THE ASSTT CIT, CEN. Circle -1(3), V. ROYAL MANORS HOTELS IND. LTD.,

ITA 2577/AHD/2003

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7723 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-06-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 30-05-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Principle of natural justice; Period of limitation; Question of law; Onus to prove; TDS; Set aside
• Section: 142(1); 133(6); 143(1); 205; 251; 143(2); 192; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER 1) ITA NO.2577/AHD/2003 FOR A.Y. 1999-2000 2) ITA NO.1982/AHD/2002 FOR A.Y. 1998-1999 3) ITA NO.1704/AHD/2002 FOR A.Y. 1998-1999 1. THE ACIT, CENTRAL CIRCLE-1(3),AHMEDABAD 2. DO- 3. ROYALE MANOR HOTELS & INDS. LTD. AHMEDABAD VS. 1. ROYALE MANOR HOTELS & INDUSTRIES LTD.,AIRPORT CROSS ROADS,HANSOL, AHMEDABAD 2. DO- 3. THE ACIT, CENTRAL CIRCLE- 1(3),AHMEDABAD PAN/GIR NO. : 31-114-CV-1288 (APPELLANTS) .. (RESPONDENTS) ASSESSEE BY : S/SHRI S.N. SOPARKAR WITH P.M. MEHTA ,AR REVENUE BY : SHRI N.S. DAYAM,DR O R D E R A.N. PAHUJA : THESE THREE APPEALS, TWO BY THE REVENUE AND ONE BY THE ASSESSEE AGAINST AN ORDER DATED 21/03/2003 FOR THE AY 1999-2000 OF THE LD. CIT(APPEALS)-II, AHMEDABAD AND ORDER DATED 28/03/2 002 FOR THE AY 1998-99 OF THE LD. CIT(APPEALS)-I, AHMEDABAD ,RAISE THE FOL LOWING GROUNDS :- ITA NO.2577/AHD/2003-AY1999-2000[ REVENUE] 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION ON ACCOUNT OF FRESH CURRENT LIABILITIES INCURRED B Y THE ASSESSEE DURING THE ACCOUNTING PERIOD UNDER CONSIDERATION, O UT OF THE TOTAL ADDITION OF RS.2,67,62,429/- AS THE ASSESSEE DID NOT FURNISH THE NECESSARY EVIDENCE IN SUPPORT THEREOF D URING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING ADDITION MADE ON ACCOUNT OF FRESH DEPOSITS/UNSECURED LOANS O BTAINED BY THE ASSESSEE DURING THE ACCOUNTING PERIOD UNDER CONSIDERATION, OUT OF THE TOTAL ADDITION OF RS.2,17 ,29,472/- AS THE ASSESSEE DID NOT FURNISH THE NECESSARY EVIDENCE IN SUPPORT THEREOF DURING THE COURSE OF ASSESSMENT PROCEEDING S. ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABOVE EXTENT . ITA NO.1982/AHD/2002- AY 1998-99 [ REVENUE] 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.2,48,82,000/- MADE ON ACCOUNT OF NEW DEPOSIT S FROM PUBLIC. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE CIT (A) BE SET-ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTEN T. ITA NO.1704/AHD/2002-AY 1998-99[ ASSESSEE] 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN NOT CONSIDE RING/DISPOSING OF THE FIRST GROUND OF APPEAL BEFORE HIM CHALLENGING THE V ALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HIM IN THE FOLLOW ING TERMS: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF T HE APPELLANTS CASE, THE IMPUGNED ASSESSMENT ORDER IS VOID AND DESERVES TO BE CANCELLED, INTER ALIA , FOR THE REASON: (A) THAT IT CONTAINS ADDITIONS WHICH HAVE BEEN MADE WITHOUT AT ALL APPLYING MIND AND WHICH ARE PATENTLY WRONG; (B) THAT ALL THE ADDITIONS HAVE BEEN MADE WITHOUT T HE LEARNED ASSESSING OFFICER ISSUING ANY SHOW CAUSE NOTICE AS SUCH CONTAINING HIS PROPOSAL TO MAKE THOSE ADDITIONS AND CALLING UPON THE APPELLANT TO SHOW CAUSE AS TO WHY HIS PROPOSAL FOR MAKING THE ADDITIONS SHOULD NOT BE CAR RIED OUT; (C) THAT THE IMPUGNED ASSESSMENT ORDER HAS BEEN PA SSED WITHOUT OBSERVING ELEMENTARY PRINCIPLES OF NATURAL JUSTICE. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES O F THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTA INING AN ADDITION OF RS.31,355 OUT OF RS.4,28,587 WHICH HAD BEEN ADDED B Y THE LEARNED ASSESSING OFFICER ON THE GROUND THAT DUES TO FIVE O F THE SEVERAL CREDITORS AS SHOWN BY THE APPELLANTS BOOKS OF ACCO UNT WERE NOT GENUINE ON THE MERE CIRCUMSTANCE THAT NOTICES U/S.1 33(6) OF THE I.T. ACT, 1961 SENT BY HIM WERE RETURNED UNSERVED. ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 3 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED CIT(APPEALS) HAS GROSSLY ERRED IN SUSTA INING AN ADDITION OF RS.3,89,533 OUT OF RS.22,05,540 WHICH HAD BEEN ADDE D BY THE ASSESSING OFFICER ON THE GROUND THAT DUES TO FOURTE EN OF THE CREDITORS FOR CAPITAL GOODS AS SHOWN BY THE APPELLANTS BOOKS OF ACCOUNT WERE NOT GENUINE TO THE EXTENT THAT THERE WERE DIFFERENC ES BETWEEN THE DUES AS PER THE APPELLANTS BOOKS OF ACCOUNT AS COMPARED TO CORRESPONDING BALANCES INTIMATED BY THE PARTIES IN RESPONSE TO NO TICES U/S.133(6) SENT BY THE ASSESSING OFFICER TO THEM. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED LD. CIT(APPEALS) HAS GROSSLY ERRED IN S USTAINING AN ADDITION OF RS.1,16,130 OUT OF RS.48,72,502 WHICH H AD BEEN ADDED BY THE ASSESSING OFFICER ON THE GROUND THAT AN ENTIRE COMPONENT OF THE OTHER LIABILITIES APPEARING IN THE APPELLANTS BA LANCE SHEET DESERVED TO BE TREATED AS NON-GENUINE EN BLOC. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED LD. CIT(APPEALS) HAS GROSSLY ERRED IN S USTAINING AN ADDITION OF RS.4,82,759 OUT OF RS.44,92,185 WHICH H AD BEEN ADDED BY THE ASSESSING OFFICER ON THE GROUND THAT AN ENTIRE COMPONENT OF THE OTHER LIABILITIES APPEARING IN THE APPELLANTS BA LANCE SHEET DESERVED TO BE TREATED AS NON-GENUINE EN BLOC. 6. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING, EVEN IF PARTIALLY, THE ADDITIONS TO THE EXTENT OF RS.31,355 (OUT OF RS.4,2 8,587), RS.3,89,533 (OUT OF RS.22,05,540), RS.1,16,130 (OUT OF RS.48,72 ,502) AND RS.4,82,759 (OUT OF RS.44,92,185) CHALLENGED BY THE APPELLANT VIDE GROUNDS OF APPEAL NO.2,3,4 AND 5 HEREINABOVE RESPEC TIVELY WITHOUT APPRECIATING, INTER ALIA, THE SUBMISSIONS MADE BY T HE APPELLANT BEFORE HIM. 7. YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, AL TER, DELETE AND/OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEF ORE THE FINAL HEARING. ITA NO.1982/AHD/2002[REVENUE] 2. ADVERTING FIRST TO THE APPEAL OF THE REVENUE FOR THE AY 1998-99, THE ONLY ISSUE IN THIS APPEAL RELATES TO DELETION OF A DDITION OF RS.2,48,82,000/- ON ACCOUNT OF NEW DEPOSITS RECEIVED FROM THE PUBLIC. F ACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THAT THE RETURN DECLARING LOSS OF RS.4,69,57,500/- FILED ON 30/11/1998, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 28.9.1999. DURING THE COURSE OF ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 4 ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [AO I N SHORT] ASKED THE ASSESSEE VIDE NOTICE DATED 27.9.2000 TO FURNISH CO NFIRMATIONS OF UNSECURED LOANS IN THE PRESCRIBED FORMAT. DESPITE SEEKING FUR THER TIME OF 15 DAYS, NO DETAILS WERE FILED. EVEN AFTER SUBSEQUENT NOTICES D ATED 23.10.2000 &7.11.2000, RELEVANT DETAILS/CONFIRMATIONS WERE NOT FILED. HOWEVER, IN THEIR REPLY DATED 29.12.2000, THE ASSESSEE CONTENDED THAT SINCE THE DEPOSITS WERE COLLECTED THROUGH THE BROKERS AND THESE BEING HUGE IN NUMBER, IT WAS NOT POSSIBLE TO COLLECT THE DESIRED DETAILS. IT WAS EXP LAINED THAT THESE DEPOSITS WERE THROUGH ACCOUNT PAYEE CHEQUES. THOUGH THE ASSE SSEE FILED COPIES OF FEW APPLICATION FORMS FOR FIXED DEPOSITS, THE AO CO NSIDERED THESE AS SELF SERVING DOCUMENTS. SINCE DESIRED CONFIRMATIONS WERE NOT FORTHCOMING, THE AO ISSUED ANOTHER NOTICE DATED 12.2.2001. DESPITE SEEK ING A NUMBER OF ADJOURNMENTS, NEITHER CONFIRMATIONS OF DEPOSITORS W ERE SUBMITTED NOR THEIR CREDITWORTHINESS WAS ESTABLISHED EVEN UNTIL 7.3.200 1. ACCORDINGLY, RELYING UPON THE DECISION IN THE CASE OF CIT VS. PRECISION FINANCE PVT. LTD.,208 ITR 465(CAL),THE AO ADDED DEPOSITS OF RS. 3,32,65,000/- RECEIVED IN THE YEAR UNDER CONSIDERATION TO THE INCOME OF THE ASSESSEE. 3. ON APPEAL, IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT SCHEDULE 4 FORMING PART OF THE AUDITED ACCOUNTS, RE VEALED THAT THERE WAS NET INCREMENT OF RS. 1,25,75,000/- IN THE DEPOSITS. IT WAS EXPLAINED TO THE AO THAT DEPOSITS WERE EITHER R ENEWAL OF DEPOSITS RECEIVED IN THE PRECEDING YEARS OR HAD BEE N RECEIVED THROUGH ACCOUNT PAYEE CHEQUES, FOR WHICH THE COMPAN Y NOT ONLY ADVERTISED ITS PUBLIC DEPOSIT SCHEME BUT ALSO APPOI NTED BROKERS. WHILE SUBMITTING A CHART SHOWING NAME, ADDRESS ,AMO UNT OF DEPOSIT ETC., IT WAS CONTENDED THAT ALL THE DEPOSIT S HAD BEEN REPAID BACK. THE ASSESSEE FURTHER REQUESTED THE AO THAT THE DEPOSITORS BEING LOCATED AT DIFFERENT PLACES, RELEV ANT INFORMATION MAY BE CALLED FOR FROM THE PARTIES DIRECTLY. RELYIN G UPON THEIR SUBMISSIONS BEFORE THE LD. CIT(A) FOR THE PRECEDING ASSESSMENT YEAR, WHEREIN A SIMILAR ADDITION HAD BEEN MADE, THE ASSESSEE CONTENDED THAT THEY HAD DISCHARGED THE INITIAL BURD EN PLACED ON ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 5 THEM U/S 68 OF THE ACT. THE ASSESSEE ALSO FURNISHE D A STATEMENT OF DEPOSITS, INCORPORATING THE FOLLOWING DETAILS: DEPOSITS RECEIVED BY COMPANY NO. OF DEPOSIT TOTAL AMOUNT BY CHEQUE/D.D. 1364 2,11,96,000/- BY CASH 313 36,86,000/- BY RENEWAL 639 83,83,000/- TOTAL 2316 3,32,65,000/- IT WAS POINTED OUT THAT REPAYMENT OF DEPOSITS OF RS.1,23,07,000,INCLUDED DEPOSITS RECEIVED IN THE EA RLIER YEAR TO THE EXTENT OF RS.89,24,000/- AND RS. 33,83,000/- RE CEIVED IN THE YEAR UNDER CONSIDERATION. RELYING UPON THEIR CONTEN TIONS IN THE PRECEDING ASSESSMENT YEAR, IT WAS ARGUED THAT THE A O WAS NOT JUSTIFIED IN MAKING THE ADDITION. 4. IN THE LIGHT OF AFORESAID SUBMISSIONS, LD. CI T(A), WHILE RELYING UPON HIS OWN DECISION IN THE PRECEDING ASSESSMENT Y EAR, DELETED THE ENTIRE ADDITION, HOLDING THAT DEPOSITS OF RS. 8 3,83,000,BEING RENEWAL OF DEPOSITS RECEIVED IN THE PRECEDING YEAR COULD NOT BE ADDED. AS REGARDS REMAINING AMOUNT, THE LD. CIT(A) OBSERVED THAT THE ASSESEE HAD FURNISHED COMPLETE DETAILS AN D HAD REQUESTED THE AO TO ISSUE SUMMONS TO EXAMINE THE DE POSITORS. SINCE THE AO HAD NOT DONE SO WHILE COMPLETE DETAILS WERE FILED IN DECEMBER,2000 AND DETAILS OF DEPOSITS EXCEEDING RS. 20,000 EACH WERE AVAILABLE WITH THE TAX AUDIT REPORT AS A LSO THE DEPOSITS OF RS.1,23,07,000 HAVING BEEN REPAID IN THE YEAR UN DER CONSIDERATION, THE LD. CIT(A) DELETED THE ENTIRE AD DITION. 