSESSMENT ORDER HAS GIVEN A DETAILED MODUS OPERANDI WHEREIN THE ACT UAL UTILIZATION OF CAPITAL BUILD UP HAS BEEN CONFESSED IN CERTAIN CASES. IN THE APPELLANT'S CASE IT IS NOT SO. THE CIRCUMSTANCES AND FACTS, IN APPELLANT'S CASE RENDER THE DIFFERENT IAL AMOUNT ONLY A FICTIONAL CHARACTER AND LYING IN FICTITIOUS NAMES. THERE IS NO REAL FUN D WHICH IS AVAILABLE WITH THE APPELLANT EITHER IN HIS BOOKS OR BANK ACCOUNT OR STOOD EXPEND ED; INVESTED OR LOANED OUT ANYWHERE. HOW CAN POSSIBLY ANY IMAGINARY FIGURE, GATHERED FRO M ANY WHERE BE TAXED AS APPELLANT'S INCOME. SIMILARLY ALL THE SO CALLED ASSETS SHOWN AG AINST SUCH BOGUS CAPITAL WILL ACQUIRE SIMILAR FICTITIOUS CHARACTER. APEX COURT HAS HELD I N 43 ITR 387 (SC) IN THE CASE OF LALJI HARIDAS THAT, IN CASES WHERE IT APPEARS TO THE INCO ME-TAX AUTHORITIES THAT CERTAIN INCOME HAS BEEN RECEIVED DURING THE RELEVANT YEAR BUT IT I S NOT CLEAR WHO HAS RECEIVED THAT INCOME AND, PRIMA FADE, IT APPEARS THAT THE INCOME MAY HAVE BEEN RECEIVED EITHER BY A OR BY B OR BY BOTH TOGETHER, IT WOULD BE OPEN TO TH E INCOME-TAX AUTHORITIES TO DETERMINE 5 ITA NO. 2368 & CO-201/AHD/2008 THE QUESTION WHO IS RESPONSIBLE TO PAY TAX BY TAKIN G ASSESSMENT PROCEEDINGS BOTH AGAINST A AND B. THEREFORE THE PRESUPPOSITION AND BASIC REQ UIREMENT IS THE ACTUAL RECEIPT OF INCOME. IN THE INSTANT CASE NOTHING HAS BEEN RECEIV ED. ONLY THE FIGURE STANDS CREATED IN A CLANDESTINE MANNER. SECONDLY IT IS NOT ONLY THE RIG HT, BUT THE DUTY OF THE ASSESSING OFFICER TO CONSIDER WHETHER OR NOT THE BOOKS DISCLOSE THE T RUE STATE OF ACCOUNTS AND CORRECT INCOME CAN BE DEDUCED THEREFROM. THE TERM 'BOOKS OF ACCOUNT' WOULD MEAN THOSE BOOKS OF ACCOUNTS WHOSE MAIN OBJECT IS TO PROVIDE CREDIBL E DATA AND INFORMATION TO FILE THE TAX RETURNS. THE CREDIBLE ACCOUNTING RECORD PROVIDES TH E BEST FOUNDATION FOR FILING RETURN OF BOTH DIRECT AND INDIRECT TAXES. IT CANNOT BE UNDERS TOOD TO MEAN COMPILATION OR COLLECTION OF SHEETS WITH THE APPELLANT'S CA. THE LEGISLATIVE INTENT IS TO ADMIT ONLY THOSE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ON HIS OWN BEHAL F WHICH BY THEIR VERY NATURE AND CIRCUMSTANCES ARE MAINTAINED FOR THE PURPOSE OF DRA WING THE SOURCE OF INCOME. FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAINED PORTION O F NEWLY INTRODUCED CAPITAL, THE CREDIT SHOULD HAVE BEEN MADE IN THE ASSESSEE'S BOOK S OF ACCOUNT KEPT IN THE REGULAR COURSE OF BUSINESS. SINCE, THE C.A. HAD ADMITTED TO HAVE CREATED THE ACCOUNTS HIMSELF, AND THE COMPLICITY OF THE ASSESSEE IN SUCH CREATION WAS NOT ESTABLISHED, THE CREDIT ENTRIES IN SUCH ACCOUNTS IN LOOSE SHEETS OF PAPER, COULD NO T BE TREATED AS ENTRIES IN THE ASSESSEE'S OWN BOOKS OF ACCOUNT KEPT IN THE REGULAR COURSE OF BUSINESS. IN THE INSTANT CASE INCOME HAS NOT BEEN EARNED IN R EALITY AND THEREFORE, THERE IS NO CASE OF ASSESSEE IN THE HUF STATUS. IT IS ALSO CLAIMED T HAT THERE IS NO AGRICULTURE LAND AND THEREFORE NO AGRICULTURE DEBTORS AS SHOWN IN THE BA LANCE SHEET FILED WITH THE ORIGINAL RETURN. FURTHER, I ALSO HOLD THAT, THE FILING RETUR N IN HUF CAPACITY OF THE ASSESSES AND CREATION OF BOGUS CAPITAL IS DONE BY SHRI PANKAJ DA NAWALA ON THE BACK OF THE ASSESSEE. AS REGARD SIGNATURES FT ON THE RETURN FORM, THE SAME HAS BEEN SIGNED BY SHR I KANTILAL R NAKRANI PRESUMING THAT HE WAS SIGNING UNDER HIS IND IVIDUAL CAPACITY. APPARENTLY THERE IS NO BENEFICIARY HERE IN THIS CAS E. BUT EVEN IF SOME ONE HAS CLAIMED ANY LOANS, EXPENDITURE OR ACQUISITION OF ANY ASSET, WHO SE SOURCE IS THIS FICTITIOUS; ENHANCED AND BOGUS CAPITAL FORMATION IN THE APPELLANT'S HAND S, THE SAME CAN NOT BE ALLOWED TO GO EXPLAINED OR ACCOUNTED FOR AND WILL HAVE TO BE TAXE D IN SUCH BENEFICIARY HANDS. MOST IMPORTANTLY, THE APPELLANT HAS FILED RETURN SHOWING INCOME OF RS.NIL (IN RESPONSE TO NOTICE U/SL48) AND WHICH HAS NO LINKAGES WITH THE C APITAL INTRODUCED AS OPENING BALANCE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT HAS MADE NO CLAIM, SOUGHT RELIEF OR ANY DEDUCTION BEFORE THE IT. DEPARTMENT. THEREFORE REJE CTION OF ANY CLAIM OR HOLDING THE DIFFERENTIAL AMOUNT VIS-A-VIS PRECEDING YEAR'S CLOS ING BALANCE BEING TAXABLE INCOME OF THE YEAR UNDER CONSIDERATION INCASE OF THE APPELLAN T IS FUTILE. HENCE HAVING APPLIED MY MIND TO THE ISSUE, IT IS HE LD THAT, THE AO WAS NOT JUSTIFIED IN RELYING UPON THE FICTITIOUS ENTRIES IN LOOSE SHEETS OF PAPER FOUND FROM THE PREMISES OF THE C.A. SHRI PANKAJ DANAWALA, WHO HAD ADMITTED TO HAVE CREATED SUCH ACCOUNTS HIMSELF. FURTHER, THESE ENTRIES WERE NEITHER SUPPORTED BY AN Y INDEPENDENT CORROBORATIVE EVIDENCE SO AS TO ESTABLISH THEIR GENUINENESS NOR WAS SUCH C APITAL UTILIZED BY ANY ONE, WARRANTING ANY ADDITION IN THE HANDS OF THE APPELLANT. IN THE LIGHT OF DISCUSSION AS ABOVE, THE ADDITION OF THE SUM OF RS.1488000/- MADE ON ACCOUNT OF UNEXPLAINED PORTION OF NEWLY INTRODUCED CAPITAL STAND DELETED. IT IS FURTHER HEL D THAT THE RETURNED INCOME OF RS.59,400/- SHOWN IN THE ORIGINAL RETURN STAND DELETED. 5. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6 ITA NO. 2368 & CO-201/AHD/2008 6. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF R EVENUE SHRI H.P. MEENA, SR. D.R. APPEARED AND CONTENDED THAT IN THE RETURN OF INCOME , THE ASSESSEE HAS DECLARED INCOME OF RS.59,400/-. DURING THE ASSESSMENT YEAR 2002-03, TH E ASSESSEE WAS SHOWING CAPITAL OF RS.5,04,785/-, WHEREAS IN THE ASSESSMENT YEAR UNDER APPEAL IT HAS SHOWN THE OPENING CAPITAL OF RS.19,92,785/-. THE ASSESSEE HAS ENHANCED CAPITAL W ITHOUT PAYING TAX. SINCE THE ASSESSEE FAILED TO SUBSTANTIATE CAPITAL, THE ASSESSING OFFICER ADDE D A SUM OF RS.14,88,000/- BEING JUMP IN CAPITAL. IN THE IMPUGNED ORDER, THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RELYING UPON THE FICTITIOUS ENTRIES, WHICH WERE NEITHER SUPPORTED BY EVIDENCES NOR SUCH CAPITAL WAS UTILIZE D. THE LD. D.R. POINTED OUT THAT SINCE THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENT TO DISOWN TH ESE ENTRIES AND THE ADDITION WAS MADE ON PROTECTIVE BASIS IN THE INSTANT CASE ON THE BASIS O F RETURN OF INCOME FILED BY HIM, THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIED IN DELETING THE SAME. THE LD. D.R. FURTHER SUBMITTED THAT IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) EVEN DELETED THE INCOME OF RS.59,400/- SHOWN BY THE ASSESSEE IN THE ORIGINAL RETURN. 7. ON THE OTHER HAND, SMT. POONAM JOSHI, LD. COUNSE L APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). SHE POINTED OUT THAT BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS FILED AN AFFIDAVIT WHEREIN THE ASSESSEE HAS CLEARLY MENTIONED THAT IT HAS SHOWN NIL INCOME IN T HE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE ENTIRE EXERCISE OF REFLECTIN G CAPITAL REPRESENTED BY WAY OF ADVANCES THAT TOO WITHOUT PREPARATION OF ANY BOOKS OF ACCOUNTS WA S THAT OF SHRI PANKAJ DANAWALA, ABOUT WHICH A LAYMAN IS NOT COMPETENT ENOUGH AND CANNOT BE EXPE CTED TO UNDERSTAND THE IMPLICATION AND CONSEQUENCES OF SUCH AN ACT. THE LD. A.R. SUBMITTED THAT FICTITIOUS ENTRIES WERE NEITHER SUPPORTED BY ANY INDEPENDENT CORROBORATIVE EVIDENCE NOR SUCH CAPITAL WAS UTILIZED, THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) BE UPHELD. 8. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) EVEN DELETED THE INCOME RETURNED BY TH E ASSESSEE AMOUNTING TO RS.59,400/-. THE REVENUE IS NOT AGGRIEVED BY SAID DELETION. THE ADDI TION OF RS.15,47,400/- ON ACCOUNT OF ENHANCED CAPITAL WAS MADE BY THE ASSESSING OFFICER ON PROTEC TIVE BASIS. IN THE ASSESSMENT ORDER ITSELF, THE 7 ITA NO. 2368 & CO-201/AHD/2008 ASSESSING OFFICER HAS STATED THAT INCOME OF RS.59,4 00/- CLAIMED AS INTEREST ON LOANS AND ADVANCES IS REQUIRED TO BE SUBSTANTIALLY ADDED IN C ASE OF RAGHAVJI PATEL OR ANY OTHER MEMBER OF SHRI RAGHAVJI PATEL GROUP AS HE CLARIFIES IN HIS OW N ASSESSMENT. APART FROM THIS, THE ASSESSEE HAS FILED AN AFFIDAVIT BEFORE THE ASSESSING OFFICER, PH OTOCOPY OF WHICH IS PLACED BEFORE US. FROM THE PERUSAL OF THE SAME AND AFTER CONSIDERING THE TOTAL ITY OF THE FACTS AND CIRCUMSTANCES, WE ARE CONVINCED THAT THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE ADDITION OF RS.14,88,000/- MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS. WE, THEREFORE, DECLINE TO INTERFERE. 9. NOW WE TAKE UP THE CROSS OBJECTION BEING CO NO. 201/AHD/2008 FILED BY THE ASSESSEE, IN WHICH THE ASSESSEE HAS RAISED ONLY ONE GROUND, W HICH READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS JUS TIFIED IN DELETING THE ADDITION OF RS.14,88,000/- MADE BY ASS ESSING OFFICER ON ACCOUNT OF UNEXPLAINED OPENING CAPITAL. 10. AS WE HAVE ALREADY DECIDED THE ISSUE IN REVENUE S APPEAL ABOVE, THEREFORE, THIS ISSUE RAISED BY THE ASSESSEE IS RENDERED INFRUCTUOUS AND THE SAME IS REJECTED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTION BY THE ASSESSEE BOTH ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 18.06.2010 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 / 06 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.