M/s Anuradha Masala Udyog (P) Ltd., Kanpur V. Joint Commissioner of Income Tax, Kanpur

ITA 257/LKW/2002

• Counselvise Citation: 25723714 RSA 2002
• Duration Of Justice: 11 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 1998-1999
• Appeal Filed On: 10-04-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTA VA
• Keywords: Unexplained cash credit; Unexplained investment; Opportunity of being heard; Principle of natural justice; Proportionate interest; Reassessment proceedings
• Section: 143(3); 80G; 147; 131; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKN BENCH B : LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA , ACCOUNTANT MEMBER I.T.A. NO. 257 /LKW/20 02 ASSESSMENT YEAR :1998 - 99 & I.T.A. NO. 1208 /LKW/20 06 ASSESSMENT YEAR :1998 - 99 M/S ANURADHA MASALA UDYOG (P) LTD., VS. A.C.I.T., 59/132, AKASHDEEP BUILDING, RANGE - 5, PURANI DAL MANDI, KANPUR. KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH GARG, ADVOCATE RESPONDENT BY : SHRI Y. P. SRIVA STAVA, D.R. DATE OF HEARING : 19 / 12 /2013 DATE OF PRONOUNCEMENT : 07/01/2014 ORDER PER SUNIL KUMAR YADAV: TH ESE APPEAL S ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER S OF CIT(A) PERTAINING TO ASSESSMENT YEAR 19 98 - 99. ONE APPEAL IS EMANATED FROM THE ASSESSMENT ORDER PASSED U/S 143(3) AND THE OTHER IS EMANATED FROM THE ORDER PASSED U/S 143(3) READ WITH SECTION 148 OF THE I. T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). SINCE BOTH THESE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. WE, HOWEVER, PREFER TO ADJUDICATE THESE APPEALS ONE AFTER THE OTHER. 2 I.T.A. NO.257/LKW/2002 2. IN THIS APPEAL THE ASSESSEE HAS ASSAILED THE ORDER OF CIT(A), INTER ALIA, ON VARIOUS GROUNDS WHICH ARE AS UNDER: 1. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I, KANPUR HAS ERRED IN CONFIRMING THE ADDITION OF RS.1261028.00 ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FACTORY BUILDING. 2. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I , K ANPUR HAS ERRED IN NOT ENTERTAINING THE SUBMISSIONS OF THE ASSE S SEE THAT WHEN THE ENTIRE WORK OF CONSTRUCTION OF FACTORY BUILDING WAS FULLY VOUCHED AND NO D EFECT HAS BEEN POINTED OUT THEREIN, THERE WAS NO LOGIC OF SUSTAINING ADDITION ON THIS ACCOUNT. 3. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I , K ANPUR HAS ERRED IN CONFIRMING THE ADDITION OF R S.500 0 .00 ON ACCOUNT OF TELE P HONE EXPENSES. 4. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I , K ANPUR HAS ERRED IN CONFIRMING THE ADDITION OF R S.10202.00 ON ACCOUNT OF DONATION. 5. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I , KANPUR HAS ERRED IN CONFIRMING THE ADDITION OF R S.25000.00 ON ACCOUNT OF STAFF WELFARE AND BUSINESS PROMOTION. 6. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD . COMMISS IONER OF INCOME TAX (APPEALS) - I , K ANPUR HAS ERRED IN CONFIRMING THE ADDITION OF R S.1300000.0 0 ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND DISALLOWING THE PROPORTIONATE INTEREST THEREON. 3 7. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I , K ANPUR HAS ERRED IN NOT VACATING THE ASSESSMENT ORDER BEING MADE WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMIS SIONS MADE BY THE ASSES SES. 8. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) - I , K ANPUR HAS ERRED IN NOT APPRECIATING THAT AS S ESSEE HAS NOT BEEN GIVEN FULLEST OPPORTUNITY OF BEING HEARD WHILE FRAMING THE ASSESSMENT AND IN VIO LATION OF PRINCIPALS OF NATURAL JUSTICE AND HENCE, DESERVED TO BE VACATED. 9. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, INTEREST U/S 234 A , 234 B AND 234 C ARE CHARGEABLE ON THE BASIS OF RETURNED INCOME AND NOT THE ASSESSED INCOME. 10. BECAUSE ON F ACTS AND IN CIRCUMSTANCES OF THE CASE, APPEAL AND ASSESSMENT ORDER IS BAD IN LAW AS WELL AS ON FACTS. 11. BECAUSE ON FACTS AND IN CIRCUMSTANCES O F THE CASE, APPELLANT RESERVES THE RIGHT TO INTRODUCE ANY OTHER GROUND OF APPEAL WITH THE KIND PERMISSION OF Y OUR HONOUR. 3. APROPOS GROUND NO. 1 & 2 , T HE ADDITION WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE FACTORY BUILDING AND IN THIS REGARD OUR ATTENTION WAS INVITED THAT THESE GROUNDS ARE COVERED BY THE ORDER OF THE TRIBUNAL PERTAINING TO ASSESSMENT YEAR 19 97 - 98 IN WHICH THE TRIBUNAL HAS CATEGORICALLY HELD T HAT REFERENCE WAS MADE TO D.V.O. U/S 133( 1)(D) OF THE ACT FOR DETERMINING THE UNEXPLAINED INVESTMENT IN FACTORY BUILDING WITHOUT HAVING ANY JURISDICTION, FOLLOWING THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF SMT. AMIYA BALA PAUL VS COMMISSIONER OF IN COME - TAX [2003] 262 ITR 407 (SC) , THEREFORE, THE VALUATION MADE BY THE D.V.O. IS IMPROPER AND NO ADDITION CAN BE MADE ON THE BASIS OF THE D.V.O.S REPORT. THE TRIBUNAL 4 ACCORDINGLY DELETED THE ADDITION MADE ON THE BASIS OF THE D.V.O.S REPORT IN THE ASSESS MENT YEAR 19 97 - 98. FOLLOWING THE D.V.O. REPORT, THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FACTORY BUILDING WAS ALSO MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 19 98 - 99. IT WAS FURTHER CONTENDED THAT SINCE THE REFERENCE MADE TO D.V.O. WAS HELD TO BE IMPROPER, THE IMPUGNED ADDITION MADE IN THE ASSESSMENT YEAR 98 - 99 DESERVED TO BE DELETED FOLLOWING THE ORDER OF THE TRIBUNAL. COPY OF THE TRIBUNAL ORDER IS PLACED ON RECORD. THE LEARNED D.R. DID NOT DISPUTE THESE FACTS. WE, THEREFORE, FOL LOWING THE ORDER OF THE TRIBUNAL, DELETE THE ADDITION MADE IN THE IMPUGNED ASSESSMENT YEAR AS THE REFERENCE MADE TO D.V.O. WAS HELD TO BE IMPROPER BY THE TRIBUNAL AS IT WAS MADE WITHOUT HAVING JURISDICTION BY THE ASSESSING OFFICER. ACCORDINGLY, WE DELETE THE ADDITIONS MADE IN THIS REGARD. 4. APROPOS GROUND NO. 3, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.5,000/ - AFTER MAKING A DISALLOWANCE OUT OF THE TOTAL CLAIM OF TELEPHONE EXPENSES ON THE GROUND THAT TELEPHONE MIGHT HAVE BEEN USED FOR THE NON BUSINESS PURPOSE. IN THIS REGARD IT WAS C ONTENDED THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND THERE IS NO POSSIBILITY OF USE OF TELEPHONE FOR THE PURPOSES OTHER THAN THE BUSINESS. HE PLACED THE RELIANCE UPON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. CO . VS COMMISSIONER OF INCOME - TAX [2002] 253 ITR 749 (GUJ) . 5. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND T HERE IS NO POSSIBILITY OF PERSONAL USE OF THE TELEPHONE. THEREFORE, NO DISALLOWANCE CAN BE MADE IN THIS REGARD UNLESS UNTIL IT IS PROVED THAT THE TELEPHONE WAS USED FOR THE 5 PURPOSES OTHER THAN THE BUSINESS. THEREFORE, WE FIND NO MERIT IN THE DISALLOWANCE AND WE DELETE THE SAME. 6. APROPOS GROUND NO. 5 , IT IS NOTICED THAT THE ASSESSEE HAS MADE THE DONATIONS OF RS.35,202/ - OUT OF WHICH HE PLACED THE RECEI PT OF RS.25,000/ - PAID TO SHRI RAMLILA SOCIETY AND ALSO CLAIMED DEDUCTION U/S 80G OF THE ACT. BUT REGARDING THE BALANCE AMOUNT OF RS.10,202/ - , NO RECEIPT WAS PRODUCED BEFO RE THE LOWER AUTHORITIES AND THE ADDITION WAS MADE BY THE ASSESSING OFFICER WHICH WAS CONFIRMED BY CIT(A). EVEN BEFORE US, NO EVIDENCE IS PLACED AS TO FOR WHAT PURPOSES THE DONATION WAS GIVEN. IN ABSENCE OF DOCUMENTARY EVIDENCE, WE FIND NO MERIT IN THIS GROUND AND WE ACCORDINGLY CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A). 7. APROPOS GROUND NO. 2, IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES, DETAILS OF WHICH ARE AS UNDER: (I) STAFF WELFARE 41,303/ - (II) FACTORY EXPENSES 72,055/ - (III) OFFICE MAINTENANCE 96,921/ - (IV) MISC. EXPENSES 1,17,428/ - (V) BUSINESS PROMOTION 3,46,968/ - (VI) SCHEME EXPENSES 8,92,775/ - 7.1 THE ASSESSING OFFICER EXAMINED THE SAME AND MADE A DISALLOWANCE OF RS.1,75,000/ - HAVING OBSERVE D THAT THESE EXPENSES WERE NOT INCURRED FOR BUSINESS PURPOSE. AN APPEAL WAS PREFERRED BEFORE THE CIT(A) AND IT WAS CONTENDED BEFORE HIM THAT THE ENTIRE DETAILS OF THESE EXPENSES WERE FURNISHED ALONGWITH THE PROPER EXPLANATION BUT IT WAS NOT ACCEPTED BY TH E ASSESSING OFFICER. THE CIT(A) EXAMINED THE DETAILS AND HAVING CONVINCED WITH THE EXPLANATION, FURNISHED BY THE ASSESSEE, RESTRICTED THE DISALLOWANCE 6 TO RS.25,000/ - AGAINST WHICH THE ASSESSEE IS BEFORE US WITH THE SUBMISSION THAT THE AD HOC DISALLOWANCES ARE NOT PERMISSIBLE. IF THE REVENUE IS NOT SATISFIED WITH ANY OF THE EXPENSES CLAIMED BY THE ASSESSEE, THEY HAVE TO MAKE SPECIFIC DISALLOWANCE. BUT THE CIT(A), WITHOUT POINTING OUT SPECIFIC DEFECT WITH RESPECT TO THE CLAIM OF EXPENSES, HAS MADE THE AD HOC DISALLOWANCE OF RS.25,000/ - , WHICH IS NOT PERMISSIBLE. 8. LEARNED D.R. PLACED RELIANCE UPON THE ORDER OF CIT(A). 9. HAVING CAREFULLY EXAMINED THE RIVAL SUBMISSIONS , WE FIND THAT THE CIT(A) HAS RESTRICTED THE DISALLOWANCE OF RS.25,000/ - ON AD HOC BASI S WITHOUT POINTING OUT ANY SPECIFIC DEFECT EITHER IN THE MAINTENANCE OF DETAILS OF EXPENSES OR IN THE NATURE OF EXPENSES OR FOR LACK OF EVIDENCE. SINCE THE DISALLOWANCE WAS MADE PURELY ON AD HOC BASIS, WE FIND NO MERIT IN THIS AD HOC DISALLOWANCES AS IT I S NOT PERMISSIBLE IN LAW. WE ACCORDINGLY DELETE THE SAME. 10. APROPOS GROUND NO. 6 TO 8, IT IS NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS INTRODUCED THE CASH CREDIT OF RS.58 LAKHS. SIN CE THE ASSESSEE COULD NOT FURNISH THE CONFIRMATION OF THE CREDITORS, HE MADE THE ADDITION OF THE SAME U/S 68 OF THE ACT. THE ASSESSEE HAS CLAIMED THE PAYMENT OF INTEREST OF RS.4,01,120/ - THEREON AND THE SAME WAS ALSO DISALLOWED AND THE ADDITION WAS MADE U /S 68 AGAINST WHICH AN APPEAL WAS FILED BEFORE THE CIT(A) WITH THE SUBMISSIONS THAT THE ASSESSEE WAS ASKED TO FILE THE CONFIRMATION LETTERS ON THE LAST DATE OF HEARING I.E. 19/03/2001 WHEN THERE WERE SERIOUS RIOTS IN KANPUR BECAUSE OF WHICH THE ENTIRE CITY WAS PLACED UNDER CURFEW AND, THEREFORE, THE ASSESSEE COULD NEITHER GET CONFIRMATION NOR FILE THEM BEFORE THE ASSESSING OFFICER. FINDING FORCE IN THE CONTENTIONS OF THE ASSESSEE, THE 7 CIT(A) CALLED A REMAND REPORT AND DIRECTED THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRY WITH REGARD TO THE CONFIRMATION LETTERS FILED BY THE ASSESSEE. THE ASSESSEE HAS FILED THE DETAILS OF THE CREDITORS ALONG WITH THE CONFIRMATION LETTERS. THE ASSESSING OFFICER HAS EXAMINED THE SAME AND HAVING CONVINCED WITH PART OF THE E XPLANATION WITH REGARD TO CASH CREDIT, RESTRICTED THE ADDITION TO RS.13 LAKHS INTRODUCED IN THE NAME OF THE FOLLOWING PERSONS: ABHINAV VISHAN (HUF) 1,50,000 KASHI PD. KAILASH NATH 2,50,000 KARITA GUPTA 1,00,000 SIMMI GUPTA 50,000 SUDHA GUPTA 50,000 M/S SUNOJ MERCHANDISE PVT. LTD. 5,00,000 PRITI AGARWAL 2,00,000 ---------- 13,00,000 ---------- 11. AGAINST THESE ADDITIONS, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL. 12. DURING THE COURSE OF HEARING OF THE APPEAL, THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE DETAILS OF ALL THESE CASH CREDITORS AND THE COPIES OF ACCOUNTS WITH THE SUBMISSION THAT AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND WERE PROPER LY ENTERED IN THE BOOKS OF ACCOUNT. SOME OF THE CASH CREDITORS ARE ASSESSED TO TAX AND THEIR PAN WERE ALSO FURNISHED TO THE ASSESSING OFFICER. SINCE PROPER CONFIRMATION LETTERS COULD NOT BE FILED, AS ASSESSEE WAS NOT PAYING INTEREST ACCRUED THEREON TO TH E CREDITORS REGULARLY, THE ASSESSING OFFICER HAS TREATED THESE CASH CREDITS TO BE NON GENUINE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT WHEN COMPLETE DETAILS OF CASH CREDITORS WERE FILED 8 BEFORE THE ASSESSING OFFICER DURING THE ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER COULD HAVE SUMMON ED THEM AND EXAMINE THE VERACITY OF THE CASH CREDIT. MOREOVER, THE PAN OF THE CASH CREDITORS WERE ALSO GIVEN AND IF THE ASSESSING OFFICER WANT TO VERIFY THE CASH CREDITORS, HE COULD HAVE CALLED THE REP ORT FROM THE CONCERNED OFFICERS OF THE CREDITORS BUT INSTEAD OF DOING ANY EXERCISE, THE ASSESSING OFFICER HAS TREATED THESE CASH CREDITS AS NON GENUINE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SINCE THE APPEAL IS TOO OLD AS THE ASSESSM ENT YEAR RELATE TO 98 - 99, NO PURPOSE WOULD BE SERVED BY RESTORING THE MATTER BACK TO THE ASSESSING OFFICER FOR FURTHER VERIFICATION. 13. THE LEARNED D.R. PLACED HEAVY RELIANCE UPON THE ORDER OF CIT(A) WITH THE SUBMISSIONS THAT THE ONUS IS UPON THE ASSESSE E TO FILE THE CONFIRMATION LETTERS ALONG WITH THE COMPLETE DETAILS OF THE CREDITORS. IF THE ASSESSEE FAILS TO DISCHARGE IT ONUS, THE REVENUE AUTHORITIES ARE JUSTIFIED IN TREATING THE CASH CREDITS AS NON GENUINE. 14. HAVING GIVEN A THOUGHTFUL CONSIDERATIO N TO THE RIVAL SUBMISSIONS AND FROM THE CAREFUL PERUSAL OF THE RECORD, WE FIND THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS FILED THE COMPLETE DETAILS OF THE CASH CREDITORS ALONG WITH THEIR PAN. SIMPLY BECAUSE THE ASSESSEE COULD NOT FILE CONFIRMATIO N LETTERS, THE ASSESSING OFFICER HAS TREATED THESE AS NON GENUINE DESPITE THE FACT THAT THE COMPLETE DETAILS WERE AVAILABLE BEFORE HIM. THE COPY OF THE ACCOUNT IS ALSO PLACED ON RECORD FROM WHICH IT IS EVIDENT THAT THE CASH CREDITS WERE INTRODUCED THROUGH ACCOUNT PAYEE CHEQUES, THEREFORE, THE FINANCIAL POSITION OF THE CREDITORS COULD VERY WELL BE EXAMINED BY THE ASSESSING OFFICER FROM THE BANKERS OF THE CREDITORS. THE PAN WAS ALSO WITH THE ASSESSING OFFICER, THEREFORE, NECESSARY ENQUIRY COULD HAVE BEEN MA DE 9 BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEN THE MATTER WAS REFERRED TO THE ASSESSING OFFICER. BUT THE ASSESSING OFFICER DID NOT MAKE ANY EFFORT TO VERIFY THE GENUINENESS OF THE TRANSACTIONS, MADE THE IMPUGNED ADDITION. WE HAVE ALSO EXAMINE D THE FACTS OF THE CASE AND NOTICED THAT THE ASSESSMENT YEAR INVOLVED IS 19 98 - 99 AND NO PURPOSE WILL BE SERVED IN SENDING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER SINCE THE ASSESSEE HAS ALREADY PLACED MATERIAL ON RECORD FOR NECESSARY VERIFICATI ON FOR THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS AND IDENTITY OF THE CREDITORS BUT THE PROPER ENQUIRY COULD NOT BE MADE BY THE ASSESSING OFFICER, FOR WHICH, ACCORDING TO US, THE ASSESSEE SHOULD NOT BE PENALIZED. WE, THEREFORE, ARE OF THE VIE W THAT UNDER THE GIVEN FACTS & CIRCUMSTANCES THE ADDITION MADE BY THE CIT(A) IS NOT SUSTAINABLE IN THE EYES OF THE LAW. WE ACCORDINGLY DELETE THE SAME. 15. GROUND NO. 9 IS CONSEQUENTIAL IN NATURE HENCE NO INDEPENDENT ADJUDICATION IS CALLED FOR. 16. GROU ND NO. 10 & 11 ARE GENERAL IN NATURE. I.T.A. NO. 1208/LKW/2006 1 7 . THROUGH THIS APPEAL THE ASSESSEE HAS ASSAILED THE ORDER OF CIT(A), INTER ALIA, ON VARIOUS GROUNDS, WHICH ARE AS UNDER: 1. BECAUSE THE RE - ASSESSMENT FRAMED U/S. 148 IS WITHOUT JURISDICTION, BAD IN LAW, VOID ABINITIO AND BE QUASHED. 2. BECAUSE THE NOTICE U/S. 148, NOT ADDRESSED TO THE COMPANY, THE ENTIRE RE - ASSESSMENT PROCEEDINGS AND THE RE - ASSESSMENT FRAMED THEREAFTER IS WITHOUT JURISDICTION, BAD IN LAW AND BE QUASHED. 10 3. BECAUSE NO RETURN HAVING BEEN FILED PURSUANT TO THE NOTICE ISSUED U/S. 144, THE ASSESSMENT FRAMED U/S. 147/143(3) IS CONTRARY TO THE PROVISIONS OF LAW AND BE QUASHED. 4. BECAUSE THE AUTHORITIES BELOW HAVE ERRED ON FACTS AND IN LAW IN FRAMING THE ASSESSMEN T U/S. 147/143(3) OF THE AC T, FOR THE REASONS THAT THERE BEING NO LEGAL AND VALID NOTICE, NOT ADDRESSED AND SERVED IN ACCORDANCE WITH THE PROVISIONS OF LAW, THE ASSESSMENT FRAMED IS VOID ABINITIO, BAD IN LAW AND BE QUASHED. 5. BECAUSE THERE BEING NO INVE STMENT MADE BY THE COMPANY AS ALLEGED, THE AUTHORITIES BELOW HAVE ERRED ON FACTS AND IN LAW IN MAKING THE ADDITION OF RS.10,00,000/ - AS UNEXPLAINED INVESTMENT U/S. 69, THE ADDITION BE DELETED. 6. BECAUSE THE AUTHORITIES BELOW HAVE WRONGLY RELIED UPON AND HAVE WRONGLY INTERPRETED THE STATEMENT ON OATH OF SHRI K.K. TIWARI AND HAVE THEREBY MADE AN ADDITION OF AS UNEXPLAINED INVESTMENT, WHICH ADDITION IS CONTRARY TO FACTS AND BE DELETED. 7. BECAUSE THE AUTHORITIES BELOW HAVE WRONGLY MADE AND UPHELD THE ADDITI ON OF RS.17,44,536/ - RELATING TO THE EXPENDITURE ON ADVERTISEMENT AND PUBLICITY AS NOT ADMISSIBLE TO ASSESSMENT YEAR UNDER CONSIDERATION. 8. BECAUSE THE ENTIRE EXPENDITURE OF RS.17,44,536/ - INCURRED ON ADVERTISEMENT AND PUBLICITY BEING FOR THE PURPOSE OF BUSINESS, WHICH FACT HAS NOT BEEN DISPUTED, THERE WAS NO JUSTIFICATION FOR THE AUTHORITIES BELOW NOT TO ALLOW THE SAME AS AN ALLOWABLE DEDUCTION. 9. BECAUSE THE TOTAL EXPENDITURE ON ADVERTISEMENT AND PUBLICITY INCURRED DURING THE YEAR, BEING AND THE ASSESSEE HAVING CLAIMED RS.17,44,536/ - ONLY, AGAINST THE TOTAL EXPENDITURE, THE AUTHORITIES BELOW HAVE NOT CONSIDERED THE FACTS AND CIRCUMSTANCES AND HAVE ARBITRARILY HELD THAT 11 THE EXPENDITURE OF RS.17,44,536/ - CLAIMED IS NOT ALLOWABLE. 10. BECAUSE IN ANY CASE AND IN ALL CIRCUMSTANCES OF THE CASE, THE ADDITIONS MADE BOTH ON ACCOUNT OF RS.10,00,000/ - AS UNEXPLAINED INVESTMENT AND RS.17,44,536/ - ARE AGAINST T HE PRINCIPLES OF NATURAL JUSTICE. 11. BECAUSE IN ANY CASE THE RE - ASSESSMENT FRAMED U/S. 147 AND THE ADDITIONS MADE THEREIN ARE ALL CONTRARY TO FACTS, PROVISIONS OF THE LAW, THE ENTIRE ORDER BE QUASHED. 1 8 . GROUND NO. 1 TO 6 RELATE TO VALIDITY OF THE RE OPENING OF THE ASSESSMENT AND AN ADDITION OF RS.10 LAKHS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE REASONS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, AC CORDING TO WHICH, THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER ON RECEIPT OF INFORMATION FROM THE INVESTIGATION WING THAT IT HAS BEEN ALLEGED IN THE TAX EVASION PETITION (TEP) THAT COMPANY CREATED FICTITIOUS VOUCHERS BY DEBITING RS.10 LAKHS BEING S ECURITY DEPOSIT BY WAY OF CASH PAID TO SHRI ARUN GUPTA AND SMT. RENU GUPTA AND HAS ALSO SHOWN EXPENDITURE OF RS.6,26,137/ - ON THE SAID TENANTED HOUSE. ON THE BASIS OF THIS INFORMATION, THE STATEMENT OF SHRI KRISHANA KUMAR TEWARI, MANAGING DIRECTOR OF THE COMPANY WAS RECORDED IN WHICH HE HAD ADMITTED THAT RS.10 LAKHS WAS PAID BY THE COMPANY AND THE TRANSACTION WAS NOT ENTERED IN BOOKS OF ACCOUNT. HE ACCORDINGLY MADE SURRENDER OF RS.10 LAKHS. ON THE BASIS OF THIS STATEMENT, THE ASSESSING OFFICER HAS REOPEN ED THE ASSESSMENT AND MADE THE ADDITION OF RS.10 LAKHS AS UNEXPLAINED INVESTMENT IN SECURITY. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE REASONS FOR REOPENING WAS FOR CREATION OF FICTITIOUS VOUCHERS BY DEBITING RS.10 LAKHS. THEREFORE, B Y CREATING FICTITIOUS VOUCHERS, THE ASSESSEE HAS WITHDRAWN RS.10 LAKHS IN CASH, WHICH WAS USED BY HIM FOR SECURITY DEPOSIT OF RS.10 LAKHS TO 12 SHRI ARUN GUPTA AND SMT. RENU GUPTA. THEREFORE, THE SOURCE OF UNEXPLAINED INVESTMENT MADE IN SECURITY DEPOSIT WAS EXPLAINED. IF ANY ADDITION WAS CALLED FOR, IT COULD HAVE BEEN MADE FOR FICTITIOUS EXPENSES CLAIMED BY CREATING FICTITIOUS VOUCHERS BY DEBITING RS.10 LAKHS BUT NO ADDITION WAS MADE IN THIS REGARD. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THA T SINCE THE ASSESSMENT WAS REOPENED ON THE BASIS OF DEBITING RS.10 LAKHS IN THE PROFIT & LOSS ACCOUNT BY CREATING FICTITIOUS VOUCHERS AND NO ADDITION WAS MADE IN THIS REGARD IN THE ASSESSMENT ORDER, BUT THE ADDITION WAS MADE WITH REGARD TO UNEXPLAINED INVE STMENT OF RS.10 LAKHS FOR SECURITY DEPOSIT. THEREFORE, THE REOPENING IS NOT VALID. LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING CASE LAWS: (I) COMMISSIONER OF INCOME - TAX VS ICICI BANK LTD. [2012] 349 ITR 482 (BOM) (II) COMMISSIONER OF INCOME - TAX VS ATLAS CYCLE INDUSTRIES [1989] 180 ITR 319 (P&H) (III) DY. DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) VS. SOCIETE INTERNATIONAL DE TELECOMMUNICATION [2012] 139 ITD 328 (MUM) 1 9 . LEARNED D.R., ON THE OTHER HAND, HAS CONTENDED T HAT THE REOPENING WAS MADE FOR CREATION OF FICTITIOUS VOUCHERS BY DEBITING RS.10 LAKHS AND ALSL FOR THE INVESTMENT IN SECURITY DEPOSIT BY MAKING A PAYMENT IN CASH TO SHRU ARUN GUPTA AND RENU GUPTA. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS MADE THE ADDITION ON ACCOUNT OF UN EXPLAIN ED INVESTMENT IN SECURITY, THEREFORE, IT IS NOT PROPER TO SAY THAT NO ADDITION WAS MADE ON THE POINT FOR WHICH ASSESSMENT WAS REOPENED AFTER FORMING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. THE LEARNED D.R. FURTHER CONTENDED THAT DURING THE COURSE O F INVESTIGATION, THE MANAGING DIRECTOR OF THE ASSESSEE SHRI K. K. TIWARI HAD ALSO ADMITTED THAT RS.10 LAKHS WAS PAID 13 BY THE COMPANY BUT TRANSACTION WAS NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE COMPANY AND HE ACCORDINGLY SURRENDERED RS.10 LAKHS FOR TAXATION BEFORE THE ADI. IN SUCH CIRCUMSTANCES, THE REOPENING CANNOT BE HELD TO BE INVALID OR ILLEGAL. 20 . HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE RECORD, WE FIND THAT THE ASSESSING OFFICER HAS RECORDED THE REASONS FOR REOPENING OF THE ASSESSMENT. FOR THE SAKE OF REFERENCE, THE REASONS RECORDED BY THE ASSESSING OFFICER ARE EXTRACTED AS UNDER: THE ASSESSES COMPANY HAD TAKEN PROPERTY NO. 118/118 - A, P AC ROAD, SHYAM N AGAR, KANPUR ON MONTHLY RENT OF RS.25,000/ - FROM SRI ARUN GUPTA AND SMT. RENU GUPTA VIDE LEASE AGREEMENT DATED 01.06.J997. IN THIS CONNECTION, TAX EVASION PETITION WAS RECEIVED IN THE INVESTIGATION WING AND IT HAS BEEN ALLEGED IN THE TEP THAT THE COMPANY C REATED FI CTITIOUS VOUCHERS BY DEBITING RS.10 LAKHS BEING SECURITY DEPOSIT BY WAY OF CASH PAID TO SRI ARUN GUPTA AN D RENU GUPTA AND HAS ALSO SHOWN EXPENDITURE OF RS. 6,26 ,137/ - ON THE SAID TENANTED HOUSE. THE MATTER WAS INVESTIGATED BY THE ASSTT . DIRECTOR O F I NCOME TAX (INV.) BY RECORDING STATEMENT U/S 1 31 OF THE I . T. ACT 1961 OF SHRI K. K. TEWARI, M.D. OF THE COMPANY, WHO ADMITTED THAT RS.10 LAC WAS PAID BY THE COMPANY BUT TRANSACTIONS WERE NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE COMPANY AND HE SURRENDER ED RS.10 LAC FOR TAXATION BEFORE THE ADI. 20 .1 FROM A CAREFUL PERUSAL OF THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT, WE FIND THAT ON THE BASIS OF THE INFORMATION RECEIVED FROM THE TAX EVASION PETITION, IT HAS BEEN ALLEGED THAT THE COMPANY CREATED FICTITIOUS VOUCHERS BY DEBITING RS.10 LAC BEING SECURITY DEPOSIT BY WAY OF CASH PAID TO SHRI ARUN GUPTA AND SMT. RENU GUPTA AND HAS ALSO SHOWN EXPENDITURE OF RS.6,26,137/ - ON THE SAID TENANTED HOUSE. DURING THE COURSE OF INVESTIGA TION, THE ADI HAS ALSO RECORDED THE STATEMENT 14 OF SHRI K. K. TEWARI, M.D. OF THE COMPANY WHO ADMITTED BEFORE HIM THAT RS.10 LAC WAS PAID BY THE COMPANY BUT TRANSACTIONS WERE NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE COMPANY AND CONSEQUENTLY HE SURRENDERED RS.10 LAC FOR TAXATION BEFORE THE ADI. ON THE BASIS OF THIS INFORMATION, THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BUT IN THE REASONS RECORDED BY THE ASSESSING OFFICER, NOTHING IS VISIBLE AS TO WHAT BELIEF HE HAS FORMED, WHETHER IT WAS FOR THE CRE ATION OF FICTITIOUS VOUCHERS BY DEBITING RS.10 LAC OR WHETHER IT IS FOR PAYMENT OF RS.10 LAC BEING A SECURITY DEPOSIT IN CASH TO SHRI ARUN GUPTA AND SMT. RENU GUPTA, WHICH WAS LATER ON SURRENDERED BY THE M.D. OF THE ASSESSEE COMPANY. IF THE FIRST ALLEGATI ON THAT COMPANY HAS CREATED THE FICTITIOUS VOUCHERS BY DEBITING RS.10 LAC IS PROVED, IT WOULD RESULT INTO THE AVAILABILITY OF CASH OF RS.10 LAC FOR ITS UTILIZATION BY THE ASSESSEE IN HIS OWN MANNER, IN THAT CASE THE ADDITION ON ACCOUNT OF SECOND ALLEGATIO N THAT HE HAS PAID A CASH OF RS.10 LAC AS SECURITY DEPOSIT CANNOT BE MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT AS THE SOURCE OF INVESTMENT IS ESTABLISHED OR PROVED. IN SUCH A CIRCUMSTANCE, THE BELIEF SHOULD HAVE BEEN FORMED ONLY WITH RES PECT TO THE CREATION OF THE FICTITIOUS VOUCHERS BY DEBITING RS.10 LAC FOR WHICH THE DISALLOWANCE OF EXPENSES TO THE EXTENT OF RS.10 LAC CAN BE MADE BY THE ASSESSING OFFICER BY HOLDING THAT THESE EXPENSES ARE FICTITIOUS IN NATURE AND WERE NOT INCURRED FOR T HE BUSINESS PURPOSE. BUT IN THE INSTANT CASE, NO ADDITION WAS MADE IN THE REASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER ON ACCOUNT OF DEBITING THE EXPENSES BY CREATING FICTITIOUS VOUCHERS TO THE EXTENT OF RS.10 LAC. THE ADDITION WAS MADE ONLY ON ACCO UNT OF UNEXPLAINED INVESTMENT FOR THE SECURITY DEPOSIT. IN THE REASONS RECORDED, THE ASSESSING OFFICER HAS NOT RECORDED HIS BELIEF AS TO WHICH ACCOUNT THE INCOME ESCAPED ASSESSMENT. IF THE INFORMATION RECEIVED IN THE TEP APPEARS TO BE CORRECT, THE ASSESS EE COULD HAVE GENERATED RS.10 LAC BY CREATING FICTITIOUS VOUCHERS AND DEBITING 15 IT TO THE PROFIT & LOSS ACCOUNT TO THE EXTENT OF RS.10 LAC. IN THAT SITUATION, RS.10 LAC CASH WOULD BE AVAILABLE WITH THE ASSESSEE FOR PAYMENT AS SECURITY DEPOSIT TO SHRI ARUN GUPTA AND SMT. RENU GUPTA. UNDER THESE CIRCUMSTANCES, THE ADDITION, IF CALLED FOR, CAN ONLY BE MADE BY MAKING A DISALLOWANCE TO THE BOGUS EXPENSES CLAIMED BY CREATING THE FICTITIOUS VOUCHERS. BUT IN THIS REGARD IN THE ENTIRE ASSESSMENT ORDER, THE ASSESSI NG OFFICER HAS NOT MADE ANY DISCUSSION. HE HAS SIMPLY MADE AN ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN SECURITY DEPOSIT HAVING RELIED UPON THE STATEMENT OF THE M.D. MADE TO THE ADI U/S 131 OF THE ACT. 20.2 AS PER THE PROVISIONS OF SECTION 147, THE ASSESSING OFFICER IS REQUIRED TO FORM A BELIEF BY RECORDING REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. BUT IN THE INSTANT CASE, NO BELIEF WAS FORMED BY THE ASSESSING OFFICER AND SIMPLY REOPENED THE ASSESSMENT ON THE BASIS OF THE INF ORMATION ALLEGED IN TEP. WE HAVE ALSO CAREFULLY EXAMINED THE AFORESAID JUDGMENTS REFERRED TO BY THE ASSESSEE AND WE FIND THAT IT IS A SETTLED POSITION OF LAW THAT BEFORE REOPENING THE ASSESSMENT, THE ASSESSING OFFICER IS REQUIRED TO FORM A BELIEF BY RECOR DING REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS ALSO A SETTLED POSITION OF LAW THAT THE ISSUES OR THE GROUNDS ON WHICH ASSESSMENT IS REOPENED IS REQUIRED TO BE ADJUDICATED AND ADDITIONS ARE TO BE MADE ON THESE POINTS. IF THE ASSE SSING OFFICER IS FAILED TO MAKE ANY ADDITION ON THOSE POINTS ON WHICH THE ASSESSMENT IS REOPENED, THE REOPENING OF THE ASSESSMENT IS HELD TO BE INVALID AND ILLEGAL. IN THE INSTANT CASE, THE ASSESSMENT WAS MAINLY REOPENED ON THE BASIS OF THE CREATION OF TH E FICTITIOUS VOUCHERS AND DEBITING TO THE PROFIT & LOSS ACCOUNT TO THE EXTENT OF RS.10 LAC AND ALSO OTHER EXPENSES OF RS.6,26,137/ - BUT NO ADDITION WAS MADE BY THE ASSESSING OFFICER WHILE COMPLETING THE REASSESSMENT PROCEEDINGS. THE ADDITION WAS MADE ONLY ON 16 ACCOUNT OF UNEXPLAINED INVESTMENT ON THE BASIS OF THE STATEMENT OF M.D. OF THE ASSESSEE COMPANY. UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE REASONS ARE NOT PROPERLY RECORDED. THEREFORE, REASSESSMENT FRAMED CONSEQUENT THERETO IS NOT VALID AND WE ACCORDINGLY QUASH THE SAME. SINCE THE REOPENING IS QUASHED, WE FIND NO JUSTIFICATION TO DEAL WITH THE ISSUES ON MERIT. ACCORDINGLY THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO.257/LKW/2002 IS PARTLY ALLOWED AND I.T.A. NO.1208/LKW/200 6 IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/01/2014 ) SD/. SD/. (A. K. GARODIA) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07/01/2014 *CL SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSIS T ANT REGISTRAR