5 THE REVENUE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR, W HILE CARRYING US THROUGH THE ORDER OF THE AO AND WRITTEN SUBMISSIONS FILED BY HIM, CONTENDED THAT THE ATTITUDE OF ASSESSEE WAS NON-COO PERATIVE DURING THE ASSESSMENT PROCEEDINGS. IT WAS CONTENDED THAT THE LD. CIT(A) IN TOTAL DISREGARD OF SETTLED POSITION OF LA W, HAD CAST THE ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 6 BURDEN ON THE AO EVEN BEFORE THE ASSESSEE COULD PRI MA FACIE ESTABLISH NATURE AND SOURCE OF DEPOSITS. THE FINDIN GS OF THE AO THAT THE ASSESSEE FURNISHED COMPLETE DETAILS OF DEP OSITS ,IS FACTUALLY INCORRECT,WHEN THE ASSESSEE DID NOT FILE EVEN A SINGLE CONFIRMATION. THE AO HAS GIVEN REASONS ON PAGE 17 O F HIS ORDER FOR NOT ISSUING THE SUMMONS. RELYING UPON A NUMBER OF DECISIONS IN THE CASE OF SUMATI DAYAL VS. CIT,214 ITR 801(SC ),CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. P LTD.,187 ITR 5 96(CAL.), CIT VS. PRECISION FINANCE PVT. LTD.,208 ITR 465(CAL), SHANKAR INDUSTRIES VS. CIT,114 ITR684(CAL),OCEANIC PRODUCTS EXPORTING CO. VS. CIT,241 ITR 497(KER),ITO VS. DIZA HOLDINGS P LTD.,2 55 ITR 573(KER),MURALIDHAR LAHORIMAL VS. CIT,280 ITR 512(G UJ),INDUS VALLEY PROMOTERS LTD. VS. CIT,305 ITR 202(DEL.),R.B .MITTAL VS. CIT,246 ITR 283(AP),MARU RAM MAKHAN LAL VS. CIT,300 ITR 12(P&H),CIT VS. HIMALAYA INTERNATIONAL LTD.,214CTR( DEL.)437 AND DISTINGUISHING THE DECISION OF THE ITAT FOR THE PRECEDING YEAR, THE LD. DR VEHEMENTLY CONTENDED THAT THE ASSE SSEE HAS NOT DISCHARGED THE INITIAL BURDEN CAST ON THEM TO ESTAB LISH THE IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS AND GENUINENESS OF THE TRANSACTIONS. THEREFORE, ORDER OF THE LD. CI T(A) SHOULD BE SET ASIDE, THE LD. DR ADDED. 5.1 ON THE OTHER HAND LD. AR ON BEHALF OF THE ASS ESSEE STRESSED THAT ISSUE IS SQUARELY COVERED BY THE DECISION DATE D 23.5.2008 OF THE ITAT FOR THE PRECEDING ASSESSMENT YEAR IN ITA N O. 1981/AHD./2002 IN THE ASSESSEES OWN CASE. 6. WE HAVE HEARD BOTH THE PATIES AND GONE T HROUGH THE FACTS OF THE CASE AS ALSO DECISIONS RELIED UPON BY BOTH THE PARTIES. FACTS IN THIS CASE ARE NOT IN DISPUTE. ONL Y DISPUTE IS REGARDING DISCHARGING OF ONUS IN TERMS OF PROVISIO NS OF SECTION 68 OF THE ACT. IN THIS CASE THE ASSESSEE COMPANY SO LICITED DEPOSITS THROUGH ADVERTISEMENTS/ BROKERS. DETAILS O F AMOUNT AND ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 7 NUMBER OF DEPOSITORS HAVE ALREADY BEEN GIVEN IN PAR A 3 ABOVE. WE FIND THAT A SIMILAR ADDITION WAS MADE BY THE AO IN RESPECT OF DEPOSITS RECEIVED THROUGH THE ADVERTISEMENTS IN THE PRECEDING ASSESSMENT YEAR IN THE ASSESSEES OWN CASE. ON APPE AL, VIDE THEIR ORDER DATED 23.5.2008, THE ITAT DELETED THE A DDITION IN FOLLOWING TERMS: 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS OF THE CASE AS ALSO DECISIONS RELIED UPON BY BOTH T HE PARTIES. FACTS IN THIS CASE ARE NOT IN DISPUTE. ONLY DISPUT E IS REGARDING DISCHARGING OF ONUS IN TERMS OF PROVISIONS OF SECT ION 68 OF THE ACT. IN THIS CASE THE TAXPAYER COMPANY SOLICITED DE POSITS THROUGH ADVERTISEMENTS/ BROKERS. DETAILS OF AMOUNT AND NUMB ER OF DEPOSITORS HAVE ALREADY BEEN GIVEN IN PARA 2.11 & 2 .12 OF THE ORDER OF THE LD. CIT(A) AND HAVE BEEN EXTRACTED IN PARA 3.6 ABOVE. A CURSORY LOOK AT THESE DETAILS REVEALS THAT OUT OF 1462 DEPOSITS, 1194 ARE BY WAY OF CHEQUE/DD AND 48 ARE R ENEWAL. REMAINING 220 DEPOSITS IN CASH TOTAL UP TO RS.23,9 4,000. LD. CIT(A) DELETED RENEWAL AMOUNT OF RS. 5,21,000 IN RE SPECT OF 48 DEPOSITS BECAUSE THESE WERE NOT RECEIVED IN THE YEA R UNDER CONSIDERATION AND HAD BEEN ACCEPTED IN EARLIER YEAR S. WE ARE IN AGREEMENT WITH THE LD. CIT(A) ON THIS NOR LD. DR CO ULD POINT OUT ANY INFIRMITY IN THIS FINDING OF LD. CIT(A). AS REG ARDS OTHER DEPOSITS, WE FIND FROM THE ORDERS OF LOWER AUTHORIT IES THAT I) IN THIS CASE DETAILS OF DEPOSITS EXCEEDING RS. 20,000 EACH, WERE FURNISHED ALONG WITH THE RETURN OF INCOME FILE D ON 27.11.1997, AS PART OF TAX AUDIT REPORT, IN WHICH C OMPLETE ADDRESS OF ALL SUCH DEPOSITORS WAS GIVEN(PG. 58 TO 62 OF THE PB). HOWEVER, THE AO CHOSE NOT TO MAKE ANY ENQUIRIES ON HIS OWN. LD. CIT(A) POINTS OUT THAT THE CASE RECORDS REVEALED TH AT THAT FOR THE FIRST TIME A DETAILED QUESTIONNAIRE WAS ISSUED ON 2 8/1/2000, FIXING THE DATE OF HEARING ON 8/2/2000. HOWEVER, THE SAID QUESTIONNAIRE AND NOTICE UNDER SECTION 142(1) WAS SERVED ON THE A PPELLANT ON 12/2/2000, WELL AFTER THE DATE OF HEARING. APPARENT LY, FOR MORE THAN TWO YEARS, AO WAS SITTING OVER THE DETAILS AVA ILABLE WITH HIM AND DID NOT INITIATE ANY INQUIRY. IN THE CASE OF CIT V. SOPHIA FINANCE LTD. REPORTED IN [1994] 205 ITR 98 [FB],WHICH THE LD. DR ALSO STATED IS APPLICABLE, THE HONBLE DELHI HIGH COURT HAS OBSERV ED THAT AN ENQUIRY BY THE AO AS TO THE EXISTENCE OR NON-EXISTENCE OF THE SHAR EHOLDER AND ABOUT THEIR CREDITWORTHINESS IS CONDITION PRECEDENT FOR TREATIN G THE CASH CREDIT AS THE INCOME OF THE COMPANY. NO SUCH ENQUIRY WAS CONDUCTE D BY THE ASSESSING OFFICER IN THIS CASE IN THE CASE OF ANY OF THE DEPO SITOR. INSTEAD THE AO ASKED THE TAXPAYER TO FILE CONFIRMATIONS VIDE LETTE R DATED 7/3/2000 OF ALL THE DEPOSITORS, THOUGH HE WAS FULLY AWARE FR OM THE LIST OF FIXED DEPOSITORS, THAT THE NUMBER WAS IARGE AND BY THAT DATE NO ENQUIRY WHATSOEVER WAS MADE BY THE AO THOUGH HE WAS IN ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 8 KNOWLEDGE ABOUT ALL DEPOSITS EXCEEDING RS.20,000/-. IN RESPONSE TO THIS LETTER, REPLY DATED 15/3/2000 WAS FILED, PA RT OF WHICH IS EXTRACTED ON PAGE 5 OF THE ASSESSMENT ORDER. LD. CI T(A) FURTHER NOTICED THAT ALONG WITH THIS REPLY, PHOTO COPIES OF ALL APPLICATION FORMS OF DEPOSITORS OF RS.20,000/- AND ABOVE WERE FILED, WHICH INDICATED THE RELEVANT DETAILS. IT WAS ALSO MENTION ED IN THE REPLY THAT IF THE AO HAD ANY DOUBT, HE MAY MAKE ENQUIRIES FROM THE ADDRESSES GIVEN IN THE APPLICATION FORMS. HOWEVER, THE AO DID NOT CONSIDER IT NECESSARY TO MAKE ANY ENQUIRIES IN THIS REGARD THOUGH EXCEPT FEW, MOST OF THE DEPOSITORS WERE FROM AHMEDABAD. THE AO HAS STATED THAT NEITHER ANY EVIDENCE WAS FIL ED FOR DEPOSITS BELOW RS.20,000/- NOR ANY FURTHER TIME WAS SOUGHT IS ALSO NOT IN ACCORDANCE WITH FACTS AVAILABLE ON RECO RD BECAUSE AS THE LD. CIT(A) MENTIONED, HE HAS CONVENIENTLY IGNOR ED THAT PART OF REPLY FURNISHED VIDE TAXPAYERS LETTER DATED 15/3/2 000 WHICH COVERS DEPOSITS BELOW RS. 20,000/-. PARA 10 OF THE SAID LETTER WHICH COVERS THESE DEPOSITS IS ALREADY EXTRACTED AB OVE IN PARA 2.THEREAFTER, AO DID NOT ACT ON THE OFFER OF TAXPA YER TO PRODUCE FD APPLICATIONS AS WERE DEEMED FIT BY THE AO. APPAR ENTLY, AO PROCEEDED TO ADD THE AMOUNT U/S 68 OF THE ACT WITHO UT ANY INQUIRY WHATSOEVER. 5.2 AS REGARDS SCOPE OF SECTION 68 OF THE ACT AND BURD EN OF PROOF ON THE TAXPAYER,HONBLE SUPREME COURT IN THE CASE OF CIT V . P. MOHANAKALA REPORTED IN [2007] 291 ITR 278 AFTER REFERRING TO SECTION 68 OF THE ACT HELD : 'THE QUESTION IS WHAT IS THE TRUE NATURE AND SCOPE OF SECTION 68 OF THE ACT? WHEN AND IN WHAT CIRCUMSTANCES WOULD SECTI ON 68 OF THE ACT COME INTO PLAY? A BARE READING OF SECTION 68 SU GGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAIN TAINED BY AN ASSESSEE; SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSEES OFFER NO EXPLANATION ABOUT THE NA TURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS; OR THE EXPLANATI ON OFFERED BY THE ASSES SEES IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY, IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEES OF THAT PREVIOUS YEAR. THE EXPRESSION 'THE ASSESSEES OFFER NO EXPLANATION' MEANS WHERE TH E ASSESSEES OFFER NO PROPER, REASONABLE AND ACCEPTABLE EXPLANAT ION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEES. IT IS TRUE THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEES AS NOT SATISFA CTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF T HE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH R EFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND I S THE SINE QUA NON FOR FORMING THE OPINION.' ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 9 IF THE ABOVE OBSERVATION OF THE SUPREME COUR T IS APPLIED TO THE FACTS OF THE PRESENT CASE, THE DECISION STARES AT THE REVENU E BECAUSE THE DETAILS FURNISHED AND EXPLANATION OFFERED BY THE TAXPAYER C ANNOT BY ANY STRETCH OF IMAGINATION BE CONSIDERED AS UNREASONABLE OR NOT AC CEPTABLE -EXPLANATION AS REGARDS THE SUM CREDITED IN THE BOOKS MAINTAINED BY THE TAXPAYER. NO INQUIRY WAS MADE BY THE AO AT ALL IN RESPECT OF DEPOSITS EX CEEDING RS. 20,000 EACH, EVEN WHEN DETAILS WERE ANNEXED WITH THE RETURN OF I NCOME. THE AO HAS STATED THAT NEITHER ANY EVIDENCE WAS FILED FOR DEPO SITS BELOW RS.20,000/-NOR ANY FURTHER TIME WAS SOUGHT IS ALSO INCORRECT IN VIEW OF TAXPAYERS LETTER DATED 15/3/2000 WHICH COV ERS DEPOSITS BELOW RS. 20,000/-. PARA 10 OF THE SAID LETTER WHIC H COVERS THESE DEPOSITS IS ALREADY REPRODUCED IN PARA 2.17 OF THE ORDER OF LD. CIT(A),EXTRACTED ABOVE. FURTHER, THE OPINION OF THE AO WHICH WAS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD WAS ALSO NOT FORMED NOR VIEWED AS DIRECTED B Y THE SUPREME COURT IN THE ABOVESAID DECISION. 5.3. IN ANOTHER DECISION RELIED UPON BY THE TAXP AYER IN THE CASE OF CIT V. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI), WHERE THE INCREASE IN SUBSCRIBED CAPITAL OF THE RESPONDENT-COMPANY, ACCEP TED BY THE INCOME-TAX OFFICER AND REJECTED BY THE COMMISSIONER ON THE GRO UND THAT A DETAILED INVESTIGATION WAS REQUIRED REGARDING THE GENUINENES S OF SUBSCRIBERS TO SHARE CAPITAL, AS THERE WAS A DEVICE OF CONVERTING BLACK MONEY BY ISSUING SHARES, WITH THE HELP OF FORMATION OF AN INVESTMENT, WHICH WAS REVERSED BY THE TRIBUNAL, THE DELHI HIGH COURT HELD THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES THE AMOUNT OF SHARE CAPITAL COULD BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. THE VIEW TAKEN BY THE DELHI HIGH COURT IN CIT V. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI), WAS CONFIRMED BY THE APEX COURT AND THE SAME WAS REPORTED IN CIT V. STELLER I NVESTMENT LTD. [2001] 251 ITR 263 . IN THE CASE OF CIT V. SOPHIA FINANCE LTD. REPORTE D IN [1994] 205 ITR 98 [FB], THE DELHI HIGH COURT HAS OBSERVED THAT AN EN QUIRY BY THE ASSESSING OFFICER AS TO THE EXISTENCE OR NON-EXISTENCE OF THE SHAREHOLDER AND ABOUT THEIR CREDITWORTHINESS IS CONDITION PRECEDENT FOR TREATIN G THE CASH CREDIT AS THE INCOME OF THE COMPANY. NO SUCH ENQUIRY WAS CONDUCTE D BY THE ASSESSING OFFICER IN THIS CASE.IN THE CASE OF SOPHIA FINANCE LTD. [ 205 ITR 98 ], IT WAS CLEARLY HELD THAT THE AO HAS JURISDICTION TO MAKE E NQUIRIES WITH REGARD TO THE NATURE AND SOURCE OF SUMS CREDITED IN THE BOOKS OF THE ASSESSEE. IN THAT VERY JUDGMENT, THE FULL BENCH ALSO STATED THAT IN THE CA SE OF STELLAR INVESTMENTS LTD., 192 ITR 287 (DELHI), SECTION 68 WAS NOT REFERRED TO AND THAT T HAT JUDGMENT CANNOT MEAN THAT THE AO CANNOT GO INTO TH E QUESTION AS TO WHETHER THE ALLEGED SHAREHOLDERS ACTUALLY EXISTED OR NOT. F ROM THIS OBSERVATION AT PAGE 105 OF 205 ITR, IT IS CLEAR THAT THE SUPREME C OURT DECISION AFFIRMING THE DELHI HIGH COURT JUDGMENT IN THE CASE OF STELLAR IN VESTMENT LTD. DOES NOT MEAN THAT THE AO DOES NOT HAVE JURISDICTION TO MAKE ENQUIRY ON SHARE CAPITAL. 5.4 SUMATI DAYAL VS. CIT,214 ITR801 (SC) IS ANO THER AUTHORITY ON THE ESSENTIALS OF INCOME-TAX LIABILITY .IN THAT CASE IT WAS HELD: ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 10 IT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A R ECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES UPON THE DEPART MENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A REC EIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAX ABLE BECAUSE IT FALLS WITHIN AN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. (SEE PARIMISETTI SEETHARAMAMMA [1965] 57 ITR 532 AT PAGE 536). BUT, IN VIEW OF SECTION 68 OF THE ACT, W HERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION O FFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH A CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., T HE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT IT THE SAID EVIDENC E BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANAT ION OF THE ASSESSEE THE DEPARTMENT CANNOT, HOWEVER, ACT UNREAS ONABLY. (SEE SREELEKHA BANERJEE'S CASE [1963] 49 ITR 112 (SC) AT PAGE 120). 5.5 AS REGARDS DECISION RELIED UPON BY THE LD. DR IN THE CASE OF COMMISSIONER OF INCOME-TAX.VS KUNDAN INVESTMENT LTD. 263 ITR 626(CAL), IN THAT CASE IN RESPECT OF SHARE CAPITAL : PUBLIC I SSUE, HONBLE HIGH COURT FOUND IN THIS CASE, NOTICES UNDER SECTION 133(6) OF THE INCOME-TAX ACT, 1961, WERE ISSUED. ABOUT 82 SUBSCRIBERS HOLDING 44,000 SH ARES WERE SELECTED OUT OF THE TOTAL NUMBER OF SUBSCRIBERS OF PUBLIC ISSUE. OUT OF THESE SUBSCRIBERS, 24 HAD RESPONDED. THESE 24 SUBSCRIBERS REPRESENTED 29, 500 SHARES, WHICH WERE ACCEPTED TO BE GENUINE. TEN PERSONS REPRESENTING 2, 300 SHARES COULD NOT BE SERVED. ABOUT 48 PERSONS, THOUGH SERVED, DID NOT RE SPOND. THE ASSESSING OFFICER CALCULATED THIS FIGURE OF PERSONS RESPONDIN G AT 40 PER CENT. IN RESPECT OF THESE 48 SHAREHOLDERS WHO DID NOT RESPOND TILL THE ASSESSMENT WAS MADE AND THIS INFORMATION WAS COMMUNICATED TO THE ASSESS EE,THE ASSESSEE DID NOT TAKE ANY STEPS EITHER TO OBTAIN CONFIRMATORY LETTER S FROM THESE NON-RESPONDING SUBSCRIBERS NOR HAD ATTEMPTED TO PRODUCE THE SUBSCR IBERS NOR ANY TO DISCLOSE THE INCOME-TAX FILE NUMBERS OF THESE SUBSCRIBERS. N EITHER HE HAD EVER APPLIED FOR ISSUING ANY NOTICE/SUMMONS UNDER SECTION 131 NO R TOOK ANY OTHER STEPS TO PROVE THE SAME. THE BURDEN, WHICH WAS INITIALLY DIS CHARGED BY THE ASSESSEE SHIFTED ON THE REVENUE. THIS STOOD DISCHARGED BY TH E REVENUE AFTER THE ENQUIRY WAS MADE THROUGH ISSUING NOTICE; UNDER SECT ION 133(6). WHEN THIS WAS SO COMMUNICATED TO THE ASSESSEE, IT WAS INCUMBE NT ON THE ASSESSEE TO TAKE APPROPRIATE STEPS TO SUBSTANTIATE THE CREDIT W ORTHINESS OF THE SUBSCRIBERS AND PROVE THE GENUINENESS OF THE TRANSACTIONS. BUT, IT HAD NOT DONE SO. . IT IS AN ADMITTED PROPOSITION THAT THE BURDEN LIES ON THE ASSESSEE. AFTER THIS WAS COMMUNICATED TO THE ASSESSEE THAT THESE PERSONS WER E NOT RESPONDING, IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SUBSCRIBERS OR THE GENUINENESS OF THE TRANSACTIONS, BUT IT HAD DONE NOTHING. THEREFORE, THE HONBLE COURT REVERSED THE FINDINGS OF ITAT AND AFFIRMED THE DECISION OF THE COMMISSIONER (APPEALS) WITH REGARD THERETO. ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 11 5.51 HOW THIS CASE HELPS THE REVENUE HAS NOT BEEN EXPLAINED BY LD. DR, ESPECIALLY WHEN NO INQUIRY WAS EVEN ATTEMPTED BY TH E AO . IN THE CITED CASE, AFTER THE INQUIRY BY THE AO, BURDEN SHIFTED TO THE TAXPAYER. UNLESS INQUIRY WAS CONDUCTED BY THE AO AND IF AS A RESULT OF SUCH INQU IRY ANY INCRIMINATION MATERIAL WAS FOUND AND UNLESS THE SAME WAS CONFRONT ED TO THE TAXPAYER, BURDEN COULD NOT SHIFT. 5.6 ANOTHER TWO DECISIONS RELIED UPON BY THE LD. DR ARE IN THE CASE OF CIT V. RUBY TRADERS AND EXPORTERS LTD. [2003]263 ITR 300(C AL)& COMMISSIONER OF INCOME-TAX.VS NIVEDAN VANIJYA NIYOJAN LTD.263 ITR 623(CAL). THE D ECISION IN RUBY TRADERS AND EXPORTERS LTD HAS BEEN CONSIDERED IN THE LATTER CASE, WHEREIN THE HONBLE HIGH COURT FOUND THAT ISSUE R ELATED TO ADDITION OF RS. 3,93,000 ON ACCOUNT OF THE SUBSCRIPTION TO SHARE CA PITAL BEING HELD AS INGENUINE TRANSACTION UNDER SECTION 68 OF THE INCOM E-TAX ACT, 1961. HONBLE HIGH COURT HELD: THE LAW WITH REGARD THERETO HAS SINCE BEEN CRYSTAL LISED. SIMILAR QUESTION WAS INVOLVED IN I.T. REFERENCE NO. 20 OF 1 996) (HINDUSTHAN TEA TRADING CO. LTD. V. CIT [2003] 263 ITR 289 (CAL)) AND I.T. REFERENCE NO. 78 OF 1995 (CIT V. RUBY TRAD ERS AND EXPORTERS LTD. [2003] 263 ITR 300 (CAL)) DISPOSED OF BY THIS COURT ON MARCH 11 AND 12, 2003. THE PRINCIPAL INGREDIENT THAT HAS TO BE SATISFIED IS TO ESTABLISH THE IDENTITY OF THE SUBSC RIBERS AND PROVE THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE T RANSACTION. WE HAVE GONE THROUGH THE ORDER OF THE ASSESSING OFFICE R AT PAGES 9-13 OF THE PAPER BOOK. IT APPEARS THAT THE ASSESSEE HAD FAILED TO ESTABLISH ANY OF THESE THREE INGREDIENTS IN RESPECT OF THE SAID AMOUNT. THE COMMISSIONER (APPEALS) MODIFIED THE ORD ER TO RS. 83,000 AND ACCEPTED THE BALANCE SIMPLY BECAUSE INCO ME-TAX FILE NUMBERS OF THE OTHER SUBSCRIBERS WERE DISCLOSED. IT APPEARS FROM PAGES 36-37 OF THE PAPER BOOK CONTAINING THE ORDER OF THE COMMISSIONER (APPEALS) THAT THESE FEW PERSONS WHO H AD SUBSCRIBED 8,300 SHARES WERE NOT INCOME-TAX ASSESSEES. THEREFO RE, ONLY THESE WERE ADDED. MR. SOM HAD RELIED ON A DECISION IN CIT V. KORLAY T RADING CO. LTD. [1998] 232 ITR 820 (CAL), WHERE IT WAS HELD THAT FURNISHING OF INCOME-TAX FILE NUMBER IS NOT SUFFICIENT TO DISCHAR GE THE BURDEN. THE PROPOSITION MAY BE CORRECT. BUT WHEN SOME MATER IAL IS PRODUCED, IT IS INCUMBENT ON THE REVENUE TO ENQUIRE INTO THE SAME. IN THIS CASE AFTER THE INITIAL ONUS WAS DISCHARGED BY THE ASSESSEE, THE INCOME-TAX AUTHORITY HAD MADE ENQUIRIES AND HAD COMMUNICATED THE RESULT OF THE ENQUIRY TO THE ASSES SEE AND REQUIRED THE ASSESSEE TO PRODUCE THE SUBSCRIBERS AN D ESTABLISH ITS CASE. BUT THE ASSESSEE DID NOT DO SO. THEREFORE, WE DO NOT THINK THAT THE COMMISSIONER (APPEALS) HAD RIGHTLY APPROAC HED THE CASE. THE PRINCIPLE IS ALREADY LAID DOWN IN THE AFORESAID TWO DECISIONS, NAMELY, HINDUSTHAN TEA TRADING CO. LTD.'S CASE [200 3] 263 ITR ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 12 289 (CAL)--I.T. REFERENCE NO. 20 OF 1996 AND. RUBY TRA DERS AND EXPORTERS LTD.' S CASE [2003] 263 ITR 300 (CAL)-I.T. REFERENCE NO. 78 OF 1995. THE LEARNED TRIBUNAL, HOWEVER, PROCEEDED ON THE BAS IS OF THE RATIO DECIDED IN CIT V. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI). ACCORDING TO THE LEARNED TRIBUNAL, IF THE SUBSCRIBERS WERE NOT AVAILABLE, IN THAT EVENT, IT CAN BE ASSESSED AT THE HANDS OF SUCH SUBSCRIBERS, NOT AT THE HANDS OF THE ASSESSEE. BUT THIS DECISION WAS OVERRULED BY THE FULL BENCH DECISION IN CIT V. SOPH IA FINANCE LTD. [1994] 205 ITR 98 (DELHI). THEREFORE, THE RATIO DECIDED IN STELLAR INVESTMENT LTD.'S CASE [1991] 192 ITR 287 (DELHI) IS NO MORE GOOD LAW. THOUGH AN S.L.P. WAS PREFERRED AGAINST ST ELLAR INVESTMENT LTD.'S CASE [1991] 192 ITR 287 (DELHI) AND THE S.L.P. WAS DISMISSED (CIT V. STELLER INVESTMENT LTD. [2001 ] 251 ITR 263 ), YET THE ORDER OF THE APEX COURT WHILE DISMISSING THE S.L.P. IS NOT A RATIO DECIDED BINDING UNDER ARTICLE 141 OF TH E CONSTITUTION OF INDIA, AS WE HAVE HELD IN THE SAID DECISIONS IN RUB Y TRADERS AND EXPORTERS LTD.' S CASE [2003] 263 ITR 300 (CAL) AND HINDUSTHAN TEA TRADING CO. LTD.'S CASE [2003] 263 ITR 289 (CAL). THE LEARNED TRIBUNAL, THEREFORE, PROCEEDED ON THE BASIS OF A WR ONG PROPOSITION OF LAW. 5.61 APPARENTLY, THIS DECISION IS NOT OF ANY ASSI STANCE TO THE REVENUE SINCE HONBLE HIGH COURT FOUND IN THIS CASE THAT AFTER T HE INITIAL ONUS WAS DISCHARGED BY THE ASSESSEE, THE INCOME-TAX AUTHORIT Y HAD MADE ENQUIRIES AND HAD COMMUNICATED THE RESULT OF THE ENQUIRY TO T HE ASSESSEE AND REQUIRED THE ASSESSEE TO PRODUCE THE SUBSCRIBERS AND ESTABLI SH ITS CASE. BUT THE ASSESSEE DID NOT DO SO. WHEREAS IN THE CASE UNDER C ONSIDERATION AO DID NOT MAKE ANY INQUIRIES AT ALL , EVEN WHEN THE TAXPAYER REQUESTED HIM TO DO SO. RATHER THIS DECISION FURTHERS THE CASE OF THE TAXPA YER. 5.7 AS REGARDS RELIANCE ON VARIOUS DECISIONS BY THE LD. DR IN THE CASE OF CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. P LTD.,1 87 ITR 596(CAL),CIT VS. PRECISION FINANCE P LTD.,208 ITR 465(CAL),SHANKAR I NDUSTRIES VS. CIT,114 ITR 689(CAL).OCEANIC PRODUCTS EXPORTING CO. VS. CIT ,241 ITR 497(KER),ITO VS. DIZA HOLDINGS P LTD.,255 ITR 573(KER),RAM LAL A GARWAL VS. CIT,280 ITR547(ALL),ACIT VS. VISHWANATH & COMPANY,292 ITR 2 25(KAR) AND ITO VS. SKYJET AVIATION (P) LTD.,71 ITD 95(AHD.) , THOUGH THESE DECISIONS POSTULATE THAT INITIAL ONUS IS ON THE TAXPAYER ,IN PRINCIPLE, TO PROVE PRIMA FACIE THE TRANSACTIONS WHICH RESULT IN CASH CREDIT IN HIS BOO KS OF ACCOUNTS AND THAT SUCH PROOF INCLUDES PROOF OF THE IDENTITY OF THE CREDITO R, THE CAPACITY OF SUCH CREDITOR TO ADVANCE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS, IN NONE OF THESE DECISIONS, ISSUE OF PUBLIC DEPOSITS WAS INVOL VED. EVEN OTHERWISE, IN THESE CASES, THE CONCERNED AO HAD UNDERTAKEN FURTH ER INQUIRIES IN RELATION TO THE CASH CREDITS AND ARRIVED AT THE CONCLUSION AS A RESULT OF SUCH INQUIRIES WHEREAS IN THE CASE UNDER CONSIDERATION , THE AO DI D NOT EVEN ATTEMPT AT ALL TO CONDUCT ANY INQUIRY WHATSOEVER. MOREOVER, IN NON E OF THESE DECISIONS CREDITS WERE IN RESPECT OF PUBLIC DEPOSITS OR SHAR E APPLICATION MONEY. LD. DR ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 13 HAS NOT EVEN ATTEMPTED TO DEMONSTRATE AS TO HOW THE FACTS IN THE CITED CASES WERE PARALLEL TO THE FACTS IN THE CASE UNDER CONSID ERATION. APPARENTLY, AFORESAID DECISIONS WERE NOT RENDERED IN THE CONTEX T OF PUBLIC DEPOSITS OR SHARE APPLICATION MONEY OR IN RESPECT O F ONUS ON THE TAXPAYER IN EXPLAINING SUCH PUBLIC DEPOSITS CREDITED IN HIS BOO KS OF ACCOUNTS. HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERIN G WORKS PVT. LTD., 198 ITR 257 OBSERVED: IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE ' LAW ' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AN D THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGH T OF THE QUESTIONS WHICH WERE BEFORE THIS COURT. A DECISION OF THIS CO URT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATER CASE, THE COURTS M UST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECIS ION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMEN T, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THI S COURT, TO SUPPORT THEIR REASONINGS. IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA [1971] 3 SCR 9; AIR 1971 SC 530, THIS COURT C AUTIONED (AT PAGE 578 OF AIR 1971 SC). THUS, RELIANCE BY THE LD. DR ON THE AFORECITED DECISIONS , WHICH WERE RENDERED IN A DIFFERENT CONTEXT, NOT RELEVANT TO TH E FACTS IN THE CASE UNDER CONSIDERATION IN RESPECT OF ADDITION OF PUBLIC DEPO SITS UNDER SECTION 68 OF THE ACT, IS MISPLACED . 5.8 IN HINDUSTAN TEA TRADING CO. LTD.,263 ITR 289(CAL) RELIED UPON BY BOTH THE PARTIES, HONBLE COURT WHILE EXAMINING THE SCOPE OF POWERS OF AO UNDER SECTION 68 OF THE ACT HELD: SECTION 68 OF THE INCOME-TAX ACT, 1961, EMPOWERS T HE ASSESSING OFFICER TO TREAT ANY SUM FOUND CREDITED IN THE BOOK S OF ACCOUNT OF THE ASSESSEE FOR ANY PREVIOUS YEAR, IF THE ASSESSEE FAILS TO OFFER EXPLANATION ABOUT THE NATURE AND SOURCES OF SUCH FU ND OR IF THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, AS INCOME FROM UND ISCLOSED SOURCES AND CHARGE THE SAME TO TAX AS INCOME OF THE ASSESSE E OF THAT PREVIOUS YEAR. THEREFORE, IT APPEARS THAT THE POWER OF THE ASSESSING OFFICER UNDER SECTION 68 IS NOT AN ABSOLUTE ONE. IT IS SUBJECT TO ITS SATISFACTION WHERE AN EXPLANATION IS OFFERED. THE P OWER IS ABSOLUTE WHERE THE ASSESSEE OFFERS NO EXPLANATION. THE SATIS FACTION WITH REGARD TO THE EXPLANATION IS IN EFFECT AN IN-BUILT SAFEGUARD IN SECTION 68 PROTECTING THE INTEREST OF THE ASSESSEE. IT PROV IDES FOR AN ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 14 OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE NATURE A ND SOURCE OF THE FUND. ONCE IT IS EXPLAINED, IT IS INCUMBENT ON THE ASSESSING OFFICER TO CONSIDER THE SAME AND FORM AN OPINION WHETHER TH E EXPLANATION IS SATISFACTORY OR NOT. THE EXPRESSION USED IN THE SECTION CLEARLY LAYS THE BURDEN ON THE ASSESSEE TO EXPLAIN THE NATURE AN D SOURCE OF THE FUND. UNLESS AN EXPLANATION IS OFFERED, THE ASSESSI NG OFFICER IS FREE TO TREAT THE FUND AS INCOME OF THE ASSESSEE FROM UN DISCLOSED SOURCES CHARGEABLE TO TAX. ONCE AN EXPLANATION IS O FFERED, THE ASSESSING OFFICER IS BOUND TO CONSIDER THE SAME. SU CH CONSIDERATION IS GUIDED BY SOUND PRINCIPLES OF LAW. THE OPINION S O FORMED MUST BE REASONABLE AND BASED ON MATERIALS AND SHALL NOT BE PERVERSE. THE EXTENT OF THE POWER OF THE ASSESSING OFFICER WHILE CONSIDERING THE MATERIALS PRODUCED BY THE ASSESSEE IS VERY WIDE. IT IS A QUESTION OF EXAMINING AS TO WHETHER THE APPARENT IS REAL. THE A SSESSING OFFICER IS EMPOWERED TO LIFT THE CORPORATE VEIL AND EXAMINE THE REAL NATURE OF THE TRANSACTION. IN THE PROCESS, HE MAY EXERCISE ITS POWER OF EXAMINING THE MATERIALS. HE MAY REQUIRE THE ASSESSE E TO PRODUCE FURTHER MATERIALS IF SO REQUIRED. HE MAY SEEK INFOR MATION FROM OTHER SOURCES ON THE BASIS OF THE MATERIAL PRODUCED. IN T HE PROCESS OF ENQUIRY, THE ASSESSEE HAS NO RIGHT OF HEARING. BUT THE ASSESSEE HAS A RIGHT TO CHALLENGE THE CONCLUSION ARRIVED AT ON T HE BASIS OF THE ENQUIRY MADE. THE ASSESSEE MAY POINT OUT THE PERVER SITY IN THE FINDING. IT MAY QUESTION THE VALIDITY OF THE PROCES S UNDERTAKEN. IT MAY POINT OUT THAT A PARTICULAR MATERIAL WAS NOT CO NSIDERED. IT MAY ALSO POINT OUT THAT THE ENQUIRY MADE WAS NOT REASON ABLE OR WAS HALF-HEARTEDLY DONE. THE PROCESS OF ENQUIRY IS SUCH THAT THE ASSESSEE HAS TO OFFER THE EXPLANATION AND PRODUCE T HE MATERIAL IN SUPPORT OF SUCH EXPLANATION AND THEN IT CAN DO NO F URTHER. THE ONUS THEN SHIFTS ON THE REVENUE TO SCRUTINISE THE MATERI ALS AND FORM AN OPINION ON THE BASIS THEREOF. FOR THE PURPOSE OF SC RUTINISING THE MATERIALS, IT MAY UTILISE ITS POWERS TO SEEK ATTEND ANCE OF ANY WITNESS OR DISCLOSURE OF ANY INFORMATION IN EXERCIS E OF ITS POWER UNDER SECTION 131. IT MAY SEEK INFORMATION FROM OTH ER SOURCES IN EXERCISE OF ITS POWER UNDER SECTION 133. ONCE A REA SONABLE ENQUIRY IS MADE, THEN THE ASSESSING OFFICER CAN DO NO FURTH ER EXCEPT ARRIVING AT A CONCLUSION ON THE BASIS OF SUCH MATER IALS. IF THE CONCLUSION IS ADVERSE WHOLLY OR IN PART TO THE INTE REST OF THE ASSESSEE, IT IS INCUMBENT ON THE ASSESSING OFFICER TO INTIMATE OR INFORM THE CONCLUSION ARRIVED AT TO THE ASSESSEE. W HEN SUCH INFORMATION OR INTIMATION IS RECEIVED BY THE ASSESS EE, THE ONUS SHIFTS ON THE ASSESSEE. IT MAY FURNISH FURTHER EXPL ANATION OR INFORMATION TO SUPPORT ITS CONTENTION. IF FURTHER I NFORMATION OR MATERIALS ARE FURNISHED, THE ASSESSING OFFICER IS B OUND TO EXAMINE THE SAME AND FORM HIS FINAL OPINION AND PASS AN APP ROPRIATE ORDER. SUCH OPINION IS ALSO SUBJECT TO EXAMINATION BY THE COMMISSIONER (APPEALS) OR THE LEARNED TRIBUNAL AND IF IT INVOLVE S A QUESTION OF LAW, IT IS ALSO SUBJECT TO SCRUTINY BY THE HIGH COU RT UNDER SECTION ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 15 256. FINDINGS OF FACT, MAY ALSO FORM THE BASIS OF A QUESTION OF LAW IF THE INFERENCE DRAWN FROM THE FACTS FOUND ARE NOT IN CONSONANCE WITH LEGAL PRINCIPLES OR THE FINDINGS ARE PERVERSE. IN S UCH A CASE THE HIGH COURT MAY INTERFERE. IF TWO VIEWS ARE POSSIBLE, EVE N IF THE HIGH COURT IS OF THE OTHER VIEW, IT CANNOT INTERFERE WIT H THE VIEW TAKEN BY THE TAXING AUTHORITY. 5.9 IN THE DECISION RELIED UPON ON BEHA LF OF THE TAXPAYER IN THE CASE OF GUJARAT FERTILISERS.VS COMMISSIONER OF INCOME-TAX, 293 ITR 70(GUJ) ,HONBLE HIGH COURT HELD : WE WILL TAKE UP THE SECOND QUESTION FIRST AS IT WA S VEHEMENTLY ARGUED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE FINDINGS REGARDING THE CASH CREDIT ENTRIES THAT THOSE WERE N OT GENUINE, ARE PERVERSE FINDINGS. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BASIC BURDEN TO PROVE THE SOURCE OF MONEY WOULD BE ON THE ASSESSEE, BUT, HE IS NOT REQUIRED TO PROVE THE SOUR CES OF THE SOURCE AND AS THE TAXING AUTHORITIES AND THE TRIBUNAL MADE AN INQUIRY INTO THE SOURCES OF THE SOURCE, I.E. SOURCE OF THE PERSO N WHO DEPOSITED THE MONEY, THE FINDINGS ARE PERVERSE. IN SUPPORT OF HIS SUBMISSION, HE HAS RELIED UPON A DIVISION BENCH'S JUDGMENT OF T HIS COURT IN THE MATTER OF MURLIDHAR LAHORIMAL V. CIT [2006] 280 ITR 512 . AFTER GOING THROUGH THE FACTS OF THE SAID CASE, WE MUST IMMEDIATELY SAY THAT THE FACTS OF THE SAID CASE WERE TOTALLY DI FFERENT. IN THE PRESENT CASE, THE ASSESSING OFFICER WHEN MAKING A F ACT FINDING INQUIRY, EXAMINED SOME OF THE CREDITORS AND AFTER A THOROUGH CROSS- EXAMINATION, HE WAS SUCCESSFUL IN OBTAINING THE INF ORMATION FROM THE WITNESS THAT THE WITNESS, IN FACT, HAD NO MONEY WITH HIM, HE WAS HAVING CERTAIN AGRICULTURAL LANDS AND FROM THE AGRICULTURAL OPERATIONS, HE COULD HARDLY MEET BOTH THE ENDS. NOT ONLY THAT, IT IS TO BE SEEN THAT A SUM OF RS. 22,500 WAS, DEPOSITED SIMPLY BECAUSE THE PARTNER OF THE FIRM, NAMELY, YOGESHBHAI, CAME I N CONTACT WITH THE SAID DEPOSITOR, HE DID NOT CHARGE ANY INTEREST OVER IT BECAUSE THE MONEY WAS GIVEN IN FRIENDSHIP AND AFTER RECEIVI NG THE SAME FROM THE FIRM, HE. AGAIN GAVE IT TO YOGESHBHAI, THE PARTNER. A DISPASSIONATE LOOK AT THE FACTS AND THE CONDUCT OF THE WITNESS WOULD PROVIDE THAT HE WAS A COOKED-UP WITNESS AND WAS BRO UGHT BEFORE THE ASSESSING OFFICER TO SAVE THE SKIN OF THE ORIGI NAL ASSESSEE, A PARTNERSHIP FIRM. WE ARE UNABLE TO HOLD THAT THE FI NDINGS RECORDED BY THE ASSESSING OFFICER, COMMISSIONER OF INCOME-TA X (APPEALS) AND THE TRIBUNAL INTO THE GENUINENESS OF THE TRANSA CTION, CALL FOR ANY INTERFERENCE. 5.10 IN ANOTHER DECISION RELIED UPON BY THE TA XPAYER IN THE CASE OF MURLIDHAR LAHORIMAL.VS COMMISSIONER OF INCOME-TA X., , 280 ITR 512(GUJ) WHEREIN QUESTION OF GENUINENESS OF GIFT WA S INVOLVED ,HONBLE HIGH COURT HELD: ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 16 SECTION 68 OF THE ACT REQUIRES THAT THERE HAS TO B E A CREDIT IN THE BOOKS MAINTAINED BY AN ASSESSEE; SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSEE OFFERS N O EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT; OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF T HE ASSESSING AUTHORITY, SATISFACTORY, THEN THE SUM SO CREDITED M AY BE CHARGED TO TAX AS INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR. THE APEX COURT, IN THE CASE OF CIT V. SMT. P.K. NOORJAHAN [1999] 237 ITR 570 , HAS LAID DOWN THAT THE WORD 'MAY' INDICATED THE INTENTI ON OF THE LEGISLATURE THAT A DISCRETION WAS CONFERRED ON THE ASSESSING OFFICER IN THE MATTER OF TREATING THE SOURCE OF INVESTMENT/ CREDIT WHICH HAD NOT BEEN SATISFACTORILY EXPLAINED AS INCOME OF THE ASSESSEE, BUT IT WAS NOT OBLIGATORY TO TREAT SUCH SOURCE OF INCOME I N EVERY CASE WHERE THE EXPLANATION OFFERED WAS FOUND TO BE NOT S ATISFACTORY. AS SECTION 68 OF THE ACT DENOTES, ONCE THERE IS A C REDIT IN THE BOOKS MAINTAINED BY THE ASSESSEE, THE PRIMARY ONUS IS ON THE ASSESSEE, NAMELY, TO OFFER AN EXPLANATION AS TO THE NATURE AN D SOURCE OF THE CREDIT. WHAT WOULD BE THE DEGREE OF THE ONUS AND WH AT SHOULD BE THE EXTENT OF EXPLANATION IN SUCH CIRCUMSTANCES, IS SUCCINCTLY LAID DOWN BY THIS COURT IN THE DECISION IN THE CASE OF C IT V. PRAGATI CO- OPERATIVE BANK LTD. [2005] 278 ITR 170 . SUFFICE IT TO STATE THAT AN ASSESSEE CAN BE ASKED TO PROVE THE SOURCE OF CREDIT IN THE BOOKS, BUT CANNOT BE ASKED TO PROVE THE SOURCE OF THE SOUR CE. UNFORTUNATELY, AS NOTED HEREINBEFORE, THE TRIBUNAL HAS PROCEEDED ON AN ENTIRELY FALLACIOUS PREMISE, WHEN IT IS OBSER VED, 'WE HAVE TO DECIDE THE QUESTION ABOUT THE GENUINENESS OF THE GI FT ON THE BALANCE OF PROBABILITIES AND, IN OUR VIEW, IT IS NO T PROBABLE THAT THE ASSESSEE RECEIVED RS. 50,000 OR ANY PART THEREOF AS A GIFT FROM RAMJI NANJI, THE DONOR.' INSTEAD OF ADDRESSING ITSE LF TO THE REQUIREMENT OF SECTION 68 OF THE ACT, THE TRIBUNAL HAS ADOPTED AN APPROACH WHICH, TO SAY THE LEAST, IS UNWARRANTED IN LAW. THE TRIBUNAL STATES THAT MOTIVATION FOR MAKING THE GIFT IS NOT ESTABLISHED. THIS FINDING IS NEITHER HERE NOR THERE . THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE CREDIT ENTRY FOUND IN HI S CAPITAL ACCOUNT. THE ASSESSEE POINTED OUT THAT HE HAD RECEIVED A GIF T FROM SHRI RAMJI NANJI. SHRI RAMJI NANJI APPEARS BEFORE THE AS SESSING OFFICER AND CONFIRMS THE FACT OF HAVING MADE THE GIFT. HE P RODUCES EVIDENCE IN SUPPORT OF THE SOURCE FROM WHICH THE FUNDS FOR M AKING THE GIFT ARE AVAILABLE WITH HIM. THE GIFT IS GIVEN BY WAY OF A BANK DRAFT. THE REVENUE DOES NOT DISPUTE ANY OF THESE FACTS. IN FAC T, THE REVENUE COMMENCES THE PRESENT PROCEEDINGS ON THE DAY IT MAK ES GIFT-TAX ASSESSMENT QUA THIS VERY GIFT IN THE HANDS OF THE D ONOR. 5.11 IN THE CASE OF UMA POLYMERS (P.) LTD. V. DY . CIT [2006] 100 ITD 1 (JODH.) (TM), IT WAS HELD THAT IN RESPECT OF SHARE APPLICATION ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 17 MONEY RECEIVED FROM INVESTORS, THE ASSESSEE-COMPANY HAS TO PROVE ONLY EXISTENCE OF PERSONS IN WHOSE NAME SHARE APPLI CATIONS ARE RECEIVED AND WHEN THE IDENTITY OF CREDITOR IS ESTAB LISHED, THEN THE BURDEN TO PROVE THAT MONEY ADVANCED BY THE CREDITOR DID NOT BELONG TO HIM BUT TO SOMEBODY ELSE, IS ON THE REVEN UE WHO HAS TO FIND THE REAL INVESTOR, AND IF ANY SHAREHOLDER IS F OUND TO HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVES TMENT IS REQUIRED TO BE MADE IN THE HANDS OF SUCH SHAREHOLDE R. 6. IN THE LIGHT OF AFORESAID DECISIONS, IF WE AN ALYSE THE FACTS OF THE CASE UNDER CONSIDERATION, WE FIND THAT DESPITE HAVING CO MPLETE DETAILS OF DEPOSITS EXCEEDING RS. 20,000 EACH IN THE RETURN OF INCOME F ILED ON 27.11.1997 ITSELF, AO DID NOT MAKE ANY INQUIRY L IN RESPECT OF SUCH DE POSITS .AFTER ISSUING FIRST NOTICE U/S 143(2) OF THE ACT ON 26.8.1998 IN THIS C ASE, WHEN THE TAXPAYER DID NOT RESPOND, THE AO WENT IN TO A SLUMBER FOR MORE T HAN A YEAR. SECOND NOTICE WAS ISSUED ONLY ON 15.11.1999 I.E. AFTER TWO YEARS OF FILING OF RETURN WHEN LIMITATION FOR COMPLETION OF ASSESSMENT WAS NEARING AND THE HEARING WAS FIXED FOR 2.12.1999. AS OBSERVED BY THE LD. CIT(A) ON PER USAL OF CASE RECORDS, A DETAILED QUESTIONNAIRE WAS ISSUED FOR THE FIRST TIM E ONLY ON 28.1.2000,FIXING THE DATE OF HEARING ON 8.2.2000. BUT THIS QUESTIONN AIRE WAS SERVED UPON THE TAXPAYER ON 12.2.2000 I.E. MUCH AFTER THE DATE OF H EARING FIXED BY THE AO. EVEN IN THIS NOTICE, AO DID NOT INSIST UPON ANY SPE CIFIC CONFIRMATION OF THE DEPOSITORS. IN REPLY TO THIS NO TICE, TAXPAYER SUBMITTED RELEVANT DETAILS ALONG WITH COMPLETE LIST OF ALL THE FIXED DEPOSITS INDICATING DEPOSITORS NAME, DATE OF DEPOS IT, SCHEME AND PERIOD, AMOUNT OF FDR AND BROKER NO. ETC. AS OB SERVED BY THE LD. CIT(A), THE DETAILS BEING IN RESPECT OF FIX ED DEPOSITS RECEIVED FROM PUBLIC IN GENERAL, THIS AMOUNTED TO R EASONABLE COMPLIANCE TO THE NOTICE. THEREAFTER, THE AO ASKED THE TAXPAYER TO FILE CONFIRMATION VIDE LETTER DATED 7/3/2000 OF ALL THE DEPOSITORS. IN RESPONSE, TAXPAYER SUBMITTED A REPLY DATED 15/3/2000 ALONGWITH PHOTO COPIES OF ALL APPLICATION FORM OF RS.20,000/- AND ABOVE. IT WAS ALSO MENTIONED IN THA T REPLY THAT IF THE AO HAD ANY DOUBT, HE MAY MAKE ENQUIRIES FROM TH E ADDRESS GIVEN ON THE APPLICATION FORM. HOWEVER, THE ASSESSI NG OFFICER DID NOT MAKE ANY ENQUIRIES THE AO HAS STATED THAT NEIT HER ANY EVIDENCE WAS FILED FOR DEPOSITS BELOW RS.20,000/-, NOR ANY FURTHER TIME WAS SOUGHT, IS BASELESS IN VIEW OF LETTER DATE D 15/3/2000 WHICH COVERS DEPOSITS BELOW RS. 20,000/-EVEN WHEN T HE TAXPAYER OFFERED TO PRODUCE THE ENTIRE F.D. FORMS, IN ORIGI NAL FOR VERIFICATION OR IN THE ALTERNATIVE XEROX OF FEW F.D . RECEIPTS, ON RANDOM BASIS OF THE PARTIES AS DEEMED FIT BY THE AO , AO DID NOT REACT. APPARENTLY, AT THAT STAGE TASK OF OBTAINING THE CONFIRMATION IN RESPECT OF 1,462 PARTIES WAS ARDUOU S ONE IN VIEW OF THE TIME AVAILABLE. IN THE LIGHT OF THESE FACTS , ESPECIALLY WHEN THE AO DID NOT UNDERTAKE ANY INDEPENDENT INQUIRY IN RESPECT OF ANY OF THE DEPOSITS, WE ARE OF THE OPINION THAT TH E TAXPAYER HAD DISCHARGED THE INITIAL ONUS LAID DOWN UPON THEM AN D THE AO DID NOTHING TO REBUT THE SAME. HONBLE DELHI HIGH COUR T IN THE CASE OF CIT V. SOPHIA FINANCE LTD. REPORTED IN [1994] 205 ITR 98 [FB], HAS OBSERVED THAT AN ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 18 ENQUIRY BY THE ASSESSING OFFICER AS TO THE EXISTENC E OR NON-EXISTENCE OF THE SHAREHOLDER AND ABOUT THEIR CREDITWORTHINESS IS CON DITION PRECEDENT FOR TREATING THE CASH CREDIT AS THE INCOME OF THE COMPA NY. SIMILARLY, INQUIRY BY THE AO WAS A CONDITION PRECEDENT IN THE LIGHT OF FACTS OF THE CASE ENUMERATED ABOVE. IN VIEW OF THE FOREGOING , ESPECIALLY WHEN NO SUCH ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER IN THIS CASE, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE ORDER OF LD. CIT(A). 7. WE MAY ,HOWEVER, REFLECT UPON A SUBMISSION MAD E BY THE LD. AR ON BEHALF OF THE TAXPAYER TO THE EFFECT THAT THE TAXPAYER HAD VIDE LETTER DATED 15.3.2000 OFFERED TO P RODUCE THE ENTIRE F.D. FORMS IN ORIGINAL FOR VERIFICATION OR IN THE ALTER NATIVE XEROX OF FEW F.D. RECEIPTS, ON RANDOM BASIS OF THE PARTIES A S DEEMED FIT BY THE AO, I T IS NOT CONTROVERTED THAT NO ACTION WAS INITIATED BY THE AO. INSTEAD IT IS NOW BEING ARGUED THAT ONUS HAS NOT BEEN DISCHARGED BY THE TAXPAYER. AT THE COST OF REPETITI ON, IN THE PRESENT CASE DETAILS REGARDING DEPOSITS EXCEEDING R S. 20,000 EACH WERE AVAILABLE WITH THE AO EVEN WHEN RETURN WA S FILED ON 27.11.1997.NO ACTION WAS TAKEN BY THE AO FOR MORE T HAN TWO YEARS NOR THE AO CHOSE TO MAKE ANY INQUIRIES. EVEN WHEN THE TAXPAYER SUGGESTED VIDE LETTER DATED 15.3.2000 TO IDENTIFY DEPOSITS BELOW RS. 20,000 EACH IN WHICH CASE AO REQ UIRED EVIDENCE, NO ACTION WAS TAKEN BY THE AO. APPARENTLY , AO FAILED TO REACT TO THE SHIFTING OF BURDEN TO INVESTIGATE I N TO THE CREDITWORTHINESS OF THE DEPOSITORS. GENERALLY SPEA KING, IT IS INCUMBENT ON THE AO TO MANAGE HIS SCHEDULE IN SUCH A MANNER THAT HE DOES NOT RUN OUT OF TIME FOR DISCHARGING HI S DUTIES CAST ON HIM BY THE STATUTE. IN THE PRESENT CASE, EVEN WHEN DETAILS WERE FURNISHED IN RESPECT OF DEPOSITS EXCEEDING RS. 20,0 00 EACH ALONG WITH RETURN, HE FAILED TO INITIATE ANY INQUIRIES. I N RESPECT OF DEPOSITS BELOW RS. 20,000 EACH, DESPITE BEING AWARE OF THE LIMITATION OF TIME, AO DID NOTHING TO VERIFY SUCH D EPOSITS EVEN ON RANDOM BASIS. THEREFORE, THERE IS NO INFIRMITY IN T HE FINDINGS OF LD. CIT(A) AND GROUND OF APPEAL HAS TO BE DISMISSED . 7. CONSIDERING THE FACTS OF THE CASE AS ALSO THE NATURE AND MODE OF RECEIPT OF DEPOSITS , WE ARE OF THE OPINION THAT THE AFORES AID DECISION IS SQUARELY APPLICABLE TO THE FACTS OBTAINING IN THE YEAR UNDE R CONSIDERATION, ESPECIALLY WHEN THERE IS NO MATERIAL BEFORE US TO CONTROVERT T HE FINDINGS OF THE LD. CIT(A) THAT THE ASSESEE HAD FURNISHED COMPLETE DETAILS IN DECEMBER,2000 AND THE DETAILS OF DEPOSITS EXCEEDING RS. 20,000 E ACH WERE AVAILABLE WITH THE TAX AUDIT REPORT FILED ALONG WIT H RETURN. IN THESE CIRCUMSTANCES, WE ARE NOT INCLINED TO INTERFERE WIT H THE FINDINGS OF THE LD. CIT(A) AND ACCORDINGLY, REJECT GROUND NO.1 IN THE A PPEAL. ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 19 ITA NO.1704/AHD/2002-AY 1998-99[ ASSESSEE] 8. NOW ADVERTING TO THE ASSESSEES APPEAL FOR TH E A.Y. 1998-99.GROUND NO.1 BEING GENERAL IN NATURE NOR ANY SUBMISSIONS H AVING BEEN MADE BEFORE US ON THIS GROUND , THIS GROUND IS DISMISSED. 9. GROUND NO.2 RELATES TO AN ADDITION OF RS.31,3 55 OUT OF TOTAL ADDITION OF RS.4,28,587. THE AO POINTED OUT THAT NOTICES U/S 13 3(6) OF THE ACT ISSUED TO THE FOLLOWING PARTIES ,AGAINST WHOM LIABILITIES WE RE OUTSTANDING, WERE RETURNED UNSERVED: (IN RS.) HCL LTD. : 14,024/- INDIA KINGCHICKEN & ENGG. CENTRE : 16,590/- SHRI SAHJANAND CONST RUCTION : 16,590/- UNICOMP.INDS. LTD. : 3,69,954/- SHARMA ENTERPRISE : 11,429/- TOTAL :4,28,587/- DESPITE CONFRONTING THE ASSESSEE, VIDE ORDERSHEET ENTRY DATED 7.3.2001, THE ASSESSEE DID NOT FILE ANY SPECIFIC RE PLY. ACCORDINGLY, THE AO TREATED THESE LIABILITIES NON-GENUINE AND ADDED TO THE INCOME. 9.1 ON APPEAL, THE ASSESSEE EXPLAINED THE CIRCUM STANCES LEADING TO THESE OUTSTANDING LIABILITIES .IN THE LIGHT OF SUBMISSION S OF THE ASSESSEE, THE LD. CIT(APPEALS) CONCLUDED AS UNDER:- 6.4. I HAVE CONSIDERED THESE SUBMISSIONS. IT IS SEEN THAT BALANCE IN RESPECT OF M/S.KINGCHICKENS ENGG. CENTRE AS PER THE BOOKS WAS ONLY RS.10,331/- AND IN RESPECT OF SAHJANAND CONSTRUCTIO N,IT IS RS.7,000/-. IN CASE OF M/S.HCL LTD. CHEQUE OF RS.14,024/- WAS R ETURNED BACK, MAKING THEREBY THAT NOTHING WAS PAYABLE BY THE APPE LLANT. THE BALANCE AS PER BOOKS IN RESPECT OF M/S.SAHJANAND CO NSTRUCTION WAS ONLY RS.7,000/-. THUS ADDITION OF (RS.10,331/- + RS .7,000/- + RS.14,024/-) = RS.31,355/- IS LIABLE TO BE SUSTAIN ED. 6.5. HOWEVER, BALANCES IN RESPECT OF M/S.UNICORP IN DUSTRIES LTD AND M/S.SHARMA ENTERPRISES ARE IN RESPECT OF PURCHASES MADE IN ASSESSMENT YEAR 1995-96, AND ON THESE ITEMS DEPRECI ATION IS ALSO BEING ALLOWED BY THE ASSESSING OFFICER. THUS ACTI ON OF ANY WAS REQUIRED TO BE TAKEN IN ASSESSMENT YEAR 1995-96, TH AT TOO AFTER ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 20 VERIFICATION AS M/S.UNICORP INDUSTRIES LTD IS A KNO WN CONCERN AND PAYMENT HAS ALSO BEEN MADE TO THEM IN THE SUCCEEDIN G YEAR. THUS ADDITION IN RESPECT OF THESE TWO ITEMS IS DELETED A ND OUT OF ADDITION OF RS.4,28,587/- ONLY A SUM OF RS.31,355/- IS CONFIRME D. 9.2 THE ASSESSEE IS NOW IN APPEAL AGAINST THE AF ORESAID FINDINGS OF THE LD. CIT(A) AND CONTENDED THAT THE LIABILITIES WERE GEN UINE. SINCE THESE HAVE NOT BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT, THESE COU LD NOT BE ADDED U/S 41(1) OF THE ACT. IN HIS CONNECTION, THE LD. AR RELIED UPON DECISIONS IN THE CASE OF CIT VS, SUGAULI SUGAR WORKS P LTD.,236 ITR 518(SC),CIT VS,. KESARIA TEA CO. LTD.,254 ITR 435(SC),CIT VS. SOUTHERN ROADWAYS,282 ITR 379MAD.) AND AHUJA GRAPHIC MACHINERY P LTD.,109 ITD 71(MUM.). TH E LD. AR POINTED OUT THAT LIABILITY OF RS. 14,024/- WAS OUTSTANDING SINC E CHEQUE ISSUED TO THE AFORESAID COMPANY WAS RETURNED WHILE THE OTHER TWO LIABILITIES OF RS. 7,000 EACH WERE INCLUDED IN THE SEPARATE ADDITION OF RS . 44,92,185/- MADE BY THE AO .THUS, THE AMOUNT WAS ADDED TWICE. 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. UNDISPUTEDLY, T HE LIABILITIES OF RS. 31,355/- ARE OUTSTANDING IN THE BOOKS. SIMPLY BECAUSE NOTICE U/S 133(6) WAS RETURNED UNSERVED, FOR WHATEVER REASONS, DOES NOT MEAN THAT THE LIABILITIES ARE NOT GENUINE. THE LIABILITIES COULD BE ADDED ,HAVING RESORT TO SECTION 41(1) OF THE ACT ONLY IF THE LIABILITY OF THE ASSESSEE CEASED FI NALLY WITHOUT THE POSSIBILITY OF REVIVING IT. THERE IS NO EVIDENCE ON RECORD THAT TH E LIABILITY HAS CEASED IN THIS CASE NOR THE AMOUNT HAS BEEN TRANSFERRED TO PROFIT AND LOSS ACCOUNT BY THE ASSESSEE AND THUS, THE AMOUNT DID NOT BECOME THE AS SESSEE'S OWN MONEY. IN THIS CONNECTION, HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS.SILVER COTTON MILLS CO. LTD.,254 ITR 728(GUJ) HE LD THAT SIMPLY BECAUSE THE PERIOD OF LIMITATION HAD COME TO AN END FOR THE PURPOSE OF FILING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FOR TAKING APPROPRIA TE ACTION AGAINST THE ASSESSEE, IT CANNOT BE SAID THAT THERE WAS A CESSAT ION OF LIABILITY. THE LIABILITY STILL REMAINS, THOUGH IT MAY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PROVISIONS OF THE LAW OF LIMITATION. RELYING UPON THE DECISION IN THE CASE OF SUGAULI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 .SC), HONBLE JURISDICTIONAL HIGH COURT FURTHER HELD THAT UNLESS THERE IS A CESS ATION OF LIABILITY OR THERE IS A ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 21 REMISSION OF LIABILITY BY THE CREDITOR, THE LIABILI TY SUBSISTS AND, THEREFORE, EVEN IF THE ENTRIES ARE MADE TO WRITE BACK THE EXPENDITURE, THE AMOUNT SO WRITTEN BACK CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. 10.1 HONBLE SUPREME COURT IN THE CASE OF BO MBAY DYEING & MANUFACTURING CO. LTD. V. STATE OF BOMBAY, AIR 1958 SC 328, IN PARA 23 OF THEIR DECISION OBSERVED AS FOLLOWS : ' 23. IT HAS BEEN ALREADY MENTIONED THAT WHEN A DEB T BECOMES TIME BARRED, IT DOES NOT BECOME EXTINGUISHED BUT ONLY UNENFORCEABLE IN A COURT OF LAW. ' 10.2 IN VIEW OF THE FOREGOING, IT IS NOT, TH EREFORE, CORRECT TO HOLD THAT THERE WAS CESSATION OF THE LIABILITY OF THE ASSESSEE IN R ESPECT OF THE SAID AMOUNT OF RS.31,355/- . IN THE INSTANT CASE, THE AO AND THE LD. CIT(A) H AVE ASSUMED THAT THE ASSESSEE HAD NO INTENTION OF HONOURING THE LIABILITY ON DEMAND, FROM THE MERE FACT THAT THE CONCERNED PARTIES DID NOT RESPOND TO NOTICE U/S 133(6) OF THE ACT. IN THESE CIRCUMSTANCES, WE HAVE NO ALT ERNATIVE BUT TO VACATE THE FINDINGS OF THE LD. CIT(A) AND THE AO IS DIRECTED TO DELETE THE ADDITION. THEREFORE, GROUND NO.2 IN THE APPEAL IS ALLOWED. 11. GROUND NO.3 RELATES TO AN ADDITION OF RS.3,89,5 33 UPHELD BY THE LD. CIT(A) OUT OF TOTAL ADDITION OF RS.22,05,540/-. TH E AO NOTICED FROM THE INFORMATION COLLECTED BY THE AO U/S 133(6) OF THE A CT THAT THERE WAS DIFFERENCE OF RS. 22,05,540/- ON ACCOUNT OF LIABILI TIES OUTSTANDING IN THEIR BOOKS VIS--VIS SHOWN BY THE 15 PARTIES IN THEIR BO OKS ,MENTIONED ON PAGE 8 OF THE ASSESSMENT ORDER,. DESPITE OPPORTUNITY GIVEN BY THE AO VIDE ORDERSHEET ENTRY DATED 7.3.2001, THE ASSESSEE DID N OT RECONCILE THE DIFFERENCE. ACCORDINGLY, THE AO ADDED THE AMOUNT OF RS. 22,05,440/-. 12. ON APPEAL, THE ASSESSEE CONTENDED THAT THE DIF FERENCE IN THE AMOUNT REFLECTED IN THE BOOKS OF THE ASSESSEE VIS--VIS BO OKS OF THE 15 PARTIES MENTIONED BY THE AO AROSE DUE TO VARIOUS REASONS.TH E ASSESSEE MIGHT NOT HAVE CONSIDERED CERTAIN BILLS BECAUSE THOSE WERE NO T ACCEPTED OR BILLS MIGHT HAVE NOT BEEN RECEIVED. IN THE LIGHT OF THESE SUBMI SSIONS, THE LD. CIT(A) OBSERVED THAT THE AO DID NOT CONFRONT THE INFORMAT ION COLLECTED BY HIM NOR ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 22 SPECIFIC DIFFERENCES WERE POINTED OUT TO THE ASSESS EE WHILE CERTAIN REPLIES ON RECORD WERE NOT CONSIDERED BY THE AO. THE LD. CIT(A ) NOTICED THAT THOUGH M/S CHETAN MEDICAL STORES CONFIRMED THE BALANCE, ST ILL THE AO MADE THE ADDITION. AFTER CONSIDERING THE REPLY OF THE ASSESS EE, THE LD. CIT(A) CONCLUDED THAT IN RESPECT OF SEVEN PARTIES AS MENTIONED IN PA RA 7.7 OF THE IMPUGNED ORDER, THERE WAS NO DIFFERENCE WHILE IN RESPECT OF M/S MERCURY TRAVELS- RS.6,672,M/S NOVATEL-RS.17,505/-,OBEROI BOMBAY RS/ 87,146/- ,BPL TELECON LTD. -RS. 2,54,050/-,SHORILAL KAPOOR-RS.864/-,FITNE SS FINDERS-RS.8,260/-,VIJAY MODI-RS.15,016/-, TOTAL DIFFERENCE WORKED OUT TO RS .3,89,533/- REMAINED UNRECONCILED.THEREFORE, THE LD. CIT(A) SUSTAINED TH E ADDITION TO THIS EXTENT. 13. THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE LD. AR ON BEHALF OF THE ASSESSEE POINTED OUT THAT THOUGH A DETAILED EXPLAN ATION WAS GIVEN BEFORE THE LD. CIT(A) AND IT WAS EXPLAINED THAT DIFFERENCE IN THE ACCOUNTS OF ALL THE PARTIES EXCEPT SHRI VIJAY MODI BEING DUE TO THE HI GHER FIGURES RETURNED BY THE CONCERNED PARTIES VIS-VIS-FIGURES MENTIONED IN THE BOOKS, NO ADDITION CAN BE MADE ON THAT BASIS. EVEN IN RESPECT OF DIFFERENCE I N THE ACCOUNT OF VIJAY MODI, NO ADDITION IS POSSIBLE SINCE THE LIABILITY IS GENU INE. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE FINDINGS OF THE LD. CIT(A) 14. AFTER HEARING THE PARTIES, WE ARE OF THE OPIN ION THAT THERE IS NOTHING TO SUGGEST THAT THE LIABILITIES RELATING TO THE SEVE N PARTIES MENTIONED BY THE LD. CIT(A) IN THE IMPUGNED ORDER AND REFERRED TO IN PA RA 12 ABOVE, ARE NOT GENUINE NOR THE LD. CIT(A) ASSIGNED ANY REASONS FOR SUSTAINING THE ADDITION. SIMPLY BECAUSE THESE LIABILITIES REMAINED UNRECONCI LED, DOES NOT PROVE THAT THE LIABILITIES ARE NOT GENUINE. IN THESE CIRCUMST ANCES AND IN VIEW OF REASONS GIVEN IN PARA 10 TO 10.2 ABOVE, ESPECIALLY WHEN THE RE IS NOTHING TO SUGGEST THAT THE LIABILITIES ARE NOT GENUINE, WE HAVE NO AL TERNATIVE BUT TO VACATE THE FINDINGS OF THE LD. CIT(A) AND THE AO IS DIRECTED TO DELETE THE ADDITION. THEREFORE, GROUND NO.3 IN THE APPEAL IS ALLOWED. 15.. GROUND NO. 4 IN THE APPEAL RELATES TO ADDITIO N OF RS.1,16,130 SUSTAINED BY THE LD. CIT(A) OUT OF TOTAL ADDITION O F RS.48,72,502/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO SUBMIT ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 23 NAMES, ADDRESSES AND CONFIRMATIONS IN RESPECT OF LI ABILITIES OF RS.48,72,502/- SINCE THE ASSESSEE DID NOT FURNISH THE REQUISITE DE TAILS, THE AO TREATED THESE LIABILITIES AS NON-GENUINE AND ADDED TO THE INCOME. 16. ON APPEAL, THE ASSESSEE CONTENDED THAT THE AM OUNT OF RS.48,72,502 ON ACCOUNT OF OTHER LIABILITIES FORMED PART OF CREDITO RS OF RS. 61,03,645 ,FOR WHICH THE ASSESSEE HAD PROVIDED THE RELEVANT DETAILS. SIN CE THE ASSESSEE HAD PROVIDED NAMES AND ADDRESSES OF ALL CREDITORS EXCEE DING RS.10,000/- EACH, ALONG WITH THEIR LETTER DATED 20.12.2000, THE AO WA S NOT JUSTIFIED IN ADDING THE AMOUNT. IT WAS FURTHER EXPLAINED THAT THE AMOUNT OF RS.48,72,502/- INCLUDED AN AMOUNT OF RS. 42.54 LACS ON ACCOUNT OF HOTEL EXP ENDITURE TAX, LUXURY TAX, SALES TAX, PF, ESI, PROFESSIONAL TAX ,SERVICE TAX, AND SIMILAR OTHER ITEMS OF ROUTINE BUSINESS LIABILITIES. BARRING RS. 3.74 LACS DUE TO AMERICAN EXPRESS BANK LTD., OTHER SMALL AMOUNTS RELATED TO REPUTED PARTIES. WHILE SUBMITTING DETAILS OF RS. 29,15,566.20 ON ACCOUNT VARIOUS STAT UTORY LIABILITIES, THE ASSESSEE EXPLAINED THAT AN AMOUNT OF RS.12,17,543/- WAS ON ACCOUNT OF PROVISION FOR TECHNICAL ASSISTANCE FEES PAYABLE TO EAST INDIA HOTEL LTD.. THE BALANCE AMOUNT REPRESENTED ADVANCES RECEIVED FROM C USTOMERS AGAINST WHICH BILLS WERE ISSUED IN SUBSEQUENT PERIOD. THE A SSESSEE ADDED THAT THE AO DID NOT EVEN CALL FOR DETAILS OF RS.88,536/- COM PRISING AMOUNTS LESS THAN RS. 10,000 EACH. IN THE LIGHT OF THESE SUBMISSIONS, THE LD. CIT(A) DELETED THE ADDITION EXCEPT IN RESPECT OF TWO AMOUNTS OF RS. 56 ,130/- AND RS. 60,000 ON THE GROUND THAT THESE WERE UNPROVED LIABILITIES . T HE RELEVANT FINDINGS OF THE LD. CIT(A) ARE A UNDER:- 8.8. I HAVE CAREFULLY CONSIDERED THESE SUBMISSIONS AND I HAVE ALSO GONE THROUGH THE CASE RECORDS. IT IS SEEN THAT AS SESSING OFFICER HAD ASKED FOR DETAILS MAINLY IN RESPECT OF SUCH LIABILI TIES EXCEEDING RS.10,000/-. IT IS ALSO SEEN THAT NO NOTICES UNDE R SECTION 133(6) WAS ISSUED THE RESPECT OF ANY OF THE PARTIES EXCEPT ONE . HENCE, NO ADDITION COULD BE MADE WHEN THE APPELLANT HAD SUBMITTED DETA ILS AS ASKED FOR. BESIDES THIS IT IS SEEN THAT APART FROM THE SUM OF RS.29.15 LAKHS AS LISTED ON ACCOUNT OF GOVT DUES, THERE WERE CERTAIN OTHER ITEMS TOO WHICH COULD NOT HAVE BEEN DISALLOWED FOR EXAMPLE EAST IND IA HOTEL LTD TO WHOM NOTICE UNDER SECTION 13(6) WAS ISSUED HAD ASKE D FOR TIME. HENCE, THE ASSESSING OFFICER COULD NOT TREAT THE AM OUNT OF RS.12,17,543/- AS UNEXPLAINED LIABILITIES. SIMILA RLY NO ADDITION COULD BE MADE FOR MEMBERSHIP FEE OF RS.5,500/- OTHER SMALLER AMOUNT SHOWN AS ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 24 ADVANCES FROM PARTIES WERE IN RESPECT OF BILLS RAIS ED LATER. BESIDES THESE EXCEPT FOR 6.7 PARTIES ALL HAD BALANCES BELOW RS.10,000/-, WHICH INCLUDED PARTIES LIKE CORPORATION BANK, GUJARAT GOV T.ETC. IT IS SEEN THAT ONLY IN RESPECT OF PAID OUTS AT RS.56,130/- AND OTH ER LIABILITIES OF RS.60,000/- PARTY WISE DETAILS WAS NOT MADE AVAILAB LE. THUS A SUM OF RS.1,16,130/- IS CORRECTLY DISALLOWABLE AS UNPROVED LIABILITIES. HENCE OUT OF RS.48,72,502/- ADDITION OF RS.1,16,130/- IS CONFIRMED AND THE BALANCE AMOUNT IS DELETED. 17. THE ASSESSEE IS NOW IN APPEAL AGAINST THE AFOR ESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSEE IN THE IR WRITTEN SUBMISSION RELIED UPON THEIR ARGUMENTS ADDUCED IN RESPECT OF I SSUES RAISED IN GROUND NOS. 2 & 3 ABOVE WHILE THE LD. DR SUPPORTED THE FIN DINGS OF THE LD. CIT(A). 18. WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND THAT THE NATURE AND DETAILS OF AMOUNT OF RS. 56,130 AND RS. 60,000 ARE NEITHER EVIDENT FROM THE IMPUGNED ORDERS NOR T HE ASSESSEE EITHER IN THEIR WRITTEN SUBMISSIONS AND EVEN BEFORE US EXPLAINED THE NATURE OF THESE LIABILITIES. IN THE ABSENCE OF RELEVANT DETAILS, TH E LD. CIT(A) UPHELD THE ADDITION OBSERVING THAT LIABILITIES ARE UNPROVED. IN THESE C IRCUMSTANCES, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUES RAISED I N THIS GROUND AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFICIENT OPPO RTUNITY TO BOTH THE PARTIES. THE ASSESSEE IS ALSO DIRECTED TO PROVIDE RELEVANT D ETAILS OF THESE LIABILITIES IN ORDER TO ENABLE THE LD. CIT(A) TO PASS A SPEAKING O RDER. WITH THESE DIRECTIONS, GROUND NO. 4 IN THE APPEAL IS DISPOSED OF 19. GROUND NO. 5 RELATES TO ADDITION OF RS.4,82,759 SUSTAINED BY THE LD. CIT(A) OUT OF TOTAL ADDITION OF RS.44,92,185/-. S INCE THE ASSESSEE DID NOT FURNISH ANY DETAILS OF RS. 44,92,185/- NOR ADDRESSE S OR CONFIRMATION OF THE PARTIES TO WHOM THESE LIABILITIES RELATED, THE AO T REATED THE ENTIRE AMOUNT AS FICTITIOUS AND ADDED TO THE INCOME. ON APPEAL, THE LD. CIT(APPEALS) CONCLUDED AS UNDER:- 9.3. I HAVE CONSIDERED THE SUBMISSION AND I HAVE A LSO GONE THROUGH THE CASE RECORDS. I FIND THAT DETAILS ALONG WITH ADDRESS OF PARTIES IN RESPECT OF ITEMS EXCEEDING RS.10,000/- WAS FURNISHE D BY THE APPELLANT ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 25 AS ASKED BY THE ASSESSING OFFICER. THE ASSESSING O FFICER DID NOT ISSUE NOTICES UNDER SECTION 133(6) IN RESPECT OF ALL THE PARTIES. HENCE IN RESPECT OF ITEMS BELOW RS.10,000/- AND CASES WHERE NO NOTICES WERE ISSUED, THERE WAS NO JUSTIFICATION OF ANY ADDITIONS . SIMILARLY WHERE TIME WAS SOUGHT BY THE PARTIES THERE WAS NO JUSTIFI CATION FOR ADDITION AS REGULAR TRANSACTIONS WITH THESE PARTIES WAS BEING C ARRIED OUT. SIMILARLY, CERTAIN PARTIES HAD SENT CONFIRMATIONS. IN VIEW OF THE FACTS NARRATED ABOVE IN RESPECT OF T HE CREDITORS (TTA) AMOUNTING TO RS. 44,92,185/- THE FOLLOWING POSITION WOULD EMERGE: TOTAL CREDITORS (TTA) 44,92,185 LESS : (I) CREDITORS EACH OF LESS THAN RS.10,000 3792 45 (II) LIABILITIES PROVIDED AS PER (A) ABOVE 186 2525 [TIPS-RS.19,649,SALARY-RS.2,65,067, TELEPHONE BILLS-RS.5,42,702, ELECTRICITY DUES-RS.10,35,107] (III) GENERAL CASHIER REIMBURSEMENT 4637 3 ---------- 22,88,143 22,04,042 LESS: BALANCE FOR WHICH NO NOTICE WAS ISSUED BY A.O. OUT OF ABOVE RS.22,04,042 9,76,4 83 ------------- BALANCE FOR WHICH NOTICES WERE SENT BY A.O. 12,27,559 LESS: BALANCES CONFIRMED BY CREDITORS 66,351 ------------ BALANCE 11,6 1,208 LESS : DIFF. IN A/C. OF VIJAY KUMAR MODI 50465 15016 = 35,449 DOUBLE ADDITION INDIA KITCHEN KING 10, 331 BALANCE OF M/S. ELCON FINLEASE (ASSESSED WITH SAME ASSESSING OFFICER) 22,280 CASES WHERE TIME WAS SOUGHT BY THE RECIPIENTS OF NOTICES (E.I.H. GROUP) 5,80,081 6,48,141 BALANCE RS. 5 ,13,067 9.4 BESIDES THIS CERTAIN REPLIES WERE RECEIVED B Y THE ASSESSING OFFICER AND ACTUAL DIFFERENCE FROM THE ACCOUNTS WAS AS UNDER: OBEROI GRAND 19,447 WESTERN SALES 10,861 30,308 5, 13,067 ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 26 30,308 4,82,759 IF THIS IS DEDUCTED THE BALANCE AMOUNT REMAINING UN CONFIRMED WORKS OUT TO RS.(RS.5,13,067 30,308) = RS.4,82,759/-. AS THE APPELLANT DID NOT EXPLAIN THIS DISCREPANCY EITHER OF THE TIME OF ASSESSMENT OR AT THE TIME OF APPELLATE PROCEEDINGS, ADDITION TO THE EXTE NT OF RS.4,82,759/- IS UPHELD AND THE BALANCE IS DELETED. 20. THE ASSESSEE IS NOW IN APPEAL AGAINST THE AFOR ESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSEE IN THE IR WRITTEN SUBMISSION RELIED UPON THEIR ARGUMENTS GIVEN IN RESPECT OF ISS UES RAISED IN GROUND NOS. 2 & 3 ABOVE WHILE THE LD. DR SUPPORTED THE FINDINGS O F THE LD. CIT(A). 21. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE NATURE AND DETAILS OF AMOU NT OF 4,82,759/- ARE NEITHER EVIDENT FROM THE IMPUGNED ORDERS NOR THE ASSESSEE E ITHER IN THEIR WRITTEN SUBMISSIONS AND EVEN BEFORE US EXPLAINED THE NATU RE OF THESE LIABILITIES AND THE DISCREPANCY. IN THE ABSENCE OF RELEVANT DETAILS , THE LD. CIT(A) UPHELD THE ADDITION OBSERVING THAT DISCREPANCY IS NOT EXPLAINE D. IN THESE CIRCUMSTANCES, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE TH E ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISS UES RAISED IN THIS GROUND AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFI CIENT OPPORTUNITY TO BOTH THE PARTIES. THE ASSESSEE IS ALSO DIRECTED TO PROVIDE R ELEVANT DETAILS OF THESE LIABILITIES AND EXPLAIN THE DISCREPANCY IN ORDER T O ENABLE THE LD. CIT(A) TO PASS A SPEAKING ORDER. WITH THESE DIRECTIONS, GROUND NO. 5 IN THE APPEAL IS DISPOSED OF ITA NO.2577/AHD/2003-AY1999-2000[ REVENUE] 22. ADVERTING NOW TO THE APPEAL OF THE REVENUE FOR THE AY 1999-2000, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT T HE RETURN DECLARING LOSS OF RS.3,71,45,666/- FILED ON 31/12/1999, AFTER BEING P ROCESSED U/S 143(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER [AO IN SHORT] ASKED THE ASSESSEE TO FURNISH COMPLET E NAMES AND ADDRESSES OF THE PERSONS AGAINST WHOM CURRENT LIABILITIES OF RS.3,09,24,609/- WERE OUTSTANDING. THOUGH THE AO ALLOWED A NUMBER OF OPPO RTUNITIES, VIDE NOTICE ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 27 DATED 24.12.2001, 20.2.2002 AND VIDE ORDERSHEET EN TRY DATED 28.2.2002 , THE ASSESSEE DID NOT FILE THE RELEVANT DETAILS ,DESPITE SEEKING ADJOURNMENTS UNTIL 22.3.2002. ACCORDINGLY, RELYING UPON HIS OWN FINDIN GS FOR THE AY 1998-99, THE AO ADDED AN AMOUNT OF RS.2,67,62,429/-, TREATING TH E SAME AS NON-GENUINE. 22.1. SIMILARLY, THE ASSESSEE DID NOT FILE CONFIR MATIONS IN RESPECT OF UNSECURED LOANS OF RS.2,17,29,472/-, DESPITE NOTICE DATED 24.12.2001, 14.2.2002 AND REQUEST MADE VIDE ORDERSHEET ENTRY DA TED 28.2.2002. SINCE THE ASSESSEE NEITHER FILED ANY CONFIRMATION NOR EST ABLISHED CREDITWORTHINESS OF THE CREDITORS, THE AO ADDED THE ENTIRE AMOUNT OF RS.2,17,29,472/-. 23. ON APPEAL, THE ASSESSEE CONTENDED THE ADDITION HAS BEEN MADE WITHOUT ANY BASIS WHATSOEVER, EITHER IN LAW OR ON FACTS. T HE A.O. HAS TAKEN A.Y. 98- 99 AS THE BASIS WHEREIN SIMILAR ADDITIONS WERE MADE . LIST OF OTHER LIABILITIES AGGREGATING TO RS.71.51 LACS FURNISHED TO THE A.O. INCLUDED (I) DUES TO OTHER GROUP COMPANIES WHICH WERE ASSESSED BY HIM (II) ALL THE REMAINING ITEMS WERE ON ACCOUNT OF STATUTORY DUES SUCH AS TDS, ESI , EXPENDITURE TAX, LUXURY TAX, SALES TAX, PROFESSIONAL TAX, ETC. WHICH WERE BOUND TO ARISE IN THE NORMAL COURSE OF APPELLANTS BUSINESS. THE ASSESSEE POINTE D OUT THAT THE AO HIMSELF OBSERVED THAT A LARGE NUMBER OF CREDITORS CONSTITUT ING THE AGGREGATE AMOUNT OF CURRENT LIABILITIES THIS YEAR INCLUDED ONLY SOM E PARTIES IN RESPECT OF WHICH ADVERSE FINDINGS HAD BEEN GIVEN IN THE ASSESSMENT ORDER FOR 1998-99. THE AUDIT REPORT UNDER SECTION 44AB OF THE ACT, INCLUDE D THE REQUIRED PARTICULARS OF EACH LOAN OR DEPOSIT COVERED UNDER SECTIONS 269SS/2 69T OF THE ACT. AS REGARDS ADDITION OF RS.2,17,29,472/-, THE ASSESSEE CONTENDED THE QUANTUM OF ADDITION REPRESENTS THE CLOSING BALANCE OF FIXED DE POSITS AND UNSECURED LOANS AS APPEARING IN THE BALANCE SHEET. OUT OF FIXED D EPOSITS OF RS.2,06,26,000/-, FRESH DEPOSITS RECEIVED DURING THE YEAR AMOUNTED TO RS.91,47,000/- THOUGH THE A.O. MADE THE ADDITION OF ENTIRE FIXED DEPOSITS . THE ASSESSEE FURNISHED CONFIRMATION IN RESPECT OF UNSECURED LOAN OF RS.11, 03,472/- OF SHREE JALARAM METALS PVT.LTD. ALSO WITH PARTYS ACCOUNT SHOWING P AN. 24. IN THE LIGHT OF AFORESAID SUBMISSIONS, THE LD. CIT(APPEALS) CONCLUDED AS UNDER WHILE DELETING THE TWO ADDITIONS ::- ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 28 5. I HAVE CAREFULLY LOOKED INTO THE SUBMISSIONS M ADE BY THE APPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORD ER. THE APPELLANT SUBMITTED THAT DETAILS REGARDING CURRENT LIABILITIES APPEARING IN THE BALANCE SHEET WERE FILED AS UNDER: - (A) A STATEMENT GIVING BROAD BREAK-UP OF THE DIFFE RENT COMPONENTS OF CURRENT LIABILITIES. (B) LIST OF CREDITORS FOR CAPITAL GOODS. (C) LIST OF CREDITORS FOR OPERATING SUPPLIES (D) LIST OF CREDITORS FOR EXPENSES (E) LIST OF PARTIES FROM WHOM SECURITIES WERE RE TAINED. (F) LIST OF OTHER LIABILITIES. SIMILAR INFORMATION WAS ALSO SUPPLIED TO THE A.O. V IDE LETTER DATED 19.2.2002 BY THE APPELLANT. THE QUESTION IS WHETHER THE A.O. COULD MAKE ADDITION ON THE GROUND THAT THE LI ABILITIES WERE FOUND BOGUS OR FICTITIOUS OR NON-GENUINE BY HIM. I N MY OPINION, THE A.O. HAD AMPLE TIME TO CONDUCT NECESSARY INQUIR IES INDEPENDENTLY AND MAKE SUITABLE ADDITION IN RESPECT OF THOSE ITEMS WHICH WERE FOUND TO BE BOGUS INSTEAD OF MAKIN G AN ADHOC ADDITION OR A LUMPSUM ADDITION. THE APPELLANT HAD SUPPLIED ALL THE DETAILS REGARDING THE LIABILITIES APPEARING IN THE BALANCE SHEET AT THE END OF THE ACCOUNTING PERIOD. THE VER Y BASIS OF ADDITION IS THAT SEVERAL LETTERS U/S.133(6) OF THE ACT WERE RECEIVED BACK AND VERSION OF SOME PARTIES DIFFERED. IN THIS REGARD, THE A.O. COULD CONFRONT THE ABOVE FACTS BEFORE THE APPELLANT AND ACCORDINGLY, SEEK RECONCILIATION OR C ONFIRMATION. THE ADDITION OF RS.35,27,689/- ON ACCOUNT OF RETEN TION SECURITY DEPOSITS HAS BEEN DELETED IN A.Y. 98-99 BY THE CIT( A)-I, AHMEDABAD. IN VIEW OF THESE FACTS, THE ADDITION OF RS.2,67,62,429/- ON ACCOUNT OF CURRENT LIABILITIES IS DELETED. 6. THE SECOND GROUND RELATING TO ADDITION ON ACCO UNT OF LOANS OR DEPOSITS RECEIVED DURING THE YEAR TO BE DISPOSED OFF WITH REGARD TO THE SUBMISSIONS OF THE APPELLANT IN THE A FORESAID PARAS. THE MANNER IN WHICH SUCH A HUGE ADDITION IS MADE BY THE A.O. CANNOT BE APPRECIATED AT ALL. THE CONCLUD ING PARA OF THE ASSESSMENT ORDER IS ALL A SWEEPING STATEMENT M ADE BY THE A.O. THE A.O. HAS NOT APPLIED HIS MIND WHILE MAKIN G ADDITION OF RS.2,17,29,472/- IN THAT HE DID NOT BOTHER EVEN OF THE COMPONENTS OR EVEN OF THE CONFIRMATION FILED BY THE APPELLANT. THE SWEEPING CONCLUSION THAT CONFIRMATIONS COULD NO T BE FILED BY THE APPELLANT, HENCE THE ONLY OPTION BEFORE THE A.O . WAS TO MAKE THE ABOVE ADDITION. THERE IS FAIRLY AMPLE TIM E WITH THE A.O. BEFORE COMPLETING THE ASSESSMENT WHEN HE CAN MAKE INDEPENDENT INQUIRIES ABOUT THE NEW CREDITORS. THE A.O. HAS NOT EVEN BOTHERED TO ASCERTAIN WHETHER THE AMOUNTS OF L OANS OR DEPOSITS WERE RECEIVED IN CASH OR BY WAY OF CHEQUE OR DRAFT SO THAT HIS SUSPICION REGARDING GENUINENESS OR CREDITW ORTHINESS ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 29 WOULD HAVE BEEN SATISFIED. THE A.O. HAS NOT ONLY M ADE ADDITION OF THE FRESH DEPOSITS BUT THE ENTIRE AMOUNT OF DEPO SITS APPEARING IN THE BALANCE SHEET OF THE APPELLANT. IN THE LIGH T OF AFORESAID DISCUSSION, THE A.O. WAS NOT SATISFIED IN MAKING SU CH AN ADDITION ON ACCOUNT OF LOANS OR DEPOSITS FOR WHICH NO INDEPENDENT INQUIRY WAS MADE BY HIM. THE CIT(A)-I, AHMEDABAD VIDE HIS ORDER NO.CIT(A)-I/CC.1(3)/151/01 -02 DATED 28.03.2002 HAS DELETED SIMILAR ADDITION IN A.Y. 199 8-99. THUS, THE ABOVE ADDITION OF RS.2,17,29,472/- IS DELETED. 25. THE REVENUE IS NOW IN APPEAL AGAINST THE AFOR ESAID FINDINGS OF THE LD. CIT(A). AS REGARDS ADDITION OF RS.2,17,29,472/- , T HE LD. DR REITERATED THEIR SUBMISSIONS IN RELATING TON A SIMILAR ADDITION ON ACCOUNT OF UNEXPLAINED DEPOSITS IN THE AY 1998-99 [C.F. PARA 5 ABOVE ] AN D SUPPORTED THE FINDINGS OF THE AO IN RESPECT OF TWO ADDITIONS. THE LD. AR ,ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ITAT DATED 23.5.2008 FOR THE AY 19 97-98 SO FAR AS ADDITION OF RS.2,17,29,472/- IS CONCERNED. AS REGARDS OTHER AD DITION ON ACCOUNT OF CURRENT LIABILITIES OF RS.2,67,62,429/- , THE LD. A R CONCEDED THAT THE SINCE THE IMPUGNED ORDER OF THE LD. CIT(A) IS NOT A SPEAKING ORDER, MATTER MAY BE RESTORED TO HIS FILE FOR READJUDICATION. 26.. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE T HROUGH THE FACTS OF THE CASE. AS REGARDS ADDITION OF RS.2,67,62,429/-,WE FI ND THAT THE LEARNED CIT(A) HAS NEITHER ANALYSED THE FACTS IN DETAIL NOR RECORD ED HIS SPECIFIC FINDINGS ON THE NATURE OF THE AFORESAID LIABILITIES. IN THESE C IRCUMSTANCES, WE FIND MERIT IN THE CONTENTIONS OF THE LD. AR THAT THE LD. CIT(A) H AS NOT PASSED A SPEAKING ORDER. WE ARE OF THE OPINION THAT THE APPLICATION O F MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORD ER. SECTION 250(6) OF THE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHILE DIS POSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERM INATION, THE DECISION THEREON AND THE REASONS FOR THE DECISION. AS IS APPARENT F ROM THE IMPUGNED ORDER, IN OUR OPINION, THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTIC E, NAMELY, THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS RE ASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHOR ITY TO THE ISSUES/POINTS RAISED BEFORE IT. THE REQUIREMENT OF RECORDING OF R EASONS AND COMMUNICATION THEREOF BY THE QUASI-JUDICIAL AUTHORITIES HAS BEEN READ AS AN INTEGRAL PART OF ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 30 THE CONCEPT OF FAIR PROCEDURE AND IS AN IMPORTANT S AFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIT Y, CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZ ES ARBITRARINESS IN THE DECISION-MAKING PROCESS. WE MAY REITERATE THAT A D ECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB, (1995)1SCC 760(SC)]. IN THIS CONNECTION FOLLOWING OBSERVATIONS OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF ANUSAYABEN A DOSHI& OTHERS VS. JCIT AND ANOTHER,177 CTR 218(BOM.), ARE RELEVANT: IT IS NEEDLESS TO EMPHASISE THAT THE ORDER OR JUDG MENT SHOULD BE SELF- EXPLANATORY. IT SHOULD NOT KEEP THE HIGHER COURT GU ESSING FOR REASONS. REASONS PROVIDE A LIVE-LINK BETWEEN CONCLUSION AND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARINESS, PASSION AND PREJUDICE. REASON IS A MANIFESTATION OF THE MIND OF THE COURT OR TRIBUNAL. IT IS A TOOL FOR JUDGING THE VALIDITY OF THE ORDER. IT GIVES AN OPPORTUNITY TO T HE HIGHER COURT TO SEE WHETHER THE IMPUGNED ORDER IS BASED ON REASONS AND THAT THE REASONS ARE BASED ON ADEQUATE LEGAL AND RELEVANT MATERIAL. GIVING REASON S IS AN ESSENTIAL ELEMENT OF ADMINISTRATION OF JUSTICE. A RIGHT TO REASONS IS , THEREFORE, AN INDISPENSABLE PART OF A SOUND SYSTEM OF JUDICIAL REVIEW. REASONED DECISION IS NOT ONLY FOR THE PURPOSE OF SHOWING THAT THE CITIZEN IS RECEIVIN G JUSTICE, BUT ALSO A VALID DISCIPLINE FOR THE AUTHORITY ITSELF. THEREFORE, STA TING OF REASONS IS ONE OF THE ESSENTIALS OF JUSTICE. IN THIS CASE, THE APPELLATE AUTHORITY BEING THE FINAL AUTHORITY ON THE FACTS WAS OBLIGED TO APPRECIATE TH E EVIDENCE, CONSIDER THE REASONING OF THE PRIMARY OR LOWER AUTHORITY AND ASS IGN ITS OWN REASONS AS TO WHY IT DISAGREED WITH THE REASONS AND FINDINGS OF T HE PRIMARY OR LOWER AUTHORITY. UNLESS ADEQUATE REASONS ARE GIVEN, MEREL Y BECAUSE IT IS AN APPELLATE AUTHORITY IT CANNOT BRUSH ASIDE THE REASO NING OR FINDING RECORDED BY THE LOWER AUTHORITY. 26.1 IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER ,WE CONSIDER IT FAIR AND AP PROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO H IS FILE FOR DECIDING THE ISSUES RAISED IN GROUND NO. 1 AFRESH IN ACCORDANCE WITH L AW, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY TH AT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKING OR DER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF T HE ACT. WITH THESE DIRECTIONS, GROUND NO. 1 IS DISPOSED OF. 27. AS REGARDS ADDITION OF RS.2,17,29,472/-, WE ARE OF THE OPINION THAT THE FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDER ATION ARE SIMILAR TO THE ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 31 FACTS OBTAINING IN THE AYS 1997-98 AND 1998-99. UN DISPUTEDLY AND AS FOUND BY THE LD. CIT(A), THE AO DID NOT APPLY HIS MIND WH ILE MAKING ADDITION OF RS.2,17,29,472/- NOR EVEN ASCERTAINED THE DETAILS O F DEPOSITS TAKEN IN THE YEAR UNDER CONSIDERATION. THE A.O. HAS NOT ONLY MA DE ADDITION OF THE FRESH DEPOSITS BUT THE ENTIRE AMOUNT OF DEPOSITS APPEARIN G IN THE BALANCE SHEET OF THE ASSESSEE. APPARENTLY, THE AO WAS NOT JUSTIFIED IN MAKING ADDITION ON ACCOUNT OF DEPOSITS RECEIVED IN THE PRECEDING YEARS . THE DEPOSITS FOR AN AMOUNT OF RS.91,47,000 ALONE ARE STATED TO HAVE BEE N RECEIVED IN THE YEAR UNDER CONSIDERATION. IN THE LIGHT OF AFORESAID DEC ISION DATED 23.5.2008 OF THE ITAT FOR THE AY 1997-98 IN THE ASSESSEES O WN CASE, REFERRED TO IN PARA 6 ABOVE, SINCE FACTS AND CIRCUM STANCES ARE SIMILAR TO FACTS OBTAINING IN THE AY 1997-98 AND 19 98-99 WHILE THERE IS NO APPARENT JUSTIFICATION FOR ADDITION MAD E BY THE AO FOR AN AMOUNT RS.2,17,29,472/-, WE HAVE NO HESITATION I N UPHOLDING THE CONCLUSIONS OF THE LD. CIT(A). THEREFORE, GROUND NO.2 IN THE APPEAL OF THE REVENUE IS DISMISSED. 28. GROUND NOS. NOS. 2 & 3 IN THE APPEAL OF THE REV ENUE FOR THE AY 1998- 99 AND GROUND NOS. 3 & 4 IN THE APPEAL OF THE REVEN UE FOR THE AY 1999-2000 AND AS ALSO GROUND NO. 6 IN THE APPEAL OF THE ASSES SEE, BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION WH ILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF RESIDUARY GROUND NO. 7 IN THE APPEAL OF THE ASSESSEE, ALL THESE GROUNDS ARE DISMISSED. 29. IN THE RESULT, APPEAL OF THE REVENUE FOR THE AY 1998-99 IS DISMISSED WHILE APPEAL OF THE ASSESSEE FOR THE AY 1998-99 IS ALLOWED, BUT PARTLY FOR STATISTICAL PURPOSES, AS AFORESAID AND THE APPEAL O F THE REVENUE FOR THE AY 1999-2000 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE S. ORDER SIGNED, DATED AND PRONOUNCED IN THE COU RT ON 24TH JULY,2009. SD/- SD /- ( MAHAVIR SINGH) ( A.N.PAHUJA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; 24TH JULY,2009 ITA NO.2577/AHD/2003 & ITA NO.1704& 1982/AHD/2002 32 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE ACIT, CENTRAL CIRCLE-1(3),AHMEDABAD 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I AHMEDABAD / CIT(APPEALS)- II, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD