Saral Plastics Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-8(1), Ahmedabad

ITA 3118/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5830 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 30-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Peak credit; Deemed to accrue or arise in india; Retrospective amendment; Additional evidence; Question of law
• Section: 142(1); 201(1); 131; 139; 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV , JUDICIAL MEMBER AND SHRI MANISH BORAD , ACCOUNTANT MEMBER ./ ITA NO. 3118 & 3063 / AHD/201 3 / ASSTT. YEAR: 20 0 8 - 2009 SARAL PLASTICS PVT. LTD. SHREE PAL ABOVE INDIAN BANK, NR. PUROHIT HOTEL, KHADIA, AHMEDABAD PAN :AADCS0480N VS ITO, WARD - 8(1), AHMEDABAD (APPLICANT) (RESPONENT) ASSESSEE BY : MR. V ARTIK CHOKSHI ,AR REVENUE BY : MR. PRASOON KABRA , SR .DR / DATE OF HEARING : 30 / 03 /201 7 / DATE OF PRONOUNCEMENT: 25 / 05 /201 7 / O R D E R PER MANISH BORAD , ACCOUNTANT MEMBER : THESE CROSS APPEAL S FOR ASST. YEAR 20 0 8 - 09 ARE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME (APPEALS) - X I V, AHMEDABAD (IN SHORT LD.CIT ( A ) ) DATED 11/10 /2013 ARISING OUT OF ORDER U/S.143(3) OF THE INCOME TAX 1961 (HEREIN AFTER REFERRED AS ACT) FRAMED ON 30/11/2010 BY ITO , WARD (8) - 1 AHMEDABAD . 2 . BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECORDS ARE THAT ASSESSEE IS A PRIVATE LIMITED COM PANY ENGAGED IN MANUFACTURING AND TRADING OF ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 2 PVC PIPES . R ETURN OF INCOME DECLARING NIL INCOME WAS E - FILED ON 16/10/2008. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS. NOTICE U/S. 143(2) OF THE ACT FOLLOWED BY 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED AN D DULY SERVED UPON THE ASSESSEE, NECESSARY INFORMATION AS CALLED FOR WERE PROVIDED. DURING THE ASSESSM ENT PROCEEDINGS ASSESSEE WAS ASKED TO EXPLAIN THE CASH CREDITS OF RS.1,45,77,661/ - BUT ASSESSEE FAILED TO PROVIDE PROPER EXPLANATION TO THE SATISFACTION OF LD.ASSESSING OFFICER (IN SHORT LD.AO) IN ORDER TO PROVE THE IDENTITY , GENUINENESS AND CREDITWORT HINESS. AS A RESULT ADDITION U/S.68 OF THE ACT FOR RS.1,45,77,661/ - WAS MADE BY THE LD.AO. SIMILARLY WITH REGARDS TO THE TRADE DEPO SIT ASSESSEE COULD NOT PROVE THE GENUINENESS OF RS.3,20,000/ - IN THE NAME OF SHRI PREYASH M. ZAVERI DUE TO WHICH ADDITION U/ S.68 OF THE ACT FOR RS.3,20,000/ - WAS MADE . D ISALLOWANCE U/S.40(A)(IA) OF THE ACT WAS MADE FOR RS.1,37,745/ - FOR NOT DEDUCTING AND DEPOSITING TAX AT SOURCE ON INTEREST PAID TO NON BANKING FINANCE COMPANY. ADDITION OF RS.25,500/ - WAS MADE U/S.40 A(2)(B ) OF THE ACT ON THE INTEREST PAID TO THE RELATIVES BEING AT THE RATE OF 18% AS AGAINST 12% PAID TO OTHER PARTIES . I N ALL , AFTER MAKING ADDITION OF RS.1,50,60,906/ - INCOME WAS ASSESSED AT RS.1,51,92,757/ - 3. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE THE LD.CIT(A ) AGAINST ALL THE ADDITION EXCEPT DISALLOWANCE U/S.40 A(2)(B ) OF THE ACT AND GOT PARTLY SUCCEEDED AS LD.CIT CONFIRMED THE ADDITION U/S.68A OF THE ACT AT RS.3,20,000/ - , AND DISALLOWANCE U/S.40(A)(IA) OF THE AC T AT RS.1,37,745/ . FURTHER WITH REGARD TO ADDITION OF RS.1,45 ,77,661/ - LD.CIT(A) ADMITTED ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WHICH WERE GOING TO THE ROOT CA USE OF THE ADDITION, REMAND REPORT WAS CALLED FOR , PERUSED THE PEAK CREDIT AMOUNT SUPPLIED BY THE ASSESSEE AND PARTLY DELETED T HE ADDI TION OF RS.84,68,293/ - (BY MISTAKE LD.CIT(A) HAS MENTIONED THE DELETED AMOUNT AT RS.94,68,293/ - ) AND CONFIRMED THE ADDITION OF RS.61,09,368/ - BEING TOTAL OF INDIVIDUAL PEAK CREDIT OF FIVE PARTIES. ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 3 4. AGGRIEVED BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFO RE THE TRIBUNAL. 5. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.61,09,369/ - [WRONGLY TOWTALLED AT RS.51,09,368 AT PAGE 37 OF THE ORDER THE LEARNED CIT(A) U/S.68 OF THE I.T ACT IN RESPECT OF THE FOLLOWING PARTIES: RS. (A) M/S. J.P. CORPORATION 14,61,700 (B) M/S. SWASTIK CORPORATION 18,38,139 (C) M/S. SUN SHINE CORPORATION 16,40,000 (D) M/S. SHANKESHWAR CORPORATION 2,86,235 (E) M/S. SUN CORPORATION 8,83,294 TOTAL : 61,09,368 2. WITHOUT PREJUDICE TO GROUND NO.1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN WORKING OUT THE PEAK OF THE CREDITS INDIVIDUALLY IN EACH ACCOUNT SEPARATELY IN RESPECT OF THE AFORESAID FIVE PARTIES, WHEREAS, LOGICALLY, HE OUGHT TO HAVE WORKED OUT THE PEAK AS PER THE WELL RECOGNIZED GLOBAL METHOD BY TAKING ALL THE DEBITS AND CREDITS CUMULATIVELY OF THE AFORESA ID FIVE ACCOUNTS IN CHRONOLOGICAL ORDER. 3. WITHOUT PREJUDICE TO THE FOREGOING GROUNDS OF APPEAL, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT( A) ERRED IN WRONGLY ADOPTING THE PEAK IN THE ACCOUNTS OF J.P. CORPORATION AT RS.14,61,700 AND IN THE ACCOUNT OF SWASTIK CORPORATION AT RS.18,38,139/ - WHEREAS THE CORRECT FIGURES OF PEAK EVEN IN THE INDIVIDUAL ACCOUNTS OF THESE TWO PARTIES COME TO RS.6,37,5 34/ - AND RS.14,64,000 RESPECTIVELY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS.3,20,000/ - U/S.68 OF THE I.T ACT IN RESPECT OF THE TRADE CREDIT IN THE NAME OF PREYASH M. ZHAVERI HUF. 5. ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF INTEREST EXPENDITURE OF RS.1,37,745 U/S.40(A)(IA) OF THE I.T. ACT. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 4 6. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1A). THE LD.COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.67,87,465/ - OUT OF TOTAL ADDITION OF RS.1,45,77,661/ - MADE U/S.68 OF THE ACT ON THE BASIS OF PEAK CREDIT IN RESPECT OF DEPOSITORS, WHOSE, NEITHER IDENTITY NOR GENUINENESS OF TRANSA CTION HAS BEEN PROVED BEFORE ASSESSING OR APPELLATE AUTHORITY. 1B). THE LD.COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRER IN LAW AND FACTS IN ADMITTING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF THE I.T. RULES AND TO IGNORE THE FACT TH AT ASSESSEE FAILED TO SUBMIT THE ADDITIONAL EVIDENCES BEFORE THE AO, WITHOUT ANY REASONABLE CASUE. 2). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSE SSING OFFICER. 3). IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD.COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD MAY BE SET - A - SIDE AND THAT OF ORDER OF THE ASSESSING OFFICER BE RESTORED. 