M/s. Sarjan Corporation, Surat V. The ACIT.,Circle-9, Surat

ITA 3040/AHD/2008

• Counselvise Citation: 304020514 RSA 2008
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 27-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: J P SHAH
• Keywords: Question of law; Validity of assessment
• Section: 133A; 131; 154; 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND A. K. GAROD IA, AM M/S SARJAN CORPORATION,)-8, PANCHRATNA TOWER, LAMBE HANUMAN ROAD, SURAT. VS. ASSTT. CIT, CIRCLE- 9,SURAT. (APPELLANT) .. (RESPONDENT) ASSTT. CIT, CIRCLE-9, SURAT. VS. M/S SARJAN CORPORATION,)-8, PANCHRATNA TOWER, LAMBE HANUMAN ROAD, SURAT. (APPELLANT) .. (RESPONDENT) M/S SARJAN CORPORATION,)-8, PANCHRATNA TOWER, LAMBE HANUMAN ROAD, SURAT. VS. ASSTT. CIT, CIRCLE- 9,SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI J. P.SHAH, AR REVENUE BY:- SHRI A. K. PATEL, DR ITA NO.3040/AHD/2008 ASST. YEAR :2005-06 ITA NO.3243/AHD/2008 ASST. YEAR :2005-06 ITA NO.1586/AHD/2009 ASST. YEAR :2005-06 ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 2 DATE OF HEARING : 30/9/11 DATE OF PRONOUNCEMENT : 21/10/2011. O R D E R PER A. K. GARODIA, ACCOUNTANT MEMBER . OUT OF THESE THREE APPEALS, THERE ARE TWO CROSS AP PEALS FILED BY THE ASSESSEE AND THE REVENUE WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) V, SURAT, DATED 23.06.2008 FOR ASST. YEAR 2 005-06 AND THE THIRD APPEAL IS FILED BY THE ASSESSEE WHICH IS DIRECTED A GAINST THE ORDER OF LD. CIT(A)-V, SURAT DATED 27/03/2009 BEING THE ORDER PA SSED BY HIM U/S 154 FOR THE SAME ASST. YEAR. SINCE CONNECTED MATTERS AR E INVOLVED IN ALL THESE THREE APPEALS, THESE WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE DECIDE THE VARIOUS ISSUES RAISED IN AS SESSEES APPEAL IN ITA NO.3040/AHD/2008 FOR ASST. YEAR 2005-06 ON MERI T. BRIEF FACTS ARE THAT THE ASSESSEE FIRM IS A BUILDER AND DURING THIS YEAR, A SURVEY ACTION U/S 133A OF THE ACT WAS CARRIED OUT ON 9/3/2005. DURING THE COURSE OF SURVEY LOOSE PAPER ETC. WERE IMPOUNDED FOR FURTHER INVESTI GATION AND ANALYSIS. THE AO FURTHER NOTED THAT AFTER THE VERIFICATION OF IMPOUNDED MATERIAL AND STATEMENTS RECORDED, IT IS FOUND THAT ASSESSEE FIRMS PARTNER SHRI ALPESHBHAI GOKULBHAI KOTADIA IN HIS STATEMENT DATED 9/3/2005 VIDE REPLY ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 3 TO QUESTION NO.31 STATED THAT HE WAS DECLARING UNDI SCLOSED INCOME OF RS.1,80,00,000/- OVER AND ABOVE THE FIRMS REGULAR INCOME FOR ASST. YEAR 2005-06. THE AO FURTHER NOTED THAT WHILE FILING THE RETURN OF INCOME, HE HAS NOT SHOWN HIS REGULAR INCOME. THE AO HELD THAT THERE IS CLEAR CUT SHORTAGE OF INCOME DECLARED AND FINALLY RETURNED IN COME AND THE ASSESSEE HAS NOT FILED ANY EXPLANATION IN THIS REGARD. THE A O WORKED OUT THAT REGULAR INCOME SHOULD HAVE BEEN 8% OF TURNOVER I.E. @ 8% OF RS.2,01,48,210/- = RS.16,11,857/-. HE ADDED AMOUNT OF RS. 1,80,00,000/- DECLARED BY THE PARTNER OF THE ASSESSEE AND FROM SU CH TOTAL, HE REDUCED THE INCOME DECLARED BY THE ASSESSEE I.E. RS.1,75,35,320 /- AND WORKED OUT THAT ASSESSEE HAS SHOWN LESSER INCOME OF RS.20,76,537/-. HE MADE ADDITION OF THIS AMOUNT. APART FROM THIS, HE MADE AN ADDITION O F RS.70,40,000/- WITH REGARD TO NEW CAPITAL INTRODUCED BY THE PARTNERS OF THE ASSESSEE FIRM. THIS ADDITION WAS MADE BY HIM BY INVOKING THE PROVISIONS OF SECTION 68. ANOTHER ADDITION OF RS.63,87,809/- WAS MADE U/S 68 IN RESPECT OF FRESH UNSECURED LOANS CLAIMED TO HAVE RECEIVED BY THE ASS ESSEE IN THE PRESENT YEAR. AGAINST ALL THESE THREE ADDITIONS, THE ASSESS EE PREFERRED APPEAL BEFORE LD. CIT(A). OUT OF THE FIRST ADDITION OF RS. 20,76,537/-, PART RELIEF WAS ALLOWED BY THE LD. CIT(A). HE HELD THAT IT WILL BE IN THE INTEREST OF JUSTICE IF THE AO IS DIRECTED TO ESTIMATE THE PROFI T @ 5% FROM REGULAR BUSINESS AND IN THIS MANNER, HE ALLOWED PART RELIEF TO THE ASSESSEE WHICH IS ACCEPTED BY THE REVENUE, SINCE NO GROUND HAS BEE N RAISED IN THIS ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 4 REGARD. THE ASSESSEE IS DISPUTING THE PART CONFIRMA TION OF THIS ADDITION. THE REVENUE HAS CHALLENGED THE DELETION OF REMAININ G TWO ADDITIONS MADE BY THE AO OF RS.70,40,000/- AND RS.63,87,809/- WHICH HAD BEEN ADDED BY THE AO U/S 68. IN THE REMAINING APPEAL OF THE ASSESSEE WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) U/S 154, W E FIND THAT THESE TWO AMOUNTS ARE IN DISPUTE BECAUSE IN THE ORDER PASSED BY THE LD. CIT(A) U/S 154 IT WAS HELD BY THE LD. CIT(A) THAT IN THE ORIGI NAL ORDER DATED 23.06.2008, THESE ADDITIONS WERE WRONGLY DELETED BY HIM ON THIS BASIS THAT TELESCOPING BENEFIT HAD TO BE ALLOWED TO THE A SSESSEE WITH REGARD TO ADDITIONAL INCOME DECLARED BY THE ASSESSEE DURING T HE COURSE OF SURVEY. IN THE ORDER PASSED BY LD. CIT(A) U/S 154, IT WAS HEL D THAT SUCH TELESCOPING BENEFIT IS NOT ALLOWABLE AND HE CONFIRMED THESE TWO ADDITIONS AGAINST WHICH, THE ASSESSEE HAS PREFERRED THE THIRD APPEAL. APART FROM THE LEGAL GROUND AND THE ARGUMENTS IN RESPECT OF SUCH LEGAL G ROUND, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT ON MER IT, NO ADDITION IS JUSTIFIED IN THE PRESENT CASE. IT WAS SUBMITTED BY HIM THAT THERE IS NO DISPUTE REGARDING THE TURNOVER DECLARED BY THE ASSE SSEE IN THE REGULAR BOOKS. REGARDING THIS ASPECT THAT AMOUNT DECLARED I N THE COURSE OF SURVEY WAS NOT ADDED IN THE INCOME TO THE EXTENT OF RS.20, 76,537/-, IT WAS SUBMITTED THAT THIS ALLEGATION IS NOT CORRECT AND H E SUBMITTED THAT AUDITED ACCOUNTS ARE AVAILABLE ON PAGES 1 TO 24 OF THE PAPE R BOOK. HE DREW OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT AVAILABLE ON PAGE 16 OF THE PAPER ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 5 BOOK AND SHOWED THAT ADDITIONAL DISCLOSURE MADE WAS INCLUDED IN THE INCOME OF THE ASSESSEE FOR THE PRESENT YEAR. REGARD ING THE REGULAR INCOME, IT WAS SUBMITTED THAT THE SAME WORKS OUT TO 2.83% BEFORE DEDUCTION ON ACCOUNT OF INTEREST ON PARTNERS CAPIT AL AND PARTNERS SALARY. HE FURTHER SUBMITTED THAT THE BOOKS WERE NOT REJECT ED BY THE AO AND HENCE, NO ADDITION IS CALLED FOR. 3. REGARDING THE SECOND ADDITION MADE BY THE AO OF RS.70,40,000/-, IT WAS SUBMITTED THAT NO ADDITION CAN BE MADE IN TH E CASE OF THE ASSESSEE FIRM WITH REGARD TO THE CAPITAL BROUGHT IN BY THE P ARTNERS AND IN SUPPORT OF HIS CLAIM, THE LD. AR RELIED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PANKAJ DYESTUFF INDUST RIES IN ITA NO.241 OF 1993 DATED 6.7.2005. HE SUBMITTED A COPY OF THIS DE CISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. PANKAJ DYESTUFF INDUS TRIES (SUPRA). 4. REGARDING THE THIRD ADDITION OF RS.63,87,809/- M ADE BY THE AO U/S 68 WITH REGARD TO FRESH UNSECURED LOANS, IT WAS SUB MITTED THAT THIS ADDITION IS ALSO NOT JUSTIFIED BECAUSE INITIAL ONUS HAS BEEN DULY DISCHARGED BY THE ASSESSEE. HE DREW OUR ATTENTION TO LETTER DA TED 22.10.2007 SUBMITTED BY THE ASSESSEE BEFORE THE AO, COPY OF WH ICH IS AVAILABLE ON PAGES 25 & 26 OF THE PAPER BOOK AND ALSO DREW OUR A TTENTION TO PARA -6 OF THIS LETTER, AS PER WHICH, DULY SIGNED CONFIRMATION S IN RESPECT OF UNSECURED LOANS TAKEN WERE SUBMITTED WITH NAMES, AD DRESSES AND PANS. ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 6 REGARDING THIS ASPECT, IT WAS SUBMITTED THAT THE LO ANS HAVE BEEN REPAID BY ACCOUNT PAYEE CHEQUES. HE DREW OUR ATTENTION TO THE AUDITORS REPORT IN FORM NO.3CD IN PARTICULAR OUR ATTENTION WAS DRAWN T O PAGE 14 OF THE PAPER BOOK WHERE IT IS CERTIFIED BY THE AUDITORS TH AT IT IS A CLAIM OF THE ASSESSEE THAT FRESH LOANS WERE RECEIVED BY THE ASSE SSEE BY WAY OF ACCOUNT PAYEE CHEQUES ONLY. OUR ATTENTION WAS ALSO DRAWN TO PAGE 10 OF THE STATEMENT OF FACTS FILED BY THE ASSESSEE BEFORE LD. CIT(A) WHEREIN IT WAS SUBMITTED BY THE ASSESSEE THAT THE ALLEGATIONS OF A O ARE NOT CORRECT THAT DETAILS HAD NOT BEEN SUBMITTED BY THE ASSESSEE SINC E ALL DETAILS HAD BEEN DULY SUBMITTED IN THE FIRST SUBMISSIONS DATED 22/10 /2007 AND SECOND SUBMISSION ON 18/12/2007. ON PAGES 11 & 12 OF THE S TATEMENT OF FACTS, PARTY-WISE DETAILS WERE SUBMITTED WHICH SHOWS THAT THE ASSESSEE FILED CONFIRMATIONS ALONG WITH PAN AND ACKNOWLEDGEMENT OF INCOME-TAX RETURNS ETC. WHICH WERE SUBMITTED BEFORE THE AO WIT H REGARD TO ALL THE PARTIES FROM WHOM FRESH LOANS WERE TAKEN BY THE ASS ESSEE. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT VS. ORISSA CORPORATION (P) LTD. 159 ITR 78 (SC) IN SUPP ORT OF THIS CONTENTION THAT WHEN PRIMARY ONUS HAS BEEN DISCHARGED BY THE A SSESSEE AND THE AO HAS NOT MADE ANY ENQUIRY THEREAFTER, THE ADDITION C ANNOT BE MADE. 5. AS AGAINST THIS, THE LD. DR SUPPORTED THE ORDERS OF AO AND OF THE LD. CIT(A). ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 7 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF LOWER AU THORITIES. FIRST, WE DECIDE THE FIRST ADDITION MADE BY THE AO OF RS.20,7 6,537/- OUT OF WHICH PART RELIEF HAS BEEN ALLOWED BY THE LD. CIT(A) WHO RESTRICTED THE ADDITION TO RS.10,07,410/-. WE FIND THAT THE AO HAS NOT REJE CTED THE BOOKS OF ACCOUNT AND HE HAS ESTIMATED THE INCOME ON THE BASI S THAT ASSESSEE HAS FAILED TO COMPLY WITH THE NOTICES. WE ALSO FIND THA T IT IS OBSERVED BY LD. CIT(A) ON PAGE 3 OF HIS ORDER THAT IN THE PRESENT C ASE, THE ASSESSEE HAS SHOWN NET PROFIT @ 2.83% WHICH IS ALSO CONFIRMED BY THE AUDIT REPORT AND PROFIT AS PER BOOKS IS REQUIRED TO BE ACCEPTED. HE FURTHER SAYS THAT HOWEVER, THE VOLUNTARILY DISCLOSED INCOME IS ONLY R S.1,75,00,000/- LESS BY RS.5 LACS TO THE DISCLOSED AMOUNT OF RS.1,80,00, 000/-. AGAINST THIS FINDING OF THE LD. CIT(A), IT WAS SUBMITTED THAT NO GROUND HAS BEEN RAISED BY THE REVENUE IN APPEAL FILED BY IT. HENCE NO ADDI TION ON THIS ACCOUNT IS JUSTIFIED UNLESS IT IS FOUND THAT ADDITIONAL INCOME DECLARED BY THE ASSESSEE DURING THE SURVEY OF RS.1,80,00,000/- HAD NOT BEEN SHOWN BY THE ASSESSEE AS ADDITIONAL INCOME. ON THIS ASPECT, WE FIND THAT AS PER PROFIT AND LOSS ACCOUNT AVAILABLE IN THE PAPER BOOK, THIS AMOUNT OF RS.1,80,00,000/- HAS BEEN SHOWN IN THE INCOME SIDE. PROFIT BEFORE INTERE ST ON PARTNERS CAPITAL AND PARTNERS SALARY IS SHOWN BY THE ASSESSEE AT RS. 184.06 LACS AND THE NET INCOME WAS ARRIVED AT RS.175.24 LACS AFTER ALLOWING DEDUCTION OF ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 8 RS. 1,81,369/- ON ACCOUNT OF INTEREST ON PARTNERS C APITAL AND RS.7,00,000/- ON ACCOUNT OF PARTNERS SALARY. HENCE THIS ADDITIONA L INCOME OF RS.180 LACS DECLARED DURING THE COURSE OF SURVEY HAS BEEN DULY CONSIDERED IN THE PROFIT AND LOSS ACCOUNT OF THE PRESENT YEAR. IN ADD ITION TO THAT, THERE IS RS.406,145.19 INCOME DECLARED BY THE ASSESSEE ON AC COUNT OF REGULAR BUSINESS BEFORE INTEREST ON PARTNERS CAPITAL AND PA RTNERS SALARY AND THIS FINDING IS DULY RECORDED BY LD. CIT(A) THAT PROFIT AS PER BOOKS IS REQUIRED TO BE ACCEPTED AND THIS FINDING OF LD. CIT(A) HAS N OT BEEN CHALLENGED BY THE REVENUE AS NO SUCH GROUND HAS BEEN RAISED. CONS IDERING THESE FACTS, THE ADDITION CONFIRMED IS NOT SUSTAINABLE IN THE PR ESENT CASE. WE, THEREFORE, DELETE THE SAME. GROUND NO. 2 & 3 OF ASS ESSEES APPEAL ARE ALLOWED. 7. NOW, WE DECIDE THE ISSUE OF REMAINING TWO ADDITI ONS WHICH WERE DELETED BY THE LD. CIT(A) AS PER ORIGINAL ORDER DAT ED 23.06.2008 BUT AS PER ORDER PASSED U/S 154, IT WAS HELD THAT THESE WE RE SUSTAINED. 8. REGARDING THE FIRST ADDITION OF RS.70,40,000/- M ADE BY THE AO UNDER SECTION 68 IN RESPECT OF FRESH PARTNERS CAPIT AL, WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. PANKAJ DYESTUFF INDUSTRIES (SUPRA). THE RELEVANT PART OF THIS JUDGEMENT IS REPRODUCED BELOW :- ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 9 13. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHE D THE DETAILS WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASS ESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF THE AS SESSEE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN THE ACCOUNTS OF THE PARTNERS WERE NOT DEPOSITS F ROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSITION THAT THIS WAS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION G IVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR C ASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE NON-ACCEPTANCE O F THAT EXPLANATION DOES NOT, HOWEVER, PROVIDE MATERIAL FOR FINDING THAT THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIR M,. AS HELD BY THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONE R OF INCOME TAX ALLAHABAD VS. JAISWAL MOTOR FINANCE (SUPRA), IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THERE WERE PROFITS OF THE FIRM, THE AMOUNT CREDITED TO THE PARTNERS ACCOUNTS COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN, T HE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATIO N IS NOT FOUND SATISFACTORY. 14. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, BOTH THE DEPUTY CIT(APPEALS) AND THE TRIBUNAL HAVE FOUND THA T THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS WHICH WAS ON IT BY OFFERING EXPLANATION, WHICH HAS NOT BEEN FOUND TO B E INCORRECT OR FALSE IN ANY MANNER. THE INTEREST OF THE REVENUE IS ALSO SAFEGUARDED AS THE INCOME-TAX OFFICER HAS BEEN GIVE N THE LIBERTY ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 10 TO CONSIDER THE SAID CREDITS IN THE HANDS OF THE PA RTNERS IF HE IS NOT SATISFIED WITH THE SOURCES OF INVESTMENT OF CASH CR EDITS IN THE ACCOUNTS OF THE PARTNERS. 15. IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO F IND THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM ANY INFIRMITY WH ICH WOULD REQUIRE INTERFERENCE AT THE HANDS OF THIS COURT. AC CORDINGLY, IT IS HELD THAT THE TRIBUNAL WAS RIGHT IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.87,250/- BEING DEPOSITS IN THE ACCOU NTS OF THE PARTNERS. THE QUESTION REFERRED TO THIS COURT IS, A CCORDINGLY, ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE A SSESSEE AND AGAINST THE REVENUE. 9. IN THE PRESENT CASE, THIS IS NOT A CASE OF THE R EVENUE THAT PARTNERS OF THE ASSESSEE FIRM ARE FICTITIOUS BECAUSE IN THE STA TEMENT OF THE PARTNER, ADDITIONAL INCOME OF RS.180 LACS WAS DECLARED DURIN G THE COURSE OF SURVEY AND IT WAS DULY SHOWN IN THE RETURN OF INCOM E AND THE ADDITION WAS MADE BY THE AO ON THE BASIS OF THAT STATEMENT O NLY WHICH IS ALTHOUGH DELETED BUT THE FACT REMAINS THAT IT IS NOT A CASE OF THE REVENUE THAT THE PARTNERS OF THE ASSESSEE FIRM ARE FICTITIOUS. HENCE , IN THE PRESENT CASE THE AO IS ALSO ENTITLED TO PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATI SFACTORY BUT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE FIRM. BY F OLLOWING THE RATIO OF THE ABOVE DECISION OF HON. GUJARAT HIGH COURT, WE D ELETE THIS ADDITION OF RS.70,40,000/-. ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 11 10. NOW, WE TAKE UP THE ISSUE OF THIRD ADDITION OF RS.63,87,809/- MADE BY THE AO U/S 68 OF THE ACT IN RESPECT OF FRESH UNS ECURED LOAN IN THE PRESENT YEAR. 11. WE FIND THAT AS PER LETTER DATED 22/10/2007 SUB MITTED BY THE ASSESSEE TO THE AO COPY OF WHICH IS AVAILABLE ON PA GES 25 & 26 OF THE PAPER BOOK, RELEVANT DETAILS WERE SUBMITTED BY THE ASSESSEE BEFORE AO. WE ALSO FIND THAT IN THE STATEMENT OF FACTS FILED B Y THE ASSESSEE BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT T HIS ALLEGATION OF AO IS NOT CORRECT THAT DETAILS WERE NOT FURNISHED BEFORE HIM. IN FACT, THE ASSESSEE HAS FURNISHED PARTY-WISE LIST OF ALL THE DOCUMENTS BEFORE THE AO- SHOWING DULY SIGNED CONFIRMATION ALONG WITH PAN, COPY OF PA N CARD, COPY OF BANK STATEMENT, COPY OF INCOME-TAX RETURNS ACKNOWLE DGEMENT ETC. IN RESPECT OF ALL THE CREDITORS AND IT WAS ALSO POINTE D OUT THAT CREDITORS ARE ASSESSED TO TAX FOR MORE THAN FOUR YEARS. IN SPITE OF THIS, WE FIND THAT NO ENQUIRY WAS MADE BY THE AO AND THE ADDITION WAS MAD E. WE ALSO FIND THAT THIS HAS BEEN DISCLOSED EVEN IN THE TAX AUDIT REPORT THAT THE SAME WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. THE AO HAS ALSO ACCEPTED THE SAME INDIRECTLY BECAUSE NO PROCEEDINGS WERE INITIAT ED FOR THE VIOLATION OF PROVISIONS OF SECTION 269SS WITH REGARD TO THE RECE IPT OF THESE LOANS. WHEN CONFIRMATION OF ALL THESE PARTIES WERE FURNISH ED ALONG WITH PAN, COPY OF ACKNOWLEDGEMENT OF INCOME-TAX RETURNS ETC. AND NO ENQUIRY WAS ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 12 MADE BY THE AO, WE FEEL THAT ADDITION MADE BY THE A O CANNOT BE SUSTAINED BECAUSE THE ASSESSEE HAS DISCHARGED ITS P RIMARY ONUS AND THEREAFTER IT WAS REQUIRED ON THE PART OF THE AO TO POINT OUT THE REASONS AND THE BASIS FOR NOT ACCEPTING THE CLAIM OF ASSESS EE REGARDING UNSECURED LOANS. THE DECISION OF HONBLE APEX COURT IN THE CA SE OF ORISSA CORPORATION (SUPRA) IS ALSO SUPPORTING THE CASE OF THE ASSESSEE. THE RELEVANT PORTION OF THIS JUDGMENT AT PAGE 84 IS AS UNDER :- IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE R EVENUE THAT THE SAID CREDITORS WERE INCOME-TAX ASSESSEES. THEIR INDEX NU MBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOT ICES UNDER SECTION 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTH Y OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFO RT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES , THE ASSESSEE COULD NOT DO ANY THING FURTHER. IN THE PREMISES, IF THE T RIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE BUR DEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WA S UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES. IN THAT CASE, AT LEAST SUMMONS WERE ISSUED BY THE A O TO THE LOAN CREDITOR U/S 131(1) AT THE INSTANCE OF THE ASSESSEE AND THE REVENUE DID NOT PURSUE THE MATTER FURTHER. IN THE PRESENT CASE, EVEN NO SU MMON WAS ISSUED BY THE AO TO THE LOAN CREDITORS ALTHOUGH THERE WAS NO REQU EST OF THE ASSESSEE IN THE PRESENT CASE FOR ISSUING THE SUMMONS BUT STILL THE FACT REMAINS THAT INSPITE OF FURNISHING THE CONFIRMATIONS ALONG WITH ADDRESSES & PANS OF ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 13 THE LOAN CREDITORS, NO ATTEMPT WAS MADE BY THE AO T O VERIFY THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS AND HENC E, AS PER THIS JUDGMENT OF HON. SUPREME COURT, IT IS SEEN THAT NO EFFORT WA S MADE BY THE REVENUE TO PURSUE THE SO CALLED LOAN CREDITORS AND SINCE TH E ASSESSEE COULD NOT DO ANYTHING FURTHER, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. WE, THEREFORE, HOLD THAT THIS ADDITION MADE BY THE AO U/S 68 IS NOT SUSTAINABLE IN THE LIGHT OF THIS DECISION OF HONBL E SUPREME COURT AND IN THE LIGHT OF THE FACTS OF THE CASE, SINCE CONFIRMAT IONS ALONG WITH ADDRESSES AND PANS WERE MADE AVAILABLE BY THE ASSESSEE TO THE AO AND NO EFFORT WAS MADE BY THE AO TO PURSUE THE LOAN CREDITORS. WE , THEREFORE, DELETE THIS ADDITION ALSO. 12. NOW, WE FIND THAT ONLY ONE GROUND RAISED BY THE ASSESSEE IN ITS ORIGINAL APPEAL I.E. ITA NO.3040/AHD/2008 IS LEFT I N WHICH THE ASSESSEE HAS CHALLENGED THE VALIDITY OF ASSESSMENT PROCEEDIN GS ON THE BASIS THAT THERE WAS NO SERVICE OF NOTICE U/S 143(2) WITHIN TH E SPECIFIED TIME. ALTHOUGH, THIS IS THE CLAIM OF THE ASSESSEE THAT TH IS NOTICE SAID TO HAVE BEEN ISSUED BY THE AO ON 20.6.2006 WAS NEVER SERVED ON THE ASSESSEE BUT AS PER COPY OF THE NOTICE BROUGHT ON RECORD, THERE IS SOME SIGNATURE OF SOME PERSON ALTHOUGH NO NAME OR DATE IS APPEARING A ND HENCE, IT IS NOT COMING OUT THAT WHETHER THE SAME WAS SERVED ON THE ASSESSEE OR NOT. HERE, WE WOULD LIKE TO OBSERVE THAT AS PER OUR DECI SION IN THE ABOVE PARA, ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 14 WE FIND THAT NONE OF THE ADDITIONS MADE BY THE AO I S SUSTAINABLE AND WE HAVE ALREADY DELETED THEM AND HENCE THIS ISSUE OF V ALIDITY OF ASSESSMENT PROCEEDING IS OF ACADEMIC INTEREST ONLY. HENCE WE D O NOT DECIDE THIS ASPECT PARTICULARLY WHEN THE FACTS ARE NOT CLEAR. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 21/10/2011. SD/- SD/- (MUKUL KR. SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NOS.3040 &3243/AHD/2008 & ITA NO. 1586/AHD/2009 ASST. YEAR 2005-06 15 1.DATE OF DICTATION 04/10/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 19/10/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..