SHRI CHANDRASHEKHAR V. MUDALIAR, Nagpur V. A.C.I.T. Central Cir. 1(1), Nagpur

ITA 298/NAG/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4520 (ITAT-NAGPUR)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 1998-1999
• Appeal Filed On: 26-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGNES P THOMAS
• Keywords: Unexplained investment; Opportunity of being heard
• Section: 143(3); 234B; 147; 131; 148

Judgement Text

1 ITA NO. 298/NAG/2015. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 298 /NAG/2015. ASSESSMENT YEAR : 1998 - 99 . SHRI CHANDRA SHEKHAR V. MUDALIAR, ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CENTRAL CIRCLE - 1(1), NAGPUR. PAN ADSPM1529K. APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT BY : S MT. AGNES P. THOMAS. DATE OF HEARING : 29 - 08 - 2016 DATE OF PRONOUNCEMENT : 19 TH SEPT., 2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - III, NAGPUR DATED 20 - 10 - 2015 AND PERTAINS TO ASSESSMENT Y EAR 1998 - 99. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE NOTICE ISSUED UNDER SECTION 148 OF I.T. ACT 1961 IS ILLEGAL, INVALID AND BAD IN LAW AND CONSEQUENT ASSESSMENT FRAMED THEREUPON DESERVES TO BE QUASHED/ANNULLED. 2. THE FRESH REASONS RECORDED BY A.O. IS CONTRAR Y TO THE DIRECTION OF THE HONBLE ITAT, NAGPUR BENCH, NAGPUR AND HENCE FRESH ASSESSMEN FRAMED UNDER SECTION 143(3) R.W.S. 254 IS ILLEGAL, INVALID AND BAD IN LAW AND DESERVES TO BE CANCELLED. 3. THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE A.O. HAS CARRI ED OUT THE DIRECTIONS OF THE HONBLE ITAT, NAGPUR BENCH, NAGPUR, IN LETTER AND SPIRIT. 2 ITA NO. 298/NAG/2015. 4. THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE A.O. HAS DUTY FOLLOWED THE MANDATE OF SECTION 148(2) OF I.T. ACT, 1961 FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF I.T. ACT, 1961. 5. THE A.O. ISSUING THE NOTICE U/S 148 OF I.T. ACT 1961 AND THE A.O. RECORDING THE REASONS IS NOT THE SAME PERSON AND THUS ASSESSMENT FRAMED IS ILLEGAL, INVALID AND BAD IN LAW. 6. THERE IS NO VALID SERVICE OF NOTICE UNDER SECTION 148 OF I.T. ACT 1961 AS THE REASONS RECORDED WERE NOT COMMUNICATED TO ASSESSEE WITHIN THE TIME LIMIT OF SIX YEARS SPECIFIED U/S 149 OF I.T.ACT 1961. 7. THE ADDITION MADE BY A.O. AT RS.17,00,000/ - AT THE HANDS OF ASSESSEE IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 8. THE LD . CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 17 LAKHS AT THE HANDS OF ASSESSEE WHEN THE RASID PAWTI ON THE BASIS SOF WHICH THE A.O. REOPENED ASSESSMENT OF ASSESSEE RELATES TO FIRM M/S NEW VIRAJ HOUSING AGENCY IN WHICH ASSESSEE IS A MANAGING PARTNER. 9. THE ASSESSEE DENIES LIABILITY TO PAY INTEREST UNDER SECTION 234A, 234B AND 234C OF I.T. ACT, 1961. WITHOUT PREJUDICE, INTEREST CHARGED UNDER SECTION 234A, 234B AND 234C IS ILLEGAL, INVALID AND EXCESSIVE. 2. APROPOS THE ISSUE OF JURISDICTION: IN THIS CASE, THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON 28 - 02 - 2003 WITH TOTAL INCOME OF RS.75,000/ - WHICH WAS INVALID RETURN. NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 15 - 10 - 2004 BY THE AO IN RESPONSE TO WHICH THE ASSESSEE SUBMITTED THAT THE RETURN ALREADY F ILED ON 28 - 02 - 2003 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE I.T. ACT. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143 OF THE I.T. ACT, INFORMATION WAS RECEIVED BY THE AO THAT THE ASSESSEE HAS PAID CASH OF RS.17,00,000/ - T O ONE SHRI NARENDRA NATRAJ MUD A LIAR, CIVIL LINES, GONDIA FOR PURCHASE OF AGRICULTURAL LAND AT VILLAGE MUNDIPAR, TALUKA GONDIA ADMEASURING 0.40 R HECTORS. 3. THE INFORMATION IN POSSESSION OF THE ASSESSING OFFICER WAS ACTUALLY A RECEIPT GIVEN BY THE SHRI NARENDRA N. MUDLIAR ON STAMP PAPER OF RS.50/ - DATED 07 - 07 - 1997 IN WHICH HE HAS ACKNOWLEDGED THE RECEIPT OF RS.17,00,000/ - IN CASH FROM SHRI CHANDRASHEKHAR V. MUDLIAR, MANAGING PARTNER OF M/S NEW VIRAJ 3 ITA NO. 298/NAG/2015. HOUSING AGENC Y. AFTER NECESSARY VERIFICATION, THE ASSESSING OFFICER CAME TO CONCLUSION AND HELD HAT THE PAYMENT OF RS.17 LAKHS DATED 07 - 07 - 1997 TO SHRI NARENDRA NATRAJ MUDLIAR WAS UNEXPLAINED IN THE HANDS OF THE ASSESSEE. THE AMOUNT WAS ADDED IN THE HANDS OF THE ASSESS EE AND THE ASSESSMENT WAS COMPLETED ON 27 - 03 - 2006. IN THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) - II, NAGPUR, THE APPEAL OF HE ASSESSEE WAS DISMISSED BY ORDER DATED 22 - 11 - 2007 AND THE ADDITION MADE BY THE ASSESSING OFFICER IN THE CASE OF SHRI CHANDRASHEKH AR V. MUDLIAR WAS UPHELD. IN FACT , IN THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE MAJOR GROUND TAKEN BY THE ASSESSEE WAS THAT THE PAYMENT WAS MADE BY THE FIRM M/S NEW VIRAJ HOUSING AGENCY AND NOT BY SHRI CHANDRASHEKHAR V. MUDLIAR. THE ISSUE WAS DEALT IN DETAIL BY THE CIT(A) AND IT WAS HELD THAT UNEXPLAINED INVESTMENT CANNOT BE ASSESSED IN THE HANDS O THE FIRM AS ARGUED BY THE ASSESSEE. 4. THE ASSESSEE FILED APPEAL BEFORE HONBLE ITAT, NAGPUR BENCH, NAGPUR AGAINST THE ORDER OF THE CIT(APPEALS), NAGPUR. DURING THE APPEAL BEFORE THE HONBLE ITAT, THE ASSESSEE FILED TWO ADDITIONAL GROUNDS WHICH WERE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AO ERRED IN ASSUMING THE JURISDICTION U/S 147 OF THE ACT, 1961 WHEN NO REASONS ARE RECORD ED FOR RE - OPENING THE ASSESSMENT NOR IT WAS SUPPLIED TO THE APPELLANT HENCE THE ORDER OF THE AO IS BAD IN LAW. THE LD. CIT(A) ERRED IN UPHOLDING THE RE - ASSESSMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AO ERRED IN RE - OPENING THE ASSESSM ENT OF THE APPELLANT WHEN THE DOCUMENT ON THE BASIS OF WHICH THE AO FORMED OPINION OF ESCAPEMENT OF INCOME DOES NOT RELATE TO THE APPELLANT BUT, I T RELATES TO THE FIRM IN WHICH THE ASSESSEE IS A PARTNER AND THEREBY MAKING THE ADDITION OF RS.17.00 LAKHS IN THE HANDS OF THE APPELLANT. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO. 5. THE HONBLE ITAT ADMITTED ADDITIONAL GROUND NO. 1 BUT REFUSED TO ADMIT GROUND NO. 2 STATING THAT IT IS MERELY AN EXTENSION OF THE GROUND TAKEN BY THE 4 ITA NO. 298/NAG/2015. ASSESSEE IN HIS APP EAL ORIGINALLY. THE ASSESSEE HAS TAKEN GROUND THAT THE ESCAPEMENT OF INCOME DOES NOT RELATE TO THE APPELLANT BUT IT RELATES TO THE FIRM IN WHICH THE ASSESSEE IS A PARTNER. THIS GROUND WAS NOT ADMITTED BY THE HONBLE ITAT. 6. ON GROUND NO. 1 AS ABOVE, THE ASSESSMENT WAS SET A S IDE TO THE FILE OF THE AO AND AO WAS DIRECTED TO SUPPLY THE COPY OF THE REASONS RECORDED BY HIM U/S 148(2) OF THE I.T. ACT. IT WAS FURTHER DIRECTED BY THE HONBLE ITAT THAT THE ASSESSEE, IF SO CHOOSES, CAN FILE THE OBJECTIONS AGAINST THE REASONS TO BELIEVE WITHIN 30 DAYS BEFORE THE AO AND THE BEFORE PROCEEDING FOR THE ASSESSMENT, MUST DISPOSE OF THE OBJECTIONS FILED BY THE ASSESSEE WITHIN A REASONABLE TIME. 7. THE ASSESSING OFFICER, AS PER THE DIRECTIONS ISSUED BY HE HONBLE ITAT, RE - I NITIATED THE PROCEEDINGS IN WHICH SHRI AJAY SINGH, C.A. AND SHRI ARVIND BAWANE, ADVOCATE ATTENDED ON BEHALF OF THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE AO HAS RECORDED IN PARA 3.1 OF THE ASSESSMENT ORDER DATED 18 - 02 - 2014 THAT AS PER THE DETAILS AVAI LABLE ON RECORD, THE RELEVANT CASE RECORDS WERE FULLY DESTROYED INCLUDING THE RECORDS OF THE ASSESSEE, IN FIRE ACCIDENT THAT BROKE OUT IN THE OFFICE (AAYAKAR BHAVAN, NAGPUR) OF HE THEN AO ON 22 - 05 - 2005. HENCE, THE ORIGINAL REASONS RECORDED FOR REOPENING OF THE CASE U/S 148(2) WERE NOT AVAILABLE WITH HIS OFFICE AND AS PER THE THEN AO (THE AO WHO MADE ORIGINAL ASSESSMENT ORDER), THE RECORDS OF THE CASE WERE R ECONSTRUCTED WITH THE CO - OPERATION OF HE ASSESSEE. THEREFORE, THE AO HAS STATED THAT IT WAS NOT POSSIB LE TO INTIMATE TO ASSESSEE THE ORIGINAL REASONS OF REOPENIN G IN THE CASE OF THE ASSESSEE FOR A.Y. 1998 - 99. 8. THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING AFRESH ON 07 - 01 - 2014 AND INTIMATED TO THE ASSESSEE. THE OBJECTION FILED BY THE ASSESSEE BY LETTER DATED 22 - 01 - 2014 WERE DEALT BY THE ASSESSEE AND ASSESSMENT WAS COMPLETED AFTER ADDING UNDISCLOSED INVEST MENT OF RS. 17 LAKHS TO THE TOTAL INCOME. THE 5 ITA NO. 298/NAG/2015. ASSESSED INCOME WAS RS.17,75,000/ - AS AGAINST THE RETURNED INCOME OF RS.75,000/ - . 9 . UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) OBSERVED THAT THE SITUATION AND CIRCUMSTANCES IN THE PRESENT CASE APPEAR TO BE VERY PECULIAR. IT IS SEEN FROM THE RECORDS AS STATED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER THAT FIRE HAD BROKEN OUT IN THE INCOME TAX OFFICE ON 22 - 05 - 2005 DURING WHICH THE RECORDS INCLUDING THE ASSESSEES RECORDS WERE DESTROYED. THE RE CORDS OF THE ASSESSEE WERE ACTUALLY RECONSTRUCTED WITH THE ASSESSEES COOPERATION. 10 . THE LEARNED CIT(APPEALS) FURTHER OBSERVED THAT CONSIDERING THE CIRCUMSTANCES AND THE FACTS IT WAS IMPOSSIBLE FOR THE ASSESSING OFFICER TO FURNISH COPY OF THE REASONS RE CORDED TO THE ASSESSEE, THE GROUND NO. 1 TO 3 RAISED BY THE APPELLANT ARE DISMISSED. THE CIT(APPEALS) WAS OF THE CONSIDERED OPINION THAT THE PROCEEDINGS OF RE - OPENING U/S 147 WERE VALID AND LEGAL AS FAR AS THESE GROUNDS ARE CONCERNED. 11 . LEARNED CIT(APPEA LS) FURTHER DISMISSED ASSESSEES PLEA THAT AO HAS NOT FOLLOWED THE DIRECTIONS OF ITAT, BY HOLDING AS UNDER : ON A CAREFUL PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSING OFFICER HAS CARRIED OUT THE DIRECTIONS OF THE HONBLE ITAT, NAGPUR BE NCH IN LETTER AND SPIRIT. ALL POSSIBLE STEPS WERE TAKEN TO RECORD THE REASONS ON THE BASIS OF THE RECORDS AND THE REASONS WERE INTIMATED TO THE ASSESSEE BY LETTER DATED 08 - 01 - 2014. THE OBJECTIONS WERE FILED BY THE ASSESSEE AGAINST SUCH REASONS BY LETTER DATED 22 - 01 - 2014. THE OBJECTIONS WERE DISPOSED OFF BY HE AO DATED 23 - 01 - 2014 AND THE ASSESSMENT ORDER WAS PASSED AFTER DISPOSING OFF THE OBJECTIONS BY ORDER DATED 18 - 02 - 2014. THE CONTENTION OF THE ASSESSEE THAT THE FRESH REASONS RECORDED BY THE AO ARE BAD IN LAW AND ILLEGAL DOES NOT HAVE ANY MERIT BECAUSE THERE IS NO DISPUTE ON THE FACT THAT THE ORIGINAL RECORDS WHICH WERE AVAILABLE WITH THE DEPARTMENT WERE DESTROYED IN THE FIRE THAT BROKE OUT IN THE INCOME 6 ITA NO. 298/NAG/2015. TAX OFFICE, AAYAKAR BHAVAN, NAGPUR ON 22 - 05 - 2005. THERE WAS NO WAY THE ASSESSING OFFICER COULD HAVE INTIMATED SUCH ORIGINAL RECORDING OF REASONS. THE ONLY WAY WAS TO RECORD THE REASONS AFRESH. THE AO HAS RECORDED REASONS AFRESH AS PER HONBLE ITAT DIRECTIONS AND INTIMATED THE SAME TO THE ASSESSEE. ASSESSEES OBJECTIONS HAVE ALSO BEEN DISPOSED OFF BEFORE MAKING THE ORDER DATED 18 - 02 - 2014. 12 . AGAINST THE ABOVE ORDER, THE ASSESSEE HAS APPEALED BEFORE THE ITAT. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AO HAS RECORDED FRESH REASONS ON 07 - 01 - 2014 TO SUPPORT THE NOTICE ISSUED ON 15 - 10 - 2014, WHICH IS PRIMA FACIE IMPERMISSIBLE AND IS NOT IN ACCORDANCE WITH LAW. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE AO HAS NOT PROVIDED THE ORIGINAL REASONS AND THE SAME MAY BE AVAILABLE IN THE DEPARTMENTAL RECORDS. THE LEARNED COUNSEL SUBMITTED THAT NOT PROVIDING REASONS RECORDED BEFORE COMPLETION OF ASSESSMENT RESULTS INTO MAKING THE ASSESSM ENT BAD IN LAW. 13 . PER CONTRA LEARNED D.R. SUBMITTED THAT THERE WAS A FIRE IN THE PREMISES OF THE REVENUE AND THE ORIGINAL RECORDS GOT BURNT. HE SUBMITTED THAT NOBODY CAN BE ASKED TO DO THE IMPOSSIBLE. THE AO AFTER RECONSTRUCTING THE NECESSARY FILE ALONG WITH THE HELP OF THE ASSESSEE, HAS DONE WHAT WOULD BE BEST POSSIBLE. IN SUCH CIRCUMSTANCES, NON FURNISHING OF ORIGINAL REASONS RECORDED WHICH WERE BURNT IN FIRE CANNOT BE DEEMED AS RENDERING THE ASSESSMENT VOID AB I NITIO. 14 . UPON CAREFUL CONSIDERATION I F IND THAT IT IS CLEAR THAT THE ORIGINAL REASONS RECORDED HAS GOT BURNT AS THERE WAS FIRE IN THE REVENUE PREMISES. THE NECESSARY FILE WAS RECONSTRUCTED WITH THE HELP OF THE ASSESSEE. THE AO ON THE BASIS OF RECONSTRUCTED FILE HAS PROVIDED THE REASONS. IN SUC H SITUATION I DO NOT THINK THAT THE ASSESSMENT CAN BE QUASHED ONLY ON THIS GROUND. IT IS SETTLED LAW THAT NOBODY CAN BE ASKED TO DO THE IMPOSSIBLE. 7 ITA NO. 298/NAG/2015. 15 . IN THESE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE ASSESSEES PLEA AGAINST THE VALIDITY OF JURISDICTION IS NOT SUSTAINABLE. ACCORDINGLY I UPHOLD THE WELL REASONED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE. 1 6 . APROPOS THE ISSUE ON MERITS. THE BRIEF FACTS ON MERIT ARE C U LLED OUT FROM THE AO IN HIS ORDER AS UNDER : AS PER DIRECTIONS, ON THE PERUSAL OF TH ORIGINAL ASSESSMENT ORDER AND OTHER RELEVANT DETAILS, SUCH AS PAVATI / RECEIPT, BANK STATEMENT AND STATEMENT OF RECORDED U/S 131 OF SHRI CHANDRASHEKHAR V. MUDLIAR ON 30.09.2005, IT HAS BEEN FOUND THAT THE ASSESSEE SHRI CHANDRASHEKHAR V. MUDLIAR HAS INVESTED RS. 17 LAKHS AND GIVEN THIS AMOUNT TO SHRI NARENDRA N. MUDLIAR AS A MANAGING PARTNER OF FIRM M/S NEW VIRAJ HOUSING AGENCY, NAGPUR. THE ASSESSEE HAS SUBMITTED THE COPY OF CHAQUE OF RS. 13,50,000/ - AN AMOUNT RETURNED BY SHRI NARENDRANATH MUDLIAR, COPY OF LEGAL NOTICE U/S 138(B) OF NEGOTIABLE ACT OF RS. 13,50,000/ - AND COPY OF COMPLAINT LODGED BEFORE THE HONBLE JUDICIAL MAGISTRATE FIRST CLASS COURT, NAGPUR W.R.T. TO DISHONOURING OF CHEQUE VIDE A SUBMISSION DATED 04.02.2014. VIDE ORDER SHEE T NOTINGS DATED 17 - 02 - 2014 THE ASSESSEE WAS ASKED TO SHOW CAUSE THAT WHY RS. 17 LAKHS SHOULD NOT BE ADDED TO YOUR INCOME FOR THE RELEVANT A.Y. 1998 - 99? THE ASSESSEE REPLIED THAT IN HIS SUBMISSION DATED 0 4.02.2014; WE HAVE EXPLAINED THE REASONS FOR NOT ADD ITION OF RS. 17 LAKHS SUCH AS THE MONEY BELONGS TO THE FIRM M/S NEW VIRAJ HOUSING AGENCY. ON PERUSAL OF THE DOCUMENTS IT NIS AMPLE CLEAR THAT THE ASSESSEE HAS GIVEN RS. 17 LAKHS TO SHRI NARENDRA N. MUDLIAR. THE ASSESSEE MADE A CONTENTION THAT, A CHEQUE AMO UNTING TO RS.13,50,000/ - ISSUED BY SHRI NARENDRA MUDLIAR TOWARDS RETURN OF MONEY TAKEN BACK WHEN THE DEAL WAS NOT FINALIZED, INDICATE THAT THE AMOUNT OF RS. 17 LAKHS GIVEN TO SHRI NARENDRA MUDLIAR IS IN THE NAME OF FIRM AND NOT IN THE NAME OF ASSESSEE. HE ALSO SUBMITTED THAT THE DEAL HAS NOT BEEN FINALIZED AND THE AMOUNT WAS RETURNED BY SHRI NARENDRA MUDALIAR AND THE A/C PAYEE CHEQUE FOR RS. 17 LAKHS IN THE NAME OF M/S NEW VIRAJ HOUSING AGENCY DRAWN ON A GONDIA BANK HAS NOT BEEN REALIZED. FURTHER THE ASS ESSEE SUBMITTED THAT M/S NEW VIRAJ HOUSING AGENCY HAS FILED CASES IN COURT U/S 138 OF NEGOTIABLE INSTRUMENT ACT AND COMPLAINT HAS BEEN REGISTERED FOR THE REASONS OF BOUNCING OF CHEQUES DUE TO INSUFFICIENT FUND. 8 ITA NO. 298/NAG/2015. 1 7 . THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION THAT THE PAYMENT WAS MADE ON BEHALF OF THE FIRM ON THE GROUND THAT PROPER EVIDENCE OF THE FIRM HAVING GIV EN MONEY TO THE ASSESSEE WAS NOT AVAILABLE. HE FURTHER EXAMINED THE BANK STATEMENT OF THE FIRM AND FOUND THE CASH WITHDRAWAL S OF A CONSIDERABLE LOWER AMOUNT. HE FURTHER DISBELIEVED THE EARLIER BALANCE SHEET OF THE FIRM WHERE ADVANCE AS SHOWN TO HAVE BEEN GIVEN TO THE ASSESSEE ON THE GROUND THAT THE BALANCE SHEETS OF THE RELATED PERIOD WERE NOT FIL E D. 1 8 . UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) AFFIRMED THE AOS ACTION. AT THE OUTSET THE LEARNED CIT(APPEALS) NOTED AS UNDER : THE AR HAS VEHEMENTLY RELIED ON THE STATEMENT OF THE ASSESSEE DATED 30.09.2005 WHEREIN HE HAS STATED THAT THE PAYMENT OF RS.17,00,000/ - TO SHRI N.N. M UDALIAR WAS MADE IN THE CAPACITY OF THE MANAGING PARTNER OF THE FIRM M/S NEW VIRAJ HOUSING AGENCY AND, THEREFORE, IT WAS ARGUED THAT THE INVESTMENT BELONS TO THE FIRM AND NOT THE ASSESSEE. EXAMINATION OF THE SAID STATEMENT SHOWS THAT THE APPELLANT HAD STAT ED FOLLOWING THINGS: (I) THE CASH WAS PAID BY THE FIRM OUT OF THE CASH WITHDRAWALS FROM THE CC LIMIT IN THE SAMATA SAHAKARI BANK. (II) THE MONEY WAS GIVEN FROM TIME TO TIME AND THE ENTRY OF SUCH CASH PAYMENT IS DULY MADE IN THE ACCOUNT OF THE FIRM. (III) THE AMOUNT WA S RETURNED BY SHRI N.N. MUDALIAR BY WAY OF CHEQUE WHICH WAS BOUNCED AND HENCE A CIVIL SUIT HAS BEEN FILED BY THE FIRM AGAINST THE SAID PERSON. 1 9 . LEARNED CIT(APPEALS) FOLLOWED THE SAME REASONING AS THAT OF THE AO RECORDING SHORTAGE IN WITHDRAWAL FROM THE BANK BY THE FIRM AND NON CREDIT WORTHINESS OF THE EARLIER BALANCE SHEET OF THE FIRM. HOWEVER, NO SPEAKING ORDER HAS BEEN GIVEN BY THE AO OR BY THE CIT(APPEALS) AS TO WHY THE FACT THAT SHRI 9 ITA NO. 298/NAG/2015. N.N. MUDLIAR RETURNED THE AMOUNT BY CHEQUE TO THE FIRM AND THE SAME WAS BOUNCED AND AS A RESULT CIVIL SUIT HAS BEEN FILED BY THE FIRM AGAINST HIM CAN BE IGNORED. THE ORDERS OF THE AUTHORITIES BELOW DOES NOT AT ALL DEAL WITH THIS ISSUE. IN MY CONSIDERED OPINION, THIS IS AN IMPORTANT ISSUE AN D GOES TO THE ROOT OF THE MATTER. FURTHER I FIND THAT THE REVENUE HAS RELIED UPON THE RECEIPT ISSUED BY SHRI N.N. MUDLIAR BUT HAS NEVER BOTHERED TO CONFRONT HIM REGARDING THE ASSESSEES CLAIM THAT THE SAID PAYMENT WAS MADE BY THE ASSESSEE TO SHRI N.N. MUDL IAR ON BEHALF OF THE FIRM. IF IT IS ASSESSEES CLAIM THAT THE AMOUNT WAS PAID ON BEHALF OF THE FIRM AND THE PAYEE ALSO REFUNDED THE AMOUNT BY CHEQUE IN THE NAME OF THE FIRM , THEN THERE IS NO REASON THAT THE SAME SHOULD BE TREATED AS INCOME IN THE HANDS O F THE ASSESSEE. IF THE FIRM COULD NOT PROPERLY EXPLAIN THE SOURCE OF THE SAME, THE REVENUE WAS FREE TO TAKE ACTION AGAINST THE FIRM AS PER LAW. HENCE I FIND THAT INTEREST OF JUSTICE DEMANDS THAT THE ISSUE BE REMITTED TO THE FILE OF THE AO. THE AO IS DIRE CTED TO GIVE A SPEAKING ORDER ON THE ISSUE DISCUSSED IN THE PRECEDING PARAGRAPH AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. 20 . IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOS E S. ORDER PRONOUNCED I N THE OPEN COURT ON THIS 19 TH DAY OF SEPT., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED: 19 TH SEPT., 2016. 10 ITA NO. 298/NAG/2015. COPY FORWARDED TO : 1. SHRI CHANDRA SHEKHAR V. MUDALIAR, 40, F/6, DESHMUKH APARTMENT, DATTATRAYA NAGAR,NAGPUR. 2. A.C.I.T., CENTRAL CIRCLE - 1(1), NAGPUR. 3. C.I.T. - (CENTRAL) , NAGPUR. 4. CIT(APPEALS), - II I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.