7. FROM GOING THROUGH THE GROUNDS OF BOTH THE PARTIES WE OBS ERVE THAT GROUND NO.1, 2 AND 3 IN AS SESSEES APPEAL AND GROUND NO.1A AND 1B OF REVENUES APPEAL ARE IN RELATION TO THE ADDITION OF RS.1,45,77,661/ - MADE BY THE LD.AO U/S.68 OF THE ACT . WE FIRST TAKE UP THIS ISSUE. 8. LD.AR SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS , ASSESSEE WAS ASKED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF 15 PARTIES FROM WHOM TOTAL LOAN OF RS.1,45,77,661/ - WAS TAKEN. HOWEVER, A SSESSEE COULD NOT PRODUCE ANY EVIDENCE TO EXPLAIN THE SOURCE OF IMPUGNED CASH CREDIT. DURING THE APPELLANT PROCEEDING ASSESSEE SUBMITTED ADDITIONAL EVIDENCE S ALONGWITH AFFIDAVIT S WITH RESPECT TO THE LOAN S TAKEN DURING THE YEAR. DETAILED EXAMINATION WAS MADE BY LD.CIT(A) AFTER ADMITTING ADDITIONAL EVIDENCE. LD .CIT(A) H AS RIGHTLY DELETE D THE ADDITION OF RS.1 6 , 8 0,528 / - RELATING TO UNSECURED LOAN FROM FOUR PARTIES AS THE LD.AO MENTIONED HIS SATISFACTION IN HIS REMAND REPORT . ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 5 H OWEVER, LD.CIT(A) WAS NOT SATISFIED WITH THE GENUINENESS AND CREDITWORTHINESS OF THE UNSE CURED LOANS TOTALING TO RS.1,28,97,133/ - RECEIVED FROM FIVE PARTIES AN D THEREFORE TOOK A VIEW TO APPLY PEAK CREDIT THEORY FOR ALL THE FIVE PARTIES INDIVIDUALLY AND ACCORDINGLY CONFIRMED THE ADDITION OF RS.61,09,368/ - . LD.COUNSEL FURTHER ADDED THAT LD.CIT(A ) SHOULD HAVE NOT APPLIED THE PEAK CRE DIT INDIVIDUALLY OF EACH PARTY RATHER PEAK CREDIT SHOULD HAVE BEEN WORKE D OUT FOR ALL THE FIVE PARTIES CUMULATIVELY . DETAILS OF THESE PEAK CREDIT S IS PLACED ON RECORD AT PAGE 133 AND 134 OF THE PAPER BOOK AS PER WHICH PEAK CRED IT CALCULATED AT RS.45,22,452/ - . LD.COUNSEL REQUESTED THAT AT THE PLACE OF RS.61,09,368/ - BEING THE PEAK CREDIT CONFIRMED BY LD.CIT(A)ADDITION SHOULD BE RESTRICTED TO RS.45,22,452/ - 9. LD.COUNSEL ALSO SUBMITTED THAT IF HONBLE TRIBUNAL IS NOT WITH THE ASSESSEE ON APPLYING CUMULATIVE PEAK CREDIT THEORY THAN THE CORRECT INDIVIDUAL PEAK CREDIT FIGURE IN CASE OF TWO PARTIES MAY BE APPLIED NAMELY M/S.J.P. CORPORATION AT RS.6,37,534/ - AND M/S.SWASTIK C ORPORATION AT RS.14,64,000/ - A S AGAINST RS.14,61 ,700/ - AND RS.18,38,139/ - RESPECTIVELY CONFIRMED BY LD.CIT(A) WITH REGARD TO THE S E TWO PARTIES. 9.1 FURTHER LD.COUNSEL RELIED ON THE DECISION OF CO - ORDINATE BENCH IN THE CASE OF S.R. ENTERPRISES V/S. ITO IN ITA NO.2429/AHD/1999 PRONOUNCED ON 20/07/2000 IN RES P E CT OF HIS CONTENTION OF APPLYING CUMULATIVE PEAK THEORY . 10. ON THE OTHER HAND LEAR NED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED SUPPORTING THE ORDER OF LD.AO A ND ALSO CHALLENGED THE ACTION OF LD.CIT(A) FOR ADMISSION OF ADDITIONAL EVIDENCE S UNDE R RULE 46A OF THE INCOME TAX RULE AND ALSO AGAINST APPLICATION OF PEAK CREDIT IN RESPECT OF DEPOSITORS FOR WHICH ASSESSEE COULDNT SUPPLY THE BASIC DETAILS OF IDENTITY, GENUINENESS AND CREDITWORTHINESS BEFORE THE ASSESSING ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 6 AUTHORITY . LD.DR A LSO SUBMITTED T HAT PEAK CREDIT SHOULD NOT BE APPLIED BECAUSE AT THE PAPER BOOK OF PAGE 133 AND 134 SHOWING WORKING OF PEAK CREDIT OF FIVE DEPOSITORS, T HERE ARE VARIOUS ENTRIES WHICH ARE NOT BANK/CASH T RANSFER BUT MERELY JOURNAL ENTRIES . 11. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORDS PLACE BEFORE US AN D GONE THROUGH THE DECISION REFERRED BY LD.COUNSEL. ISSUE RAISED BY BOTH THE PARTIES IN VARIOUS GRO UNDS AS DISCUSSED ABOVE REVOLVES ROUND THE ISSUE OF ADDITION U/S.68 OF THE ACT AT RS.1,45,77,661/ - MADE BY THE LD.AO. IT IS A FACT THAT DURING THE ASSESSMENT PROCEEDINGS ASSESSEE COULDNT SATISFY THE THREE LIMBS I.E IDENTITY, CREDITWORTHINESS AND GENUINENESS OF CASH CREDIT/UNSECURED LOANS AT RS.1,45,77,661/ - EVEN AFTER BEING PROVIDI NG VARIOUS OPPORTUNITIES. THEREAFTER WHEN THE MATTER CAME UP BEFORE THE LD.CIT(A) , ASSESSEE FILED ADDITION AL EVIDENCE TO EXPLAIN THE IMPUGNED CASH CREDIT AND ALSO FILED AFFIDAVIT BY THE DIRECTOR THAT AUDITED BALANCESHEET , BANK STATEMENT , DETAILS OF LOANS AC CEPTED I N BOOK OF ACCOUNTS , WERE PRODU CED BEFORE THE ASSESSING AUTHORITY. HOWEVER, LD.AO WITHOUT MAKING ANY FUR THER ENQUIRY FROM APPELLANT SIMPLY RESORTED FOR ADDITION U/S.68 OF THE ACT. WE FIND SUBSTANCE IN THE ORDER OF LD.CIT(A) ADMITTING ADDITIONAL EVID ENCE BY FOLLOWING THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT V/S P.K. NOORJEHAN(1999) 155 CTR (SC)509 WHEREIN IT HAS BEEN HELD THAT UN SATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUT OMATICALLY IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INCOME OF THE ASSESEE 11.1 A CCORDINGLY WE DISMISS THE GROUND OF REVENUE RAISED AGAINST ADMITTING OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULE OF LD.CIT(A). WE ARE OF THE OPINI ON THAT ASSESSEE FILED BASIC DETAILS BEFORE THE ASSESSING AUTHORITY AND NEEDED TIME TO GATHER SUFFICIENT INFORMATION. DETAILS FILED BY THE ASSESSEE AS ADDITIONAL EVIDENCE WERE GOING TO THE ROOT ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 7 CAUSE OF THE ISSUE PLACED BEFORE FIRST APPELLATE AUTHORITY AND THEREFORE LD. CIT(A) RIGHTLY ADMITTED THE ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULE . 12. WE FURTHER OBSERVE THAT LD.CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER. AS PER THE REMAND REPORT LD.AO WAS SATISFIED WITH THE CASH CRED IT OF RS.16,80,828/ - RECEIVED FROM FOUR PARTIES NAMELY MODERN PLASTICS RS.4,48,7 08/ - , SANJAY SHAH RS.7,06,820/ - , SONAL D SHAH RS.1,25,000/ - AND SMITA KOBAWALA RS.4,00,000/ - HOWEVER FOR THE REMAINING AMOUNT OF RS.12,879, 1 33 / - RECEIVED FROM FIVE PARTIES THERE WAS NO SATISFACTORY REPLY BY THE ASSESSE E. WE FIND AGGREGATE AMOUNT OF RS.1,28,97,133/ - FROM THE FIVE PARTIES. 13. LD.CIT(A) THEREAFTER ADOPTED THE PEAK CREDIT THEORY AND CALLED FOR DETAILS FOR CALCULATING INDIVIDUAL PEAK CREDIT OF EACH PA RTY BECAUS E THE DETAI L S CHEQUE ISSUED, CHEQUE CLEARED NAMES OF THE PARTIES WERE NOT REAC HING AT THE CORRECT CONCLUSION . LD.CIT(A) ACCORDINGLY CONFIRMED THE ADDITION OF RS.61,09,368/ - BEING TOTAL PEAK CREDIT OF THESE FIVE PARTIES. WE WOULD LIKE TO SUMMARIZE THE FIGU RES OF THE FOLLOWING FIVE PARTIES CONTAINING THE DETAILS OF UNSECURED LOAN IN THE NAME OF EACH PARTIES AND THE PEAK CREDIT CONFIRMED BY LD.CIT(A). SR.NO. NAME OF DEPOSITORS AMOUNT OF DEPOSIT PEAK CREDIT CONFIRMED 1. M/S.SWASTIK CORPORATION RS.42,94,139/ - RS.18,38,139/ - 2. M/S.SHANKHESWAR CORPORATION RS.17,39,294/ - RS.2,86,235/ - 3. M/S.SUNCOPORATION RS.21,62,000/ - RS.8,83,294/ - 4. M/S.SUN SHINE CORPORATION RS.32,40,000/ - RS.16,40,000/ - 5. M/S.J.P. CORPORATION RS.14,61,700/ - RS.14,61,700/ - ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 8 TOTAL RS.1,28,97,133/ - RS.61,09,368/ - 13.1 WE FURTHER OBSERVE THAT LD.DR HAS PLEADED ABOUT NON APPLICATION OF PEAK THEORY IN THE CASE OF ASSESSEE WHICH WE FIND NOT TO BE CORRECT IN THE GIVEN FACTS AND CIRCUMSTANCES BECAUSE THE BASIC ABOUT O PENING BALANCE OF SUCH CASH CREDIT , HOW MUCH CASH/FUND HAD COME FROM KNOWN AND ACCEPT SOURCES WHERE THE FUND HAS FLOW ARE NOT ON RECORD. IT IS ONLY THE NEGATIVE FIGURE I.E SHORTAG E OF FUND WHICH IS UN EXPLAINED NEEDS TO BE ADDED TO THE INCOME OF ASSESSEE. 13.2 WE FIND IT PERTINENT TO REPRODUCE THE DETAILED FINDINGS OF LD.CIT(A) ON THIS ISSUE OF APPLICATION OF PEAK THEORY WHICH READS AS UNDER : 5.2 NOW COMING TO GROUND WISE ADJUDICATION : (A) GROUND NO. 1 IS GENERAL AND TECHNICAL TO TREAT THE ASSESSMENT ORDER AS BAD IN LAW AND REQUESTED TO BE QUASHED. THE APPELLANT HAS NOT SUBSTANTIATED THIS GROUND. NO EXPLANATION OR SUBMISSION MADE IN RESPECT OF THIS GROUND. AS DISCUSSED AT PARA 4 ABOVE, THERE IS ; NO INFIRMITY OF ANY KIND BY WHICH THE IMPUGNED ASSESSMENT ORDER CAN BE HELD AS BAD IN LAW. THIS GROUND IS THEREFORE DISMISSED. (B) (I) GROUND NO. 2 IS AGAINST THE ADDITION OF RS. 1,45,77,661/ - U/S 68 OF THE IT. ACT. A.O.'S CONTENTIONS, APPELLANT'S SUBMISSION BOTH BEFORE A.O., AS WELL AS BEFORE ME INCLUDING ADDI TIONAL EVIDENCES, REMAND REPORT OF A.O. AND REJOINDER OF REMAND REPORT HAD ALREADY BEEN DISCUSSED AT PARA 4 ABOVE. THE APPELLANT RELYING ON VARIOUS CASE LAWS, EMPHASIZED THAT IT HAS DISCHARGED ITS ONUS AS CASTED U/S 68 OF THE ACT FOR IDENTIFY, GENUINITY AN D CREDIT WORTHINESS IN RESPECT OF ALL SUCH PARTIES FROM WHOM LOANS/ DEPOSITS WERE ACCEPTED BY SUBMISSION OF LEDGER ALE, CONFIRMATION, PAN NO. AND EVIDENCES TO REFLECT THAT SUCH LOAN / DEPOSIT WERE ACCEPTED & REPAID BOTH DURING THE PREVIOUS YEAR AS WELL AS IN SUBSEQUENT YEAR THROUGH BANKING CHANNEL AND GENUINE TRANSACTIONS. THE A.O. ON THE OTHER HAND FOUND APPELLANT'S SUBMISSION AND EXPLANATION UNSATISFACTORY. THE A.O. IN THE INITIAL PARA MENTIONED THAT APPELLANT IN SPITE OF REPEATED REQUESTS DOES NOT FURNIS HED TAX AUDIT REPORT IN FORM NO. 3CB & 3CD. BUT HE MENTIONED THAT VERIFICATION OF BALANCE SHEET AS ON 31/03/08 REFLECT THAT DURING THE YEAR ASSESSEE ACCEPTED RS. 1,45,77,661/ - LOANS AND TOTAL UNSECURED LOAN AS ON 31/03/08 WAS OF RS. 1,99,45,655/ - . HE FUR THER OBSERVED THAT BOOKS OF ACCOUNTS WERE PRODUCED INCLUDING CASH BOOK ON 15/10/10 AND IT WAS FOUND THAT THE DETAILS OF ACCEPTANCE OF DEPOSIT WAS NOT IN LEDGER FORM BUT IN THE FORM OF A LIST ATTACHED TO BALANCE SHEET ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 9 HAVING OPENING BALANCE, ADDITION, REPAY MENT AND CLOSING BALANCE. THE A.O. CATEGORICALLY MENTIONED THAT AUDITOR CERTIFIED THE BOOKS OF ACCOUNT AND BALANCE SHEET. THE A.O. HOWEVER MADE THE ADDITION OF RS. 1,45,77,661/ - U/S 68 OF THE ACT WITHOUT DELIBERATING THE OPENING BALANCE, RECEIPT OF DEPOSIT , REPAYMENT IN THE ASSESSMENT ORDER. THE APPELLANT FILED AN AFFIDAVIT ALONGWITH CORRECT DETAIL OF SUCH UNSECURED LOANS DURING REMAND PROCEEDINGS WHICH WERE DULY VERIFIED BY A.O. AFTER SUCH VERIFICATION, THE A.O. IN THE REMAND REPORT CONSIDERED ONLY 5 PARTI ES FROM WHOM APPELLANT STATED THAT LOAN OF RS. 1,28,97,133/ - WAS RECEIVED DURING IMPUNGED PREVIOUS YEAR. (II) THE A.O. IN THE REMAND REPORT EXAMINED AND VERIFY VARIOUS TRANSACTIONS WITH THESE FIVE PARTIES INCLUDING THE TRANSACTION WHICH WERE NOT REFLECTED IN APPELLANT'S BANK ACCOUNT BEING JOURNAL ENTRY. IT IS THEREFORE IT WILL BE IN THE FITNESS OF FACTS TO DEAL WITH EACH SUCH PARTY INDEPENDENTLY AS FOLLOWS: (A) (I) M/S. J.P. CORPORATION : AS PER THE DETAILS OF UNSECURED LOANS GIVEN IN TABULAR FORM WITH OP ENING BALANCE, ADDITION /REPAYMENT AND CLOSING BALANCE AS FILED BY APPELLANT WITH AFFIDAVIT OF SH. SANJAY SHAH, DIRECTOR OF THE APPELLANT COMPANY DT. 09/02/2012 THERE IS NIL OPENING BALANCE, DURING THE YEAR RS. 14,61,700/ - WERE RECEIVED FROM THIS PARTY WHI LE RS. 13,17,177/ - WERE REPAID LEAVING THE CLOSING BALANCE OF RS. 1,44,523/ - . THE APPELLANT IN THE PAPER BOOK DT. 09/02/12 (PAGE 1 TO 103) AS PER INDEX DISCUSSED AT PARA 4B ABOVE HAS NOT SUBMITTED ANY LEDGER ACCOUNT, ADDRESS OR PAN FOR THIS PARTY. THE APPE LLANT SUBMITTED COPY OF HIS CORPORATION BANK ACCOUNT NO. CC/01/990008 WHERE ON 05/02/08 A CHEQUE FORM BANK OF INDIA (CHEQUE NO. 0924981) FOR AN AMOUNT OF RS. 6,08,700/ - RECEIVED AND CLEARED TO SAY THAT THE SAME WAS RECEIVED FROM M/S J. P. CORPORATION. IN RE SPECT OF SECOND ENTRY OF RS. 8,59,000/ - [RS. 859000 + 602700 = RS. 1461700] IT IS CONTENDED THAT THE SAME IS JOURNAL ENTRY. THE APPELLANT IN ITS SUBMISSION DT. 22/02/13 FOR THE FIRST TIME SUBMITTED THAT - 'FURTHER IN THE CASE OF J. P. CORPORATION THE AMOUNT OF RS. 14 LAKH HAS BEEN RECEIVED AGAINST ADVANCE GIVEN TO THEM EARLIER' (A)(II) IT IS THEREFORE APPELLANT FAILED TO SUBMIT ANY ADDRESS, PAN FROM THIS PARTY. FURTHER THERE IS NO DETAILS ABOUT JOURNAL ENTRY. THE APPELLANT'S CONTENTION THAT THIS PARTY REFUNDED THE ADVANCES GIVEN EARLIER BUT WITH NIL OPENING BALANCE AND WITHOUT SUBSTANTIATION OF SUCH FACT, THIS EXPLANATION CANNOT BE ACCEPTED. (A)(III) THE APPELLANT SUBMITTED FOLLOWING LEDGER DETAIL ON 11/10/13 FOR WORKING OF PEAK CREDIT (BOTH IND IVIDUAL & COMBINED) FOR J. P. CORPORATION DATE TYPE PARTICULARS OPENING BAL. DEBIT CREDIT RUNNING BALANCE 12/04/2007 BP CHQ. NO. 756623 172500 172500 ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 10 07/05/2007 BP CHQ. NO. 756638 265666 438166 10/05/2007 BP CHQ. NO. 756648 79250 517416 10/07/2007 BP CHQ. NO. 756786 507000 1024416 24/09/2007 BP CHQ. NO. 197587 292591 1317007 28/11/2007 JV CHQ. NO. 226243 859000 458007 23/11/2008 BP CHQ. NO. 924981 602700 144693 (A)(IV) AS AGAINST THIS, THE APPELLANT'S BANK STATEMENT (PAGE 22 - 62 OF P.B. DT. 09/02/2012) WHICH EITHER DOES NOT REFLECT THESE ENTRIES OR REFLECT DIFFERENT ENTRIES AS FOLLOWS: (I) ON 25/04/2007 CHEQUES NO. 0756625 ISSUED TO MAHESHBHAI FOR RS. 1,72,50 07 - , THERE IS NO CHEQUE CLEARING OF 756623. (II) ON 08/05/2007 THERE IS CHEQUE CLEARING OFRS. 265666 VIDE CHEQUE NO. 756638 WITH THE NAME OF J. P. CORPORATION, (III) ON 14/05/2007 VIDE CHEQUE NO. 0756647 AMOUNT OF RS. 2,00,000/ - GOT CLEARED IN TH E NAME OF J. P. CORPORATION (THERE IS NO SUCH ENTRY IN APPELLANT'S DETAILS) (IV) ON 18/05/2007 VIDE CHEQUE NO. 0756650 AN AMOUNT OF RS. 1,00,0007 - GOT CLEARED IN THE NAME, OF J. P. CORPORATION (THERE IS NO SUCH ENTRY IN APPELLANT'S DETAILS), (V) ON 18/05/2007 VIDE CHEQUE NO. 0756648 AN AMOUNT OF RS. 79250 GOT CLEARED IN THE NAME OF J. P. CORPORATION. (VI) ON 21/05/2007 VIDE CHEQUE NO. 0756653 AN AMOUNT OF RS. 1,79,250 GOT CLEARED IN THE NAME OF J. P. CORPORATION (THERE IS NO SUCH ENTRY IN APP ELLANT'S DETAIL) (VII) ON 11/07/2007 VIDE CHEQUE NO. 0756786 AN AMOUNT OF RS. 5,07,000/ - GOT CLEARED IN THE NAME OF SHASHANK AND NOT OF J. P. CORPORATION. (VIII) ON 25/09/2007 VIDE CHEQUE NO. 197587 AN AMOUNT OF RS. 2,92,761/ - GOT CLEARED IN THE NAME OF RADHA SWAMI AND NOT OF J. P. CORPORATION. (A)(V) IT IS THEREFORE, THE APPELLANT NEITHER GIVEN PAN, CONFIRMATION, ADDRESS OF THIS PARTY NOR SUBMITTED CORREC T & CREDIBLE DETAILS. THE APPELLANT FAILED TO DISCHARGE ITS ONUS OF ESTABLISHING IDENTITY, GENUINITY ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 11 AND CREDIT WORTHINESS. IT IS UNDISPUTED THAT APPELLANT ADMITTED TO RECEIVE RS. 14,61,700/ - FROM THIS PARTY DURING PREVIOUS YEAR AND FAILED TO SUBSTANTIATE I TS CONTENTION THAT IT RECEIVED BACK LOAN GIVEN TO THIS PARTY. IN THE ABSENCE OF ANY POSSIBILITY OF VERIFICATION FROM THIS PARTY, THE A.O. IS JUSTIFIED IN ARRIVING AT CONCLUSION TO TREAT RS. 14,61,700/ - AS UNEXPLAINED. (A)(VI) HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. NIPUN BUILDERS & DEVELOPERS PVT. LTD. (2013) 350 ITR 407 EVEN AFTER CONSIDERING HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2009) 319 ITR (ST.) 5 AND IN THE MATTER WHERE APPELLAN T FILED DETAILS LIKE PAN, CONFIRMATION, BANK DETAILS IN RESPECT OF PARTIES APPLIED FOR SHARE OF THE COMPANY HELD. 'UNDER SECTION 68 THE ONUS IS UPON THE ASSESSEE TO PROVE THE THREE INGREDIENTS, I.E., IDENTITY AND CREDITWORTHINESS OF THE PERSON FROM WHOM T HE MONIES WERE TAKEN AND THE GENUINENESS OF THE TRANSACTION. AS TO HOW THE ONUS CAN BE DISCHARGED WOUJD DEPEND ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IT IS EXPECTED OF BOTH THE SIDES - THE ASSESSEE AND THE ASSESSING AUTHORITY - TO ADOPT A REASONABLE APPROACH. THE ASSESSEE HERE IS A PRIVATE LIMITED COMPANY. IT CANNOT ISSUE SHARES IN THE SAME MANNER IN WHICH A PUBLIC LIMITED COMPANY DOES. IT HAS TO GENERALLY DEPEND ON PERSONS KNOWN TO ITS DIRECTORS OR SHAREHOLDERS DIRECTLY OR INDIRECTLY TO BUY ITS SHARE S. ONCE THE MONIES ARE RECEIVED AND SHARES ARE ISSUED, IT IS NOT AS IF THE SHARE - SUBSCRIBERS AND THE ASSESSEE - COMPANY LOSE TOUCH WITH EACH OTHER AND BECOME INCOMMUNICADO. CALLS DUE ON THE SHARES HAVE TO BE PAID; IF DIVIDENDS ARE DECLARE D, THE WARRANTS HAVE TO BE SENT TO THE SHAREHOLDERS. IT IS A CONTINUING RELATIONSHIP, EVEN GRANTING THAT IT MAY NOT BE OF THE SAME DEGREE IN WHICH IT EXISTS BETWEEN A DEBTOR AND CREDITOR. THE SHARE - SUBSCRIBERS IN THE PRESENT CASE HAVE EACH INVESTED SUBSTAN TIAL AMOUNTS IN THE ASSESSEE'S SHARES, AS THE CHART AT PAGES 2 - 3 OF THE ASSESSMENT ORDER WOULD SHOW. MOST OF THEM, BARRING TWO OR THREE, ARE THEMSELVES PRIVATE LIMITED COMPANIES. IT CANNOT THEREFORE BE CONTENDED, AS WAS CONTENDED BEFORE US ON BEHALF OF THE ASSESSEE, THAT IF THE SUMMONS ISSUED U/S. 131 TO THE SUBSCRIBING COMPANIES AT THE ADDRESSES FURNISHED BY THE ASSESSEE RETURNED UNNERVED, THE AO IS DUTY - BOUND TO ENFORCE THEIR ATTENDANCE WITH ALL THE POWERS VESTED IN HIM. THE UNREAS ONABLENESS OF SUCH A GENERAL PROPOSITION IS WRIT LARGE IN THE FACE OF THE CONTENTION. THE ASSESSEE - COMPANY RECEIVED THE SHARE MONIES; IT EVEN SAYS THAT THE COMMUNICATIONS SENT BY IT AT THE ADDRESSES DID NOT RETURN UNSERVED, YET WHEN THE AO REQUESTED IT - T HAT TOO ONLY AFTER TRYING TO SERVE THE SUMMONS UNSUCCESSFULLY - TO PRODUCE THE PRINCIPAL OFFICER OF THE SUBSCRIBING COMPANIES, THE ASSESSEE DEVELOPED COLD FEET AND SAID IT CANNOT HELP IF THOSE COMPANIES DID NOT APPEAR AND THAT IT WAS FOR THE ASSESSING OFFI CER TO ENFORCE THEIR ATTENDANCE. IT NEEDS TO BE REMEMBERED THAT THE AO DID NOT MERELY STOP WITH ISSUING SUMMONS; HE FOLLOWED IT UP WITH A VISIT BY THE INSPECTOR WHO CONFIRMED THAT NO SUCH COMPANIES FUNCTIONED FROM THE ADDRESSES FURNISHED BY THE ASSESSEE. L ET US SEE THE ATTITUDE OF THE ASSESSEE TOWARDS DISCHARGING ITS ONUS IN SUCH CIRCUMSTANCES. IT SAYS THAT THE AO MAY GET THE ADDRESSES FROM THE ROC'S WEBSITE. WE DO NOT THINK THAT AN ASSESSEE CAN TAKE SUCH AN UNREASONABLE ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 12 ATTITUDE TOWARDS HIS ONUS U/S. 68, L ITTLE REALIZING THAT WHEN THE FINDING IS THAT THE SUBSCRIBING COMPANIES HAVE NOT BEEN FOUND EXISTING AT THE ADDRESSES GIVEN BY THE ASSESSEE, IT IS OPEN TO THE AO TO EVEN HOLD THAT THE IDENTITY OF THE SHARE - SUBSCRIBERS HAS NOT BEEN PROVED, LET ALONE THEIR C REDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. IT WAS NOT OPEN TO THE ASSESSEE, GIVEN THE FACTS OF THIS CASE, TO DIRECT THE AO TO GO TO THE WEBSITE OF THE COMPANY LAW DEPARTMENT/ROC AND SEARCH FOR THE ADDRESSES OF THE SHARE - SUBSCRIBERS AND THEN C OMMUNICATE WITH THEM FOR PROOF OF THE GENUINENESS OF THE SHARE SUBSCRIPTION. THAT IS THE ONUS OF THE ASSESSEE, NOT OF THE AO. ASSESSEE DID NOT PRODUCE THE PRINCIPAL OFFICER OF THE COMPANIES WHO SUBSCRIBED TO THE SHARES; IT MERELY FILED A LETTER AT THE 'DAK ' COUNTER OF THE AO, STATING THAT THE COMMUNICATIONS SENT BY IT TO THE SHARE SUBSCRIBERSHAVE NOT COME BACK UNSERVED. THIS IS NOT COMPLIANCE WITH THE DIRECTIO N OF THE AO WHO HAD ISSUED NOTICE TO THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICERS OF THE SUBSCRI BING COMPANIES. AS IS WELL KNOWN, IN THE CASE OF PRIVATE LIMITED COMPANIES, IT CANNOT BE DENIED THAT THERE IS A CONTINUING CONTACT AND RELATIONSHIP WITH THE SHARE HOLDERS AND IF THE ASSESSEE WAS SERIOUS ENOUGH TO ESTABLISH ITS CASE, IT OUGHT TO HAVE PRODUC ED THE PRINCIPAL OFFICERS OF THE SUBSCRIBING COMPANIES BEFORE THE AO SO THAT THEY CAN EXPLAIN THE SOURCES FROM WHICH THE SHARE SUBSCRIPTION WAS MADE. THAT WOULD ALSO HAVE TAKEN CARE OF THE DIFFICULTY OF THE ASSESSEE IN PROVING THE CREDITWORTHINESS OF THE S UBSCRIBER COMPANIES. IT WAS, THEREFORE, IN THE ASSESSEE'S OWN INTEREST TO HAVE ACTIVELY PARTICIPATED AND COOPERATED IN THE ASSESSMENT PROCEEDINGS AND COMPLIED WITH THE DIRECTION OF THE AO TO PRODUCE THE PRINCIPAL OFFICERS OF THE SUBSCRIBING COMPANIES. INST EAD, THE ASSESSEE TOOK AN ADAMANT, IF WE MAY USE THAT EXPRESSION, ATTITUDE AND FAILED TO COMPLY WITH THE DIRECTION OF THE AO; NOT ONLY THAT, IT CHALLENGED THE AO'S FINDING THAT THE SUMMONS SENT TO THE COMPANIES CAME BACK UNSERVED WITH THE REMARK' NO SUCH COMPANY', WHICH WAS ALSO SUPPORTED BY THE REPORT OF THE INSPECTOR WHO MADE A VISIT TO'THE ADDRESSES. THE ASSESSEE THUS TOOK A VERY EXTREME STAND WHICH WAS IN OUR OPINION NOT JUSTIFIED; CERTAINLY IT DID NOTHING WORTHWHILE TO DISCHARGE THE ONUS TO PR OVE THE CREDITWORTHINESS OF THE SUBSCRIBING COMPANIES, OPEN TO THE AO TO SEEK INFORMATION FROM THE ASSESSEE AS TO THE CREDITWORTHINESS OF THE CREDITOR/SHARE SUBSCRIBER WHICH MAY INCLUDE INFORMATION AS TO THE SOURCES OF THE CREDITOR/SHARE SUBSCRIBER . IF PROVING THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER IS NOW JUDICIALLY ACCEPTED AS ONE OF THE INGREDIENTS OF THE ONUS CAST ON THE ASSESSEE UNDER SECTION 68, WE DO NOT SEE HOW PROOF OF THE RESOURCES OF THE CREDITOR/SHARE SUBSCRIBER CAN BE COMPLETELY EXCLUDED FROM THE SWEEP OF THE BURDEN. IT MAY NOT BE REQUIRED OF THE ASSESSEE TO GIVE IN - DEPTH PARTICULARS AND DETAILS ABOUT THE RESOURCES OF THE CREDITOR OR THE SHARE SUBSCRIBER, BUT THE MINIMUM REQUIRED OF HIM WOULD BE, IN OUR OPINION, INFO RMATION THAT WILL PRIMA FACE SATISFY THE AO ABOUT THE CREDITWORTHINESS MERE FURNISHING OF THE COPIES OF THE BANK ACCOUNTS OF THE SUBSCRIBERS IS NOT SUFFICIENT TO PROVE THEIR CREDITWORTHINESS. THERE MUST BE, IN OUR OPINION, SOME POSITIVE EVIDENCE TO SHOW TH E NATURE AND SOURCE OF THE RESOURCES OF THE SHARE SUBSCRIBER ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 13 HIMSELF AND THEREFORE IT IS NECESSARY FOR HIM TO COME BEFORE THE AO AND CONFIRM HIS SOURCES FROM WHICH HE SUBSCRIBED TO THE CAPITAL.' (A)(VII) THE RATIO OF THIS JUDGMENT WAS FOLLOWED BY DELHI HIGH COURT IN THE CASE OF CIT VS. TITAN SECURITIES LTD. (2013) 215 TAXMAN 164. IT IS THEREFORE ALL THE THREE INGREDIENT VIZ. IDENTIFY, GENUINITY AND CREDIT WORTHINESS HAS TO BE PROVED BY ASSESSEE INDEPENDENTLY. HERE IN THE CASE OF APPELLANT ALL THE T HREE INGREDIENTS ARE UNSUBSTANTIATED THEREFORE, THE ADDITION SO MADE OF RS. 16,61,700/ - IS UPHELD AND CONFIRMED. (B)(I) M/S SWASTIK CORPORATION AND M/S SUN SHINE CORPORATION: THE A.O. IN THE REMAND REPORT SUBMITTED THAT IN REFERENCE TO SUM RECEIVED OF RS. 42,94,139/ - FROM M/S SWASTIK CORPORATION AND OF RS. 32,40,000/ - FROM M/S SUNSHINE CORPORATION, THE CONFIRMATION SUBMITTED BY APPELLANT REFLECT ONE PAN I.E. AHYPP814A. ON THE ADDRESS AS SUBMITTED BY APPELLANT INQUIRIES WERE CONDUCTED BY A.O. BUT SUCH PARTIE S WERE NOT FOUND AT GIVEN ADDRESSES. THE A.O. FAILED TO PRODUCE THESE PARTIES FOR VERIFICATION. THE APPELLANT SUBMITTED THAT THESE BOTH ARE PROP, CONCERN OF SHRI HASMUKHBHAIRATILAL PATEL THE PAN IS SAME FOR BOTH THE PROP, CONCERN. FURTHER, IT WAS CONTENDED THAT SINCE APPELLANT FILED THE CONFIRMATION & PAN, THE A.O. SHOULD HAVE VERIFIED FROM THE DEPARTMENT'S RECORD THE WHEREABOUTS OF SUCH PARTIES. (B)(II) AS DISCUSSED IN PREVIOUS PARAS, AS PER LEGAL PROPOSITION THE APPELLANT HAS TO DISCHARGE ITS ONUS INDEPE NDENTLY FOR THREE INGREDIENTS I.E. IDENTIFY, GENUINITY AND CREDIT WORTHINESS. THE APPELLANT BY MERE FILING OF PAN AND CONFIRMATION CANNOT CONCLUDE THAT IT HAD DISCHARGED SUCH ONUS. ON INQUIRIES IF THE SAID PARTIES ARE NOT AVAILABLE THEN THE CREDIT WORTHINE SS OF SAID PARTIES CANNOT BE HELD AS DISCHARGED. THIS BECOME MORE IMPORTANT IN VIEW OF VARIOUS ENTRIES IN THE LEDGER ACCOUNT WHICH REFLECT THE JOURNAL ENTRIES IN BOTH THESE PROP, CONCERNS. FURTHER NO INTEREST WAS RECEIVED OR PAID FOR SUCH LOAN/DEPOSIT BY T HESE PARTIES OR APPELLANT. THE CONTRA A/C AND CONFIRMATION FILED BY APPELLANT VIDE PAPER BOOK DT. 09/02/12 (PAGE 4 - 62) OF BOTH THESE PARTIES IS ATTACHED WITH THIS ORDER AS READY REFERENCE AS ANNX.A - 1 & A - 2. FROM THE VARIOUS ENTRIES AS APPEARING IN THESE CO NTRA ACCOUNT, IFVERIFICATION IS DONE FROM VARIOUS ENTRIES APPEARING IN APPELLANT'S BANK A/C ATCORPORATION BANK (PAGE 22 - 62 OF P.B. DT. 09/02/2012) IF DONE THAN FOLLOWING DISCREPANCIES WERE FOUND (B)(III) IN RESPECT OF SWASTIK CORPORATION: (I) THERE IS NO REFERENCE OF APPELLANT'S PAYMENT / LOAN OF RS. 2,25,000/ - DT. 05/05/07 VIDE CHEQUE NO. 0756556. (II) THERE IS NO REFERENCE OF APPELLANT'S PAYMENT / LOAN OF RS. 2,00,000/ - EACH ON 08/08/07 VIDE CH. NO. 0756808 AND DT. 11/09/07 CH. NO. 07568 51. ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 14 (III) THERE IS RECEIPT OF RS. 3,00,000/ - DT. 29/11/07 VIDE CH. NO. 226281 BUT APPELLANT REFLECTED ONLY RS. 1,75,000/ - ALSO CONTRA A/C DULY CONFIRMED REFLECT RS. 1,75,000/ - . (B)(IV) IN REFERENCE TO SUNSHINE CORPORATION (I ) THERE IS NO ENTRY OR REFERENCE FOR PAYMENT BY APPELLANT DT. 12/04/07VIDE CH. NO. 756616 FOR RS. 228000 (II) THERE IS NO ENTRY OF PAYMENT BY APPELLANT OF RS. 5,00,000/ - DT. 13/03/08 VIDE CH. NO. 0197861, RS. 5,00,000/ - DT. 17/03/08 VIDE CH. NO. 0197863 AND RS. 6,00,000/ - DT. 17/03/08 VIDE CH. NO. 0197862. (III) THE ENTRY OF RS. 4,00,000/ - DT. 03/01/08 VIDE CH. NO. 197689 AS STATED TO BE PAYMENT BY APPELLANT IS IN THE NAME OF SHRI S. T. DESAI. (B)(V) IT IS THEREFORE, THE CONTRA ACCOUNT & CONFIRMATION SO SUBMITTED BY APPELLANT ARE NOT PROPER AND EXAMINATION OF SUCH PARTY BECOMES IMPORTANT & RELEVANT. THE A.O. IN THE REMAND REPORT CERTIFIED THAT LOAN RECEIPT ENTRY THROUGH JOURNAL ENTRY WAS CLAIMED TO BE PAYMENT MADE BY M/S NANDAN TRADI NG CO. FOR WHICH APPELLANT FILED CONTRA A/C, PAN, CONFIRMATION AND DISCHARGED THE ONUS CASTED AND HENCE NOT TO BE DISBELIEVED. THERE IS NO DISCREPANCY AS FAR AS RECEIPT OF LOAN EXCEPT ONE AS THAT OF IN M/S SWASTIK CORPORATION. IT IS THER EFORE, I AM INCLINED WITH THE CONTENTION OF A.O. THAT APPELLANT BY NOT PRODUCING THESE PARTIES. BY SIMPLY ALLEGING THE A.O. TO FIND WHEREABOUTS OF THESE PARTIES THE APPELLANT HAS NOT DISCHARGED ITS BURDEN AS CASTED U/S 68 OF THE ACT IN VIEW OF RATIO OF CAS E LAWS DISCUSSED EARLIER. HOWEVER, CONSIDERING BOTH LOAN EXTENDING ENTRIES AND LOAN RECEIVED ENTRIES THROUGH BANKING CHANNEL, IT IS ONLY THE PEAK OF SUCH CREDIT IN INDIVIDUAL ACCOUNT WHICH CAN BE LEGITIMATELY SAID TO BE LOAN RECEIVED / ACCEPTED FROM SUCH P ARTY AND THE SAME CAN BE HELD AS UNDISCLOSED AND DEEMED INCOME U/S 68 OF THE ACT. SUCH PEAK FOR M/S SWASTIKCORPORATION AND M/S SUNSHINE CORPORATION AS COMPUTED AND SUBMITTED BY APPELLANT (APPENDED WITH THIS APPEAL ORDER AS ANNX. B - 1) IS OF RS. 18.38.13 9/ - AND RS. 16,40,0007 - RESPECTIVELY, {T IS THEREFORE THESE TWO AMOUNTS ARE UPHELD U/S 68 OF THE ACT IN RESPECT OF THESE TWO PARTIES, (C) IN REFERENCE TO M/S SHANKESWAR CORPORATION AND M/S SUN CORPORATION THE FINDINGS AND NATURE OF TRANS ACTIONS ARE SIMILAR TO M/S SWASTIK CORPORATION AND M/S SUNSHINE CORPORATION I.E. APPELLANT PRODUCED CONTRA ACCOUNT & CONFIRMATION WITH PAN NO. OF THESE TWO PARTIES BUT THESE PARTIES WERE FOUND NON - EXISTENT AT THE GIVEN ADDRESS AND APPELLANT FAILED TO PRO DUCE THESE PARTIES. FURTHER A PART OF ENTRIES IN RESPECTIVE LEDGER ACCOUNT ARE THROUGH JOURNAL VOUCHER ENTRIES. THE APPELLANT'S WORKING OF PEAK FOR INDIVIDUAL PEAK CREDIT ON THE BASIS OF BOTH RECEIPT AND REPAYMENT OF LOAN WORKS OUT TO RS. 2S6235/ - IN RESPE CT OF M/S SUN CORPORATION, WHILE THE SAME IS RS. 88S294/ - IN RESPECT M/S SHANKASHWAR CORPORATION. OTHER FACT I.E. THERE IS NO INTEREST RECEIPT OR PAYMENTS ARE ALSO THERE. THERE ARE OTHER ENTRIES IN THESE NAMES IN APPELLANT'S BANK ACCOUNT NOT TAKEN INTO CON SIDERATION IN THE LEDGER ACCOUNT. THEREFORE AS DISCUSSED ABOVE AT (I) & (II) THE PEAK CREDIT OF RS. 2,86,255/ - AND RS. 8,83,294/ - ARE UPHELD AS CONFIRMED ADDITION U/S 68 OF THE ACT. ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 15 (D) AS DISCUSSED EARLIER, OUT OF TOTAL ADDITION OF RS. 1,45,77,661/ - THE A.O. IN HIS REMAND REPORT WAS SATISFIED WITH THE LOAN ACCEPTED FROM FOLLOWING PARTIES : (A) MODERN PLASTICS 448708 (B) SANJAY SHAH 706820 (C) SONAL D SHAH 125000 (E) SMITAKOBAWALA 400000 168028 IT IS THEREFORE OUT OF REMAINING ADDITION OF RS. 1 ,28,97,133/ - CONSIDERING THE ROTATIONAL TRANSACTION, THE PEAK CREDIT AS CONFIRMED / UPHELD ARE AS FOLLOWS: (A) M/S J P CORPORATION 1461700 (B) M/S SWASTIK CORPORATION 1838139 (C) M/S SUN SHINE CORPORATION 1640000 (D) M/S SHANKHESHWAR CORPORATION 286235 (E) M/S SUN CORPORATION 883294 TOTAL 6109368 THE ADDITION U/S 6 8 OF THE ACT TO THE EXTENT RS. 6 109368/ - ARE UPHELD. IT IS THEREFORE THE A.O. IS DIRECTED TO DELETE THE BALANCE ADDITION OF RS. 8 4,68,293/ - (1,45,77,661 - 51,09,368). THE APPELLANT GETS PART RELIEF. THIS GROUND IS PARTLY ALLOWED. 13.3 IN THE GIVEN CASE LD.CIT(A) HAS DISCUSSED AT LENGTH ABOUT THE FIVE PARTIES AS REFERRED ABOVE AND COMES TO THE CONCLUSION THAT AS THERE WERE NO DETAILS ABOUT JOURNAL ENTRIES , MISMATCH OF NAME AND ASSEST BANK STATEMENT ENTR IES AND THOSE REFLECTED IN THE B OOK. I N THIS SITUATION LD.CIT(A) HAS RIG HTLY ADOPTED PEAK CREDIT THEORY . WE CONFIRM THE ACTION OF LD.CIT(A) OF APPLYING PEAK CREDIT THEORY . 13.4 FURTHER AS REGARDS TO THE ISSUE AS TO WHE THER THE PEAK CREDIT THEORY SHOULD HAVE BEEN APPLIED TO EACH PAR TY INDIVIDUALLY OR CUMULATIVELY . WE FIND IT PERTINENT TO REPRODUCE FINDINGS OF CO - ORDINATE BENCH IN THE CASE OF SR ENTERPRISES V/S ITO( SUPRA) WHEREIN FACT ARE QUITE SIMILAR SO MUCH SO THAT IN THIS CASE ASSESSE FAILED TO FILE CONFIRMATION BEFORE LD.AO AND SOME OF PARTIES STATED THAT CASH WAS NOT GIVEN BY THEM TO THE ASSESEE. LD.AO MADE AN ADDITION ON EACH CASH CREDIT WHEREAS TRIBUNAL HELD PEAK OF THE ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 16 CREDIT SHOULD BE APPLIED . I N DECIDING SO CO - ORDINATE BENCH OBSERVE AS FOLLOWS : 6. I HAVE GIVEN CAREFUL THOUGHT TO THE RIVAL SUBMISSIONS OF THE PARTIES. IN MY CONSIDERED VIEW, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN ASKING THE ASSESSEE TO PROVE THE CREDITS INTRODUCED IN THE SHA PE OF SALE RECEIPTS FROM THE CUSTOMERS AND WHEN THOSE WERE NOT PROVED, TREATING THEM AS UNEXPLAINED INCOME OF THE ASSESSEE. THE ASSESSING OFFICER WAS ALSO JUSTIFIED IN RECORDING STATEMENT OF THE PURCHASERS REGARDING THE CASH PAYMENT ALLEGEDLY MADE BY THEM. THE DENIAL CONTAINED IN THE STATEMENT WAS DULY PUT TO THE ASSESSEE AND THE ASSESSEE OFFERED NO EXPLANATION. THERE MAY BE SOME JUSTIFICATION FOR THE ARGUMENT THAT ASSESSEE SHOULD HAVE BEEN PERMITTED TO CROSS - EXAMINE PERSONS WHO DEPOSED AGAINST THE ASSESSEE , BUT THEN THIS ARGUMENT HAS BEEN SPECIFICALLY GIVEN BY THE LEARNED COUNSEL FOR THE ASSESSEE AND, THEREFORE, I NEED NOT COMMENT UPON THIS ASPECT ANY FURTHER. 6.1. IT IS NOW WELL ACCEPTED PROPOSITION THAT EVEN ADDITION FOR UNPROVED TRADE CREDIT CAN BE MADE . WHEN IT IS BROUGHT ON RECORD THAT THE CASH INTRODUCED IN THE BOOKS OF ACCOUNT, IS NOT GENUINE AND ASSESSEE'S OWN MONEY, THERE IS NO MATERIAL' DIFFERENCE WHETHER IT IS INTRODUCED AS 'CASH CREDIT' OR AS 'TRADE CREDIT'. IN BOTH THE, CASES, THE CREDIT IS TO BE ASSESSED AS 'DEEMED INCOME' OF THE ASSESSEE. I FURTHER DO NOT FIND ANY SUBSTANCE IN THE ARGUMENT THAT CASH CREDITS APPEAR ON THE LIABILITY SIDE WHEREAS SUNDRY DEBTORS APPEAR ON THE ASSET SIDE OF THE BALANCE SHEET AND, THEREFORE SECTION 68 IS NOT APPLICA BLE TO TRADE CREDITS. THE ABOVE IS TRUE OF GENUINE CASH CREDITS AND NOT OF CREDIT ENTRIES WHICH ARE HELD TO BE NON - GENUINE. THE STRONG RELIANCE OF THE ASSESSEE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. SMT. P.K. NOORJAHAN (SUPRA) IS ALS O NOT OF ANY AVAIL. THE DECISION WAS GIVEN ON THE PECULIAR FACTS BEFORE THE COURT AND IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE ME. THEREFORE. I DO NOT FIND ANY SUBSTANCE IN THE SUBMISSIONS ADVANCED BY SHRI J.P. SHAH EXCEPT THE ON E RELATING TO THE WORKING OF THE ADDITION. 6.2. THAT ON TREATING CREDIT ENTRIES AS NON - GENUINE, THE AMOU NT INTRODUCED HAS BEEN TAKEN TO BE ASSESSEE S DEEMED INCOME. ALL THE CREDITS HAVE BEEN ADDED WITHOUT BOTHERING TO KNOW AS TO WHAT WAS THE CASH AVAILABLE WITH THE ASSESSEE ON A GIVEN DATE ON WHICH IT WAS INTRODUCED IN THE BOOKS OF ACCOUNT AS RECEIPT FROM THE CUSTOMER. THE ASSESSING OFFICER HAS NOT BE EN MENTIONED DATES OF CREDITS. IT IS ALSO NOT AVAILABLE ON RECORD AS TO WHAT WAS THE OPENING BALANCE WITH THE ASSESSEE AND HOW MUCH CASH HE HAD FROM KNOWN AND ACCEPTED SOURCES. IN THE ABSENCE OF ABOVE MATERIAL, THE ADDITION FOR UNEXPLAINED CASH COULD NOT B E WORKED OUT. WHAT HAS BEEN INTRODUCED BEYOND THE AVAILABLE CASH COULD ONLY BE TREATED AS 'UNEXPLAINED'. IT IS. THEREFORE, NECESSARY TO WORK OUT THE PEAK OF THE CREDITS AS ALSO DETAILS OF AVAILABLE FUNDS WITH THE ASSESSEE AND THEN SEE HOW MUCH UNACCOUNTED FOR CASH HAS BEEN INTRODUCED IN THE BOOKS OF ACCOUNTS. THE PEAK OF SUCH AMOUNTS IS TO BE ADDED; IN THE HANDS ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 17 OF THE ASSESSEE AS 'DEEMED INCOME' AND IN ACCORDANCE WITH LAW. TO ENABLE THE ASSESSING OFFICER TO CARRY OUT THE ABOVE EXERCISE, THE IMPUGNED ORDERS ARE SET ASIDE AND MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER FOR PASSING A FRESH ORDER AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE MATTER IS, ACCORDINGLY, RESTORED TO THE FILE OF ASSESSING OFFICER FOR PASSING A FRES H ORDER IN THE LIGHT OF ABOVE OBSERVATIONS. 14. RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH WE OBSERVE IN THE CASE OF ASSESSEE ALSO CUMULATIVE PEAK CREDIT THEORY SHOULD BE APPLIED BECAUSE THE MOVEMENT OF FUND ARE INTERMINGLE D AS EVIDENT FROM GOING THROUGH THE DETAILS PROVIDED IN THE ORDER OF LD.CIT(A) AS WELL AS CHART SHOWING WORKING OF PEAK CREDIT PLACED ON PAGE 133 AND 134 OF PAPER BOOK. AS PER THIS CHART PEAK CREDIT I S ON 25/03/2008 AT RS.45,22,452/ - 14.1 LD.DR DURING HIS ARGUMENTS SUBMI TTED THAT THIS CHART SHOWING PEAK CREDIT OF FIVE PARTIES REFERRED AT PAGE 133 AND 134 OF PAPER BOOK SHOULD NOT BE GIVEN ANY COGNIZANCE B ECAUSE THERE ARE VARIOUS JOURNAL ENTRIES ON 30/04/2007 OF RS.8,83,294/ - AND ON 24/11/2007 OF RS.8,56,000/ - AND OTHERS . TO REBUT THIS FINDINGS LD.COUNSEL SUBMITTED THAT A LL THESE ENTRIES THROUGH JOURNAL VOUC HER ARE CREDIT ENTRIES SHOWN ON CREDIT SIDE AND IF THEY ARE REMOVED , PEAK BALANCE WILL C OME DOWN DRASTICALLY. WE THEREFORE IGNORE THE CONTENTION OF LD.DR AND ACCEPT THE WORKING OF PEAK CREDIT OF RS.45,22,452/ - SHO WN BY THE ASSESSEE AND SUSTAIN ADDITION U/S.68 OF THE ACT TO RS.45,22,452/ - AS AGAINST TOTAL INDIVIDUAL PEAL CREDIT OF RS.61,09,368/ - 14.2 SUMMARIZING OUR DISCUSSION WE ALLOW ASSESSEES GROUND NO.2 OF APPLYING GLOBAL METHOD OF PEAK CREDIT FOR THE FIVE PARTIES AT RS.45,22,452/ - AND DISMISS GROUND NO.1 AND 3 OF THE ASSESSEE. SIMILARLY AS WE HAVE SUSTAINED ADDITION OF RS.45,22,452/ - U/S.68 OF THE ACT ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 18 REVENUE S G ROUND NO.1A IS PARTLY ALLOW AND GROUND NO.1B RELATING TO ADMITTING THE ADDITIONAL EVIDENCE STANDS DISMISS ED . 15. NOW WE TAKE UP GROUND NO.4 OF THE ASSESSEE AGAINST ORDER OF LD.CIT(A) CONFIRMING ADDITION OF RS.3,20,000/ - U/S.68 OF THE ACT. AT THE OUTSET LD.COUNSEL FOR THE ASSESSEE REQUESTED FOR NO T PRESSING THIS GROUND. AS ASSESSEE HAS NOT PRESSED THIS GROUND WE DISMISS THIS GROUND AS NOT PRESSED AND CONFIRM THE ADDITION OF R S.3,20,000/ - U/S.68 OF THE ACT IN RESPECT OF TRADE CREDIT IN THE NAME OF SHRI PREYASH M. ZHAVERI(HUF). IN THE RESULT THIS GRO UND OF ASSESSEE IS DISMISS ED . 16. NOW WE TAKE UP GROUND NO.5 IN ASSESSEE APPEAL , AGAINST ORDER OF LD.CIT(A) CONFIRMING DISALLOWANCE U/S.40(A)(IA) OF THE ACT OF INTEREST PAID TO NON BANKING FINANCE COMPANY AT RS.1,37,745/ - AT THE OUTSET LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT ISSUE IN THIS APPEAL IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT V/S ANSAL LAND MARK TOWNSHIP(P)LTD.[2015] 61 TAXMANN.COM 45 DECLARING AMENDMENT MADE IN SECTION 40(A)(IA) THROUGH F I NANCE ACT 2012 IS DECLARATORY AND CURATIVE IN NATURE AND SHOULD BE GIVEN RETROSPECTIVE EFFECT FROM 01/04/2005. LD.COUNSEL ACCORDINGLY REQUESTED FOR SETTING ASIDE THE ISSUE TO THE FILE OF LD.AO TO EXAMINE THAT THE INTEREST PAYMENT HAS BEEN OFFERED AS INCOME BY RESPECTIVE NON BANKING FINANCE COMPANY IN THEIR REGULAR RETURN OF INCOME AND IF THEY HAVE PAID DUE T AXES THERE ON , ASSESSEE SHOULD NOT BE TREATED IN DEFAULT U/S.40(A)(IA) OF THE ACT AS THE REVENUE HAS OBTAIN ED DUE TAXES ON THE INTEREST INCOME. 17. ON THE OTHER HAND LD.DR RAISED NO OBJECTION FOR SETTING ASIDE TO THE FILE OF LD.AO. ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 19 18. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORD PLACED BEFORE US AND GONE THROUGH THE DECISION RELIED BY LD.COUNSEL . F ROM PERUSAL OF THE RECORD WE OBSERVE TH AT ASSESSEE HAS NOT DEDUCTED INCOME TAX U/S. AT SOURCE 194A OF THE ACT ON THE INTEREST PAID AT RS.87,508/ - TO CHOLAMANDALAM FINANCE AND RS.50,245/ - TO GE MONEY. AS A RESULT LD.AO DISALLOWED THE EXPENDITURE OF RS.1,37,745/ - U/S.40(A)(IA) OF THE ACT WHICH W AS FURTHER CONFIRMED BY LD.CIT(A). 18.1 WE FURTHER OBSERVE THAT HONBLE HIGHT COURT OF DELHI IN THE CASE OF CIT V/S ANSAL LAND MARK TOWNSHIP (P) LTD.(SUPRA) DEALT WITH SIMILAR ISSUE FOR NON DEDUCTION OF TAX U/S.194J AND DISALLOWANC E MADE U/S.40(A)(IA) OF THE ACT . WE OBSERVE T HAT HONBLE HIGH COURT CONFIRMED THE ORDER OF TRIBUNAL BY ADOPT ING THE RATIO OF DECISION OF AGRA BE N CH IN ITA NO.337/AGRA/2013 RAJIV KUMAR AGARWAL VS ACIT BY OBSERVING AS FOLLOWS: 8. IT IS SEEN THAT THE ISSUE IN THESE AYS ARISES IN THE CONTEXT OF THE DISALLOWANCE BY THE ASSESSING OFFICER OF THE PAYMENT MADE BY THE RESPONDENT ASSESSEE TO ANSAL PROPERTIES AND INFRASTRUCTURE LTD. ('APIL') WHICH PAYMENT, ACCORDING TO THE REVENUE, OUGHT TO HAVE BEEN MADE ONLY AFTER DEDUCTING TAX AT SOURCE UNDER SECTION 194J OF THE ACT. BEFORE THE ITAT, IT WAS URGED BY THE ASSESSEE THAT IN VIEW OF THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, THE PAYMENT MADE COULD NOT HAVE BEEN DISA LLOWED. RELIANCE WAS PLACED ON THE DECISION OF THE AGRA BENCH OF ITAT IN ITA NO. 337/AGRA/2013 (RAJIV KUMAR AGARWAL V. ACJT) IN WHICH IT WAS HELD THAT THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS DECLARATORY AND CURATIVE IN NATURE AND SHOULD BE GI VEN RETROSPECTIVE EFFECT FROM 1ST APRIL 2005. 9. IT IS SEEN THAT THE SECOND PROVISO TO SECTION 40(A)(IA) WAS INSERTED BY THE FINANCE ACT. 2012 WITH EFFECT FROM 1ST APRIL 2013. THE EFFECT OF THE SAID PROVISO IS TO INTRODUCE A LEGAL FICTION WHERE AN ASSESSE E FAILS TO DEDUCT TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII B. WHERE SUCH ASSESSEE IS DEEMED NOT TO BE AN ASSESSEE IN DEFAULT IN TERMS OF THE FIRST PROVISO TO SUB - SECTION (1) OF SECTION 201 OF THE ACT, THEN, IN SUCH EVENT, 'IT SHALL BE DEEMED T HAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO'. ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 20 10. IT IS POINTED OUT BY LEARNED COUNSEL FOR THE REVENUE THAT THE FIRST PROVISO TO SECTION 201 (1) OF THE ACT WAS INSERTED WITH EFFECT FROM 1ST JULY 2012. THE SAID PROVISO READS AS UNDER: 'PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT (I ) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (II I) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME; AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED.' 11. THE FIRST PROVISO TO SECTION 201(1) OF THE ACT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. IT ALSO STATES THAT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 OF THE ACT. NO DOUBT, THERE IS A MANDATORY REQUIREMENT UNDER SECTION 201 TO DEDUCT TAX AT SOU RCE UNDER CERTAIN CONTINGENCIES, BUT THE INTENTION OF THE LEGISLATURE IS NOT TO TREAT THE ASSESSEE AS A PERSON IN DEFAULT SUBJECT TO THE FULFILMENT OF THE CONDITIONS AS STIPULATED IN THE FIRST PROVISO TO SECTION 201(1). THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) ALSO REQUIRES TO BE VIEWED IN THE SAME MANNER. THIS AGAIN IS A PROVISO INTENDED TO BENEFIT THE ASSESSEE. THE EFFECT OF THE LEGAL FICTION CREATED THEREBY IS TO TREAT THE ASSESSEE AS A PERSON NOT IN DEFAULT OF DEDUCTING TAX AT SOURCE UND ER CERTAIN CONTINGENCIES. 12. RELEVANT TO THE CASE IN HAND, WHAT IS COMMON TO BOTH THE PROVISOS TO SECTION 40(A)(IA) AND SECTION 201(1) OF THE ACT IS THAT AS LONG AS THE PAYEE/RESIDENT (WHICH IN THIS CASE IS ALIP) HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID TAX ON SUCH INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERSON IN DEFAULT. AS FAR AS THE PRESENT CASE IS CONCERNED, IT IS NOT DISPUTED BY THE REVENUE THAT THE PAY EE HAS FILED RETURNS AND OFFERED THE SUM RECEIVED TO TAX. 13. TURNING TO THE DECISION OF THE AGRA BENCH OF ITAT IN RAJIV KUMAR AGARWAL'S CASE (SUPRA ), THE COURT FINDS THAT IT HAS UNDERTAKEN A THOROUGH ANALYSIS OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT AND ALSO SOUGHT TO EXPLAIN THE RATIONALE BEHIND ITS INSERTION. IN PARTICULAR, THE COURT WOULD LIKE TO REFER TO PARA 9 OF THE SAID ORDER WHICH READS AS UNDER: 'ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT IN COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE RECIP IENTS OF THE PAYMENTS. SUCH A ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 21 POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THEREFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THAT THERE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVIZE NOT DEDUCTING TAX AT SOURCE WHEN SUCH TAX DEDUCTIONS ARE DUE, BUT, SO FAR AS THE LEGAL FRAMEWORK IS CONCERNED, THIS PROVISION IS NOT FOR THE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE SEPARATE PENAL PROVISIONS TO THAT EFFECT. DEINCENTIVIZING A LAPSE AND PUNIS HING A LAPSE ARE TWO DIFFERENT THINGS AND HAVE DISTINCTLY DIFFERENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOTATIONS. WHEN WE APPRECIATE THE OBJECT OF SCHEME OF SECTION 40(A)(IA), AS ON THE STATUTE, AND TO EXAMINE WHETHER OR NOT, ON A 'FAIR, JUST AND EQUITA BLE' INTERPRETATION OF LAW AS IS THE GUIDANCE FROM HON'BLE DELHI HIGH COURT ON INTERPRETATION OF THIS LEGAL PROVISION, IN OUR HUMBLE UNDERSTANDING, IT COULD NOT BE AN 'INTENDED CONSEQUENCE' TO DISALLOW THE EXPENDITURE, DUE TO NON - DEDUCTION OF TAX AT SOURC E, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 40(A)(IA), AS WE SEE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT IS NOT, IN OUR CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR A N INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271C, AND, SECTION 40(A)(IA) DOES NOT ADD TO THE SAME. THE PROVISIONS OF SECTION 40(A)(IA), AS THEY EXISTED PRIOR TO INS ERTION OF SECOND PROVISO THERETO, WENT MUCH BEYOND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDSHIPS EVEN IN CASES IN WHICH THE ASSESSEE'S TAX WITHHOLDING LAPSES DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BE EN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN 'INTENDED CONSEQUENCE' TO PUNISH THE ASSESSEES FOR NON - DEDUCTION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DULY BROUGHT TO TAX. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECT IVE EFFECT FROM 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. 14. THE COURT IS OF THE VIEW THAT THE ABOVE REASONING OF THE AGRA BENCH OF ITAT AS REGARDS THE RATIONALE BEHIND THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT AND ITS CONCLUSION THAT THE SAID PROVISO IS ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 22 DECLARATORY AND CURATIVE AND HAS RETROSPECTIVE EFFECT FROM 1ST APRIL 2005, MERITS ACCEPTANCE. 15. IN THAT VIEW OF THE MATTER, THE COURT IS UNABLE T O FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ITAT IN ADOPTING THE RATIO OF THE DECISION OF THE AGRA BENCH, ITAT IN RAJIV KUMAR AGARWAL'S CASE (SUPRA). 16. NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE APPEAL IS DISMISSED. PARA 8 TO PARA 16 19. RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT IN CIT V/S. AN SAL LAND MARK TOWNSHIP (P) LTD. (SUPRA) AND EXAMINING THE FACT OF THE CASE BEFORE US , WE FIND THAT ISSUE IS SQUARELY COVERED BY TH IS JUDGMENT AND ARE OF THE VIEW THAT IF THE IMPUGNED INTEREST EXPENDITURE ON WHICH TAX HAS NOT BEEN DEDUCTED U/S.194A AND IF THEY HAVE BEEN OFFERED TO INCOME BY THE RECIPIENT AN D DUE TAXES HAS BEEN PAID , THE N NO DISALLOWANCE IS CALLED FOR IN THE HANDS OF ASSESSEE. WE ACCORDINGLY SET ASIDE THIS ISSUE TO THE FILE OF LD.AO AND DIRECT THE ASSESSEE TO PRODUCE NECESSARY EVIDENC E INC LUDING CERTIFICATE FROM CHARTERED ACCOUNTANT OF THE NON BANKING FINANCE COMPANY S CERTIFYING THAT THE INTE REST RECEIVED FROM ASSESSEE IS FORMING PART OF THE GROSS R EVENUE OF THE S E NON BANKING FINANCE COMPANY WHICH HAVE BEEN DULY OFFERED TO TAX IN THEIR RETURN OF INCOME. NEEDLESS TO MENTION THAT LD.AO WILL PROVIDE SUFFICIENT OPPORTUNITIES OF BEING HEARD TO THE ASSESSE. IN THE RESULT THIS GROUND OF ASSESSE IS ALLOW ED FOR STATISTICAL PURPOSE. 20. OTHERS GROUND NO.6 OF THE A SSESSEES APPEAL AND GROUND NO.2 AND 3 OF REVENUES APPEAL ARE GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 21. IN THE RESULT APPEAL OF THE A SSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THAT OF REVENUE IS PARTLY ALLOWED. ITA NO S.3118 & 3064 /AHD/2013 ASSESSMENT YEAR: 2008 - 09 23 ORDER PRONOUNCED IN THE COURT ON 25 / 05 / 201 7 AT AHMEDABAD. SD/ - ( RAJPAL YADAV ) JUDICIAL MEMBER SD/ - ( MANISH BO R A D ) ACCOUNTANT MEMBER TRUE COPY AHMEDABAD; DATED 25 / 05 / 201 7 MANISH / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A), AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE .