Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 0476 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 7 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-11-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Next Hearing Date
18-08-2016
Assessment Year
2005-2006
Appeal Filed On
23-03-2015
Judgement Text
- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 300 /PN/201 5 / ASSESSM ENT YEAR : 20 0 5 - 0 6 SHRI BHATABHAI SHANKAR PATEL, KORIT ROAD, NANDURBAR 425412 . / APPELLANT PAN: A BHPP1455A VS. THE INCOME TAX OFFICER , WARD 3(4), DHULE . / RESPONDENT / APPELLANT BY : SHRI SA NKET JOSHI / RESPONDENT BY : SMT. SUMITRA BANERJI / DATE OF HEARING : 0 5 . 1 0 .201 6 / DATE OF PRONOUNCEMENT: 11 . 1 1 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSE E IS AGAINST THE ORDER OF CIT (A) - 1 , NASHIK , DATED 2 1 . 0 1 .20 1 5 RELATING TO ASSESSMENT YEAR 20 0 5 - 0 6 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) R.W.S. 14 8 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL : - ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 2 1) ON THE FACTS AND IN LAW THE ID. CIT(A) - I, NASHIK HAS ERRED IN CONFIRMING ADDITION OF RS.15,00,000/ - ON ACCOUNT OF ALLEGED UNEXPLAINED UNSECURED LOANS WITHOUT APPRECIATING THE ALTERNATIVE CLAIM OF THE APPELLANT. 2) ON THE FACTS AND IN LAW THE I D. CIT(A) - I, NASHIK HAS ERRED IN PURPOSELY IGNORING SUBMISSION OF THE APPELLANT AND CONTENTION RAISED IN LETTER DATED 12/1/2015 WHILE PASSING ORDER ON 21/1/2015, THE CIT(A) HAS PURPOSELY CONSIDERED THE SUBMISSION DATED 4/9/2014 AND REPRODUCED THE SAME IN THE ASSESSMENT ORDER AS IT WAS VERY DIFFICULT FOR THE ID. CIT(A) TO REBUT THE SUBMISSION AND CONTENTIONS IN THE LETTER DATED 12/1/2015. 3) ON THE FACTS AND IN LAW THE ID. CIT(A) - I, NASHIK HAS ERRED IN REPRODUCING THE APPELLANT'S LETTER DATED 4/9/2014 A S THE TABULAR CHART MENTIONED BY CIT(A) HAS BEEN FILED WITH THE LETTER DATED 12/1/2015 AND NO SUCH CHART AS MENTIONED BY CIT(A) IS THERE IN THE LETTER DATED 4/9/2014, THE CIT(A) HAS PURPOSELY IGNORED THE SUBMISSION AND CONTENTIONS IN LETTER DATED 12/1/2015 . 3. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER: - 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS U/S 68 OF RS.15,00,000/ - IN RESPECT OF LOANS TAKEN FROM THREE PERSONS WITHOUT APPRECIATING THAT THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LENDERS WAS PROVED BY THE APPELLANT AND HENCE, THERE WAS NO REASON TO MAKE ANY ADDITION U/S 68 IN RESPECT OF THE SAID LOANS. 4. THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS LEGAL AND HENCE, THE SAME IS ADMITTED FOR ADJUDICATION. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED THE ORIGINAL RETURN OF INCOME ON 15.12.2006 DECLARING TOTAL INCOME OF RS.2,36,570/ - AND AGRICULTURAL INCOME OF RS.1,73,800/ - . THE RETURN OF INCOME FILED BY THE AS SESSEE WAS DULY PROCESSED UNDER SECTION 143(1) OF THE ACT. ON VERIFICATION OF THE ACCOUNT EXTRACT OF M/S. NIRMAL SEEDS, PACHORA, DIST. JALGAON, IT CAME TO THE NOTICE OF ASSESSING OFFICER THAT THE ASSESSEE HAD RECEIVED COMPENSATION FROM THE SAID PARTY AT R S. 20,05,000/ - FOR FAULTY SEEDS, WHICH WAS NOT REFLECTED IN THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSMENT PROCEEDINGS WERE REOPENED AFTER RECORDING THE REASONS FOR REOPENING UNDER ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 3 SECTION 147 OF THE ACT. IN RESPONSE TO THE NOTICE I SSUE D UNDER SECTION 148 OF THE ACT, THE ASSESSEE FURNISHED LETTER DATED 27.04.2012 REQUESTING THAT THE ORIGINAL RETURN OF INCOME FILED ON 15.12.2006 MAY BE TREATED AS FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT. THEREAFTER, THE ASSESSMENT PROCEEDINGS WERE TAKEN UP AND THE ASSESSEE ATTENDED AND FILED DETAILS AND EXPLANATION ON VARIOUS DATES. THE ASSESSEE WAS DEALING IN SEEDS FERTILIZERS UNDER THE NAME AND STYLE M/S. BHAGYASHREE KRUSHI SEVA KENDRA , AT NANDURBAR IN THE YEAR UNDER CONSIDERATI ON. THE ASSESSEE ALSO HAD DEALERSHIP OF SEEDS OF M/S. NIRMAL SEEDS, PACHORA, DIST. JALGAON. THE ASSESSEE FURTHER EXPLAINED THAT HE WAS ENGAGED IN THE BUSINESS OF SEEDS AND FERTILIZERS AND PLOT TRADING. HE ALSO DERIVED INCOME FROM OTHER SOURCES AND AGRIC ULTURAL INCOME. THOUGH THE ASSESSEE HAD DECLARED THE PROFIT AS PER SECTION 44AF OF THE ACT, HOWEVER, HE PRODUCED THE COPIES OF TRADING ACCOUNT, PROFIT & LOSS ACCOUNT AND BALANCE SHEET. THE ASSESSING OFFICER ON VERIFICATION NOTED THAT THE ASSESSEE HAD NOT ROUTED THE TRANSACTION IN RESPECT OF COMPENSATION THROUGH THE PROFIT & LOSS ACCOUNT AND CREDITORS THROUGH BALANCE SHEET. THE ASSESSEE FURNISHED LIST OF PERSONS / BORROWERS TO WHOM THE PAYMENTS WERE MADE ON ACCOUNT OF COMPENSATION TO THE TUNE OF RS. 49,20, 000/ - AGAINST THE SALE OF MIRCHI SEEDS, WHICH WAS CLAIMED TO BE FAULTY. WITH REGARD TO SOURCE OF PAYMENTS, THE ASSESSEE POINTED OUT THAT HE HAD RECEIVED SUM OF RS.20 LAKHS FROM M/S. NIRMAL SEEDS ON ACCOUNT OF COMPENSATION TO BE PAID TO THE FARMERS. THE S AID FACT WAS CONFIRMED BY M/S. NIRMAL SEEDS IN RESPONSE TO THE LETTER ISSUED BY THE ASSESSING OFFICER UNDER SECTION 133(6) OF THE ACT. FOR THE BALANCE RS.29,20,000/ - , THE ASSESSEE EXPLAINED THAT HE HAD BORROWED MONEY FROM FOUR PERSONS TOTALING RS.20 LAKHS AND THE BALANCE RS.9,20,000/ - , HE HAD PAID OUT OF TRADE CREDITORS. THE ASSESSEE WAS ASKED TO PRODUCE FOUR PERSONS FROM WHOM HE HAD TAKEN LOAN OF RS.5 LAKHS EACH IN ORDER TO ESTABLISH THEIR ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 4 IDENTITY AND THE CAPACITY TO LEND THE MONEY AND TO PROVE THE GENU INENESS OF TRANSACTIONS. THE ASSESSEE PRODUCED ONLY ONE PERSON I.E. SHRI LIMBA SUDAM PATIL AND HIS STATEMENT WAS RECORDED ON OATH UNDER SECTION 131 OF THE ACT. IN RESPECT OF OTHER PERSONS, THE ASSESSEE FURNISHED THE RELEVANT 7/12 EXTRACT BUT COULD NOT PR ODUCE THE PERSONS. THE ASSESSING OFFICER IN SUCH CIRCUMSTANCES, ACCEPTED THE LOAN TO THE EXTENT OF RS.5 LAKHS BUT THE BALANCE SUM OF RS.15 LAKHS WERE TREATED AS INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 6. ANOTHER ADDITION WHICH WAS MADE IN T HE HANDS OF ASSESSEE WAS ON ACCOUNT OF UNPAID COMPENSATION. THE ASSESSEE CLAIMED THAT IT HAD RECEIVED RS.20 LAKHS FROM M/S. NIRMAL SEEDS, PACHORA, DIST. JALGAON ON ACCOUNT OF COMP ENSATION PAYABLE TO THE FARMERS. DURING THE COURSE OF ASSESSMENT PROCEEDING S, STATEMENT OF ONE SHRI ISHWAR MANIK MALI WAS RECORDED WHO STATED THAT HE HAD NOT RECEIVED ANY AMOUNT ON ACCOUNT OF COMPENSATION. ON FURTHER VERIFICATION OF INFORMATION CALLED FOR UNDER SECTION 133(6) OF THE ACT, SUM OF RS.50,000/ - WAS TO BE PAID TO SHRI ISHWAR MANIK MALI. FURTHER DETAILS WERE ALSO FILED BY M/S. NIRMAL SEEDS IN RESPECT OF PERSONS TO WHOM THE COMPENSATION WAS TO BE PAID BY THE COMPANY DURING THE YEAR. IN THE ABSENCE OF SATISFACTORY EXPLANATION, SUM OF RS.50,000/ - WAS TREATED AS UNDISCLOS ED INCOME OF THE ASSESSEE. 7. BEFORE THE CIT(A), THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS DATED 13.08.2014 WHICH ARE REPRODUCED UNDER PARA 5 AT PAGES 3 AND 4 OF THE APPELLATE ORDER. IN THE SAID COMMUNICATION, REFERENCE WAS MADE TO THE EARLIER LETTER DA TED 19.06.2014, WHEREIN THE ASSESSEE HAD FURNISHED CERTAIN DETAILS WHICH WERE FORWARDED TO THE ASSESSING OFFICER, WHO IN TURN, HAD SUBMITTED REMAND REPORT DATED 25.05.2014. THE CONTENTION OF ASSESSEE IN THIS REGARD ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 5 WAS THAT SINCE THE ASSESSING OFFICER HAS NOT REBUTTED THE SUBMISSIONS AND THE CONTENTIONS OF ASSESSEE VIDE LETTER DATED 19.06.2014, THEN NO ADDITION OF RS.15 LAKHS IS TO BE MADE IN THE HANDS OF ASSESSEE. THE SECOND CONTENTION IN ALTERNATIVE WHICH WAS MADE BEFORE THE CIT(A) WAS THAT THE ASSESSEE HAD CLAIMED TO HAVE INCURRED TOTAL EXPENDITURE OF RS.49,20,000/ - IN RESPECT OF COMPENSATION PAID TO FARMERS, OUT OF WHICH RS.20 LAKHS WAS REIMBURSED BY M/S. NIRMAL SEEDS, PACHORA, DIST. JALGAON, AN AMOUNT OF RS.29,20,000/ - WAS SHOWN AS RECEIVABLE AND WAS NOT CLAIMED AS EXPENDITURE. THE ASSESSEE POINTED OUT THAT IN THE SUBMISSIONS, IT WAS STATED THAT RS.9,20,000/ - WAS PAID BY THE ASSESSEE FROM OWN SOURCES AND BALANCE RS.20 LAKHS WAS BORROWED FROM FOUR LENDERS. THE ASSESSING OFFICER HAD ACCEPTED BORROWING SOURCE FROM ONE LENDER BUT HAD REJECTED THE BORROWINGS FROM BALANCE THREE LENDERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SINCE THE LENDERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. HOWEVER, THE LENDERS HAVE BEEN PRODUCED BEFORE THE ASSESSING O FFICER DURING THE COURSE OF REMAND PROCEEDINGS AND SINCE THE REASONS FOR WHICH ADDITION WAS MADE HAS BEEN CORRECTED, NO ADDITION IS TO BE MADE. IN THE ALTERNATE, IT WAS CLAIMED BY THE ASSESSEE THAT EVEN IF THE PAYMENT TO THE EXTENT OF RS.15 LAKHS IS FOUND TO BE NOT GENUINE, THEN WHERE THE COMPENSATION WHICH IS PAID TO THE FARMERS I S DISALLOWED TO THE EXTENT OF RS.28,70,000/ - AND THE SAME IS TO BE REDUCED TO RS.13,70,000/ - , WHICH IN FACT WAS NOT CLAIMED AS EXPENDITURE UP TO DATE. THE ASSESSEE POINTED OUT T HAT NO ADDITION OF RS.15 LAKHS WAS JUSTIFIED. THE CIT(A) HELD AS UNDER: - 6. I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE. IN RESPECT OF THE CLAIM OF THE APPELLANT ABOUT THE PAYMENT OF COMPENSATION OF ` 49,20,000/ - , THE A. O. IN THE ASSESSMENT ORDE R HAS POINTED OUT THAT THE APPELLANT COULD PRODUC E ONL Y 3 PERSONS FOR VERIFICATION. THE AO. HOWEVER, ISSUED SUMMONS U/S 131 OF THE ACT TO SOME FARMERS ON TEST CHECK BASIS FOR VERIFI C ATION OF THE FACTS. AO RECORDED STATEMENT OF 7 FARMERS NAMELY ISHWAR MAN IK MALI , DAHINDULE , DIST. NANDURBAR ` 50,000/ - ); KO M ALSING FATESING RAJPUT, NANDURBAR ( ` 25,000/ - ); SUDAM VITTHAL WAGH, NANDURBAR (` 80,000/ - ); MADHAV NAMDEO MARATHE , NANDURBAR ( ` 90,000/ - ), BHAGWAN TAJANI MARATHE ( ` 4 0,000/ - ); ROHI DAS SAJAN MO GAL DAHINDU LE ( ` 40,000/ - ) AND SHRI SHIVDAS SHAMRAO MA RATHE, NAN DURBAR ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 6 ( ` 40,000/ - ) WHO HAVE DENIED HAVING RECEIVED COMPENSATION FROM THE APPE L LANT . THE A.O ., THEREFORE, MENTIONED IN THE ASSESSMENT ORDER THAT THE APPELLANT HAS NOT MADE PAYMENT TO THE ABOVE FARMERS, W HOSE STATEMENTS WERE RECORDED AND HAS ALSO FAILED TO PRODUCE THE REMAINING FARMERS. APPELLANT HAS FAILED TO EXPLAIN THE PAYMENT OF THE SAID COMPENSATION TO FARMERS SATISFACTORILY AND COULD NOT DISCHARGE HIS BURDEN PROPERLY. THE AO HAS ALSO MENTIONED THAT T HE APPELLANT COULD NOT PROVE THE GENUINENESS OF THE LOANS AMOUNTING TO ` 15 LAC THAT HE HAD DEPOSITED IN HIS BANK ACCOUNT. IN THIS REGARD THE APPELLANT HAS SUBMITTED THAT THE STATEMENT RECORDED BY THE AO. PERTAINED TO THE FARMERS WHO BELONGED TO RIVAL POLI TICAL PARTY AND WERE AGAINST THE APPELLANT'S GROUP. 6.1 THE A.O. HAS NOTED THAT THE APPELLANT HAS RECEIVED REIMBURSEMENT OF COMPENSATION OF ` 20,00,000/ - FROM THE COMPANY AND OUT OF THE SAID RECEIPT THE APPELLANT HAS NOT PAID COMPENSATION TO THE EXTENT OF ` 50,000/ - TO A FARMER NAMELY SHRI ISHWAR MANIK MALI AND HENCE MADE AN ADDITION OF PAYMENT OF COMPENSATION TO FARMERS, THE A.O. HAS ACCEPTED THE SAID PAYMENT TO THE EXTENT OF ` 19,50,000/ - . IT HAS ALSO BEEN NOTICED THAT THE SAID PAYMENTS HAVE BEEN MADE B Y THE APPELLANT BY BEARER CHEQUES AND THE APPELLANT HAS NOT MAINTAINED PROPER RECORD TO PROVE THE SAID EXPENDITURE OF ` 49,20,000/ - STATED TO HAVE BEEN INCURRED ON BEHALF OF M/S. NIRMAL SEEDS, PACHORA. THE APPELLANT HAS NOT SHOWN THE PAYMENT OF THE SAID C OMPENSATION IN THE FINANCIAL STATEMENTS (B/S, P&L A/C.). NOWHERE IN THE FINANCIAL STATEMENTS THE APPELLANT HAS MENTIONED THE FACT OF PAYMENT OF ` 49,20,000/ - AS COMPENSATION TO THE FARMERS AS CLAIMED BY HIM DURING ASSESSMENT / APPELLATE PROCEEDINGS. IN V IEW OF THE ABOVE FACTS AND DISCUSSION AND ALSO TAKING INTO CONSIDERATION THE CONFIRMATION OF M/S. NIRMAL SEEDS HAVING PAID ` 20 LAC ONLY AS COMPENSATION TO THE APPELLANT FOR ONWARD PAYMENT OF THE SAME TO THE AFFECTED FARMERS, THE CONTENTIONS RAISED BY THE APPELLANT IN GROUND NO.2 THAT THE APPELLANT SHOULD BE ALLOWED EXPENDITURE INCURRED OUT OF OWN POCKET TO THE EXTENT OF ` 29,20,000/ - AS WELL AS GROUND NO.3 THAT THE A.O. IS NOT JUSTIFIED IN MAKING DISALLOWANCE OF ` 50,000/ - ARE NO.3 THAT THE A.O. IS NOT JUSTIFIED IN MAKING DISALLOWANCE OF ` 50,000/ - ARE REJECTED. GROUND NOS.2 & 3 A RE ACCORDINGLY DISMISSED. 8. THE SECOND ASPECT OF THE ADDITION WAS NON - PRODUCTION OF THREE LENDERS BEFORE THE ASSESSING OFFICER. THE ASSESSEE BEFORE THE CIT(A) CONTENDED THAT THE LENDERS COULD NOT BE PRODUCED AS THEY WERE BUSY IN GRAMPANCHAYAT ELECTIONS AND REQUEST WAS MADE TO SUMMON THEM UNDER SECTION 131 OF THE ACT. IN VIEW THEREOF, THE CIT(A) ASKED THE ASSESSING OFFICER TO RECORD THE STATEMENTS OF LENDERS. ALL THE THREE PERSONS APPEARED BEFORE THE ASSESSING OFFICER AND CONFIRMED THAT THEY HAD PAID R S.5 LAKHS EACH BY BANK CHEQUES TO THE ASSESSEE. HOWEVER, THEY COULD NOT EXPLAIN THE SOURCE OF MONEY. THEY FAILED TO FURNISH THEIR BANK STATEMENTS TO PROVE THE SOURCE OF CREDIT WITH THEM. WITH REGARD TO REPAYMENT OF LOAN, ALL THE THREE PERSONS FURNISHED SIMILARLY WORDED AFFIDAVITS THAT THE ASSESSEE HAD ALLOWED THEM TO CULTIVATE THE AGRICULTURAL LAND AT VILLAGE WAGODHA AND DUDHALE FREE OF COST FOR THE YEARS ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 7 2005 - 06 TO 2008 - 09 TO RECOVER RS.5 LAKHS. THE CIT(A) WAS OF THE VIEW THAT WHERE THE ASSESSEE HAS FA ILED TO PROVE THE GENUINENESS OF CASH CREDITS AND ALSO WHERE THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE CREDITWORTHINESS AND SOURCE OF CREDITS, THEN THE ADDITION OF RS. 15 LAKHS WAS UPHELD. THE CIT(A) ALSO NOTED THAT THE AFFIDAVITS FILED BY THREE P ERSONS REGARDING THE METHOD OF REPAYMENT OF LOAN WAS SELF SERVING DOCUMENTS AND WERE CONCOCTED TO PROVE THE TRANSACTION AS GENUINE. WITH REGARD TO THE ALTERNATE PLEA OF THE ASSESSEE, THE CIT(A) VIDE PARA 11 OBSERVED THAT THE ASSESSEE HAD CLAIMED PAYMENTS TO THE FARMERS TO THE EXTENT OF 49,20,000/ - APPEARING IN HIS BANK STATEMENT THROUGH BEARER CHEQUES. HOWEVER, THE ASSESSING OFFICER HAD ACCEPTED THE SAID PAYMENTS ONLY TO THE EXTENT OF RS.19,50,000/ - . THE PLEA OF ASSESSEE IN THIS REGARD WAS THAT IN CASE T HE PAYMENTS ARE ACCEPTED TO THE EXTENT OF RS.19,50,000/ - WHICH WERE SOURCED OUT OF PROCEEDS FROM M/S. NIRMAL SEEDS, NO FURTHER ADDITION IS MERITED IN THE HANDS OF ASSESSEE. HOWEVER, THE CIT(A) REJECTED THE CLAIM OF ASSESSEE IN VIEW OF CASH DEPOSITS IN THE BANK ACCOUNT. THE CIT(A) NOTED FROM THE BANK ENTRIES THAT THE ASSESSEE HAD REPAID RS.10 LAKHS ON 18.12.2004 TO SATPUDA TR. CO. AND HAD PAID COMPENSATION TO THE FARMERS TO THE EXTENT OF RS.20,05,000/ - . IN VIEW THEREOF, WHERE THE ASSESSEE HAD PAID COMPENS ATION TO THE EXTENT OF RS.20,05,000/ - AND WAS LEFT WITH RS.45,000/ - , THEN THE SUBMISSIONS OF ASSESSEE THAT HE HAD AVAILABILITY OF CASH OUT OF DISALLOWANCE OF COMPENSATION WAS FOUND TO BE COMPLETELY MISPLACED BY THE CIT(A). THE CIT(A) NOTED THAT THE ASSESS ING OFFICER HAD DISALLOWED THE PAYMENT OF COMPENSATION TO ONE FARMER AMOUNTING TO RS.50,000/ - AND THE ASSESSEE HAD DEPOSITED RS.15 LAKHS ON 05.01.2005 OUT OF HIS UNDISCLOSED INCOME AND HENCE, THE ADDITION OF RS.15 LAKHS UNDER SECTION 68 OF THE ACT ON ACCOU NT OF UNSECURED LOANS CONFIRMED BY THE CIT(A). ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 8 9. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 10. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS SELLING SEEDS MANUFACTURED BY M/S. NIRMAL SEEDS. IN T HE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD CHILLI SEEDS MANUFACTURED BY M/S. NIRMAL SEEDS, WHICH DID NOT FRUCTIFIED AND AS A RESULT, FARMERS WERE GIVEN COMPENSATION TO THE TUNE OF RS.49,20,000/ - . THE SOURCE OF SAME WAS RS.20 LAKHS RECEIVED FROM M/ S. NIRMAL SEEDS, RS. 9,32,000/ - FROM THE BUSINESS FUNDS OF ASSESSEE AND RS.20 LAKHS RECEIVED FROM FOUR DIFFERENT LENDERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ONE PERSON WAS PRODUCED AND THE LOAN TO THE EXTENT OF RS.5 LAKHS WAS ACCEPTED. IN RESPEC T OF BALANCE THREE LENDERS, AMOUNT WAS ADDED UNDER SECTION 68 OF THE ACT AT RS.15 LAKHS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT BEFORE THE CIT(A) DURING THE REMAND PROCEEDINGS, THE ASSESSEE PRODUCED THE OTHER THREE PERSONS WHOSE STATEMENTS WERE RECORDED, WHO IN TURN, ACCEPTED THE LOANS AND ALSO PRODUCED 7/12 EXTRACTS IN ORDER TO ESTABLISH THEIR CREDITWORTHINESS. FURTHER, THE AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE HERE STRESSED THAT REASSESSMENT PROCEEDINGS WERE INITIATED IN 2012 IN RELATION TO THE PROCEEDINGS OF ASSESSMENT YEAR 2005 - 06. ATTENTION WAS DRAWN TO THE SUBMISSIONS FILED BEFORE THE CIT(A) WHICH ARE PLACED AT PAGES 1 TO 6, SECOND ONE AT PAGES 10 T O 16 AND THIRD ONE AT PAGES 20 TO 23 OF THE PAPER BOOK. THE MAIN CONTENTION AS PER THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS ALLOWING THE TELESCOPING BENEFIT, WHEREIN THE ASSESSEE CLAIMED THAT IT HAD TO PAY COMPENSATION TO THE EXTENT OF R S.49,20,000/ - , AGAINST WHICH M/S. NIRMAL SEEDS PAID ONLY RS.20 LAKHS. THE ASSESSING OFFICER DISALLOWED RS.50,000/ - OF COMPENSATION AND HENCE, THE BALANCE CLAIM WAS ONLY RS.48,70,000/ - . THE ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 9 ASSESSEE HAD FILED THE RETURN OF INCOME DECLARING PROFIT UNDER SE CTION 44AF OF THE ACT. HE FURTHER POINTED OUT THAT THE GROUND OF APPEAL NO.2 BEFORE THE CIT(A) WAS FOR ALLOWING THE COMPENSATION OF RS.29,20,000/ - WHICH WAS DISALLOWED BY CIT(A) UNDER PARA 6.1. IN CASE THE DISALLOWANCE WAS MADE OF RS.29,20,000/ - , THEN TH E PLEA OF TELESCOPING IS TO BE ALLOWED IN THE HANDS OF ASSESSEE AND NO ADDITION IS WARRANTED. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF CIT(A). 12. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE ADDITION MADE UNDER SECTION 68 OF THE ACT AMOUNTING TO RS.15 LAKHS. THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL AND HAS RAISED AN ISSUE OF ALLOWING TELESCOPING OF THE AMOUNT DISALLOWED IN THE HANDS OF ASSESSEE. THE CLAIM OF ASSESSEE WAS THAT IT WAS REQUIRED TO PAY COMPENSATION TO THE FARMERS AGAINST THE MIRCHI SEEDS, WHICH WERE SOLD BY HIM, WHICH IN TURN, WERE MANUFACTURED BY M/S. NIRMAL SEEDS. SINCE THE SEEDS DID NOT FRUCTIFY, THE FARMERS WERE ENTITLED TO THE COMPENSATION A GAINST THE CLAIM OF RS.49,20,000/ - , M/S. NIRMAL SEEDS PAID COMPENSATION TO THE TUNE OF RS.20 LAKHS. THE ASSESSEE BEFORE THE ASSESSING OFFICER CLAIMED THAT IT HAD PAID BALANCE COMPENSATION OUT OF HIS FUNDS. HOWEVER, THE FINDING OF AUTHORITIES BELOW WAS TH AT THE ASSESSEE HAD PAID COMPENSATION TO THE TUNE OF RS.20 LAKHS ONLY. THE ASSESSEE WAS ASKED TO EXPLAIN THE EXPENDITURE OF RS.49,20,000/ - , WHICH SAID TO HAVE BEEN INCURRED ON BEHALF OF M/S. NIRMAL SEEDS. THE ASSESSEE HAD NOT SHOWN THE SAID PAYMENT OF CO MPENSATION IN ITS FINANCIAL STATEMENTS. IN VIEW OF THE SAME AND TAKING INTO CONSIDERATION THE CONFIRMATION OF M/S. NIRMAL SEEDS HAVING PAID RS.20 LAKHS AS COMPENSATION TO THE ASSESSEE FOR ONWARD PAYMENT TO THE ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 10 FARMERS, THE PLEA OF THE ASSESSEE THAT IT SHO ULD BE ALLOWED EXPENDITURE INCURRED OUT OF OWN P O CKET TO THE EXTENT OF RS.29,20,000/ - , WAS REJECTED BY THE CIT(A). FURTHER, THE ASSESSING OFFICER HAD ALSO DISALLOWED SUM OF RS.50,000/ - CLAIMED TO HAVE PAID COMPENSATION TO ONE SHRI ISHWAR MANIK MALI . THE ASSESSEE IS NOT IN APPEAL AGAINST BOTH THESE ASPECTS OF THE ADDITIONS. IN CASE THE ENTIRETY OF THE FACTS ARE TAKEN INTO CONSIDERATION, THEN THOUGH THE ASSESSEE CLAIMS THAT IT HAD TO INCUR EXPENDITURE OF RS.49,20,000/ - ON ACCOUNT OF COMPENSATION DUE TO THE FARMERS BUT THE ASSESSING OFFICER AND THE CIT(A) HAD ALLOWED COMPENSATION ONLY TO THE EXTENT OF RS.19,50,000/ - I.E. CLAIM OF RS.20 LAKHS ON ACCOUNT OF AMOUNT RECEIVED FROM M/S. NIRMAL SEEDS AND RS.50,000/ - DISALLOWED BY THE ASSESSING OFFICER AND THE CIT(A ) WHICH WAS TO BE PAID TO ONE SHRI ISHWAR MANIK MALI . IN CASE THE ASSESSEE HAS BEEN HELD TO HAVE PAID COMPENSATION ONLY TO THE EXTENT OF RS.19,50,000/ - , THEN THE ONUS WAS UPON THE ASSESSEE TO PROVE THE SOURCE OF SAID PAYMENT TO THE EXTENT OF RS.19,50,000/ - ONLY. THE ASSESSEE ADMITTEDLY, HAD RECEIVED RS.20 LAKHS FROM M/S. NIRMAL SEEDS WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AND HENCE, THE COMPENSATION AMOUNT IS SOURCED FROM THE SAID LOAN AND NO FURTHER ADDITION IS TO BE MADE ON THIS ACCOUNT IN THE HANDS OF ASSESSEE. 13. NOW, COMING TO THE SECOND PART OF THE ORDER OF CIT(A) , WHO HAD PERUSED THE BANK STATEMENTS AND ALSO SCANNED AND REPRODUCED THE SAME AS PART OF THE APPELLATE ORDER. ON PERUSAL OF THE SAME, THE ASSESSEE WAS FOUND TO HAVE DEPOSITED RS.5 LAKHS EACH ON 05.01.2005 TOTALING RS.15 LAKHS IN RESPECT OF SAID AMOUNT RECEIVED FROM THREE PERSONS . THOUGH BEFORE THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE ONLY PRODUCED 7/12 EXTRACT OF THE SAID PERSONS BUT COULD NO T PRODUCED THE SAME, HENCE ADDITION WAS MADE TO THE EXTENT OF RS.15 LAKHS. HOWEVER, BEFORE THE CIT(A) DURING THE COURSE OF ITA NO. 300 /PN/20 1 5 SHRI BHATABHAI S. PATEL 11 REMAND PROCEEDINGS , ALL THE THREE PERSONS WERE PRODUCED, WHO ADMITTED TO HAVE ADVANCED SUM OF RS.5 LAKHS EACH TO THE ASSESSEE . THE ENTIRE TRANSACTION WAS THROUGH BANKING CHANNEL. IN SUCH CIRCUMSTANCES, WHERE THE IDENTITY OF THE PERSONS HAVE BEEN PROVED AND EVEN THE CREDITWORTHINESS HAS BEEN ESTABLISHED BY FILING RELEVANT 7/12 EXTRACT, AGRICULTURAL LAND HOLDING AND THE PRODUCE, THEN T HE GENUINENESS OF TRANSACTIONS STANDS ESTABLISHED AND THERE IS NO MERIT IN THE ADDITION MADE UNDER SECTION 68 OF THE ACT AND THE SAME IS DELETED. ACCORDINGLY, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 1 4 . IN THE RESULT, THE APPEAL OF ASSE SSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 11 TH DAY OF NOVEMBER , 201 6 . SD/ - SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 11 TH NOVEMBER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESP ONDENT; 3. ( ) / THE CIT(A) - 1 , NASHIK ; 4. / THE CIT - 1 , NASHIK ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE CO PY // / SR. PRIVATE SECRETARY , / ITAT, PUNE
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