DCIT 22(3), NAVI MUMBAI V. IQBAL M SAYED, NAVI MUMBAI

ITA 2619/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9379 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 30-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR SINGH
• Keywords: Sale consideration of property below Jantri Value; Additional evidence; Corroborative evidences; Onus to prove
• Section: 40A(3); 143(3); 50C; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I BENCH BEFORE SHRI I.P.BANSAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 2576/MUM/2009 (ASSESSMENT YEAR: 2005 -06) DCIT 22(3), 3 RD FLOOR, TOWER NO.6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI VS. SHRI IQBAL M. SAYED, 416 B, PERSEPOLIS, PLOT NO.74, SECTOR-17, VASHI, NAVI MUMBAI PAN NO. AMZPS 2897 Q (APPELLANT) (RESPONDENT) CO NO. 201/MUM/2009 (ARISING OUT OF ITA NO.2576/M/2009) (ASSESSMENT YEAR: 2005 -06) IQBAL M. SAYED, 416 B, PERSEPOLIS, PLOT NO.74, SECTOR-17, VASHI, NAVI MUMBAI PAN NO. AMZPS 2897 Q VS. DCIT 22(3), 3 RD FLOOR, TOWER NO.6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI (CROSS OBJECTOR) (RESPONDENT) & ITA NO. 2619/MUM/2010 (ASSESSMENT YEAR: 2006 -07) DCIT 22(3), 3 RD FLOOR, TOWER NO.6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI VS. SHRI IQBAL M. SAYED, 416 B, PERSEPOLIS, PLOT NO.74, SECTOR-17, VASHI, NAVI MUMBAI PAN NO. AMZPS 2897 Q (APPELLANT) (RESPONDENT) CO NO. 145/MUM/2011 (ARISING OUT OF ITA NO.2619/M/2010) ASSESSMENT YEAR: 2006 -07 SHRI IQBAL M. SAYED, 416 B, PERSEPOLIS, PLOT NO.74, SECTOR-17, VASHI, NAVI MUMBAI PAN NO. AMZPS 2897 Q VS. DCIT 22(3), 3 RD FLOOR, TOWER NO.6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI PRADEEP KUMAR SINGH ASSESSEE BY : MS. RITIKA AGARWAL DATE OF HEARING : 12.11.2012 DATE OF PRONOUNCEMENT : 21.11.2012 2 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 ORDER PER RAJENDRA, A.M. : ITA NO. 2576/M/09 ( AY 2005-06) FOLLOWING GROUNDS OF APPEALS/CROSS-OBJECTIONS HAVE BEEN FILE BY THE ASSESSING OFFICER (AO)/ ASSESSEE, CHALLENGING THE ORDER DATED 19.12.2008 OF THE CIT (A)-XXII, MUMBAI. GROUNDS OF APPEAL OF FILED BY THE AO, FOR THE AY 2005-06, READ AS UNDER: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.19,46,385/- MADE BY THE AO ON ACCOUNT OF UNCO NFIRMED CREDITORS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS UNABLE TO FURNISH THE CONFIRM ATIONS AND PROVE THE GENUINENESS OF THE CREDITORS. 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE ADDITION MADE BY THE AO ON ACCOUNT OF CASH EXPENSES FROM RS.8,40,560/- TO RS.84,056/- THEREBY GIVING RELIEF OF RS.7,56,504/- TO THE ASSESSEE WITH OUT APPRECIATING THE FACT THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THESE EXPENSES. 3.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. THE LD.CIT( A) ERRED IN RESTRICTING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF LABOUR CHAR GES FROM RS.1,91,520/- TO RS.95,760/- GIVING RELIEF OF RS.95,760/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THESE EXPENSES. CROSS OBJECTION- RESPONDENT INDIVIDUAL IS AGGRIEVED BY THE ORDER PAS SED BY LD.AO U/S 143(3) OF THE INCOME-TAX ACT,1961. 1.BECAUSE. LD. CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING ACTION OF THE LD.AO IN TREATING THE LONG TERM CAPITAL GAIN AS SHORT TERM CAPITAL GAI N ON SALE OF IMMOVABLE PROPERTY AND ALSO INVOKING THE PROVISIONS OF SECTION 50C IGNORING THE SALE DEED AND OTHER RELEVANT DETAILS ON RECORD. 2.BECAUSE, LD. CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING ACTION OF THE LD. AO IN TREATING THE AMOUNT REPRESENTED BY DECLARATION AS UNEXPLAINED CA SH CREDIT AMOUNTING TO RS.12,60,156/-. 3.BECAUSE, LD. CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE LD, AO IN MAKING DISALLOWANCE U/S 40(A)(IA) OF RS.48,57,997/- ON VAR IOUS PAYMENTS. 4.BECAUSE, LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING AN ADDITION OF RS.5,000/- U/S 40A(3) OF THE ACT. 5.BECAUSE, LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.8,456/- ON ESTIMATE BASIS FROM VARIOUS EXPENSES INCURRED. 6. BECAUSE, LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.95,760/- OUT OF TOTAL LABOUR CHARGES PAID. 7. BECAUSE, LD. CIT(A) ERRED IT LAW AND ON FACTS IN STAINING ADDITION OF RS.40,730/- OUT OF BUSINESS PROMOTION EXPENSES. 3 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIF Y OR WITHDRAW ANY GROUND OF CROSS OBJECTION. 2. ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF CONSTRUCTION, FILED HIS RETURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME OF RS.1 4,29,789/-. AO FINALISED THE ASSESSMENT ORDER U/S. 143 (3) OF THE INCOME-TAX ACT, 1961(ACT) , ON 31.12.2007DETERMINING THE TOTAL INCOME AT RS. 1, 0,30,686/-. DURING THE ASSESSMENT PROCEEDINGS AO MADE CERTAIN ADDITIONS/ DISALLOWANCES TO THE INCOME OF THE ASSESSEE. AGAIN ST THE ORDER OF THE AO ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA). HE PARTLY ALLOWED THE APPEAL FILED BEFORE HIM. AGAINST THE ORDER OF THE FAA APPEAL HAS BEEN F ILED BY THE AO WITH REGARD TO UNCONFIRMED CREDITORS, CASH PAYMENTS AND LABOUR CHA RGES. 3 . 1. GROUND NO.1 IS ABOUT DELETION OF ADDITION AMOUNTING TO RS.19.46 LAKHS. DURING THE ASSESSMENT PROCEEDINGS, AO ASKED THE ASSESSEE TO SU BMIT DETAILS OF 17 CREDITORS AND CONFIRMATIONS THERETO. ASSESSEE SUBMITTED COPIES O F ACCOUNTS OF 12 PERSONS. WHILE GOING THROUGH THE COPIES OF ACCOUNTS, THE AO FOUND THAT T HE COPIES DID NOT CONTAIN ADDRESS OR PAN OF THE PERSONS CONCERNED. HE HELD THAT THE AUTHENTI CITY OF THE SIGNATURES / CONFIRMATIONS AND THE GENUINENESS OF THE PARTIES COULD NOT BE VERIFIE D. OUT OF THE FIVE BALANCE CREDITORS, IN CASE OF TWO, COPIES OF ACCOUNTS WERE NOT CONFIRMED. IN C ASE OF THREE PARTIES, THE ASSESSEE HAD NOT FURNISHED CONFIRMATIONS ALSO. CONSIDERING THESE FAC TS, THE AO HELD THAT IN THE ABSENCE OF CONFIRMATION AMOUNT SHOWN AS CREDIT BALANCE AGAINST 17 CREDITORS, WAS TO BE TREATED AS UNPROVED/UNSUBSTANTIATED. AS A RESULT, HE ADDED RS. 19.46 LAKHS TO THE INCOME OF THE ASSESSEE. 3.2. IN THE APPELLATE PROCEEDINGS, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA, HELD THAT THE ASSESSING OFFICER HAD MADE NO EFFORT TO VERIFY THE GENUINENESS OF THE CREDITORS, THAT THE ADDITIONS WE RE MORE LIKE AN ADHOC AND SUMMARY ADDITION, THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WE RE NOT REJECTED BY THE ASSESSING OFFICER, THAT THE NEXUS BETWEEN THE EXPENDITURE AND THE BUSI NESS HAD NOT BEEN CHECKED, THAT NO EFFORT HAD BEEN MADE TO PROVE THAT THE ASSESSEE HAD NOT DI SCHARGED THE ONUS TO PROVE NECESSARY FACTS, THAT THE ORDER OF THE ASSESSING OFFICER DID NOT SPEAK ABOUT ANY DEFINITE REASON FOR DISALLOWING THE TRADE CREDITORS. RESULTANTLY, THE A DDITION MADE BY THE ASSESSING OFFICER WAS DELETED. 3.3. BEFORE US, THE DR SUBMITTED THAT THE ASSESSEE HAD N OT SUPPLIED CONFIRMATION LETTERS, THAT IN A FEW CASES, EVEN ACCOUNTS WERE NOT FILED, THAT FAA DID NOT CALL FOR ANY REMAND REPORT, THAT THE ASSESSING OFFICER HAD NO CHANCE TO VERIFY THE GENUINENESS OF THE CREDITORS. THE AR RELIED UPON THE ORDERS OF THE FAA. 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. DURING THE COURSE OF HEARING BEFORE US, A SPECIFIC QUESTION WAS PUT TO THE AR TO FIND OUT AS TO WHETHER THE COPIES OF THE ACCOUNTS, FILED BEFORE TH E AO, FORMED THE PART OF THE PAPER BOOK FILED BY THE ASSESSEE. IT WAS ADMITTED THAT SAME WE RE NOT AVAILABLE IN THE PAPER BOOK. WE FIND THAT THE FAA HAS DELETED THE ADDITION WITHOUT MAKIN G ANY ENQUIRY ABOUT THE GENUINENESS OF THE CREDITORS. THE ACT HAS GIVEN AMPLE POWERS TO T HE FAA TO MAKE ENQUIRIES HIMSELF OR GET THE ENQUIRIES MADE THROUGH THE AO. IN OUR OPINION, A REMAND REPORT SHOULD HAVE BEEN CALLED BY THE FAA IF HE WAS OF THE OPINION THAT PROPER VER IFICATION WAS NOT MADE. IN THE INTEREST OF JUSTICE, WE REMAND THE MATTER BACK TO THE FILE OF T HE FAA TO CALL FOR THE REMAND REPORT AND TO PASS A SPEAKING ORDER. GROUND NO.1 IS PARTLY ALLOWE D IN FAOVOUR OF THE ASSESSING OFFICER. 4 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 4 . GROUND NO.2 IS ABOUT RESTRICTING THE ADDITION MAD E BY THE AO, ON ACCOUNT OF CASH EXPENSES FROM RS.8.4 LAKHS TO RS.84,056/-,THEREBY G IVING RELIEF OF RS.7.56 LAKHS. FROM THE ASSESSMENT ORDER, IT IS TRANSPIRES THAT DURING ASSE SSMENT PROCEEDINGS, AO PERUSED THE CASH BOOK OF THE ASSESSEE AND FOUND THAT HE HAD CLAIMED EXPENSES AMOUNTING TO RS.8.4 LAKHS UNDER VARIOUS HEADS OF EXPENSES CONVEYANCE, OFFICE EXPENSES, PETROL, REPAIRS AND MAINTENANCE, STAFF WELFARE ETC..ASSESSEE DID NOT PR ODUCE ANY VOUCHERS OR PAPERS IN SUPPORT OF THESE PAYMENTS. AS THE GENUINENESS OF THE CLAIM COU LD NOT BE VERIFIED BY THE AO, SO HE DISALLOWED THE ENTIRE CLAIM MADE BY THE ASSESSEE. 4.1. IN THE APPELLATE PROCEEDINGS, THE FAA HELD THAT THE AO WAS NOT WRONG IN DISALLOWING CERTAIN PORTION OF THE EXPENSES AS UNVERIFIABLE AND NON-GENUINE, THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE THAT EXPENSES IN QUESTION WERE I NCIDENTAL TO BUSINESS OR THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS E OF BUSINESS, THAT THE ASSESSEE WOULD HAVE INCURRED CERTAIN EXPENSES DURING THE COURSE OF BUSINESS. FINALLY, THE FAA HELD THAT 10% DISALLOWANCE OF THE TOTAL EXPENSES FOR NOT BEING PR OVED WOULD BE JUST AND FAIR AND SERVE THE PURPOSE. 4.2. BEFORE US, THE DR SUBMITTED THAT THE ASSESSEE HAD N OT PRODUCED ANY EVIDENCE OF INCURRING THE EXPENDITURE FOR BUSINESS PURPOSES BEF ORE THE AO/FAA, THAT THE FAA HIMSELF HAD ADMITTED THAT THE ASSESSEE HAD FAILED TO SUBSTA NTIATE HIS CLAIM, THAT EXPENSES CLAIMED TO HAVE BEEN INCURRED WERE NOT VERIFIABLE. THE AR REL IED UPON THE ORDER OF THE FAA. 4.3. WE HAVE HEARD RIVAL SUBMISSIONS AND WE ARE OF THE O PINION THAT THE FAA SHOULD NOT HAVE GIVEN ANY RELIEF TO THE ASSESSEE WITHOUT MAKIN G FURTHER ENQUIRIES. WE FAIL TO UNDERSTAND AS TO WHY THE REMAND REPORT WAS NOT CALLED FOR BY T HE FAA, IF HE WAS OF THE OPINION THAT FURTHER VERIFICATION/INVESTIGATION WAS REQUIRED FOR DECIDING THE ISSUE BEFORE HIM. IN THESE CIRCUMSTANCES, IN OUR OPINION, IT WOULD BE JUST AND PROPER TO REMAND THE MATTER BACK TO THE FILE OF THE FAA FOR PASSING A SPEAKING ORDER AFTER OBTAINING NECESSARY DOCUMENTARY EVIDENCES FROM THE ASSESSEE BEFORE ALLOWING/DISALLO WING THE CLAIM MADE BY HIM. 5 . GROUND NO.3 RAISED BY THE DEPARTMENT IS WITH REGA RD TO LABOUR CHARGES. WHILE FRAMING THE ASSESSMENT, AO FOUND THAT THE ASSESSEE HAD CLAIMED LABOUR CHARGES AMOUNTING TO RS.9.57 LAKHS PAID TO 25 PERSONS. HE FOUND THAT MOS T OF THE PAYMENTS WERE IN CASH. HE HELD THAT THE GENUINENESS OF THESE PAYMENTS COULD NOT BE VERIFIED, THAT PAYMENTS WERE NOT JUSTIFIED. HE DISALLOWED 20% OF THE LABOUR CHARGES AMOUNTING TO RS.1.91 LAKHS AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE FAA WHILE DECIDING THE APPEAL FILED BY THE ASSE SSEE HELD THAT THE AO WAS NOT WRONG IN DISALLOWING CERTAIN PORTION OF THE EXPENSES, THAT T HE ASSESSEE HAS PLEADED HIS INABILITY TO IDENTIFY THE PERSONS TO WHOM PAYMENTS CASH PAYMENTS WERE MADE, THAT MERE BOOK ENTRIES DO NOT PROVE GENUINENESS OF EXPENSES. FINALLY, HE HELD THAT THE ASSESSEE WOULD HAVE INCURRED CERTAIN CASH EXPENSES DURING THE COURSE OF BUSINESS AND CONFIRMED THE DISALLOWANCE OF 10% OF THE TOTAL EXPENDITURE I.E. RS.95,760/-. 5.1. BEFORE US, THE DR AND THE AR MADE SAME SUBMISSIONS WHICH WERE MADE FOR THE EARLIER GROUNDS OF APPEAL. WE FIND THAT THE FAA HAS NOT DECIDED THE ISSUE ON MERITS. IN OUR 5 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 OPINION, FOR DECIDING THE ISSUE FURTHER VERIFICATIO N/INVESTIGATION IS NECESSARY. IN THE INTEREST OF JUSTICE, MATTER IS REMANDED BACK TO THE FILE OF THE FAA FOR PASSING SPEAKING ORDER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE/AO. THE ASSESSEE IS DIRECTED TO EXTEND FULL COOPERATION TO THE FAA. GROUND NO.3 IS ALLOWED IN PART IN FAVOUR OF THE DEP ARTMENT. 6. AS A RESULT, APPEAL FILED BY THE REVENUE FOR THE AY 2005-06 STANDS PARTLY ALLOWED. C.O.NO.201/MUM/2009 (AY 2005-06) 7. IN CROSS OBJECTION, FIRST GROUND RAISED BY THE A SSESSEE PERTAINS TO UPHOLDING THE ACTION OF THE AO BY THE FAA IN TREATING THE LONG TERM CAPI TAL GAIN AS SHORT TERM CAPITAL GAIN ON SALE OF IMMOVABLE PROPERTY AND INVOKING THE PROVISIONS O F SECTION 50C OF THE ACT. 7.1 DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED T HAT THE ASSESSEE HAD SHOWN SALE OF PLOT OF LAND. THE AO ASKED THE ASSESSEE TO SUBMIT A COPY OF THE PURCHASE AND SALE DEED IN RESPECT OF THE PLOT IN QUESTION. HE INVOKED SECTIO N 50C OF THE ACT AND ADOPTED THE VALUE TAKEN BY THE STAMP DUTY AUTHORITIES. HE DENIED THE INDEXATION COST TO THE ASSESSEE AND ENTIRE CONSIDERATION WAS BROUGHT TO TAX UNDER THE HEAD SHO RT TERM CAPITAL GAINS. 7.2 IN THE APPELLATE PROCEEDINGS, FAA HELD THAT PLOT OF LAND WAS SOLD FOR A CONSIDERATION OF RS.10 LAKHS, THAT ENDORSEMENT OF THE STAMP DUTY AUTHORITIES WAS NOT AVAILABLE, THAT THE CORRECT CAPITAL GAINS HAD NOT BEEN DECLARED BY THE APPELLANTS. ADDITION MADE BY THE AO WAS UPHELD BY THE FAA. 7.3 WE FIND THAT THE AO HAS TAKEN THE SALE CONSIDERATIO N FOR THE PLOT IN QUESTION AT RS.15 LAKHS, WHEREAS AS PER THE FAA, THE PLOT WAS SOLD AT RS.10 LAKHS. IN OUR OPINION, THE ISSUE UNDER CONSIDERATION NEEDS FURTHER VERIFICATION. IN THE INTEREST OF JUSTICE, THE MATTER IS REMANDED BACK TO THE FILE OF THE AO TO DECIDE THE I SSUE AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSE E IS DIRECTED TO PRODUCE ALL THE NECESSARY DOCUMENTS BEFORE THE AO IN THIS REGARD. GROUND NO.1 IS PARTLY ALLOWED IN FAVOUR OF THE ASSE SSEE. 8 . THE NEXT GROUND OF CROSS OBJECTION IS ABOUT UPHOL DING THE ACTION OF THE AO IN TREATING THE AMOUNT OF RS.12.6 LAKHS THAT REPRESENTED BY THE VDIS DECLARATION. WHILE GOING THROUGH THE ORDERS OF THE AO AND THE FAA, WE FIND THAT THE ISSUE NEEDS FURTHER VERIFICATION. IT APPEARS THAT THE SUBMISSION OF THE ASSESSEE THAT SOME AMOUN T WOULD BE SUFFERING DOUBLE TAXATION HAS NOT BEEN ADJUDICATED BY THE REVENUE AUTHORITIES. T HEREFORE, THIS ISSUE IS ALSO RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. GROUND NO.2 IS PARTLY ALLOWED IN FAVOUR OF THE ASSE SSEE. 9 . THE NEXT GROUND OF CROSS OBJECTION IS WITH REGARD TO DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 6 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 9.1. THE AR SUBMITTED THAT THE ASSESSEE HAD REASONABLE C AUSES OF FAILURE FOR NOT DEDUCTING THE TAXES, THAT THE SUBMISSIONS MADE BY THE ASSESSE E WERE NOT CONSIDERED BY BOTH THE AUTHORITIES BELOW. 9.2. WE FIND THAT THE ASSESSMENT ORDER AS WELL AS THE OR DER BY THE FAA ARE SILENT ABOUT THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD. IN THE INTEREST OF JUSTICE, THIS MATTER NEEDS TO BE RESTORED BACK TO THE FILE OF THE AO. GROUND NO.3 IS PARTLY ALLOWED. 10. GROUNDS NO.4 & 5, RELATING TO ADDITION MADE UNDER S ECTION 40A(3) AMOUNTING TO RS. 5000/-AND AN ADDITION OF RS.8,456/- ON ESTIMATE BAS IS FOR VARIOUS EXPENSES INCURRED BY THE ASSESSEE. 10.1. WE HAVE PERUSED THE ORDERS OF THE FAA AND THE AO. I N OUR OPINION, BOTH THESE ADDITIONS /DISALLOWANCES NEED FURTHER VERIFICATION AND, THEREFORE, THE SAME ARE SENT BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. GROUNDS NO.4&5 ARE PARTLY ALLOWED. 11. GROUND NO.6 IS ABOUT LABOUR CHARGES. WE HAVE ALREA DY RESTORED THE MATTER TO THE FILE OF THE AO, WHILE DEALING WITH THE GROUND NO.3 RAISE D IN THE APPEAL OF THE REVENUE, THEREFORE, NO SEPARATE ORDER IS PASSED FOR GROUND NO.6 OF THE CROSS OBJECTION. 11.1 . GROUND NO.7 DEALS WITH ADDITION OF RS.40,730/- , MADE BY THE AO, OUT OF THE BUSINESS PROMOTION EXPENSES . ASSESSEE HAD CLAIMED BUSINESS PROMOTION EXPENSES OF RS2,03,668/-. IN HIS SUBMISSIONS BEFORE THE AO HE STATED THAT THESE EXPENSES WERE INCURRED FOR THE ENTERTAINMENT OF THE VISITING CLIENTS AND F OR TAKING CARE OF THEIR NEEDS DURING THEIR STAY ON BUSINESS TRIPS. AO HELD THAT THE EXTENT OF THE CLAIM WAS NOT JUSTIFIED, THAT PERSONAL ELEMENT OF IN THE EXPENSES INCURRED COULD NOT BE DE NIED. HE DISALLOWED RS. 1,00,000/- OUT OF PROMOTION EXPENSE. IN THE APPELLATE PROCEEDINGS FAA HELD THAT THAT THE AO WAS NOT WRONG IN DISALLOWING CERTAIN PORTION OF EXPENSES AS THE SAME WERE NOT JUSTIFIED AND ALSO IN VIEW OF THE PERSONAL ELEMENT OF EXPENSES INVOLVED THEREIN, THAT THE APPELLANT HAD NOT PROVED THAT THESE EXPENSES ARE INCIDENTAL TO BUSINESS AND WHOLLY AND SOLELY EXPENDED FOR THE PURPOSE OF BUSINESS. HE RESTRICTED THE DISALLOWANCE TO 20% CO NFIRMING ADDITION OF RS.40,730/- AND GIVING RELIEF OR RS.59,270/-. BEFORE US, AR SUBMIT TED THAT ADDITION WAS MADE ON AN AD-HOC BASIS, THAT NO PERSONAL ELEMENT WAS INVOLVED IN THE EXPENDITURE IN QUESTION, THAT AO AND FAA HAD NOT APPRECIATED THE FACTS IN PROPER PROSPEC TIVE. DR SUPPORTED THE ORDER OF THE FAA. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL. FROM THE ORDERS OF THE AO/FAA IT IS NOT CLEAR AS WHAT WAS THE BASIS OF ADD ITION/PART RELIEF. IN OUR OPINION MATTER NEEDS FURTHER VERIFICATION AND INVESTIGATION AT THE LEVEL OF THE AO. IN THE INTEREST OF JUSTICE MATTER IS BEING RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. GROUND NOS.6 & 7 ARE PARTLY ALLOWED. CROSS OBJECTIONS FILED BY THE ASSESSEE STAND PARTLY ALLOWED. 7 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 ITA NO. 2619/M/10 - ( AY 2006-07) 12. FOLLOWING GROUNDS OF APPEAL HAVE BEEN FILED BY THE AO FOR THE YEAR UNDER CONSIDERATION: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF RS.8,89,000/- ON ACCOU NT OF UNCONFIRMED CREDITORS WITHOUT APPRECIATING THE FACT THAT THE A.O. MADE THE SAID ADDITION SINCE THE ASSESSEE FAILED TO PRODUCE CONFIRMATION TO PROVE THE GENUINENESS OF THE SAID AMOUNT. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF RS.3,06,095/- ON ACCOU NT OF MISCELLANEOUS RECEIPTS IN ICICI BANK AS UNEXPLAINED INCOME SINCE ASSESSEE FAILED TO FURNISH DETAILS/EVIDENCE IN SUPPORT OF THE SAME. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE MADE U/S.40(A)(IA) BY THE A.O. UNDER V ARIOUS HEADS FROM RS.56,10,415/- TO RS. 16,49,842/- THEREBY GIVING RELIEF OF RS.39,60,5 73/- WITHOUT APPRECIATING THE FACT THE ASSSESSEE HA S NOT DEDUCTED TAX AT SOURCE AS REQUIRED U/S. 194 OF THE ACT. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O OF RS.7,88,924/ -BEING FIN DS FROM UNEXPLAINED SOURCES WITHOUT APPRECIATING THE FACT THAT THE A.O. MADE THE SAID ADDITION SINCE THE ASSESSEE FAILED TO PRODUCE SUPPORTING EVIDENCE IN RESPECT OF THE CAPITAL INTRODUCED IN THE BUSINES S. 5.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND TH E LAW, THE LD.CIT(A) HAS ERRED IN ACCEPTING FRESH EVIDENCE, WHEN THERE WAS NO BONAFIDE REASONS FOR TH E ASSESSEE FOR NOT PRODUCING THE SAME AT THE TIME OF ASSESSMENT PROCEEDINGS. 6.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) FAILED TO CALL FOR A REMAND REPORT FROM THE A.O. WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE A.O. AND ENTERTAINING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF THE I.T.RULES,1961. 7.THE APPELLANT PRAYS THAT THE ORDER OF THE THAT OF THE A.O. BE RESTORED. 8.THE APPELLANT CRAVES LEAVE TO AMEND OR MAY BE NEC ESSARY. 13 . GROUND NO.1 IS ABOUT DELETING THE ADDITION MADE BY THE A.O. OF RS.8,89,0 00/- ON ACCOUNT OF UNCONFIRMED CREDITORS. DURING THE ASSES SMENT PROCEEDINGS AO DIRECTED THE ASSESSEE TO SUBMIT DETAILS OF CREDITORS AND CONFIRM ATIONS THERETO ABOUT 9 PERSONS, BUT THE ASSESSEE DID NOT FURNISH CONFIRMATIONS LETTERS FROM THE CREDITORS. IN ABSENCE OF CONFIRMATIONS, HE ADDED RS.8.89 LAKHS TO THE TOTAL INCOME OF THE A SSESSEE. FOR DELETING THE ADDITION, THE FAA HAS GIVEN ALMOST THE SAME REASONS, THAT WERE GIVEN BY HIM FOR DELETING THE ADDITION FOR THE EARLIER AY. (IN PARA 3.2). FOLLOWING THE ORDERS OF THE LAST ASSESSMENT YEAR WE RESTORE BACK THE MATTER TO THE FILE OF THE FAA. GROUND NO.1 IS PARTLY ALLOWED IN FAVOU R OF THE AO. 14 . GROUND NO.2 PERTAINS TO DELETION OF ADDITION O F RS.3.06 LAKHS ON ACCOUNT OF MISCELLANEOUS RECEIPTS IN ICICI BANK. WHILE FRAMIN G THE ASSESSMENT ORDER AO FOUND THAT 8 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 BANK ACCOUNT OF THE ASSESSEE WITH ICICI BANK HAD SH OWN CREDIT OF RS.3.06 LAKHS. AS PER THE AO, NO DETAILS OR EVIDENCE WAS PRODUCED BEFORE HIM TO EXPLAIN THE NATURE OF THE SAID RECEIPTS. HE HELD THAT IN ABSENCE OF ANY EXPLANATI ON, THE AMOUNT IN QUESTION WAS TO BE TREATED AS UNEXPLAINED INCOME OF THE ASSESSEE. IN APPELLATE PROCEEDINGS, THE FAA HELD THAT THE ASSESSEE HAD SUBMITTED A LETTER FROM ICICI LOMB ARD (DATED 9-5-2005), THAT THE SAID LETTER PROVED THE GENUINENESS OF THE ENTRY, THAT THE AO OV ERLOOKED THIS ASPECT WHILE MAKING THE ADDITION. 14.1. BEFORE US, DR SUBMITTED THAT FAA DID NOT ALLOW THE AO TO VERIFY THE GENUINENESS OF THE LETTER OF ICICI LOMBARD, THAT ADDITIONAL EVIDE NCE WAS ADMITTED BY THE FAA WITHOUT PROVIDING AN OPPORTUNITY TO THE AO. 14.2. WE FIND THAT THE FAA DID NOT CALL FOR ANY COMMENTS FROM THE AO WHILE DISCUSSING THE LETTER OF ICICI LOMBARD. IN OUR OPINION, THE F AA SHOULD HAVE CALLED FOR A REMAND REPORT IN THIS REGARD. IN THESE CIRCUMSTANCES, THE MATTER IS BEING RESTORED BACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION. GROUND NO.2 IS PARTLY ALLOWED IN FAVO UR OF THE REVENUE. 15 . GROUND NO.3 IS ABOUT RESTRICTING THE DIS ALLOWANCE MADE UNDER SECTION 40A(IA) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THA T THE ASSSESSEE HAD MADE PAYMENTS UNDER THE HEADS LABOUR CHARGES, MACHINERY HIRING CH ARGES, TRANSPORTATION CHARGES AND AUDIT FEE, THAT ASSESSEE HAD DEDUCTED TAX AT SOURCE AS PE R THE PROVISIONS OF THE SECTION 194 OF THE ACT. FOR FAILURE OF NON DEDUCTION OF TAX HE MADE D ISALLOWANCE OF RS.56.10 LAKHS. IN THE APPELLATE PROCEEDINGS, FAA REFERRED TO THE LABOUR R EGISTER PRODUCED BY BEFORE HIM. HE HELD THAT PROVISIONS OF TDS WERE NOT APPLICABLE FOR SUCH PAYMENTS. FROM THE MATERIAL AVAILABLE WITH HIM, HE HELD THAT THE PAYMENT MADE TO TARMAL I NDIA PVT. LTD. WAS FOR PURCHASE OF RAW MATERIAL AND NOT FOR LABOUR. FINALLY, HE HELD THAT BY AND LARGE, THE ASSESSEES CLAIM WAS CORRECT. GIVING RELIEF OF RS. 39.6 LAKHS, HE UPHELD ADDITION OF RS.16.49 LAKHS. 15.1. AFTER GOING THROUGH THE ORDERS OF THE AO AND THE FA A WE ARE OF THE OPINION THAT THE QUESTION OF LIABILITY UNDER TDS PROVISIONS HAS NOT BEEN LOOKED INTO BY THE AO/ FAA PROPERLY. THE ASSESSEE HAD NOT SUBMITTED ALL THE N ECESSARY DOCUMENTS BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. ASSESSEE HAS CLAIMED TH AT HE HAD MADE PART PAYMENT OF TAXES DEDUCTED AT SOURCE. IN OUR OPINION HIS SUBMISSION N EEDS FURTHER VERIFICATION. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT IT WOULD BE JUST AND PROPER TO SEND BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION. GROUND NO.3 STANDS PARTLY ALLOWED IN FA VOUR OF THE AO. 16 . LAST EFFECTIVE GROUND OF APPEAL IS ABOUT D ELETION OF ADDITION OF RS.7,88,924/-.AS PER THE AO, THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE SO URCE OF INTRODUCTION OF THE SAID AMOUNT. HE TREATED THE AMOUNT-IN-QUESTION AS FUNDS OBTAINED FROM UNEXPLAINED SOURCES AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEL LATE PROCEEDINGS FAA HELD THAT BEFORE MAKING THE ADDITION THE AO HAD NOT FULLY INVESTIGAT ED IN THE RECORDS AVAILABLE WITH HIM ON THE ISSUE, THAT THE ASSESSEE HAD PROVED THE GENUINE NESS OF THE TRANSACTION FROM HIS BOOKS OF ACCOUNTS AND BANKS. 9 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 16.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN OUR OPINION , A REMAND REPORT SHOULD HAVE BEEN OBTAINED BY THE FAA BEFORE DECIDING THE ISSUE . IF HE WAS OF THE OPINION THAT MATTER WAS NOT FULLY INVESTIGATED BY THE AO. IN THESE CIRCUMS TANCES, IN THE INTEREST OF JUSTICE, THE MATTER IS SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDI CATION. GROUND NO.4 FILED BY THE AO STANDS PAR TLY ALLOWED IN HIS FAVOUR. 17 . GROUNDS NO.5 & 6 ARE ABOUT FRESH EVIDENCE PRODUCED BY THE ASSESSEE BEFORE THE FAA. AS WE HAVE RESTORED BACK THE MATTER TO THE FIL E OF THE AO, SO BOTH THE GROUNDS ARE TREATED AS DISPOSED FOR STATISTICAL PURPOSES. 18. APPEAL FILED BY THE REVENUE, FOR THE AY. 2006-07, STANDS PARTLY ALLOWED. C.O.NO.145/MUM/2011 ( AY 2006-07) 19. CROSS OBJECTIONS FILED BY THE ASSESSEE READ AS UNDE R : THE RESPONDENT INDIVIDUAL IS AGGRIEVED BY THE ORDER OF LD. CIT (A)-33 MUMBAI FOR AY 2006-07. 1.(I) BECAUSE, CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE MADE BY LD. AO FOR RS.16,49,622/- BY INVOKING SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961, IGNORING THAT THE APPELLANT HAD NO LIABILITY TO DEDUCT TDS U/S 194C OF THE ACT ON SUCH EXPENSES. (II)BECAUSE, CIT(A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ABOVE DISALLOWANCE IGNORING THE FACT THAT OUT OF TOTAL EXPENSE OF RS.16,49,622/- AP PELLANT HAS ALREADY PAID RS. 10,31,465/- AND ONLY RS. 6,18,157/- IS PAYABLE AT THE YEAR END. 19.1 . GROUNDS RAISED IN THE CROSS-OBJECTION FILED BY THE ASSESSEE IS ABOUT DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. AS THE MA TTER HAS BEEN RESTORED BACK TO THE FILE OF THE AO, (PARA 15.1) THE ASSESSEE CAN SUBMIT HIS ARG UMENTS, IN THIS REGARD, BEFORE THE ASSESSING OFFICER. CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED PARTLY. 20. AS A RESULT, APPEALS/CROSS OBJECTIONS FILED BY THE AO/ASSESSEE (ITA NOS. 2576/M/09 & 2619/M/10 AND CO NOS.201/M/09 & 145/M/11) STAND P ARTY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 SD/- (I.P.BANSAL) JUDICIAL MEMBER SD/- (RAJENDRA) ACCOUNTANT MEMBER MUMBAI, DATED 21 ST NOVEMBER, 2012 PKM 10 ITA NO. 2576/MUM/2009 CO NO. 201/MUM/2009 ITA NO. 2619/MUM/2010 CO NO. 145/MUM/2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS), MUMB AI 4. COMMISSIONER OF INCOME TAX, , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH I MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI