Shri Naresh Thakurdas Wadhwani, Pune V. CIT (Central), Pune, Pune

ITA 302/PUN/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49906 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: misc
• Appeal Filed On: 23-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V ANANDARAJAN
• Assessee Lawyers: V L JAIN
• Keywords: Difference of opinion; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NO. 302-A/PN/2006 (ASSTT. YEAR : 1991-92 TO 2001-02) SHRI NARESH THAKURDAS WADHAWANI , OFFICE NO. 26-30, 2 ND FLOOR, SAI KRUPA BHAWAN, OPP. KSB PUMP, KHARALWADI, PIMPRI, PUNE-411018 PAN : NOT AVAILABLE .. APP ELLANT V. CIT (CENTRAL) , PUNE . RESPONDENT ASSESSEE BY : SHRI V.L. JAIN DEPARTMENT BY : SHRI. V. ANANDARAJAN , CIT (DR) ORDER PER I.C. SUDHIR, JM THE ASSESSEE HAS IMPUGNED REVISIONAL ORDER PASSED U/S. 263 OF THE ACT QUESTIONING THE ASSUMING OF JURISDICTION U/S. 263 OF THE ACT BY THE LD CIT AND SECONDLY, HIS ACTION IN SETTING ASIDE THE O RDER PASSED U/S. 158 BD BY THE A.O. 2. THE RELEVANT FACTS ARE THAT ON 9.11.2000 SEARC H WAS CONDUCTED AT THE BUSINESS AND RESIDENTIAL PREMISES OF M/S. VASCO N GROUP AND ONE SHRI RAJA SURYAWANSHI. DURING THE COURSE OF SEARCH A PROMISSORY NOTE SIGNED BY THE ASSESSEE, TO PAY A SUM OF RS. 30 LAK HS TO THE BEARER WAS FOUND IN THE OFFICE PREMISES OF SHRI RAJA SURYAWANS HI. THE EXPLANATION OF THE ASSESSEE BEFORE THE A.O REMAINED THAT AN AGREEM ENT WAS MADE WITH SHRI P.A. VALAME ON BEHALF OF M/S. M.S. CONSTRUCTIO N (WHEREIN ASSESSEE WAS A PARTNER) FOR THE SALE OF UNITS IN A PROJECT C ONSTRUCTED BY M/S. M.S. CONSTRUCTION FOR A CONSIDERATION OF RS. 28 LAKHS. SHRI P.A. VALAME HAD PAID RS. 15 LAKHS. THE TRANSACTION OF SALES OF SHO PS TO SHRI P.A. VALAME WAS CANCELLED IN THE SAME FINANCIAL YEAR AND THE SU M OF RS. 15 LAKHS WAS ITA . NO 302-A/PN/2006 SHRI NARESH THAKURDAS WADHAWANI... A.Y 91-92 TO 01-02 PAGE OF 6 2 RETURNED TO HIM. HENCE, THERE WAS NO UNDISCLOSED IN COME IN THE HANDS OF THE ASSESSEE AS PER THE PROMISSORY NOTE ISSUED FOR RS. 30 LAKHS. IT WAS EXPLAINED THAT MR. VALAME NEEDED ASSURANCE, HENCE A PROMISSORY NOTE OF RS. 30 LAKHS WAS EXECUTED AND KEPT WITH SHRI RAJA S URYAVANSHI, ASSESSEES ADVOCATE AND HIS SON MR. SAGAR WHO WAS A PARTNER IN M/S. M.S. CONSTRUCTION. THE A.O. ACCEPTED THIS EXPLANA TION AND DID NOT MAKE ANY ADDITION ON ACCOUNT OF THE SAID PROMISSORY NOTE FOUND AND SEIZED DURING THE COURSE OF THE SEARCH. THE LD CIT REMAIN ED OF THE VIEW THAT WHILE FRAMING ASSESSMENT, THE A.O DID NOT APPEAR T O HAVE TAKEN COGNIZANCE OF THE SAID PROMISSORY NOTE WITH THE CAU SE SHOWN BY THE ASSESSEE, AS PER LAW. AFTER CONSIDERING THE REPLY OF THE ASSESSEE FILED IN RESPONSE TO THE NOTICE ISSUED BY HIM U/S. 263 OF TH E ACT, THE LD CIT THUS HELD THE ASSESSMENT ORDER ON THE ISSUE AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. CONSEQUENT LY, THE ASSESSMENT ORDER HAS BEEN SET ASIDE WITH DIRECTION TO VERIFY T HE FACTS, APPLY THE PROVISIONS OF SEC.132(4A) CORRECTLY AND INITIATED P ENALTY PROCEEDINGS U/S. 271D WITH RESPECT TO RECEIPT OF CASH OF RS. 30 LAKH S. 3. IN SUPPORT OF THE GROUND, THE LD. A.R. SUBMITTED THAT THERE WAS NO INCOME ARISING OUT OF THE SAID PROMISSORY NOTE TO T HE ASSESSEE FOUND IN THE PREMISES OF SHRI RAJA SURYAWANSHI DURING THE CO URSE OF SEARCH CONDUCTED AT HIS PREMISES. HE SUBMITTED THAT THE I SSUE HAS BEEN DECIDED BY THE A.O AFTER APPLICATION OF HIS MIND FULLY. IN SUPPORT, HE DREW OUR ATTENTION TO PAGE NOS. 4 TO 12 OF THE PAPER BOOK. THESE PAGES ARE LETTER OF THE ASSESSEE ADDRESSED TO THE A.O IN RESPONSE TO THE QUERY RAISED BY THE A.O INCLUDING THE ISSUE RELATING TO THE PROMISS ORY NOTE. THE LD. A.R ALSO DREW OUR ATTENTION TO THE STATEMENTS OF THE AS SESSEE RECORDED U/S. 131 OF THE ACT ON 9.11.2000, A COPY WHEREOF HAS BEE N MADE AVAILABLE AT PAGE NOS. 1 TO 5 OF THE PAPER BOOK. THE LD. A.R. H AS SPECIFICALLY REFERRED ITA . NO 302-A/PN/2006 SHRI NARESH THAKURDAS WADHAWANI... A.Y 91-92 TO 01-02 PAGE OF 6 3 ANSWER OF THE ASSESSEE IN RESPONSE TO QUESTION NOS. 9 AND 10 RAISED TO HIM U/S 131 OF THE ACT. IN HIS STATEMENTS, THE ASS ESSEE HAS DENIED RECEIPT OF ANY CASH OF RS. 30 LAKH BY WAY OF PROMIS SORY NOTE FROM SHRI RAJA SURYAWANSHI. THE LD. A.R. CONTENDED THAT ONLY DUE TO DIFFERENT OPINION ON THE SUBJECT, THE LD CIT HAS INVOKED THE PROVISIONS OF SEC. 263 OF THE ACT WHICH IS NOT PERMISSIBLE AS PER THE EST ABLISHED PROPOSITION OF THE LAW. IN SUPPORT, HE PLACED RELIANCE ON THE FOL LOWING DECISIONS : I) MALABAR INDUSTRIAL CO. LTD., V/S. CIT,243 ITR 8 3 (SC) II) CIT V/S. GABRIEL INDIA LTD.,203 ITR 108 (BOM) III) RAMAKANT SINGH V/S. CIT, 53 DTR 291 (PAT.) IV) CIT V/S. MEHROTRA BROTHERS, 270 ITR 157 (M.P) THE LD. A.R. ALSO REFERRED THE REVISIONAL ORDER WHE REIN THE LD CIT HAS REPRODUCED THE EXPLANATION OF THE ASSESSEE. 4. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTI FY THE REVISIONAL ORDER UNDER CONSIDERATION AND PLACED RELIANCE ON THE FOL LOWING DECISIONS : I) INDIAN TEXTILES V/S. CIT,157 ITR 112 (MAD) II) BISMILLAH TRADING CO.,V/S. INTELLIGENCE OFFICE R, 248 ITR 292 (KER.) 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE EXPLANATION OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW ABOUT THE PROMISSORY NOTE SIGNED BY THE ASSESSEE FOR RS. 30 LAKHS, REMAINED T HAT AN AGREEMENT CONTAINED AT PAGE NOS. 18 TO 15 OF BUNDLE NO. 8, WA S MADE WITH SHRI PRAKASH A. VALAME ON BEHALF OF M/S. W.S. CONSTRUCTI ONS, WHEREIN THE ASSESSEE WAS A PARTNER FOR THE SALE OF UNITS IN A P ROJECT KNOWN AS WADHWANI PLAZA CONSTRUCTED BY M/S. M.S. CONSTRUC TION, FOR A CONSIDERATION OF RS. 28 LAKHS. THE SAID SHRI VALAM E HAD PAID A SUM OF RS. 15 LAKH, THE DETAILS OF WHICH WERE FURNISHED VI DE ANNEXURE TO LETTER ITA . NO 302-A/PN/2006 SHRI NARESH THAKURDAS WADHAWANI... A.Y 91-92 TO 01-02 PAGE OF 6 4 DT. 13.9.2004 BEFORE THE A.O. IT WAS EXPLAINED THAT THE DEAL WAS LATER ON CANCELLED. AS A SEQUENCE, THE ENTIRE SUM OF RS. 15 LAKH WAS RETURNED TO SHRI VALAME, DETAILS OF WHICH WERE FURNISHED TO THE A.O VIDE ENCLOSURE 3 TO LETTER DATED 13.9.2004. IT WAS STATED THAT THE AGREEMENT AND PROMISSORY NOTE, HOWEVER, REMAINED WITH SHRI RAJA S URYAWANSHI, THE ASSESSEES ADVOCATE SINCE HIS SON MR. SAGAR WAS A PARTNER IN M/S. W.S. CONSTRUCTIONS. IT WAS SUBMITTED THAT MR. VALAME N EEDED ASSURANCE THAT DEAL WILL BE PUT THROUGH, HENCE A PROMISSORY NOTE W AS EXECUTED AND KEPT WITH MR. RAJA SURYAWANSHI. MR. VALAME DID NOT MAKE FURTHER PAYMENTS OF RS. 15 LAKH. THE DEED WAS CANCELLED AND THE AMO UNT WAS REPAID. THE DETAILS OF THE RE-PAYMENTS WERE GIVEN TO THE A.O. IT WAS FURTHER STATED THAT A PROMISSORY NOTE DOES NOT EVIDENCE RECEIPT OF ANY AMOUNT BUT IT IS PROMISE TO PAY. IT WAS STATED THAT EVEN IF CASH HAD BEEN RECEIVED AS A PART OF THE DEAL, THE SAME WOULD STAND REFUNDED AS THE DEAL WAS CANCELLED AND THE AMOUNT RECEIVED WAS REFUNDED. 6. HAVING GONE THROUGH THE ORDER IMPUGNED, WE FIND THAT THE LD CIT HAS NOT ACCEPTED THE ABOVE EXPLANATION WITH THIS OB SERVATION THAT ON THE PROMISSORY NOTE NAME OF MR. VALAMES DOES NOT APPE AR; THERE IS NO DATE AS TO WHEN PAYMENTS SHALL BE MADE AND THAT THERE W AS NO REASON AS TO WHY THE SAID PROMISSORY NOTE WAS KEPT BY SHRI RAJA SURYAWANSHI FOR TWO YEARS WITH HIM WHEN THE AGREEMENT WAS CANCELLED IN DECEMBER 1988. WE FIND THAT THE EXPLANATION OF THE ASSESSEE THAT A PROMISSORY NOTE DOES NOT EVIDENCE RECEIPT OF ANY AMOUNT BUT IT IS A PR OMISE TO PAY ONLY HAS NOT BEEN REBUTTED BY THE LD CIT OR BY THE REVENUE B EFORE US. NO EVIDENCE HAS BEEN FOUND DURING THE COURSE OF SEARC H THAT AN AMOUNT OF RS. 30 LAKH IN CASH WAS PAID TO THE ASSESSEE. IN V IEW OF THIS MATERIAL FACT, WE ARE OF THE VIEW THAT ACTION OF THE A.O IN NOT TAKING COGNIZANCE OF THE PROMISSORY NOTE FOR NOT MAKING ADDITION IN T HE HANDS OF THE ITA . NO 302-A/PN/2006 SHRI NARESH THAKURDAS WADHAWANI... A.Y 91-92 TO 01-02 PAGE OF 6 5 ASSESSEE CANNOT BE TREATED AS ERRONEOUS ONLY BECAUS E THE LD CIT WAS HAVING A DIFFERENT POSSIBLE VIEW ABOUT THE PROMISS ORY NOTE. UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS DISC USSED ABOVE, WE COME TO THE CONCLUSION THAT IT IS A CASE OF MERE CHANGE OF OPINION ON THE SUBJECT ON THE BASIS OF WHICH, AS PER ESTABLISHED P ROPOSITION OF LAW AN ASSESSMENT CANNOT BE TREATED AS ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE . THE CORRESPONDENCES (PL ACED AT PAGE NOS. 6 TO 11 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSE E ) BETWEEN THE ASSESSEE AND A.O SUGGEST THAT WHILE DECIDING THE IS SUE, THE A.O HAD APPLIED HIS MIND IN THIS REGARD. THUS, IT CANNOT B E SAID THAT IT IS A CASE OF NON-APPLICATION OF MIND BY THE A.O ON THE ISSUE WHI LE DEALING WITH IT. IN THE CASE OF RAMAKANT SINGH V/S. CIT (SUPRA) REPLY A LONGWITH NECESSARY DETAILS AND EVIDENCES WERE FURNISHED BY THE ASSESSE E BEFORE THE A.O IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR ALL QUERIE S RAISED IN THE QUESTIONNAIRE, THE PATNA BENCH OF THE TRIBUNAL IN I TS RECENT DECISION DATED 21.1.2011 HELD THAT THE A.O. HAS APPLIED HIS MIND O N ALL THE ISSUES RAISED BY THE CIT AND ORDER OF CIT U/S. 263 WAS HELD NOT S USTAINABLE. SIMILAR SUBSTANTIAL FACTS ARE HERE IN THE PRESENT CASE, AS DISCUSSED ABOVE. THE REVISIONAL ORDER IN QUESTION IS THUS NOT SUSTAINABL E HENCE IT IS SET ASIDE AND CONSEQUENTLY, ASSESSMENT ORDER ON THE ISSUE OF PROMISSORY NOTE IS RESTORED . THE GROUNDS QUESTIONING THE VALIDITY OF THE REVISIONAL ORDER ARE THUS DECIDED IN FAVOUR OF THE ASSESSEE, AND ARE ALLOWED. 7. IN RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JUNE 2 011 SD/- SD/- ( G.S.PANU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 30TH JUNE, 2011 ITA . NO 302-A/PN/2006 SHRI NARESH THAKURDAS WADHAWANI... A.Y 91-92 TO 01-02 PAGE OF 6 6 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (CENTRAL), PUNE 4. THE D.R. A BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE