LAKAMSHI J GALA, MUMBAI V. DCIT CC 2(2), MUMBAI

ITA 2402/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0745 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 16-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 27-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: PRANALI DIXIT
• Keywords: Unexplained cash credit; Unexplained expenditure; Gift; Search and seizure; Salary income; Loose papers; Opportunity of being heard; Additional evidence
• Section: 69C; 80C; 143(3); 142(1); 153A; 32; 68; 69; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NOS. 2402 TO 2406/MUM/2015 (ASSESSMENT YEARS: 2005-06, 2006-07 & 2008-09 TO 2010-11) SHRI LAKAMSHI J. GALA VS. DCIT, CENTRAL CIRCLE - 2(2) ROOM NO. 1, 1ST FLOOR CENTRAL BUILDING 23, CHOWPATTY SEA FACE GIRGAUN, MUMBAI 400006 (EARLIER DCIT, CC - 12) ROOM NO. 804, 8TH FLOOR OLD CGO BLDG., M.K. ROAD MUMBAI 400020 PAN AACPG4775A APPELLANT RESPONDENT ITA NOS. 2534 TO 2537/MUM/2015 (ASSESSMENT YEARS: 2004-05, 2006-07, 2008-09 & 200 9-10) DCIT, CENTRAL CIRCLE - 2(2) VS. SHRI LAKAMSHI J. GALA ROOM NO. 804, 8TH FLOOR OLD CGO BLDG., M.K. ROAD MUMBAI 400020 ROOM NO. 1, 1ST FLOOR CENTRAL BUILDING 23, CHOWPATTY SEA FACE GIRGAUN, MUMBAI 400006 PAN AACPG4775A APPELLANT RESPONDENT ITA NOS. 2400 & 2401/MUM/2015 (ASSESSMENT YEARS: 2006-07 & 2008-09) SHRI BHAVESH L . GALA VS. DCIT, CENTRAL CIRCLE - 2(2) ROOM NO. 1, 1ST FLOOR CENTRAL BUILDING 23, CHOWPATTY SEA FACE GIRGAUN, MUMBAI 400006 (EARLIER DCIT, CC - 12) ROOM NO. 804, 8TH FLOOR OLD CGO BLDG., M.K. ROAD MUMBAI 400020 PAN AEJPG3968G APPELLANT RESPONDENT ITA NOS. 2540 TO 2542/MUM/2015 (ASSESSMENT YEARS: 2008-09 TO 2010-11) DCIT, CENTRAL CIRCLE - 2(2) VS. SHRI BHAVESH L . GALA ROOM NO. 804, 8TH FLOOR OLD CGO BLDG., M.K. ROAD MUMBAI 400020 ROOM NO. 1, 1ST FLOOR CENTRAL BUILDING 23, CHOWPATTY SEA FACE GIRGAUN, MUMBAI 400006 PAN AEJPG3968G APPELLANT RESPONDENT ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 2 ASSESSEE BY: MS. PRANALI DIXIT REVENUE BY: MS. JACINTA ZIMIK VASHAI DATE OF HEARING: 04.01.2018 DATE OF PRONOUNCEMENT: 19.01.2018 O R D E R PER BENCH THESE CROSS APPEALS FILED BY TWO DIFFERENT ASSESSEE S AND THE REVENUE ARE DIRECTED AGAINST SEPARATE, BUT IDENTICA L ORDERS OF THE CIT(A)- 48, MUMBAI DATED 16 TH FEBRUARY, 2015 FOR ASSESSMENT YEARS 2004-05 TO 2010-11. SINCE THE FACTS ARE IDENTICAL AND ISSUES A RE COMMON, FOR THE SAKE OF CONVENIENCE THESE APPEALS WERE HEARD TOGETHER AN D ARE DISPOSED OFF BY THIS COMMON ORDER. 2. THE ASSESSEE AS WELL AS THE REVENUE HAS TAKEN MORE OR LESS COMMON GROUNDS OF APPEAL FOR ALL THE ASSESSMENT YEARS. THR OUGH THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE ADDITIONS SUSTAINED BY THE CIT(A) IN RESPECT OF UNSECURED LOANS UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), DISALLOWANCE OF INTEREST E XPENSES, DISALLOWANCE OF CONSULTANCY EXPENSES AND DISALLOWANCE US 80C/80D OF THE ACT. REVENUE HAS TAKEN THE GROUNDS CHALLENGING THE DELETION MADE BY THE CIT(A) TOWARDS CESSATION OF LIABILITY UNDER SECTION 41(1)(A) OF TH E ACT, DELETION OF UNSECURED LOAN ADDED UNDER SECTION 68 OF THE ACT, D ELETION OF UNEXPLAINED CREDIT CARD EXPENSES MADE UNDER SECTION 69C OF THE ACT, DELETION OF ADDITIONS MADE TOWARDS UNEXPLAINED PURCHASE OF APPL E IPOD. SIMILARLY IN THE CASE OF SHRI BHAVESH L. GALA THE ASSESSEE HAS T AKEN GROUNDS CHALLENGING THE ADDITIONS SUSTAINED BY THE CIT(A) T OWARDS UNSECURED LOANS MADE UNDER SECTION 68 OF THE ACT, INTEREST DISALLOW ANCE CLAIMED AGAINST RENTAL INCOME, DISALLOWANCE OF CONSULTANCY EXPENSES AND ADDITION TOWARDS MUNDAN CEREMONY GIFTS UNDER SECTION 68 OF THE ACT. THE REVENUE HAS TAKEN GROUNDS CHALLENGING THE DELETION MADE BY THE CIT(A) TOWARDS CESSATION OF LIABILITY UNDER SECTION 41(1)(C), UNEX PLAINED CREDIT TOWARDS ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 3 UNSECURED LOANS UNDER SECTION 68 OF THE ACT AND DEL ETION OF ADHOC ADDITIONS TOWARDS BANK DEPOSITS UNDER SECTION 69 O F THE ACT. 3. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA NO. 2402/MUM/2015 FOR A.Y. 2005-06 ARE THAT THE ASSESSEE IS AN INDIVI DUAL DERIVING INCOME FROM SALARY AND OTHER SOURCES. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT, WAS CARRIED OUT IN THE CASE OF RELI ABLE PAPER (INDIA) PVT. LTD. AND ITS GROUP CONCERNS, MUMBAI BETWEEN 23 RD FEBRUARY, 2010 AND 20 TH APRIL, 2010 WHEREIN INCRIMINATING DOCUMENTS RELATI NG TO THE ASSESSEE WAS FOUND AND SIMULTANEOUSLY ACTION UNDER SECTION 1 32 OF THE ACT, WAS CARRIED OUT IN THE PREMISES OF THE ASSESSEE. CONSEQ UENT TO THE SEARCH NOTICE UNDER SECTION 153A OF THE ACT DATED 07.03.20 11 WAS ISSUED AND DULY SERVED ON THE ASSESSEE CALLING FOR THE RETURN OF INCOME FOR A.Y. 2004- 05 TO A.Y. 2009-10. IN RESPONSE TO THE NOTICE, THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEARS 2005-06 TO 20 09-10 ON 23.03.,2011. FOR A.Y. 2010-11 THE ASSESSEE HAS FILE D RETURN OF INCOME UNDER SECTION 139(1) ON 31 ST DECEMBER 2010. 4. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDI NGLY NOTICES UNDER SECTIONS 143(2) AND 142(1) OF THE ACT DATED 2 5 TH APRIL 2011 WERE ISSUED. ON 26 TH APRIL, 2011 THE ASSESSEE FILED A LETTER OF ADJOURN MENT SEEKING TIME FOR FILING DETAILS. A FURTHER NOTICE U NDER SECTION 142(1) DATED 25 TH APRIL, 2011 ALONG WITH A QUESTIONNAIRE WAS ISSUED FIXING THE CASE FOR HEARING ON 12.05.2011. THE ASSESSEE NEITHER APPEARE D NOR FILED ANY DETAILS ON THE DATE FIXED FOR HEARING, HOWEVER, FILED A LET TER DATED 19.05.2011 SEEKING ADJOURNMENT OF HEARING. THE AO HAS ISSUED O NE MORE LETTER DATED 15.10.2012 AND DIRECTED THE ASSESSEE TO COMPLY WITH THE EARLIER NOTICE ISSUED ON 25 TH APRIL, 2011. THE ASSESSEE NEITHER APPEARED NOR FIL ED ANY DETAILS. THEREFORE, IN VIEW OF THE NON-COMPLIANCE O N THE PART OF THE ASSESSEE, THE AO ISSUED A SHOW CAUSE NOTICE ON 29.1 0.2012 ASKING AS TO WHY THE ASSESSMENT SHOULD NOT BE COMPLETED UNDER SE CTION 144 OF THE ACT, ON THE BASIS OF THE MATERIAL, DOCUMENTS AND INFORMA TION AVAILABLE ON RECORD. SINCE THE ASSESSEE FAILED TO COMPLY WITH TH E SHOW CAUSE NOTICE ISSUED, THE AO HAS PASSED THE ASSESSMENT UNDER SECT ION 144 R.W.S. 153A ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 4 OF THE ACT, ON 25 TH MARCH, 2013 DETERMINING THE TOTAL INCOME ON THE BA SIS OF THE MATERIAL, DOCUMENTS AND INFORMATION AVAILABL E ON RECORD. WHILE DOING SO, THE AO HAS REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT AND DETERMINED THE TOTAL INCOME ON THE BASI S OF BEST JUDGEMENT ASSESSMENT IN TERMS OF SECTION 144 OF THE ACT AND M ADE VARIOUS ADDITIONS INCLUDING ADDITIONS TOWARDS UNSECURED LOANS AS UNEX PLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT, CESSATION OF LIABILITY , TOWARDS UNPROVED SUNDRY CREDITORS UNDER SECTION 41(1)(A), ADHOC ADDI TION TOWARDS BANK DEPOSIT UNDER SECTION 69C, DISALLOWANCE OF INTEREST EXPENSES, DISALLOWANCE OF CONSULTANCY EXPENSES, DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80C/80D, ADDITION ON ACCOUNT OF UNDISCLOSED JEWELLE RY AND UNEXPLAINED PURCHASE OF APPEAL IPOD. 5. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER PASSED BY THE AO UNDER SECTION 144 R.W.S. 153A OF THE ACT, ON THE GROUND THAT THE AO HAS PASSED THE ASSES SMENT ORDER WITHOUT PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD. TH E ASSESSEE HAS ALSO TAKEN A LEGAL PLEA IN AS MUCH AS THE ADDITIONS MADE BY THE AO FOR A.Y. 2004-05 TO A.Y. 2008-09 ARE BAD IN LAW AS THE ASSES SMENT FOR A.Y. 2004 -5 TO A.Y. 2008-09 HAVE BE UNABATED/CONCLUDED AS ON TH E DATE OF SEARCH AND HENCE IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF THE SEARCH NO ADDITION CAN BE MADE. IN THIS REGARD RELI ED UPON THE DECISION OF THE ITAT, MUMBAI SPECIAL BENCH, IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT (2012) 137 ITD 287 (MUM). REGARDING T HE ADDITION MADE BY THE AO TOWARDS UNSECURED LOAN, CESSATION OF LIABILI TY, UNEXPLAINED CREDIT CARD EXPENDITURE, DISALLOWANCE OF INTEREST EXPENSES , CONSULTANCY EXPENSES, DENIAL OF DEDUCTION UNDER SECTION 80C/80D, THE ASSE SSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ALONG WITH ADDITIONAL EVIDENCES. THE CIT(A), DURING THE COURSE OF APPELLATE PROCEEDINGS FORWARDE D THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE TO THE AO FOR HIS C OMMENTS. THE AO, VIDE HIS REMAND REPORT DATED 20 TH AUGUST, 2014, COMMENTED ON THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AND THEIR ADMISSIBI LITY. THE AO ALSO ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 5 COMMENTED ON THE GROUND TAKEN BY THE ASSESSEE WITH REGARD TO EX-PARTE ASSESSMENT ORDER UNDER SECTION 144 AND REJECTION OF BOOKS OF ACCOUNT AND SUBMITTED THAT THE ASSESSEE WAS NON-COOPERATIVE DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH IS EVIDENCE FROM THE F ACTS RECORDED IN THE ASSESSMENT ORDER WHERE NUMBER OF NOTICES HAVE BEEN ISSUED TO THE ASSESSEE TO FILE DETAILS FOR WHICH THE ASSESSEE HAS FILED TO FILE ANY EVIDENCE. IN SO FAR AS THE ADDITION TOWARDS UNEXPLAINED CASH CREDIT, THE AO HAS REITERATED THE FINDINGS RECORDED IN THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVIDE ANY EVIDENC E TO JUSTIFY THE UNSECURED LOANS WITH IDENTITY OF THE PARTIES AND AL SO FAILED TO FILE ANY EVIDENCE TO PROVE THE GENUINENESS OF TRANSACTION AN D CREDITWORTHINESS OF THE PARTIES. AS REGARDS OTHER ADDITIONS MADE IN THE ASSESSMENT ORDER, THE AO HAS REITERATED HIS FINDINGS RECORDED AT THE TIME OF ASSESSMENT. 6. THE CIT(A), AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND ALSO CONSIDERING THE ADDITIONAL EVIDENCES FILED BY THE A SSESSEE, PARTIALLY ALLOWED THE APPEAL FILED BY THE ASSESSEE, WHEREIN HE DELETE D THE ADDITIONS MADE BY THE AO TOWARDS CESSATION OF LIABILITY TOWARDS UNPRO VED SUNDRY CREDITORS UNDER SECTION 41(1)(A) BY HOLDING THAT THE ADDITION S MADE BY THE AO IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND AS A RESU LT OF SEARCH. THE CIT(A) FURTHER OBSERVED THAT SO FAR AS UNEXPLAINED CASH CREDIT TOWARDS UNSECURED LOANS, DELETED THE ADDITION MADE BY THE A O IN RESPECT OF CREDIT REPRESENTING OPENING BALANCE BROUGHT FORWARD FROM P REVIOUS FINANCIAL YEARS ON THE GROUND THAT THE CREDITS RECEIVED FOR T HE PAST CANNOT BE CONSIDERED UNDER SECTION 68 OF THE ACT. IN SO FAR A S FRESH CREDITS, WHEREVER THE ASSESSEE HAS FILED CONFIRMATION LETTERS, THE CI T(A) HAS DELETED THE ADDITIONS MADE BY THE AO BY HOLDING THAT THE ASSESS EE FILED CONFIRMATION LETTERS TO PROVE THE IDENTITY OF CREDITORS, THEREFO RE THE AO WAS INCORRECT IN MAKING THE ADDITIONS ONLY ON THE GROUND THAT THE AS SESSEE HAS FAILED TO PROVE GENUINENESS OF TRANSACTION AND CREDITWORTHINE SS OF THE PARTIES. SIMILARLY, THE CIT(A) DELETED THE ADDITIONS MADE BY THE AO TOWARDS UNEXPLAINED CREDIT CARD EXPENSES UNDER SECTION 69C OF THE ACT ON THE GROUND THAT THE AO HAS FAILED TO BRING ON RECORD AN Y EVIDENCE TO PROVE THAT ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 6 THE ASSESSEE HAS INCURRED CREDIT CARD EXPENSES. MER ELY POSSESSING CREDIT CARD DOES NOT MEAN THAT THE ASSESSEE HAS INCURRED E XPENDITURE. THEREFORE, THE QUESTION OF DISALLOWANCE ON ADHOC BASIS ON SUSP ICIONS AND SURMISES CANNOT ARISE. SIMILARLY, THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO TOWARDS INTEREST EXPENSES FOR A.Y. 2010-11 AND ALSO DELETED THE DISALLOWANCES ON ACCOUNT OF UNDISCLOSED JEWELLERY A ND UNEXPLAINED PURCHASE OF APPEAL IPOD. HOWEVER, THE CIT(A) CONFIR MED THE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF CONSULTANCY EXPENSES AND DISALLOWANCE ON ACCOUNT OF CLAIM UNDER SECTION 80C/ 80D BY HOLDING THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCES. I N SO FAR AS UNSECURED LOANS, THE CIT(A) HAS CONFIRMED THE ADDITION MADE B Y THE AO WHEREVER THE ASSESSEE FAILED TO FILE ANY KIND OF EVIDENCE INCLUD ING CONFIRMATION FROM THE CREDITORS. THE CIT(A) ALSO CONFIRMED THE DISALLOWAN CE OF INTEREST EXPENSES FOR A.Y. 2008-09 ON ACCOUNT OF ASSESSEES FAILURE T O FILE PROOF OF PAYMENT OF INTEREST ALONG WITH NAME AND ADDRESS OF THE PARTIES AND THEIR PAN. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE A S WELL AS REVENUE ARE IN APPEAL BEFORE US. 7. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT TH E LEARNED CIT(A) WAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO TOWARDS UNSECURED LOANS AS UNEXPLAINED CASH CREDIT UNDER SECTION 68, IGNORING THE FACT THAT THE ASSESSEE HAS FILED CONFIRMATION LETTERS AND ALS O EVIDENCES TO PROVE THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THE LEARNED A.R. FURTHER SUBMITTED THAT THE CIT(A) HAS CONFIRMED THE ADDITION ONLY ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE T O SUBSTANTIATE THE LOAN WITH ANY EVIDENCE IGNORING THE FACT THAT ALL THESE LOANS HAVE BEEN ACCEPTED BY CHEQUE AND THE ASSESSEE HAS FILED CONFIRMATION L ETTERS FROM THE PARTIES. THE LEARNED A.R. FURTHER SUBMITTED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF ` 5,51,378/- FOR A.Y. 2008-09 WHEN HE HAS ALLOWED SUCH INTEREST PAYMENT FOR A.Y. 2010-11 UNDER SIMILAR FACTS WITHOUT BRINGING ANY CONTRARY EVIDENCE. THE A .R. FURTHER SUBMITTED THAT THE ASSESSEE HAS INCURRED CONSULTANCY EXPENSES WHICH HAVE BEEN PAID BY CHEQUE. MERELY FOR NON PRODUCTION OF BILLS AND VOUCHERS ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 7 EXPENDITURE INCURRED BY THE ASSESSEE CANNOT BE DISA LLOWED. SIMILARLY, IN RESPECT OF DEDUCTIONS CLAIMED UNDER SECTION 80C/80D THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTIONS TOWARDS INVESTMENTS UNDER SECTION 80C/80D AND PROOF OF WHICH HAS BEEN F URNISHED BEFORE THE CIT(A). THE CIT(A) IGNORED ALL EVIDENCES TO SUSTAIN THE ADDITIONS. 8. THE LEARNED A.R. FURTHER SUBMITTED THAT THE ADDITIO NS MADE BY THE AO FOR A.Y. 2004-05 TO A.Y. 2008-09 IN THE ASSESSME NTS FRAMED UNDER SECTION 153A, WITHOUT ANY REFERENCE TO SEIZED MATER IAL IS BAD IN LAW AS THE ASSESSMENTS FOR A.Y. 2004-05 TO 2008-09 HAVE BEEN U NABATED/CONCLUDED ON THE DATE OF SEARCH. THE A.R., WITH REFERENCE TO THE SEARCH, SUBMITTED THAT IN THIS CASE THE SEARCH TOOK PLACE ON 20 TH APRIL, 2010 AND BY THE TIME THE ASSESSMENTS FOR A.Y. 2004-05 TO A.Y. 2008-09 HA VE BEEN UNABATED AND THE TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 14 2(1) HAS BEEN EXPIRED, THEREFORE, IN THE ABSENCE OF ANY INCRIMINATING MATE RIAL FOUND AS A RESULT OF SEARCH NO ADDITION CAN BE MADE IN THE ASSESSMENT OR DER UNDER SECTION 153A OF THE ACT. IN THIS REGARD RELIED UPON THE DEC ISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTA L WAREHOUSING CORPORATION (NAVA SHEVA) LTD. (2015) 374 ITR 645 AN D DIVISION BENCH JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. MURLI AGRO PRODUCTS LTD. (2014) 49 TAXMANN.COM 172. THE A SSESSEE ALSO RELIED UPON THE DECISION OF THE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT (2012) 137 ITD 287. 9. THE LEARNED D.R., ON THE OTHER HAND, SUBMITTED THAT THE CIT(A) HAS DELETED THE ADDITIONS MADE BY THE AO TOWARDS UNSECU RED LOANS, UNEXPLAINED LIABILITY TOWARDS UNPROVED SUNDRY CREDI TORS AND UNEXPLAINED CREDIT CARD EXPENDITURE BY ADMITTING ADDITIONAL EVI DENCES, EVENTHOUGH THE AO HAS COMMENTED ON ADDITIONAL EVIDENCES FILED BY T HE ASSESSEE AND ADMISSIBILITY OF SUCH ADDITIONAL EVIDENCES. THE ORD ER PASSED BY THE CIT(A) IS BRIEF AND CRYPTIC AND THE CIT(A) HAS NOT GIVEN A NY REASON FOR DELETING THE ADDITIONS MADE BY THE AO. THE LEARNED D.R. FURTHER SUBMITTED THAT THE CIT(A) HAS DELETED UNSECURED LOANS ONLY ON THE BASI S OF CONFIRMATION LETTERS FILED BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT MERE FILING OF ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 8 CONFIRMATION LETTERS WOULD NOT BE SUFFICIENT COMPLI ANCE TO DISCHARGE THE ONUS CAST UNDER SECTION 68 OF THE ACT, TO PROVE IDE NTITY, GENUINENESS AND CREDITWORTHINESS OF THE PARTIES. THE CIT(A) DELETED THE ADDITIONS MADE BY THE AO TOWARDS UNEXPLAINED CREDIT CARD EXPENDITURE BY SHIFTING THE BURDEN ON THE AO TO PROVE THE EXPENDITURE INCURRED BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO FURNISH ANY KIND OF EVIDENCE IN THE ASSESSMENT PROCEEDINGS AND EVEN DUR ING THE REMAND PROCEEDINGS. THE LEARNED D.R. FURTHER SUBMITTED THA T THE CIT(A) DELETED THE CESSATION OF LIABILITY WITHOUT DISCUSSING HOW T HE ADDITION MADE BY THE AO IS NOT SUSTAINABLE WHEN THE ASSESSEE IS NOT ABLE TO FILE ANY EVIDENCE TO PROVE SUNDRY CREDITORS APPEARING IN THE BOOKS OF AC COUNT. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. IN THIS CASE THE SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT, WAS CONDUCTED ON 20 TH APRIL, 2010. THE FACTS BORN OUT FROM THE RECORD RE VEALS THAT DURING THE COURSE OF SEARCH INCRIMINATING MATERIAL RELATIN G TO THE ASSESSEE WAS FOUND AND SEIZED. THE AO HAS PASSED EX-PARTE ASSESS MENT ORDER UNDER SECTION 144 R.W.S. 153A OF THE ACT AND MADE VARIOUS ADDITIONS TOWARDS CESSATION OF LIABILITY UNDER SECTION 41(1)(A), UNEX PLAINED CASH CREDIT UNDER SECTION 68 TOWARDS UNSECURED LOANS, DISALLOWANCE OF INTEREST EXPENSES, DISALLOWANCE OF CONSULTANCY EXPENSES, DISALLOWANCE OF 80C/80D DEDUCTIONS, ADDITION TOWARDS UNEXPLAINED CREDIT CAR D EXPENDITURE AND ADDITION ON ACCOUNT OF UNDISCLOSED JEWELLERY AND UN EXPLAINED PURCHASE OF APPEAL IPOD. THE AO FURTHER OBSERVED THAT THE ASSES SEE IS NON-COOPERATIVE AND NOT FILED ANY DETAILS IN RESPECT OF VARIOUS NOT ICES AND QUESTIONNAIRE ISSUED. THE AO HAS MADE VARIOUS ADDITIONS TOWARDS U NSECURED LOANS, UNPROVED SUNDRY CREDITORS, CONSULTANCY EXPENSES, DI SALLOWANCE OF INTEREST EXPENSES AND DEDUCTIONS CLAIMED UNDER SECTION 80C/8 0D AND UNEXPLAINED CREDIT CARD EXPENSES. BUT, EXCEPT FOR A DDITION MADE ON ACCOUNT OF UNDISCLOSED JEWELLERY AND UNEXPLAINED PU RCHASE OF APPLE IPOD AND ALSO UNEXPLAINED EXPENDITURE MADE ON LOOSE PAPE RS, THE AO HAS NOT REFERRED TO ANY INCRIMINATING MATERIAL FOUND AS A R ESULT OF SEARCH IN ALL ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 9 OTHER ADDITIONS MADE FOR ALL THE ASSESSMENT YEARS. IT IS THE CLAIM OF THE ASSESSEE THAT THE ADDITIONS MADE BY THE AO TOWARDS UNSECURED LOANS, CESSATION OF LIABILITY, DISALLOWANCE OF INTEREST EX PENSES, DISALLOWANCE OF CONSULTANCY EXPENSES AND DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80C/80D ARE BASED ON THE RETURN OF INCOME F ILED BY THE ASSESSEE WITHOUT THERE BEING ANY INCRIMINATING MATERIAL FOUN D AS A RESULT OF SEARCH. THE ASSESSEE FURTHER CONTENDED THAT IN THE ASSESSME NT FRAMED UNDER SECTION 153A, AO IS NOT EMPOWERED TO MAKE ANY ADDIT ION IN THE ABSENCE OF SEIZED MATERIAL IN RESPECT OF ASSESSMENTS THAT HAVE BEEN UNABATED OR ALREADY COMPLETED AS ON THE DATE OF SEARCH. 11. HAVING HEARD BOTH THE SIDES AND CONSIDERING THE MAT ERIAL ON RECORD, WE FIND THAT THE ADDITIONS MADE BY THE AO TOWARDS U NSECURED LOANS UNDER SECTION 68 OF THE ACT, CESSATION OF LIABILITY UNDER SECTION 41(1)(A), UNEXPLAINED CREDIT CARD EXPENDITURE UNDER SECTION 6 9C, DISALLOWANCE OF INTEREST EXPENSES, CONSULTANCY EXPENSES AND DENIAL OF DEDUCTION CLAIMED UNDER SECTION 80C/80D ARE NOT BASED ON ANY REFERENC E TO THE INCRIMINATING MATERIAL FOUND AND SEIZED AS A RESULT OF SEARCH. WE FURTHER OBSERVES THAT THE HON'BLE BOMBAY HIGH COURT, IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (NAVA SHEVA) LTD. (SUPRA) H AS HELD THAT IN THE ABSENCE OF ANY SEIZED MATERIAL FOUND DURING THE SEA RCH NO ADDITION CAN BE MADE IN RESPECT OF UNABATED ASSESSMENTS WHICH HAVE BECOME FINAL AS ON THE DATE OF SEARCH. THIS LEGAL PROPOSITION IS FURTH ER SUPPORTED BY THE DECISION OF THE DIVISION BENCH OF THE HON'BLE BOMBA Y HIGH COURT, IN THE CASE OF MURLI AGRO PRODUCTS LTD. (SUPRA) WHEREIN IT WAS HELD THAT NO ADDITIONS CAN BE MADE IN RESPECT OF UNABATED ASSESS MENTS WHICH HAVE BECOME FINAL, IF NO INCRIMINATING MATERIAL IS FOUND DURING THE SEARCH. THE ITAT, MUMBAI SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. ACIT (SUPRA) HAS TAKEN SIMILAR VIEW WHEREIN IT WAS CATEGORICALLY OBSERVED THAT THE AO IS NOT EMPOWERED TO MAKE ANY A DDITION IN THE ABSENCE OF ANY SEIZED MATERIAL IN RESPECT OF ASSESS MENTS THAT HAVE UNABATED/CONCLUDED AS ON THE D ATE OF SEARCH. IN TH IS CASE, THE SEARCH TOOK PLACE ON 20 TH APRIL, 2010. ADMITTEDLY, AS ON THE DATE OF SEARCH THE ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 10 ASSESSMENT FOR A.Y. 2004-05 TO A.Y. 2008-09 HAVE BE EN UNABATED. THE TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 143(2) HAS ALSO EXPIRED AS ON THE DATE OF SEARCH. THEREFORE, WE ARE OF THE CONSID ERED VIEW THAT THE AO CANNOT MAKE ANY ADDITIONS IN RESPECT OF UNABATED AS SESSMENTS, IF NO INCRIMINATING MATERIAL IS FOUND DURING THE SEARCH F OR A.Y. 2004-05 TO A.Y. 2008-09. 12. COMING TO THE ADDITION MADE BY THE AO TOWARDS UNSEC URED LOANS UNDER SECTION 68 OF THE ACT. ADMITTEDLY THE ASSESSE E HAS NOT FILED ANY DETAILS BEFORE THE AO AT THE TIME OF ASSESSMENT. TH E ASSESSEE HAS FILED ADDITIONAL EVIDENCES IN THE FORM OF CONFIRMATION LE TTERS BEFORE THE CIT(A). THOUGH THE CIT(A) HAS FORWARD THE ADDITIONAL EVIDEN CES FILED BY THE ASSESSEE FOR THE COMMENTS OF THE AO, IN THE REMAND REPORT THE AO HAS OPPOSED ADMISSION OF ADDITIONAL EVIDENCES AND ALSO COMMENTED THAT MERE FILING OF CONFIRMATION LETTERS WOULD NOT ABSOL VE THE ASSESSEE FROM THE OBLIGATION TO DISCHARGE THE BURDEN CAST UNDER S ECTION 68 OF THE ACT. THE CIT(A) HAS DELETED ADDITION MADE BY THE AO TOWA RDS UNSECURED LOANS MERELY ON THE BASIS OF CONFIRMATION LETTERS F ILED BY THE ASSESSEE WITHOUT GIVING ANY REASON IN RESPECT OF GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE CLAIM S TO HAVE FILED ALL EVIDENCES TO PROVE UNSECURED LOANS INCLUDING CONFIR MATION LETTERS, ITR ACKNOWLEDGEMENT AND BANK STATEMENT TO PROVE THE IDE NTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THE FACTS ARE CONTRARY. THE CIT(A) DELETED ADDITION MAD E BY THE AO TOWARDS UNSECURED LOANS, WITHOUT ANY REASON. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS RE-EXAMINATION BY THE AO IN THE LIGHT OF THE ADDITIONAL EVIDENCES FILED BY THE ASSE SSEE TO PROVE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF TH E AO AND DIRECT HIM TO CONSIDER IT AFRESH AFTER AFFORDING REASONABLE OPPOR TUNITY OF BEING HEARD. IF THE ASSESSEE FILES DETAILS IN RESPECT OF THE IDE NTITY, GENUINENESS OF TRANSACTION, ETC. THEN THE AO IS DIRECTED TO DELETE THE ADDITION MADE TOWARDS UNSECURED LOANS. ONCE THE ASSESSEE DISCHARG ES ITS INITIAL ONUS ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 11 OF IDENTITY, GENUINENESS OF TRANSACTION AND CREDITW ORTHINESS THEN THE AO IS PRECLUDED FROM GOING TO QUESTION THE SOURCE IN V IEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LO VELY EXPORTS (2008) 216 ITR 195 WHEREIN IT WAS HELD THAT THE NAMES AND ADDRESS OF THE PERSONS FROM WHOM THE LOAN WERE TAKEN HAVE BEEN FUR NISHED TO THE AO, THEN THE AO IS FREE TO REOPEN THE INDIVIDUAL ASSESS MENT IN ACCORDANCE WITH LAW BUT THE ADDITIONS CANNOT BE REGARDED AS UN DISCLOSED INCOME UNDER SECTION 68 OF THE ACT. 13. IN SO FAR AS CESSATION OF LIABILITY, THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO ONLY ON THE GROUND THAT THERE WAS AS SESSMENT ORDER UNDER SECTION 143(3) FOR THE PREVIOUS YEAR WHEREIN THERE IS NO ADDITION AND ALSO THE ADDITION IS MADE WITHOUT ANY INCRIMINA TING MATERIAL WITHOUT DISCUSSING THE ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 41(1)(A), WHEN THE ASSESSEE HAS NOT ABLE TO FURNISH ANY EVIDENCE T O PROVE THE SUNDRY CREDITORS. SIMILARLY IN RESPECT OF ADDITIONS TOWARD S DISALLOWANCE OF INTEREST EXPENSES, CONSULTANCY EXPENSES AND DEDUCTI ON CLAIMED UNDER SECTION 80C/80D THE CIT(A) HAS EITHER DELETED THE A DDITIONS OR CONFIRMED THE ADDITIONS WITHOUT DISCUSSING THE ISSUE RAISED B Y THE AO AS WELL AS THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE IS SUE NEEDS TO BE RE- EXAMINED BY THE AO IN THE LIGHT OF THE ADDITIONAL E VIDENCES FILED BY THE ASSESSEE. SIMILARLY, IN RESPECT OF DELETION OF ADDI TION IN RESPECT OF UNDISCLOSED JEWELLERY AND UNEXPLAINED PURCHASE OF A PPLE IPOD THE CIT(A) HAS NOT GIVEN ANY COGENT REASON FOR DELETING THE AD DITIONS MADE BY THE AO. THE ORDER OF THE CIT(A) IS BRIEF AND CRYPTIC AN D NO REASON HAS BEEN GIVEN TO COUNTER THE ALLEGATIONS MADE BY THE AO. ON THE OTHER HAND, THE ASSESSEE HAS FILED VARIOUS DETAILS IN RESPECT OF JE WELLERY AND APPLE IPOD TO EXPLAIN THE SOURCE. THEREFORE, WE ARE OF THE CONSID ERED VIEW THAT THE ISSUES NEED TO BE RE-EXAMINED BY THE AO IN THE LIGH T OF THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. HENCE, WE SET ASID E THE ISSUE OF DISALLOWANCE OF INTEREST EXPENSES, DISALLOWANCE OF CONSULTANCY EXPENSES, DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80C /80D, DISALLOWANCE OF ADDITION BASED ON LOOSE PAPERS, DELETION OF ADDI TION MADE BY THE AO ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 12 TOWARDS UNPROVED SUNDRY CREDITORS UNDER SECTION 41( 1)(A), DELETION OF ADDITION MADE TOWARDS UNSECURED LOANS UNDER SECTION 68 OF THE ACT, DELETION OF UNEXPLAINED CREDIT CARD EXPENSES UNDER SECTION 69C, DELETION OF UNEXPLAINED JEWELLERY AND DELETION OF UNEXPLAINE D PURCHASE OF IPOD. THE AO IS DIRECTED TO RECONSIDER THE ISSUES IN THE LIGHT OF THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AFTER AFFORDING REA SONABLE OPPORTUNITY OF HEARING. 14. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE AN D APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 2400 & 2401/MUM/2015 AND 2540 TO 2542/MUM/ 2015 15. THE FACTS AND ISSUES INVOLVED IN THESE APPEALS ARE IDENTICAL TO THE FACTS AND ISSUED DISCUSSED IN ITA NOS. 2402 TO 2406 /MUM/2015 AND ITA NOS. 2534 TO 2537/MUM/2015, IN THE CASE OF SHRI LAK HAMSHI J. GALA. IN THESE APPEALS THE ASSESSEE HAS CHALLENGED THE ADDIT IONS SUSTAINED BY THE CIT(A) IN RESPECT OF UNSECURED LOANS FOR A.Y. 2008- 09 AND DISALLOWANCE OF INTEREST EXPENDITURE AGAINST RENTAL INCOME, CONSULT ANCY EXPENSES AND ADDITIONS TOWARDS MUNDAN CEREMONY GIFTS UNDER SECTI ON 69A FOR A.Y. 2006-07. THE REVENUE HAS CHALLENGED THE DELETION OF ADDITIONS MADE BY AO TOWARDS OUTSTANDING LIABILITY AND UNEXPLAINED LO ANS UNDER SECTION 68 OF THE ACT AND ADHOC ADDITION TOWARDS BANK DEPOSITS UNDER SECTION 69 OF THE ACT. WE HAVE CONSIDERED SIMILAR ISSUES IN THE C ASE OF SHRI LAKHAMSHI J. GALA, WHERE WE SET ASIDE ALL ISSUES TO THE FILE OF THE AO FOR RECONSIDERATION. THE REASONS GIVEN BY US IN ITA NO. 2402 TO 2406/MUM/ 2015 SHALL MUTATIS MUTANDIS APPLY TO THESE APPEALS. THEREFORE, FOR THE DETAILED REASONS GIVEN IN THE PRECEDING PARAGRAPHS IN THE CASE OF SHRI LAKHAMSHI J. GALA, WE SET ASIDE THE APPEALS FILED B Y THE ASSESSEE AS WELL AS THE REVENUE FOR A.Y. 2006-07 TO A.Y. 2010-11. TH E AO IS DIRECTED TO RECONSIDER THE ISSUE RAISED BY BOTH THE PARTIES IN THE LIGHT OF THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AFTER AFFORDING REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO. 2402+/MUM/2015 SHRI LAKAMSHI J. GALA/BHAVESH L. GALA 13 16. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSE E AND REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2018. SD/ - SD/ - (JOGINDER SINGH) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19 TH JANUARY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -48, MUMBAI 4. THE CIT - CENTRAL-1, MUMBAI 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.