The ITO, Ward-10(3), Ahmedabad V. Smt. Chetna J.Shah L.H. Jagdish K.Shah(IND.), Ahmedabad

ITA 244/AHD/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5981 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-06-2010
• Assessment Year: 1996-1997
• Appeal Filed On: 24-01-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: B D KARIA
• Keywords: Set aside
• Section: 143(3); 143(1); 143(2); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE SHRI MUKUL SHRAWAT,JM & SHRI A N PAHUJA,AM] ITA NOS.243 AND 244/AHD/2005 (ASSESSMENT YEARS:-1995-96 AND 1996-97) INCOME-TAX OFFICER, WARD- 10(3),ROOM NO. 120,NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD V/S SMT. CHETNA J SHAH L/H OF LATE SHRI JAGDISHCHANDRA K SHAH, 20,PRATIMA SOCIETY, NAVRANGPURA, AHMEDABAD [PAN:31-004-PY-0462] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI M C PANDIT, . DR ASSESSEE BY:- SHRI B D KARIA, AR O R D E R A N PAHUJA: THESE APPEALS BY THE REVENUE AGAINST TWO SEPARATE ORDERS DATED 15-10-2004 AND 04-10-2004 OF THE LD. C IT(APPEALS)- XVI, AHMEDABAD, FOR THE AYS 1995-96 AND 1996-97 RES PECTIVELY, RAISE THE FOLLOWING GROUNDS: ITA NO.243/AHD/2005[ AY 1995-96]: 1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,15,496/- MADE ON ACCOUNT OF INCOME OF 10 TRUSTS CREATED IN 1981. 2 THE LEARNED CIT(A) HAS FURTHER ERRED IN LAW AND O N FACTS IN DELETING ADDITION OF RS.2,00,000/- MADE ON ACCOUNT OF INCOME OF 10 TRUSTS CREATED IN 1992. 3 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.40,799/- MADE U/S 68 OF THE I.T. ACT. 4 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.50,000/- MADE OUT OF SERVICE CHA RGES ON ACCOUNT OF PAYMENT TO ASSESSEES OWN PROP. CONCERN VIZ. M/S RE LIABLE SERVICE CO. 5 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DISALLOWANCE OF RS.56,298/- MADE OUT OF INTEREST PAYMENT. ITA NOS.243 & 245/AHD/2005 2 6 FROM THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 7 IT IS, THEREFORE , PRAYED THAT THE ORDER OF THE L EARNED CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABOVE EXTENT. ITA NO.244/AHD/2005[ AY 1996-97] : 1 :THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,00,000/- MADE ON ACCOUNT OF SERVIC E CHARGES PAID TO M/S RELIABLE SERVICE CO. 2 THE LEARNED CIT(A) HAS FURTHER ERRED IN LAW AND O N FACTS IN DELETING ADDITION OF RS.12,405/- MADE ON ACCOUNT OF DISALLOW ANCE OF INTEREST PAID TO M/S RELIABLE SERVICE CO. 3 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.2,96,880/- MADE ON ACCOUNT OF TEN TRUST ON SUBST ANTIVE BASIS. 4. FROM THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 5. IT IS, THEREFORE , PRAYED THAT THE ORDER OF THE LEARNED CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABOVE E XTENT. SINCE ISSUES INVOLVED IN THE THESE APPEALS WERE S IMILAR AND RELATE TO THE SAME ASSESSEE, THESE WERE HEARD TOGETHER FOR THE SAKE OF CONVENIENCE AND ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER. 2. ADVERTING FIRST TO GROUND NOS. 1 & 2 IN THE AP PEAL FOR THE AY 1995-96 AND GROUND NO.3 IN THE APPEAL FOR THE AY 19 96-97 IN RELATION TO INCOME OF THE TRUSTS, FACTS IN BRIEF, A S PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.61,962/- FO R THE AY 1995-96 FILED ON 31.3.1997 AND RETURN FILED ON 28-3-1998 FO R THE AY 1996-97 BY THE ASSESSEE, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT],WERE TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT . DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THESE TWO ASSE SSMENT YEARS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT LAT E SHRI J.K. SHAH ITA NOS.243 & 245/AHD/2005 3 THE ASSESSEE, A MEMBER OF NITEX/ KOLSAWALA GROUP, INCORPORATED 20 PVT. LTD. COMPANIES IN APRIL, 1981 WITH HIMSELF AS DIRECTOR ALONG WITH HIS WIFE AND THE SAME SET OF PERSONS AS SHARE HOLDE RS. LATER IN 1981/1983,TEN IDENTICAL TRUSTS NAMELY NIKHIL TRUST, PANKAJ TRUST, HETAL TRUST, SANJAY TRUST, GRAVITY TRUST, CHETAK TRUST, J OY TRUST, JAGAT TRUST, NOVELTY TRUST AND PIONEER TRUST WERE SETTLED THROUGH IDENTI CAL DEEDS WITH SHRI J.K. SHAH BEING THE SOLE TRUSTEE. THE AFORESAID 20 PVT. LTD. COMPANIES WERE MADE BENEFICIARIES IN THE TRUSTS - T WO PVT. LTD. COMPANIES PER-TRUST. THOUGH IT IS MENTIONED IN THE ASSESSMENT ORDER THAT A CHART SHOWING DETAILS OF TEN TRUSTS, T RUSTEES, DATE OF SETTLEMENT, SETTLER, NAME OF BENEFICIARY IS ENCLOSE D AS PER ANNEXURE 'A' TO THE ASSESSMENT ORDER, WE DO NOT FIND ANY SUC H ANNEXURE WITH THE COPY OF THE ASSESSMENT ORDER FILED BEFORE US FO R THE AY 1995-96. THE AO OBSERVED THAT IN THE ASSESSMENT ORDERS OF THE TRUSTS FOR THE AY 95-96 THAT THESE TRUSTS WERE NOTHING BUT BOG US, NON-GENUINE AND NON-ENTITIES, CREATED TO DIVERT THE PROFITS OF THE J.K. SHAH GROUP. THESE TRUSTS WERE SETTLED WITH A SMALL CORP US OF RS.500/- ONLY WHICH COULD HAVE BEEN HARDLY SUFFICIENT TO BEN EFIT A BENEFICIARY IN GENUINE CASES WHILE THE PVT. LTD COMPANIES WERE ONLY FOUND TO BE PAPER ENTITIES AND THE TRUSTS HAD NEVER PASSED ON A SINGLE PENNY TO THE BENEFICIARIES IN THEIR 16 YEARS OF EXISTENCE. THEREFORE, THESE TRUSTS WERE HELD TO BE BOGUS, NON-GENUINE AND NON-E XISTENT TRUSTS IN SEPARATE ORDERS PASSED IN THE CASE OF EACH OF THE T RUSTS. SINCE THE TRUSTS HAD FILED RETURNS OF INCOME FOR THESE ASSESS MENT YEARS, PROTECTIVE ASSESSMENT WAS MADE IN THEIR HANDS WITH THE OBSERVATIONS THAT SUBSTANTIVE ADDITION IS TO BE MAD E IN THE HANDS OF THE PERSON TO WHOM THE INCOME REALLY BELONGED TO. T HE APPEALS OF THE TRUSTS WERE ALSO LATER DISMISSED BY THE DCIT(A) AND PROTECTIVE ASSESSMENTS WERE CANCELLED WITH THE OBSERVATIONS TH AT THE ADDITION SHOULD BE MADE SUBSTANTIVELY IN THE HANDS OF SHRI J .K. SHAH AND ANY OTHER FAMILY MEMBER WHO WAS THE REAL OWNER OF THIS INCOME. THE L D. CIT(A)-XII ALSO HAD ITA NOS.243 & 245/AHD/2005 4 OCCASION TO EXAMINE THE ABOVE ISSUE IN CASE OF SHAH TRUST FOR THE AY.93-94,WHEREIN VIDE ORDER DATED 22-12-1995, THE L D. CIT(A) HELD IN SIMILAR TERMS. IN THE LIGHT OF THESE FACTS, THE AO SHOWCAUSED THE ASSESSEE ON 23.12.1997 AS TO WHY AN AMOUNT OF RS.3, 15,496/- ON ACCOUNT OF INCOME OF THE ABOVE TEN TRUSTS FOR THE AY.95-96 BE NOT ADDED SUBSTANTIVELY IN HIS HANDS AS THE PROTECTIVE ASSESSMENT MADE IN THE CASE OF TEN TRUSTS HAD ALREADY BEEN CANCELLE D. AFTER SEEKING ADJOURNMENTS, ONE SHRI R. C. PATEL, CA ATTENDED ON BEHALF OF ASSESSEE AND FILED A LETTER DATED 7-2-1998,WHEREIN IT WAS MENTIONED THAT THEIR DETAILED SUBMISSION FILED IN THE CASE OF TEN TRUSTS BE TREATED AS SUFFICIENT COMPLIANCE OF NOTICE DATED 23 -12-97 AND 2-2- 1998. AFTER CONSIDERING THE REPLY ON BEHALF OF THE ASSESSEE AND RELYING ON THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF MCDOWEL & CO. PVT. LTD. VS. CTO 154 ITR 148 (SC) AS ALSO TH E ORDER OF THE LD. DCIT(A) IN THE CASE OF THE AFORESAID TRUSTS, THE AO CONCLUDED THAT THE AFORESAID 10 TRUSTS WERE NOTHING BUT INSTRUMENTS OF TAX AVOIDANCE CREAT ED BY SHRI J.K. SHAH ALONG WITH HIS WIFE WHILE THE BENEFICIARY COMPANIES WERE NOTHING BUT PAPER ENTITIES AND HAD APPARENTLY NOT ACHIEVED ANY OF THEIR STATED OBJ ECTS. SINCE THE FUNDS WERE ROTATED THROUGH THE TRUSTS IN SUCH A MANNER THAT TH EIR INCOME WAS EITHER NON- TAXABLE OR REMAINED MARGINALLY ABOVE THE MAXIMUM AM OUNT NOT CHARGEABLE TO TAX, THIS RESULTED IN CONSIDERABLE TAX AVOIDANCE BY SHRI J.K. SHAH. ACCORDINGLY, WHILE RELYING UPON THE DECISIONS IN THE CASE OF MCD OWELL & CO. LTD. VS. CTO, (1985) 154 ITR 148, 171 (SC), CIT VS. DURGAPRASAD M ORE 82 ITR 540 (SC),CIT VS. ALOK MITRA 126 ITR 599(SC), ITO. VS. SAMIR BUIL DERS (1987) 23 ITD 570 (AMD), ATMAN TRUST VS. ITO (1989) ITD 315 (AND.), I TO VS. P. C. SHAH (1989) 43 ITD 680 (AHD), SHREE GANESH ACHAHALBHAI FAMILY T RUST (1993) 47 ITD 58, HARISH TRUST & ORS, VS. ITO(1989) 78 CTR 6 (ABD), N EO TRUST VS. IAC (1992) 41 ITD 412 (AHD), DCIT VS. PAJARIA BROS. 54 TTJ 151, A CIT VS. STRONG FOUNDATION (INDIA) PVT. LTD. 57 ITD 9, AMAR ASSOCIATE VS. ITO 56 TTJ 100, ITO VS. GUJ. ALKALIES & CHEMICAL LTD. (ITA NO. 231/AHD/1990 DECI DED ON 28-2-95), ACIT VS. APARNA FAMILY TRUST & OTHERS (ITA NO-1440 TO 1445/ AHD/1992 DECIDED ON 23. ITA NOS.243 & 245/AHD/2005 5 12. 96( DECIDED AFTER CONSIDERING THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF BANYAN & BERRY (84 TAXMAN 575), S P JAI SWAL VS. CIT 224 ITR 619(SC), AND CIT MADRAS VS. MEENAKSHI MILLS, MADURA I ,(63 ITR 609), THE AO CONCLUDED THAT. I) THE TRUSTS MANAGED BY THE ASSESSEE WERE BOGUS AN D NON GENUINE; (II) THE RATIO OF THE DECISION OF HON'BLE SUPREME C OURT IN MCDOWELLS CASE AND OTHER CASES AS DISCUSSED ABOVE WAS SQUAREL Y APPLICABLE TO THE FACTS OF THE INSTANT CASE; (III) THE ASSESSEE WAS MANAGING TRUSTEE OF THE VARI OUS TRUSTS AND CLEARLY CONTROLED THE AFFAIRS OF THE TRUSTS AS WAS EVIDENT FROM THE CLAUSE IN THE TRUST DEEDS PROVIDING FOR EXTRA VOTE TO THE ASS ESSEE IN CASE OF A TIE; (IV) THE ASSESSEE WAS THE ONLY AND MALE TRUSTEE OF ALL THE TEN TRUSTS FROM WHICH IT CAN EASILY BE INFERRED IN THE CONTEXT OF INDIAN SOCIAL SYSTEM THAT THE ASSESSEE WAS HAVING ABSOLUTE CONTRO L OVER THE AFFAIRS OF THE TRUSTS; (V) NO BENEFITS HAD BEEN PASSED ON BY THE TRUSTS TO THE BENEFICIARIES AND THE TRUSTS THEMSELVES WERE UNDER THE ABSOLUTE C ONTROL OF SHRI J.K. SHAH, THE ASSESSEE; AND (VI) THE ASSESSEE DESPITE BEING PROVIDED SUFFICIENT OPPORTUNITY DID NOT PRODUCE A SINGLE PIECE OF EVIDENCE TO THE EFFECT TH AT THE INCOME OF THE TRUSTS WAS IN FACT BEING ENJOYED BY ANY OTHER P ERSON. IN THE LIGHT OF AFORESAID FACTS, THE AO FURTHER C ONCLUDED THAT THE ASSESSEE WAS THE REAL BENEFICIARY OF THE INCOME OF THE 10 TRUSTS AND THEREFORE, THE AGGREGATE OF INCOME OF THE TRUSTS AMOUNTING TO RS.3,15,496/- REL ATING TO THE PREVIOUS YEAR RELEVANT TO AY 1995-96 WAS SUBSTANTIVELY ASSESSED I N THE HANDS OF THE ASSESSEE. 2.1 IN THE AY 1996-97 ALSO, THE AO ADDED AN AMOUN T OF RS.2,96,880/- IN RESPECT OF THE FORESAID TRUSTS. 2.2 ON SIMILAR REASONING, SINCE DESPITE SUFFICIENT OPPORTUNITY, THE ASSESSEE DID NOT FURNISH RELEVANT DETAILS SOUGHT BY THE AO IN ITA NOS.243 & 245/AHD/2005 6 RESPECT OF TEN OTHER TRUSTS NAMELY AKAR TRUST, JA GRUTI TRUST,KANAK TRUST, KUBER TRUST,MAHAVIR TRUST,MAMTA TRUST, PAVAN TRUST,PUNAM TRUST, SALI BHADRA TRUST & SARAL TRUST CREATED IN 1 992, THE AO ADDED AN ESTIMATED AMOUNT OF RS. 2 LACS IN THE AY 1 995-96 . 3. ON APPEAL, THE LEARNED CIT(A)WHILE RELYING UPON THE DECISION DATED 4.3.2004 OF HIS PREDECESSOR IN THE CASE OF T HE ASSESSEE FOR THE AY 1997-98 DELETED THE ADDITION OF RS.3,15,496/ -,HOLDING AS UNDER:- 3.1 I HAVE GONE THROUGH THE FACTS OF THE CASE AND SUBMISSIONS OF THE LEARNED A.R. IT IS SEEN THAT IN THE ABOVE MENTIONED APPELLATE ORDER, THE LEARNED C.I.T.(A) HAS DECIDED THE ISSUE IN APPEAL A FTER A DETAILED DISCUSSION AND HIS FINDING IN PARA 7 ARE NOTED AS U NDER: 'ON CONSIDERATION OF THE SUBMISSIONS OF SHRI SHAH A ND THE CONTENTIONS OF THE A.O., I AM OF THE VIEW THAT THER E WAS NO CASE FOR HOLDING THAT THE INCOMES OF THE DISCRETIONARY TRUST S MANAGED BY THE APPELLANT ACTUALLY BELONGED TO HIM SUBSTANTIALLY FO R TAX PURPOSE. ADDITION OF RS.1,94,930/- IS, THEREFORE, DIRECTED T O BE DELETED.' AS THE GROUND AND THE FACTS AND CIRCUMSTANCES OF TH IS APPEAL ARE SIMILAR TO THE APPEAL REFERRED TO ABOVE FOR A.YR. 1997-98, I, RESPECTFULLY FOLLOWING THE ORDER OF THE APPELLATE AUTHORITY FOR A.YR. 1997-98, DIRECT THE A.O. TO DELETE THE ADDITION OF RS.3,15,496/-. 3.1 LIKEWISE, THE LD. CIT(A) DELETED THE ADDITIO N OF RS.2 IN THE FOLLOWING TERMS:- 4. GROUND NO. 3 IS AGAINST THE ADDITION OF RS.2 LA CS BEING THE INCOME OF 10 TRUSTS (CREATED IN THE YEAR 1992) IN THE HANDS O F THE APPELLANT. 4.1 THE A.O. HAS GIVEN HIS FINDING REGARDING THE IM PUGNED DISALLOWANCE IN PARA 6.5 ON PAGE 23 OF THE ASSESSME NT ORDER. THE A.O. HAS NOTED THAT THESE TRUSTS WERE CREATED BY SHRI J. K. SHAH AND HIS FAMILY MEMBERS IN THE F.YR. 1992-93 ON THE SAME PATTERN AS THE OTHER 10 TRUSTS CREATED IN THE YEAR 1981. IT HAS BEEN OBSERVED BY T HE AO THAT DESPITE VARIOUS OPPORTUNITIES GIVEN, THE APPELLANT DID NOT RESPOND TO THE QUERIES RAISED BY THE A.O. REGARDING THESE TRUSTS. THEREFOR E, IN THE ABSENCE OF DETAILS, THE AO INFERRED THAT THERE WAS NO CHANGE I N THE PATTERN OF CREATION OF TRUSTS, ROTATION OF TRUST FUND AND EARNING OF IN COME BY THESE 10 TRUSTS SETTLED IN THE YEAR 1992 WHEN COMPARED WITH THE TRU STS CREATED IN 1981. ITA NOS.243 & 245/AHD/2005 7 THEREFORE, THE A.O. HELD THAT THE ASSESSEE IS THE S OLE BENEFICIARY OF THE MODUS OPERANDI OF CREATION OF MULTIPLE ENTITIES IN THE CASE OF THE 10 TRUSTS CREATED IN 1992, BECAUSE THE ASSESSEE WAS HELD AS S OLE BENEFICIARY IN SIMILAR CIRCUMSTANCES AS EXISTED FOR THE 10 TRUSTS CREATED IN THE YEAR 1981. THEREAFTER, THE AO, IN THE ABSENCE OF ANY DETAILS, ESTIMATED THE INCOME OF THESE 10 TRUSTS CREATED/SETTLED BY SHRI J.K. SHAH I N 1992, AT RS.2 LAKHS FOR THE A.YR. 1995-96 AND ADDED THE SAME IN THE HANDS O F THE APPELLANT. 4.2 THE APPELLANT HAS MADE THE FOLLOWING SUBMISSION CONTAINED M PARA 3 AND 4 OF THE WRITTEN SUBMISSIONS DATED 30.9.2004. GROUND NO. 3.1 AND 3.2 ARE PERTAINING TO ADDITION AMOUNTING TO RS.200000/- ON ACCOUNT OF ALLEGED INCOME OF 10 TRUS TS SETTLED IN THE YEAR 1992. THE APPELLANT BEGS TO SUBMIT THAT THE AS SESSING OFFICER HAS MADE THE ADDITION ONLY ON ESTIMATED BASIS RELYI NG UPON THE ADDITION OF INCOME MADE IN THE HANDS OF APPELLANT I N RESPECT OF 10 TRUSTS SETTLED IN THE YEAR 1981. YOUR HONOUR MAY KI NDLY NOTE THAT THIS IS THE ONLY YEAR IN WHICH SUCH AD-HOC ESTIMATE D ADDITION IS MADE EITHER IN THE PREVIOUS YEAR OR IN THE SUBSEQUE NT YEARS. FOR READY REFERENCE, COPIES OF STATEMENT OF INCOME FOR THE A. Y. 1992- 93 AND ASSESSMENT ORDER PASSED U/S. 143(3) AS WELL AS COPIES OF STATEMENT OF INCOME FOR THE A. YR. 1994-95 AND THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT ARE ANNEXED HER EWITH AND MARKED AS ANNEXURE B. (IV) FOR THE SUBSEQUENT YEAR BEING A.Y. 1996-97, YO UR HONOUR HEARD THE APPEAL ON 29.9.2004 AND IT WAS POINTED OU T THAT NO SUCH ADDITIONS ARE MADE IN THE ASSESSMENT ORDER PASSED U /S. 143(3) BY THE ASSESSING OFFICER. HENCE, IT IS PRAYED THAT THE ADDITIONS OF RS.2,00,000/- MADE ON ACCOUNT OF ALLEGED INCOME OF 10 TRUSTS SETTLED IN THE YEAR 1992 ONLY ON ESTIMATED BASIS BE DELETED IN TOTO'. 4 3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT CAREFULLY. IT IS NOTED THAT BASICALLY THE AO HAS MADE ADDITION TREATING THE TRUSTS CREATED IN 1992 AS NON-GENUINE ON THE GROUND THAT THE MODUS OPERANDI OF CREATING THE SAID TRUSTS WAS THE SAME AS OF THE 10 TRUSTS CREATED IN 1981. AS THE INCOME OF THE 10 TRU STS CREATED IN 1981 WAS HELD TO BE THE INCOME OF THE APPELLANT TREATING THO SE TRUSTS AS NON GENUINE AND HOLDING THE APPELLANT AS SOLE BENEFICIARY, THE A.O. HAS MADE ADDITION OF RS.2,00,000/-, AS THE ESTIMATED INCOME OF THE 10 TRUSTS CREATED IN 1992 ALSO IN THE HANDS OF THE APPELLANT TREATING THESE T RUSTS AS NON-GENUINE AND HOLDING THE APPELLANT AS SOLE BENEFICIARY. HOWEVER, AS HELD IN THE PRECEDING PARAS, THE ADDITION OF INCOME OF THE 10 T RUSTS CREATED IN 1981 HAS BEEN DELETED. THEREFORE, THE ADDITION OF INCOME MADE IN RESPECT OF THE TRUSTS CREATED IN 1992, FOLLOWING THE BASIS FOR ADD ITION FOR TRUSTS CREATED IN 1981, IS ALSO LIABLE TO BE DELETED. SECONDLY, THE A .O. HAS ESTIMATED THE INCOME OF THE 10 TRUSTS CREATED IN 1992 AT RS.2 LAK HS. HOWEVER, THE A.O. ITA NOS.243 & 245/AHD/2005 8 HAS NOT PLACED ANY MATERIAL ON RECORD TO FORM THE B ASIS FOR THIS ESTIMATE. THEREFORE, IN THE ABSENCE OF ANY BASIS OR MATERIAL ON RECORD FOR ESTIMATING THE INCOME AT RS.2 LAKHS, SUCH ESTIMATED ADDITION C ANNOT BE SUSTAINED. THIRDLY, AS POINTED OUT BY THE APPELLANT NO ADDITIO N HAS BEEN MADE REGARDING THESE 10 TRUSTS CREATED IN 1992, EITHER I N THE A.YR. 1994-95, NOR IN THE SUBSEQUENT ASSTT. YEAR 1996-97. IT IS ALSO N OTED THAT IN THE FIRST RELEVANT ASSESSMENT YEAR 1992-93 ALSO, NO SUCH ADDI TION WAS MADE IN THE ASSESSMENT ORDER PASSED U/S. 143(3). THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE OF RS.2 LAKHS IN THE HANDS OF THE APPELLANT IS DIRECTED TO BE DELETED. 3.2 FOLLOWING THE ORDERS OF HIS PREDECESSORS INC LUDING ORDER DATED 3.9.2004 FOR THE AY 1985-86, THE LD. CIT(A) DELETED ADDITION OF RS. 2,96,880/- IN THE AY 1996-97 ALSO. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELYI NG ON DECISION DATED 4.7.2005 IN THE CASE OF SHRI NAVIN CHANDRA K SHAH IN ITA NOS. 2724,2990 TO 2995/AHD./2003 FOR THE AYS 1993-94 & A Y1987- 88,1989-90 TO 1992-93,1994-95 & 1997-98 SUPPORTED T HE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON. WE FIND THAT THE ITAT IN THEIR AFORESAID ORDER DATED 4.7.2005 IN THE CASE OF SHRI NAVINCHANDRA K SHAH WHILE ADJUDICATING A SIMILAR ISSUE IN THE CON TEXT OF SIMILAR TEN TRUSTS UPHELD THE FINDINGS OF THE LD. CIT(A) THAT THAT INCOME OF THE TRUSTS COULD NOT BE ADDED IN THE HANDS OF THE ASSES SEE. UNDISPUTEDLY, SINCE THE FACTS AND CIRCUMSTANCES IN THE CASE OF AFORESAID TEN TRUSTS CREATED IN 1981 ARE SIMILAR TO THE FACTS OBTAINING IN THE AFORESAID DECISION OF THE ITAT AND NO CONTRA RY DECISION HAS BEEN BROUGHT TO OUR NOTICE BY THE REVENUE, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A) IN DELETIN G THE ADDITION OF RS.3,15,496/- IN THE AY 1995-96 & RS. 2,96,880 IN T HE AY 1996-97. ITA NOS.243 & 245/AHD/2005 9 5.1 AS REGARDS ADDITION OF RS. 2 LACS IN THE AY 1 995-96 IN RESPECT OF TEN TRUSTS CREATED IN 1992, THE LD. CIT(A) FOUND THAT FACTS AND CIRCUMSTANCES IN RESPECT OF THESE TRUSTS WERE SIMIL AR TO THE TRUSTS CREATED IN 1981 WHILE NO ADDITION WAS MADE BY THE A O HIMSELF IN THE AYS 1992-93 AND1994-95 OR IN SUBSEQUENT ASSESSMENT YEAR 1996- 97. SINCE SIMILAR ADDITION HAS BEEN DELETED IN RESP ECT OF TEN TRUSTS CREATED IN 1981 WHILE THERE WAS NO BASIS FOR ESTIMA TE OF RS. 2 LACS MADE BY THE AO, THE LD. CIT(A) DELETED THIS ADDITIO N ALSO. THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONT RARY TO THESE FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TA KE A DIFFERENT VIEW IN THE MATTER. IN THESE CIRCUMSTANCES WE HAVE NO AL TERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A). 5.2 IN VIEW OF THE FOREGOING, GROUND NOS. 1 & 2 IN THE APPEAL FOR THE AY 1995-96 AND GROUND NO.3 IN THE APPEAL FOR TH E AY 1996-97 ARE DISMISSED. 6. GROUND NO. 3 IN THE APPEAL FOR THE AY 199 5-96 RELATES TO ADDITION OF RS. 40,799/- U/S 68 OF THE ACT. THE AO NOTICED THAT THE ASSESSEE HAD SHOWN DEPOSITS IN THE NAME OF THESE TE N TRUSTS ON 13- 4-1994, 19-4-1994 AND 28-1-1995 AT RS.40,000/- AND FURTHER INTEREST RS.799/- WAS ALSO CREDITED ON 19-4-1994 IN THE ACCO UNT OF EIGHT TRUSTS. SINCE THE ASSESSEE DID NOT FURNISH ANY DETA ILS NOR ESTABLISHED THE GENUINENESS OF AMOUNT DEPOSITED IN HIS BOOKS OF ACCOUNTS, THE ENTIRE SUM RS.40799/- CREDITED IN THE AY-95-96 WAS ADDED TO THE INCOME OF THE ASSESSES U/S. 68 OF THE ACT. 7. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON, OBSERVING AS UNDER:- ITA NOS.243 & 245/AHD/2005 10 5. GROUND NO. 4 IS PERTAINING TO ADDITION OF RS.40 ,799/- MADE U/S 68 OF THE INCOME-TAX ACT, 1961. 5.1 THE A.O. HAS DISCUSSED THIS DISALLOWANCE IN PAR A 6.5(I) ON PAGE 23 OF THE ASSESSMENT ORDER. THE A.O. FOUND DEPOSITS AN D INTEREST IN THE NAME OF TEN TRUSTS AMOUNTING TO RS.40,799/- AND HAS MADE THIS ADDITION ON THE GROUND THAT THE APPELLANT DID NOT GIVE ANY REPLY OR DETAILS IN THIS REGARD DESPITE NUMEROUS OPPORTUNITIES GIVEN. 5.2 THE APPELLANT HAS MADE SUBMISSIONS ON THIS GROUND IN PARA (V) OF THE WRITTEN SUBMISSION DATED 30.9.2004 WHICH IS REP RODUCED BELOW. '(V) WITH REGARD TO GROUND NO. (4) PERTAINING TO AD DITION OF RS.40,799/- UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, IT IS RESPECTFULLY SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, C OPIES OF ACCOUNTS OF ALL THE 10 TRUSTS SETTLED IN 1992 APPEARING IN THE BOOKS OF M/S. RELIABLE SERVICE CO., PROPRIETARY CONCERN OF THE APPELLANT W ERE PRODUCED BEFORE THE ASSESSING OFFICER. COPIES OF THE SAID ACCOUNTS WERE ALSO PRODUCED BEFORE YOUR HONOUR ALONG WITH THE APPELLATE PAPERS AT ANNEXURE J. ON PERUSAL OF THE ACCOUNTS AT ANNEXURE 'J YOUR HONOUR MAY BE PLEASED TO NOTE THAT - (A) THAT DURING THE PREVIOUS YEAR 1994-95 RELEVANT TO A.Y. 1995-96, M/S. RELIABLE SERVICE CO., PROPRIETARY CONCERN OF T HE APPELLANT HAS RECEIVED BY WAY OF CHEQUE A SUM OF RS.2,000/- IN TH E MONTH OF APRIL, 1994 AND ANOTHER SUM OF RS.2,000/- IN THE MONTH OF JANUA RY, 1995. THE ABOVE AMOUNTS WERE RECEIVED BY M/S. RELIABLE SERVICE CO., PROPRIETARY CONCERN OF THE APPELLANT BY ACCOUNT PAYEE CHEQUE AND THERE IS NO ENTRY IN THESE ACCOUNTS TO SHOW THAT M/S. RELIABLE SERVICE CO., HA S PAID ANY INTEREST ON THESE AMOUNTS. (B) IN VIEW OF THE ABOVE UNDISPUTED FACTS EMERGING FROM THE ACCOUNTS AND MORE PARTICULARLY WHEN THE TRUSTS ARE GENUINE A ND THE SAME ARE CREATED IN THE YEAR 1992 AND NO ADDITION WITH RESPE CT TO INCOME OF SUCH TRUSTS WERE ADDED IN THE HANDS OF THE APPELLANT IN THE PAST YEARS AS WELL AS IN THE SUBSEQUENT YEARS, THE ADDITION U/S. 68 OF THE ACT IS UNCALLED FOR INASMUCH AS THE IDENTITY OF THE PAYEE AS WELL AS TH E PAYMENT BOTH ARE GENUINE, BONAFIDE AND AS SUCH NO ADDITION CAN BE MA DE U/S. 68 OF THE ACT. (C) SECTION 68 OF THE IN COME-TAX ACT, 1961 DEALS WITH CASH CREDIT WHICH IS NOT EXPLAINED BY THE ASSESSEE AND THE SAME IS SHOWN IN THE BOOKS OF THE ASSESSEE AND THE SOURCE OF SUCH CREDIT IS NOT SATISFACTORY THEN ONLY SUCH CASH CREDIT CAN BE DEEMED TO BE THE INCOME OF THE ASSESSEE. IN THE FACTS OF THE PRESENT CASE THE AMOU NT OF RS.4000/- IN EACH OF THE 10 TRUSTS WERE RECEIVED BY M/S. RELIABLE SER VICE CO. BY WAY OF ACCOUNT PAYEE CHEQUE AND SOURCE OF SUCH PAYMENTS WE RE NOT DOUBTED BY THE ASSESSING OFFICER. ITA NOS.243 & 245/AHD/2005 11 (D) IN VIEW OF THE ABOVE UNDISPUTED FACTS, IT IS S UBMITTED THAT BY NO STRETCH OF IMAGINATION THE PROVISIONS OF SECTION 68 CAN BE INVOKED AND THERE IS NO DOUBT OF SOURCE OF PAYMENT BY THE 10 TR USTS SO AS TO ADD THE SAME SUM OF RS.40000/- AS INCOME OF THE APPELLANT. (E) WITH REGARD TO ADDITION OF RS.799/- ADDED BY T HE ASSESSING OFFICER TOWARDS INTEREST, IT IS RESPECTFULLY SUBMITTED THAT YOUR HONOUR MAY KINDLY PERUSE THE ACCOUNTS OF THE 10 TRUSTS AT ANNEXURE 'J ' WHICH SHOWS THAT SUCH AMOUNT IS ALSO RECEIVED BY CHEQUE AS FOLLOWS:- S.NO NAME OF TRUST DATE CHEQUE NO. AMI. RS. PS. 1 MAMTA TRUST 19.4.94 93662 39.45 2 MAHAVIR TRUST 19.4.94 164119 39.45 3 KUBER TRUST 19.4.94 197199 39.45 4 KANAK TRUST 19.4.94 88673 281.21 5 JAGRUTI TRUST 19.4.94 56307 39.45 6 SHALIBADRA TRUST 19.4.94 164106 39.45 7 PAVAN TRUST 19.4.94 1671203 39.45 8 POONAM TRUST 19.4.94 93622 281.21 TOTAL 799.12 (F) FROM THE ABOVE DETAILS IT IS CLEAR THAT THE ABO VE CHEQUES RECEIVED BY M/S. RELIABLE SERVICE CO. AND THE SAID CHEQUES W ERE CREDITED IN THE ACCOUNT OF THE ABOVE TRUSTS AND WERE SHOWN AS CREDI T BALANCE AND AS SUCH THE ASSESSING OFFICER HAS ERRED IN LAW IN INVO KING PROVISIONS OF SECTION 68 OF THE ACT. (G) YOUR HONOUR IS THEREFORE REQUESTED TO DELETE TH E ABOVE ADDITION OF RS.40799/- AS NO INGREDIENT OF SECTION 68 OF THE AC T CAN BE ATTRACTED ON THE FACTS OF THE CASE'. 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I FIND CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE APPELL ANT AND IT IS SEEN THAT ITA NOS.243 & 245/AHD/2005 12 THE COPIES OF ACCOUNTS OF ALL THE 10 TRUSTS SETTLED IN 1992 APPEARING IN THE BOOKS OF ACCOUNT OF M/S. RELIABLE SERVICE CO. WERE BEFORE THE A.O. AND THE SAME WERE PRODUCED BEFORE THE UNDERSIGNED ALSO. IN VIEW OF THE CONTENTIONS OF THE APPELLANT AND THE MATERIAL ON RE CORD, THE ADDITION OF RS.40,799/- MADE BY THE A.O. U/S. 68 IS NOT JUSTIFI ED. THEREFORE, THE A.O. IS DIRECTED TO DELETE THIS ADDITION. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE HE LD. AR ON BEHALF OF THE ASSESSEE SUPPOR TED THE FINDINGS OF THE LD. CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, AN AMOUNT OF RS.4000/- IN EACH OF THE 10 TRUSTS WAS RECEIVED BY M/S. RELIABLE SERVICE CO. ,A PROPRIETOR Y CONCERN OF THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUE AND SOURCE OF SUCH PAYM ENTS WERE NOT DOUBTED BY THE ASSESSING OFFICER. LIKE WISE INTEREST OF RS. 79 9/- WAS ALSO RECEIVED BY CHEQUE. SINCE THE LD. CIT(A) FOUND THAT THE AFORE SAID TEN TRUSTS WERE GENUINE WHILE NO ADDITION WAS MADE IN THE PRECEDING OR SUCC EEDING ASSESSMENT YEARS, ADDITION HAD BEEN DELETED . IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONT RARY TO THESE FINDINGS OF THE LD. CIT(A) SO AS TO ENABLE US TO TA KE A DIFFERENT VIEW IN THE MATTER, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A).THUS, GROUND NO. 3 IN THE APPEAL FOR THE AY 1995-96 IS ALSO DISMISSED. 10. GROUND NO.4 IN THE APPEAL FOR THE AY 1995-96 AN D GROUND NO.1 IN THE APPEAL FOR THE AY 1996-97 RELATE TO DISALLOW ANCE OF RS.50,000/- AND RS. 1,00,000/- ON ACCOUNT OF SERVIC E CHARGES PAID TO THE ASSESSEES OWN PROPRIETARY CONCERN VIZ. M/S RELIABLE SERVICE CO.. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FO R THE AY 1995- 96, THE AO NOTICED THAT A SUM OF RS. 65,000/- HAD B EEN DEBITED AS SERVICE CHARGES UNDER THE HEAD PROFIT AND GAINS FRO M BUSINESS ,BEING INTEREST RECEIVED FROM PARTNERSHIP FIRMS. IN RESPONSE TO A ITA NOS.243 & 245/AHD/2005 13 SHOWCAUSE NOTICE, THE ASSESSEE EXPLAINED THAT THE P ROPRIETORY CONCERN HAD RENDERED SERVICES TO HIS GROUP IN THE FIELD OF ADMINISTRATION, BANKING FACILITIES AND HANDLING THE INVESTMENTS AND AN EXPENDITURE OF RS. 1,57,000 WAS INCURRED BY THE SAID CONCERN. OF THIS, RS. 65,000/- HAD BEEN CLAIMED BY THE ASSESSEE . SINCE THE ASSESSEE DID NOT FURNISH ANY BASIS FOR APPORTIONMEN T OF THE EXPENDITURE, THE AO ALLOWED CLAIM OF ONLY RS. 15,00 0/- AND DISALLOWED THE BALANCE. 10.1 LIKE WISE , AN AMOUNT OF RS. 1 LAC TOWAR DS CONSULTANCY FEE WAS DISALLOWED IN THE AY 1996-97 SINCE THE ASSESS EE DID NOT FURNISH ANY DETAILS, AS WAS THE CASE IN THE ASSESS MENTS OF SMT. CHETNABEN J SHAH AND SHRI JAGDISH HUF. 11. ON APPEAL IN HE AY 1996-97, THE ASSESSEE REITER ATED THEIR SUBMISSIONS BEFORE THE AO AND CONTENDED THAT RELIAB LE SERVICE COMPANY RENDERED VARIOUS SERVICES TO THE ENTITIES I N THE GROUP ,WHICH HAVE NOT ENGAGED THEIR OWN STAFF. THEY RENDERED SERVICES IN THE FILED OF ACCOUNTANCY, BANKING, ATTENDING TO I. T. AND OTHER TAXES, ADMINI STRATION ETC. THE ENTITIES IN THE GROUP DID NOT DEBIT ANY EXPENDITURE IN RELATION TO THESE SERVICES NOR ENGAGED ANY SEPARATE STAFF FOR THE ABOVE REFERRED REQUIREMENTS. IN THE P&L ACCOUNT OF THE SAID PROPRIETARY CONCERN M/S RELIABLE SERVICES CO., SERVICE CHARGES WERE SEPARATELY CREDITED AND THE ENTIRE RECEIPT IS FORM ING PART OF THE TOTAL INCOME OF THE SAID CONCERN. THEREFORE, THERE WAS NO REASON F OR DISALLOWING THIS AMOUNT. IN THE LIGHT OF THESE SUBMISSIONS, THE LD. CIT(A) DEL ETE THE ADDITION OF RS.1,00,000/- IN THE AY 1996-97, HOLDING AS UNDER: - 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF T HE CASE AND THE SUBMISSIONS MADE BY THE APPELLANT AND THE LEARNED A .R. AND FIND CONSIDERABLE MERIT IN THE ARGUMENTS OF THE APPELLAN T. THE APPELLANT HAS BEEN ABLE TO SHOW THAT THE GENERAL LEDGER (SERVICE CHARGES) ACCOUNT [AT PAGE NO. 8 OF THE PAPER BOOK] OF M/S. RELIABLE SERV ICES CO. REFLECTS CREDITS AMOUNTING TO RS.2,80,000/- RECEIVED FROM VARIOUS EN TITIES OF THE GROUP ITA NOS.243 & 245/AHD/2005 14 INCLUDING AN AMOUNT OF RS.80,000/- FROM SHRI J.K. S HAH. FURTHER, LEARNED A.R. SHOWED [AS PER PAGE 7 OF THE PAPER BOOK] THAT AGAINST THIS CREDIT AMOUNT OF RS.2,80,000/-, VARIOUS EXPENSES INCURRED HAVE BEEN CLAIMED, WHICH INCLUDE CONSULTANCY FEE OF RS.1 LAC (WHICH IS IN QUESTION IN THIS GROUND OF APPEAL) AND THEREAFTER THE BALANCE NET PR OFIT OF RS.4985.46 IS LEFT, WHICH HAS BEEN DULY TRANSFERRED TO THE CAPITA L ACCOUNT. FURTHER, IT WAS SUBMITTED THAT THE NET PROFIT AMOUNTING TO RS.4985/ - HAS BEEN DULY OFFERED FOR TAX AS PER THE STATEMENT OF COMPUTATION OF TOTA L INCOME (PAGE 1 OF THE PAPER BOOK). IN VIEW OF THESE FACTS, THE CONTENTION OF THE APPELLANT WAS FOUND SATISFACTORY AND ACCEPTABLE. THEREFORE, THE A O IS DIRECTED TO DELETE THE ADDITION OF RS.1 LAC MADE ON THIS ACCOUNT. 11.1 IN VIEW OF HIS AFORESAID FINDINGS IN THE AY 1996-97, THE LD. CIT(A) DELETED THE ADDITION OF RS. 50,000/- IN THE AY 1995-96 ALSO. 12. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR SUPPORTE D THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE S UPPORTED THE ORDER OF THE LEARNED CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY AND AS FOUND BY THE LD. CIT( A) IN THE AY 1996-97, THE ACCOUNT OF M/S. RELIABLE SERVICES CO. REFLECTE D AMOUNT RECEIVED FROM VARIOUS ENTITIES OF THE GROUP INCLUDING THE A MOUNT FROM THE ASSESSEE WHILE THE ASSESSEE CLAIMED DEDUCTION OF THE CORRESPONDING AMOUNT IN HIS PROFIT AND LOSS ACCOUNT. SINCE GENUINENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED NOR THE REVENUE HAVE BROUGHT TO OUR NOTICE ANY MATERIA L CONTRARY TO THE AFORESAID FINDINGS OF FACTS RECORDED BY THE LD. C IT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, W E HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. C IT(A). THEREFORE, GROUND NO.4 IN THE APPEAL FOR THE AY 1995-96 AND GR OUND NO.1 IN THE APPEAL FOR THE AY 1996-97 ARE DISMISSED. 14. GROUND NO.5 IN THE APPEAL FOR THE AY 1995-96 AN D GROUND NO.2 IN THIS APPEAL FOR AY 1996-97 RELATE TO DISALLOWANC E OF INTEREST OF ITA NOS.243 & 245/AHD/2005 15 RS.56,298/- IN THE AY 1995-96 & RS.12,405/- IN THE AY 1996-97 PAID TO M/S RELIABLE SERVICE CO. . SINCE THE ASSESSEE DI D NOT FURNISH RELEVANT DETAILS OF INTEREST CLAIMED AGAINST INCOME FROM OTHER SOURCES, DESPITE SUFFICIENT OPPORTUNITY ALLOWED, TH E AO DISALLOWED THE DEDUCTION,INTER ALIA , ON THE GROUND THAT 20 T RUSTS WERE NOT GENUINE. ASSESSMENT ORDER. 15. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISA LLOWANCE IN THE AY 1996-97 IN THE FOLLOWING TERMS: 5.2 THE APPELLANT HAS MADE THE SUBMISSION ON THIS GROUN D AS PER PARA 5 ON PAGE 5 OF THE WRITTEN SUBMISSIONS, WH ICH IS REPRODUCED BELOW : INTEREST PAYMENT OF RS.12,405/- 5.1 THIS PAYMENT IS ALSO DISALLOWED BY THE AO ONL Y ON THE GROUND THAT IT IS PAID TO M/S RELIABLE SERVICE CO., A PROP RIETARY CONCERN. 5.2 IN THIS CONNECTION, IT MAY BE STATED THAT IN TH E P&L ACCOUNT OF M/S RELIABLE SERVICES CO. THIS INTEREST IS CREDITED AS INCOME. THEREFORE, THE EXPENDITURE ON ONE HAND IS REPRESENT ED BY THE INCOME ON OTHER HAND IN APPELLANTS OWN CASE AND HE NCE THERE IS NO REASON FOR MAKING ANY DISALLOWANCE OF THIS AMOUN T . 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE CAREFUL LY AND THE SUBMISSIONS OF THE APPELLANT. THE CONTENTION RAISED BY THE APPELLANT WAS FOUND CORRECT IN VIEW OF THE DISCUSSION REGARDING M /S RELIABLE SERVICES CO. AND METHOD OF ACCOUNTING IN PARA 4 ABOVE AND THE EN TRIES NOTED IN THE STATEMENT OF TOTAL INCOME OF SHRI J K SHAH AND IN T HE RELEVANT ACCOUNTS OF M/S RELIABLE SERVICE CO. FILED AS PER PAPER BOOK PA GES 5, 7 & 9. THEREFORE, THIS DISALLOWANCE IS ALSO DIRECTED TO BE DELETED. 15.1 FOLLOWING HIS ORDER FOR THE AY 1996-97, TH E LD. CIT(A) DELETED THE DISALLOWANCE IN THE AY 1995-96 ALSO. 16. THE REVENUE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR SUPPORTE D THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE S UPPORTED THE ITA NOS.243 & 245/AHD/2005 16 ORDER OF THE LEARNED CIT(A),RELYING, INTER ALIA ON THE DECISION DATED 20.12.2007 IN THE ASSESSEES OWN CASE IN THE AY 199 7-98 IN ITA NO.1495/AHD./2004.. 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY AND AS FOUND BY THE LD. CIT( A) IN THE AY 1996-97, THE ACCOUNT OF M/S. RELIABLE SERVICES CO. REFLECTE D THE AMOUNT OF INTEREST RECEIVED FROM VARIOUS ENTITIES OF THE GROU P, INCLUDING THE AMOUNT FROM THE ASSESSEE , AS INCOME WHILE THE ASSESSEE CLAIMED DEDUCTION OF THE CORRESPONDING AMOUNT IN HIS PROFIT AND LOSS ACCOUNT . SINCE EXPENDITURE ON ONE HAND IS REPRESENTED BY THE INCOME IN THE ASSESSEE S OWN CASE AND GENUINENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED NOR THE RE VENUE HAVE BROUGHT TO OUR NOTICE ANY MATERIAL CONTRARY TO THE AFORESAID FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) SO AS TO ENABLE US TO T AKE A DIFFERENT VIEW IN THE MATTER, WE HAVE NO ALTERNATIVE BUT TO U PHOLD THE FINDINGS OF THE LD. CIT(A). 17.1 MOREOVER, THE ITAT , IN THEIR AFORESAID ORDER DATED 20.12.2007 IN THE ASSESSEES OWN CASE IN ITA NO.1495/AHD/2004 FOR THE AY 1997-98 CONCLUDED ON A SIMILAR ISSUE ,AS UNDER: . 8 WE HAVE HEARD LEARNED DR AND CONSIDERED THE MATE RIAL AVAILABLE ON RECORD. APROPOS GROUND NO.1, WE FIND THAT ASSESS EE HAS TWO PROPRIETARY CONCERNS, ONE OF WHICH IS RELIABLE SERV ICE COMPANY (RSC FOR SHORT). IN THE ASSESSEES BOOKS, PROPORTIONATE EXPENDITURE IS SHOWN TO BE PAID TO THE SAID RSC, AT THE SAME TIME, EQUAL AMOUNT IS CREDITED IN THE BOOKS OF RSC. WE FIND THAT THOUGH AO HAS HELD THAT RSC IS ASSESSEES OWN PROPRIETORSHIP CONCERN, EXPENDITURE IS NOT ALLOWABLE, BEING PAID TO SELF. HOWEVER, AO FAILED TO NOTICE TH AT EQUAL AMOUNTS HAVE BEEN CREDITED IN THE BOOKS OF RSC AS INCOME. WHEN THERE CAN BE NO ALLOWABLE EXPENDITURE PAID TO SELF, WITH THE SAME L OGICAL, THERE CANNOT BE INCOME FROM ONES OWN PROPRIETORSHIP CONCERN. ENTRY BEING CONTRA IN NATURE, THEY GET NEUTRALIZED I.E. THE DEBIT IN THE BOOKS OF ASSESSEE AND CREDIT IN THE BOOKS OF RSC WILL SET OFF TO EACH O THER BEING EXPENDITURE AND INCOME ATTRIBUTABLE TO ASSESSEE HIMSELF BY PROP RIETORSHIP CONCERN. IN ITA NOS.243 & 245/AHD/2005 17 VIEW THEREOF, DISALLOWANCE OF RS.37,044/- IS DELETE D, THIS GROUND OF THE ASSESSEE IS ALLOWED. 17.2 IN VIEW OF THE FOREGOING, GROUND NO.5 IN T HE APPEAL FOR THE AY 1995-96 AND GROUND NO.2 IN THIS APPEAL FOR AY 19 96-97 ARE DISMISSED. 18. GROUND NOS. 6 & 7 IN THE APPEAL FOR THE AY 19 95-96 AND GROUND NOS.4 & 5 IN THE APPEAL FOR THE AY 1996-97,BEING GE NERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, T HEREFORE, DISMISSED. 19. IN THE RESULT, BOTH THESE APPEALS ARE DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 11-06-2010 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 11 -06-2010 COPY OF THE ORDER FORWARDED TO: 1. LATE SHRI JAGDISHCHANDRA K SHAH, THROUGH LEGAL H EIR SMT. CHETNA J SHAH, AHMEDABAD, 20, PRATIMA SOCIETY, NR. DADA SAHEB PAGLA, NAVRANGPURA, AHMEDABAD 2. THE ITO, WARD-10(3), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XVI, AHMEDABAD 5. THE DR, C BENCHITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD