Shri Hiralal Dayaram Thakkar, Ahmedabad V. The Dy.CIT., Cent.Circle-1, Ahmedabad

ITA 3137/AHD/2007

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1708 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-03-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 19-07-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDALDR
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained cash credit; Rejection of books of accounts; Unexplained expenditure; Gift; Loose papers; Document seized; Opportunity of being heard; Principle of natural justice; Source of fund; Additional evidence; Question of law; Difference of opinion; Corroborative evidences; Non compliance; Commercial expediency; Onus to prove; Documents seized
• Section: 69C; 142(1); 153A; 234B; 145; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI BHAVNESH SAINI,JM & SHRI A N PAHUJA,AM ITA NOS.3137 & 3138/AHD/2007 (ASSESSMENT YEARS:-2000-01 & 2002-03) HIRALAL DAYARAM THAKKAR, PROP. RAJ GUEST HOUSE, B/12, SHREEJI BAPA COMPLEX, SHREEJI BAPA MARG, VASNA, AHMEDABAD V/S DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE- 1(1),ROOM NO. 303,AAYAKAR BHAVAN, AHMEDABAD PAN: AANPT 3721 E [APPELLANT] [RESPONDENT] ITA NOS.3409, 3410 & 3411/AHD/2007 WITH CO NOS.307, 308 & 309/AHD/2007 (ASSESSMENT YEARS:-2003-04, 2004-05 & 2005-05) DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE- 1(1), AHMEDABAD V/S HIRALAL DAYARAM THAKKAR, PROP. RAJ GUEST HOUSE, B/12, SHREEJI BAPA COMPLEX, VASNA, AHMEDABAD [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N DIVATIA, AR REVENUE BY:- SHRI SHELLEY JINDAL,DR O R D E R A N PAHUJA: THE TWO APPEALS BY THE ASSESSEE FOR THE AYS 2000-0 1 & 2002-03 AND THE THREE APPEALS BY THE REVENUE FOR THE AYS.2003- 04 TO 2005-06 AND THE CORRESPONDING CROSS-OBJECTION S[COS] DIRECTED AGAINST FIVE SEPARATE ORDERS DATED 29-05- 2007 OF THE LD. CIT(APPEALS)-I, AHMEDABAD, RAISE THE FOLLOWING GROU NDS: ITA NO.3137/AHD/2007- AY 2000-01[ASSESSEE] 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE REALIZED THAT IT WAS NOT AT ALL A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 153A FOR THIS YEAR. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) SHOULD HAVE REALIZED THAT NO INCRIMINATING MATERIAL WAS FOUND AT ALL FOR ANY OF THE FIRST FIVE YEARS (I.E. A.YS. 1999-20 00 TO 2003-04) PRIOR TO THE DATE OF SEARCH (VIZ. 9.2.2005) AND HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENING THE ASSESSME NTS FOR ALL THESE FIVE YEARS. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE REALIZED THAT SINCE NO INCRIMINATING MATERIAL WAS FOUND AT ALL FOR ANY OF THE AFORESAID FIVE ASSESSMENT YEARS THE ASSESSING OFFICER SHOULD HAVE NOT FRAMED THE ASSESSMENT ORDERS U/S.153A FOR ANY OF THOSE FIVE YE ARS. 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE THE CIT(A) SHOULD HAVE REALIZED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN EMBARKING UPON THE PROCESSING AND SCRU TINY OF THE ASSESSMENT IN A FASHION WHICH WAS PERMISSIBLE IN A REGULAR ASSESSMENT U/S.143(3) BUT IN THIS PARTICULAR CASE I T WAS NOT PERMISSIBLE U/S.153A. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE DEPARTMENTAL AUTHORITIES WERE NOT JUSTIFIED IN NOT BELIEVING THE ASSESSEE'S CLAIM OF RECEIPT OF TWO GIFTS OF RS.1 LAC EACH. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN NOT ACCEPTING THE ASSESSEE'S PLEA THAT IT WAS NOT AT ALL A FIT CASE FOR LEVY OF INTEREST U/S.234B OF THE IT. ACT. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DU RING THE COURSE OF HEARING OF THE APPEAL. ITA NO.3138/AHD/2007- AY 2002-03[ASSESSEE] 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE REALIZED THAT IT WAS NOT AT ALL A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 153A FOR THIS YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) SHOULD HAVE REALIZED THAT NO INCRIMINATING MATERIAL WAS FOUND AT ALL FOR ANY OF THE FIRST FIVE YEARS (I.E. A.YS. 1999-20 00 TO 2003-04) PRIOR TO THE DATE OF SEARCH (VIZ. 9.2.2005) AND HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENING THE ASSESSME NTS FOR ALL THESE FIVE YEARS. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE REALIZED THAT SINCE NO INCRIMINATING MATERIAL WAS FOUND AT ALL FOR ANY OF THE AFORESAID FIVE ASSESSMENT ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 3 YEARS THE ASSESSING OFFICER SHOULD HAVE NOT FRAMED THE ASSESSMENT ORDERS U/S.153A FOR ANY OF THOSE FIVE YE ARS. 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE THE CIT(A) SHOULD HAVE REALIZED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN EMBARKING UPON THE PROCESSING AND SCRU TINY OF THE ASSESSMENT IN A FASHION WHICH WAS PERMISSIBLE IN A REGULAR ASSESSMENT U/S.143(3) BUT IN THIS PARTICULAR CASE I T WAS NOT PERMISSIBLE U/S.153A. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN NOT ACCEPTING THE GENUINE NESS OF A GIFT OF RS.1 LAC FROM SHRI JAYANTIBHAI ATMARAM. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN NOT ACCEPTING THE ASSESSEE'S PLEA THAT IT WAS NOT AT ALL A FIT CASE FOR LEVY OF INTEREST U/S.234B OF THE IT. ACT. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DU RING THE COURSE OF HEARING OF THE APPEAL. ITA NO.3409/AHD/2007- AY 2003-04[ REVENUE] 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.20,60,573/- MADE BY ESTIMATING THE NET PROFIT AT 8%, WITHOUT CONSIDERING THE FACT THAT NET PROFIT DISCLOSED BY T HE ASSESSEE WAS ONLY 0.92% WHICH WAS EXTREMELY LOW IN THIS LINE OF BUSINESS. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS.60,237/- MADE ON ACCOUNT OF DISALLOWANCE OF INTE REST EXPENDITURE. 3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJEC TING THE A.O'S DECISION ON REJECTION OF BOOKS OF ACCOUNTS, WITHOUT CONSIDERING THE CORRECT LEGAL POSITION THAT WHEN NO DAY-TO-DAY CONS UMPTION RECORDS WERE MAINTAINED, REJECTION OF BOOKS OF ACCOUNTS WAS JUSTIFIED AS HELD BY HON'BLE COURTS IN THE CASES OF BASTIRAM NAR AYANDAS MAHESHWARI 210 ITR 438 (BOM), COSMOPOLITAN TRADING CORPORATION 9 TTJ 207 (JAI) AND DHONDIRAM DALICHAND 81 ITR 609 (BOM). 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 5 IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CI T (A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 4 ITA NO.3410/AHD/2007-AY 2004-05[REVENUE] 1 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMITTI NG THE FRESH EVIDENCES AND CONSEQUENTLY DELETING THE ADDITIONS P ARTICULARLY WHEN HE HIMSELF HAS DISMISSED THE ASSESSEE'S GROUND AGAI NST THE EX- PARTE ORDER AND THE GROUND OF NOT PROVIDING ADEQUAT E OPPORTUNITY OF BEING HEARD. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMIT TING ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46 A OF THE I.T. RUL ES AS NONE OF THE CONDITION THEREIN WAS SATISFIED. 3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMIT TING ADDITIONAL EVIDENCES DURING THE APPEAL HEARING BY IGNORING THE ASSESSING OFFICER'S OBJECTION FILED VIDE LETTER DATED 26/03/2 007. FURTHER, THE CIT(A) ALSO ERRED IN DIRECTING THE ASSESSING OFFICE R TO FURNISH A REMAND REPORT ON THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE AND IN CONSEQUENTLY DELETING ADDITION OF R S.1,24,81,500/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS. 3A THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.61,10,366/- MADE BY ESTIMATING THE NET PROFIT AT 8%, WITHOUT CONSIDERING THE FACT THAT NET PROFIT DISCLOSED BY T HE ASSESSEE WAS ONLY 0.35% WHICH WAS EXTREMELY LOW IN THIS LINE OF BUSINESS. 4 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJEC TING THE A.O'S DECISION ON REJECTION OF BOOKS OF ACCOUNTS, WITHOUT CONSIDERING THE CORRECT LEGAL POSITION THAT WHEN NO DAY-TO-DAY CONS UMPTION RECORDS WERE MAINTAINED, REJECTION OF BOOKS OF ACCOUNTS WAS JUSTIFIED AS HELD BY HON'BLE COURTS IN THE CASES OF BASTIRAM NAR AYANDAS MAHESHWARI 210 ITR 438 (BOM), COSMOPOLITAN TRADING CORPORATION 9 TTJ 207 (JAI) AND DHONDIRAM DALICHAND 81 ITR 609 (BOM). 5 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS.2,50,000/- MADE ON ACCOUNT OF UNEXPLAINED EXPEND ITURE NOT RECORDED IN THE BOOKS OF ACCOUNTS BUT RECORDED ON T HE SEIZED DOCUMENTS, WITHOUT VERIFYING THE CONTENTION OF THE ASSESSEE FROM THE BOOKS OF ACCOUNT. 6 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS.32,50,000/- AND RS.2,10,964/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS AND UNEXPLAINED INTEREST EXPENDITURE, RESPECTIVELY, BASED ON THE SEIZED MATERIAL, WITHOUT VERIFYING THE ARGUMENT OF THE ASSESSEE FROM THE BOOKS OF ACCOUNTS OF SHRI RAKESH THAKKAR, PARTICULARLY WHEN THE CLAIM BEFORE HIM WAS THAT MAJ ORITY OF THE TRANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNTS AND NOT ALL THE TRANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNTS . ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 5 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 8. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT (A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. ITA NO.3411/AHD/2007-AY 2005-06[REVENUE] 1 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMITTI NG THE FRESH EVIDENCES AND CONSEQUENTLY DELETING THE ADDITIONS P ARTICULARLY WHEN HE HIMSELF HAS DISMISSED THE ASSESSEE'S GROUND AGAI NST THE EX- PARTE ORDER AND THE GROUND OF NOT PROVIDING ADEQUAT E OPPORTUNITY OF BEING HEARD. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMIT TING ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46 A OF THE I.T. RUL ES AS NONE OF THE CONDITION THEREIN WAS SATISFIED. 3 THE C1T(A) HAS ERRED IN LAW AND ON FACTS IN ADMIT TING ADDITIONAL EVIDENCES DURING THE APPEAL HEARING BY IGNORING THE ASSESSING OFFICER'S OBJECTION FILED VIDE LETTER DATED 26/03/2 007. FURTHER, THE CIT(A) ALSO ERRED IN DIRECTING THE ASSESSING OFFICE R TO FURNISH A REMAND REPORT ON THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE AND IN CONSEQUENTLY DELETING ADDITION OF R S.83,85,405/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS. 4 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS.1.44,56,390/- MADE ON ACCOUNT OF UNDISCLOSED INC OME FROM SHARAFI BUSINESS FOUND RECORDED ON SEIZED DOCUMENTS AT PAGE 138 TO 140 OF ANNEXURE A 20, WITHOUT CONSIDERING THE CO NTENT OF THE SEIZED DOCUMENT AND FINDINGS OF THE A.O. 5 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELET ING THE ABOVE ADDITION BY HOLDING THAT THE TRANSACTIONS PERTAIN T O TRANSACTION BETWEEN RAKESHBHAI THAKKAR. INDIVIDUAL AND HIS PROP RIETARY CONCERN, M/S SATYA DEVELOPERS, WITHOUT CONSIDERING THE FACT THAT THE SEIZED DOCUMENT ALSO CONTAINED THE NAMES OF THI RD PARTIES SUCH AS BHARATBHAI, CHANDLODIA, RAKESHBHAI, RATANPOLE,-J ETHIBHAI GADHVI, PULINBHAI SHETH AND SUSHILABA. 6 THE C1T(A) HAS ERRED IN LAW & ON FACTS IN DELETIN G THE PROTECTIVE ADDITION AS ABOVE AND ALSO THE SUBSTANTIVE ADDITION MADE IN THE CASE OF DHARAMDEV FINANCE PVT. LTD. 7 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 6 8 IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CI T(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABOVE EXTENT. CO NO.307/AHD/2007- AY 03-04[ASSESSEE] 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RE SPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOL DING THE ADDITION OF RS.50,000 MADE BY THE LEARNED ASSESSING OFFICER ON AN AD HOC BASIS ON ACCOUNT OF HOUSEHOLD EXPENSES. HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT THE RESPONDENT HAD NO T MADE ANY DRAWINGS FOR HOUSEHOLD EXPENSES IN HIS BOOKS OF ACC OUNT SINCE HE WAS LIVING JOINTLY WITH HIS SONS WHO TOOK CARE OF T HE HOUSEHOLD EXPENSES, AND ORDERED FOR THE DELETION OF THE ADDIT ION. 2. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS OBJECTION EITHER BEF ORE OR AT THE TIME OF HEARING OF THE APPEAL. CO NO.308/AHD/2007- AY 04-05[ASSESSEE] 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RE SPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTA INING AN ADDITION OF RS.2,80,027 OF THE ADDITION OF RS.1,27,61,527 MA DE BY THE LEARNED ASSESSING OFFICER AFTER TREATING CREDITS IN THE CAPITAL ACCOUNT OF THE RESPONDENT AS UNEXPLAINED CASH CREDI TS. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING T HE ADDITION OF RS.60,000 MADE BY THE LEARNED ASSESSING OFFICER ON AN AD HOC BASIS ON ACCOUNT OF HOUSEHOLD EXPENSES. HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT THE RESPONDENT HAD NO T MADE ANY DRAWINGS FOR HOUSEHOLD EXPENSES IN HIS BOOKS OF ACC OUNT SINCE HE WAS LIVING JOINTLY WITH HIS SONS WHO TOOK CARE OF T HE HOUSEHOLD EXPENSES, AND ORDERED FOR THE DELETION OF THE ADDIT ION. 3. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS OBJECTION E ITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. CO NO.309/AHD/2007- AY 2005-06[ASSESSEE] 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTA INING AN ADDITION OF RS.50,000 OUT OF THE ADDITION OF RS.84,35,405 MA DE BY THE LEARNED ASSESSING OFFICER AFTER TREATING CREDITS IN THE CAPITAL ACCOUNT OF THE RESPONDENT AS UNEXPLAINED CASH CREDI TS. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 7 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE RESPONDENT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS.1,28,863 ON ACCOUNT OF ALLEGEDLY UNEXPLAINED EXP ENDITURE ON THE MEDICAL TREATMENT OF THE RESPONDENTS WIFE. HE OUGH T TO HAVE APPRECIATED, INTER ALIA, THAT THERE WAS NO BASIS FO R REJECTING THE RESPONDENTS EXPLANATION THAT HIS WIFE WAS AN INCOM E-TAX ASSESSEE AND THE IMPUGNED EXPENDITURE WAS DULY ACCO UNTED FOR BY HER AND BEING SUCH, THERE COULD BE NO QUESTION FOR SUSTAINING THE ADDITION IN THE RESPONDENTS HANDS. 3. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS OBJECTION E ITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. SINCE SIMILAR AND CONNECTED ISSUES WERE RAISED, TH ESE APPEALS/COS WERE HEARD SIMULTANEOUSLY FOR THE SAKE OF CONVENIENCE AND ARE BEING DISPOSED OF THROUGH THIS COMMON ORDE R. ITA NOS.3137 & 3138/AHD/2007 2. AT THE OUTSET, THE LEARNED AR ON BEHALF OF THE A SSESSEE DID NOT PRESS GROUND NOS.1 TO 4 IN THEIR AFORESAID TWO APP EALS. THEREFORE, THESE GROUNDS ARE DISMISSED AS SUCH. 3. ADVERTING NOW TO GROUND NO.5 IN THE APPEAL OF TH E ASSESSEE FOR AY 2000-01 RELATING TO ADDITION ON ACCOUNT OF TWO GIFTS OF RS.1,00,000/- EACH , FACTS, IN BRIEF, AS PER RELEV ANT ORDERS ARE THAT A SEARCH U/S 132 OF THE INCOME-TAX ACT, 1961 [HEREINA FTER REFERRED TO AS THE ACT] WAS CONDUCTED IN THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE, ALONG WITH DHARAMDEV BUILDERS GRO UP OF CASES ON 9-02-2005.CONSEQUENTLY, A NOTICE U/S 153A(A) OF THE ACT WAS ISSUED, REQUIRING THE ASSESSEE TO FILE RETURN WITHIN 30 DAY S FROM THE SERVICE OF THE NOTICE. IN RESPONSE, THE ASSESSEE FILED RET URN DISCLOSING INCOME OF RS.74,140/-ON 30-07-2006. INTER ALIA, THE AO NOTICED THAT THE ASSESSEE HAD SHOWN RECEIPT OF GIFTS FROM THE F OLLOWING TWO PERSONS:- ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 8 TARABEN V PANCHAL - RS.1,00,000/- VINUBHAI PANCHAL - RS.1,00,000/- 3.1 TO A QUERY BY THE AO ON 8.9.2006, SEEKING ADD RESS OF THE DONORS AND ASKING TO ESTABLISH THEIR CREDITWORTHINE SS, THE ASSESSEE SUBMITTED A COPY OF THE GIFT DEED OF SHRI VINUBHAI PANCHAL WITH THEIR SUBMISSIONS DATED 28-11-2006. HOWEVER, IN RESPECT O F ANOTHER DONOR, TARABEN PANCHAL, THE ASSESSEE SUBMITTED THAT CONFIRMATION WAS BEING COLLECTED AND SHALL BE SUBMITTED SHORTLY. SINCE THE ASSESSEE DID NOT ESTABLISH CAPABILITY OF THE DONOR SHRI VINUBHAI PANCHAL WHILE THE DECLARATION ITSELF WAS UNDATED AN D IN RESPECT OF ANOTHER ALLEGED DONOR EVEN DECLARATION HAD NOT BE EN FILED, THE AO CONCLUDED THAT THE CAPACITY OF THESE TWO DONORS O R GENUINENESS OF THE TRANSACTIONS WAS NOT ESTABLISHED. ACCORDINGLY , RELYING UPON DECISIONS IN CIT VS. R.S. RATHOD,212 ITR 390 (RAJ.) , ROSHAN D. HATTI VS. CIT,107 ITR 938(SC), KALEKHAN MOHAMMAED HANIF VS. C IT,50 ITR 1 (SC), SHANKAR INDUSTRIES VS. CIT,114 ITR 689 (CAL),CIT VS . BAISHNAB CHARAN MOHANTRY,212 ITR 199 (ORRISA.), CIT VS. PRECISION F INANCE (P) LTD.,208 ITR 465(CAL), NANAKCHAND LAXMANDAS VS. CIT,140 ITR 151 (ALL.), CIT VS. M. GANAPATHI MUDALIAR, 53 ITR 623(SC), CIT VS. DEVI PR ASAD VISHWANATH PRASAD, 72 ITR 194(SC), CIT VS. DURGA PRASAD MORE, 72 ITR 8 07(S.C), CIT VS. MADHAVNAGAR COTTON MILLS LTD. 104 ITR 493(BOM.), CI T VS. BANARSI LAL DHAWAN 109 ITR 360 (MAD.), CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 (DELHI) (FB), CIT VS. PRATIK FINANCE & INVT. CO. LTD. 215 ITR 272(DEL HI), SUMATI DAYAL VS. CIT 214 ITR 801 (S.C) AND REFERRING TO PROVISIONS OF SEC. 1 06 & 114 OF THE INDIAN EVIDENCE ACT, THE AO ADDED THE AFORESAID AMOUNT OF ALLEGED GIFTS OF RS.1,00,000/- EACH. 4. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITIO N OF RS.2,00,000/- IN THE FOLLOWING TERMS:- 4.2 HAVING REGARD TO ABOVE SUBMISSIONS I FOUND THA T AT THE TIME OF ASSESSMENT, THE APPELLANT WAS UNABLE TO FURNISH THE REQUIRED ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 9 CONFIRMATIONS AND IT WAS FOR THE INADEQUATE TIME. M OREOVER THE EVIDENCES WERE ALREADY AVAILABLE DUE TO THE TRANSACTIONS BEIN G THROUGH BANKING CHANNEL THERE CANNOT BE AN ALLEGATION OF AFTER THOU GHT OR MANIPULATION. HENCE THE EVIDENCE PRODUCED BEFORE ME WERE ADMITTED FOR JUSTICE AND THE A.O. WAS GIVEN AN OPPORTUNITY TO VERIFY THE SAME AN D FURNISH HIS COMMENTS ON THE SAID EVIDENCES. 4.3 THE ASSESSING OFFICER HAS IN HIS REMAND REPORT DATED 24-5-2007 STATED THAT INSOFAR AS GIFTS FROM TARABEN AND VINUB HAI ARE CONCERNED THE APPELLANT HAD FILED DECLARATION FROM THE DONORS CON FIRMING THE GIFT MADE BY THEM. HOWEVER, THE APPELLANT HAD NOT FURNISHED SOUR CES OF THEIR INCOME OR PANS OR THEIR IDENTITY. EVEN THE BANK PASS-BOOK WAS NOT FURNISHED. HENCE HE HAS REPORTED THAT THE GIFT OF RS.2 LACS CANNOT B E HELD AS GENUINE. . 4.4 THE ABOVE REMAND REPORT WAS GIVEN TO THE APPELL ANT'S REPRESENTATIVE, HE SUBMITTED THAT THE DONORS HAVING CONFIRMED THE GIFTS AND THE GIFTS HAVING BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES THERE IS NO REASON FOR HOLDING THE GIFTS AS NON-GENUINE. 4.5 ON CONSIDERATION OF THE ASSESSMENT ORDER AND TH E ABOVE SUBMISSIONS I FIND THAT THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN THE GIFT OF THE DONORS TO GIFT RS.1 LAC EACH TO THE APPELLANT. THE APPELLANT HAS PRODUCED CONFIRMATION AND THAT THE AMOUNT IS RECEIV ED BY CHEQUE WHICH SHOWS - THE GENUINENESS OF THE TRANSACTION. BUT CRE DITWORTHINESS AND CAPACITY OF DONOR HAS NOT BEEN PROVED, IN VIEW OF T HE ABOVE POSITION THE ADDITION OF RS.2 LACS MADE BY THE ASSESSING OFFICER IS CONFIRMED.. 5. IN THE AY 2002-03 ALSO, THE AO NOTICED THAT TH E ASSESSEE HAD SHOWN GIFT OF RS.1,00,000/- IN HIS CAPITAL ACCOUNT IN THE NAME OF SHRI JAYANTIBHAI ATMARAM. TO A QUERY BY THE AO, THE ASSE SSEE FILED A COPY OF DECLARATION OF GIFT BY THE DONOR BUT DID N OT FURNISH HIS PAN NOR ESTABLISHED HIS CREDITWORTHINESS .SINCE THE ASS ESSEE FAILED TO DISCHARGE HIS ONUS IN ESTABLISHING THE IDENTITY OF THE DONOR, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINES S OR CAPACITY OF THE DONOR, THE AO ADDED THE AMOUNT OF RS.1,00,000/- TO THE INCOME OF THE ASSESSEE. 6. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO IN THE FOLLOWING TERMS:- 4.2 HAVING REGARD TO ABOVE SUBMISSIONS I FOUND THAT AT THE TIME OF ASSESSMENT, THE APPELLANT WAS UNABLE TO FURNISH THE REQUIRED ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 10 CONFIRMATIONS AND IT WAS FOR THE INADEQUATE TIME, M OREOVER THE EVIDENCES WERE ALREADY AVAILABLE DUE TO THE TRANSACTIONS BEIN G THROUGH BANKING CHANNEL THERE CANNOT BE AN ALLEGATION OF AFTER THOU GHT OR MANIPULATION. HENCE THE EVIDENCE PRODUCED. BEFORE ME WERE ADMITTE D FOR JUSTICE AND THE A.O. WAS GIVEN AN OPPORTUNITY TO VERIFY THE SAME AN D FURNISH HIS COMMENTS ON THE SAID EVIDENCES. 4.3 THE ASSESSING OFFICER HAS IN HIS REMAND REPORT DATED 24-5-2007 STATED AS UNDER:- 3.1. IN THE ASSESSMENT, ADDITION ON ACCOUNT OF UNEX PLAINED CASH CREDITS AMOUNTING TO RS.4,05,501/- WAS MADE WHICH INCLUDES ADDITION OF RS.1,00,000/-, MADE ON ACCOUNT OF ADDITIONAL CAPITA L INTRODUCED IN THE FORM OF GIFT FROM SH. JAYANTIBHAI ATMARAM IN THE PERSONA L BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS SIMPLY FURNISHED DEC LARATION FROM THE DONOR WHEREIN HE HAD CONFIRMED GIFT OF RS.1 LAKH. H OWEVER, THE ASSESSEE HAS NOT FURNISHED DETAILS REGARDING SOURCES OF INCO ME AND BUSINESS- ACTIVITIES OF THE DONOR, ADDRESS PROOF AND PHOTO ID OF THE DONOR, PA NUMBER AND COPY OF BANK PASSBOOK DEMONSTRATING THE AVAILABILITY OF FUNDS AT THE RELEVANT POINT OF TIME. IN ABSENCE OF THESE BASIC INFORMATION, GIFTS OF RS.1 LAKHS CANNOT BE TREATED AS GENUINE, .. 4.4 THE ABOVE REMAND REPORT WAS GIVEN TO THE APPELL ANT'S REPRESENTATIVE, HE SUBMITTED THAT THE DONORS HAVING CONFIRMED THE GIFTS AND THE GIFTS HAVING BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES THERE IS NO REASON FOR HOLDING THE GIFTS AS NON-GENUINE,. 4.5 ON CONSIDERATION OF THE ASSESSMENT ORDER AND TH E ABOVE SUBMISSIONS I FIND THAT THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN THE GIFT GIVEN BY THE DONORS OF RS.1 LAC TO THE APPELLANT. THE APPELLANT HAS PRODUCED CONFIRMATION AND THAT THE AMOUNT IS RECEIV ED BY CHEQUE WHICH SHOWS THE GENUINENESS OF THE TRANSACTION. BUT CREDI TWORTHINESS AND CAPACITY OF DONOR HAS NOT BEEN PROVED, IN VIEW OF T HE ABOVE POSITION THE ADDITION OF RS.1 LACS MADE BY THE ASSESSING OFFICER IS CONFIRMED. 7. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A) FOR THE AYS 2000-01 AND 2002-03. THE LEARNED AR ON BEHALF OF THE ASSESSEE REITERATED THE IR SUBMISSIONS BEFORE THE LEARNED CIT(A) AND RELIED UPON DECISIONS IN MURLIDHAR LAHORIMAL VS. CIT,280 ITR 512(GUJ),CIT VS. PRAGATI CO-OPERATIVE BANK LTD.278 ITR 170(GUJ) AND DCIT VS. ROHINI BUILD ERS, 256 ITR 360(GUJ).ON THE OTHER HAND, THE LD. DR SUPPORTED TH E FINDINGS OF THE ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 11 LD. CIT(A) WHILE RELYING UPON DECISION IN CIT VS. P .MOHANAKALA,291 ITR 278(SC). 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS RELIED UPO N. AS IS EVIDENT FROM THE FACTS OF THE CASE IN THE AY 2000-01, THE ASSESSEE SUBMITTED A COPY OF THE GIFT DEED OF SHRI VINUBHAI PANCHAL WITH THEIR SUBMISSIONS DATED 28-11-2006. HOWEVER, IN RESPECT O F ANOTHER DONOR TARABEN PANCHAL, THE ASSESSEE SUBMITTED THAT CONFIRMATION WAS BEING COLLECTED AND SHALL BE SUBMITTED SHORTLY. SINCE THE ASSESSEE DID NOT ESTABLISH CAPABILITY OF THE DONOR SHRI VINUBHAI PANCHAL WHILE THE DECLARATION ITSELF WAS UNDATED AN D IN RESPECT OF ANOTHER ALLEGED DONOR EVEN DECLARATION HAD NOT BEEN FILED NOR HER CAPACITY TO MAKE A GIFT WAS ESTABLISHED, THE AO CON CLUDED THAT THE CAPACITY OF THESE TWO DONORS OR GENUINENESS OF THE TRANSACTIONS WAS NOT ESTABLISHED. IN THE AY 2002-03 ALSO, THE ASSESS EE DID NOT ESTABLISH CREDITWORTHINESS OF SHRI JAYANTIBHAI ATMA RAM. NOT AN IOTA OF EVIDENCE WAS PLACED BEFORE THE AO IN SUPPORT O F GENUINENESS OF THE GIFTS OR EVEN CAPACITY OF THE DONORS TO MAKE THE GIFTS. THE LD. CIT(A) UPHELD THE ADDITION SINCE THE ASSESSEE FAILE D TO ESTABLISH THE CAPACITY OF THE AFORESAID THREE DONORS TO MAKE GIFT S. EVEN NO EVIDENCE IN SUPPORT OF ANY ACQUAINTANCE OR LOVE OR AFFECTION BETWEEN THE DONORS AND THE ASSESSEE HAS BEEN FILED BEFORE THE LOWER AU THORITIES NOR BROUGHT TO OUR NOTICE. THERE ARE NO REASONS OR ANY OCCASION AT ALL FOR GIVING GIFTS BY THE AFORESAID THREE DONORS, EXCEPT RELYING ON THE DECIS IONS REFERRED TO ABOVE. IN OUR CONSIDERED VIEW THE JUDGMENT OF HONBLE SUPREME COU RT IN MOHAN KALAS CASE (SUPRA) WILL BE MORE APPROPRIATE IN THE FACTS OF T HE PRESENT CASE. IN CIT V. P. MOHANAKALA [2007] 291 ITR 278 (SC) IT WAS OBSERVED AS FOLLOWS:- 'A BARE READING OF SECTION 68 OF THE INCOME-TAX ACT , 1961, SUGGESTS THAT (I) THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR; AND (III) EITHER (A) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS FOUND IN THE BOOKS OR (B) THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 12 ASSESSING OFFICER, IS NOT SATISFACTORY. IT IS ONLY THEN THAT THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSES SEE OF THAT PREVIOUS YEAR. THE EXPRESSION 'THE ASSESSEE OFFERS NO EXPLANATION' MEANS THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUM FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. T HE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED B Y THE ASSESSEE AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPR ECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON THE RECORD. TH E OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH R EFERENCE TO THE MATERIAL ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSES SEE ABOUT THE NATURE AND SOURCE OF THE SUMS FOUND CREDITED IN THE BOOKS IS N OT SATISFACTORY THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE REC EIPT OF MONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME, AND, IF HE FAILS TO REBUT IT, IT CAN BE HELD AGAINST THE ASSESSEE THAT IT WAS A RECEIPT OF AN INCOME NAT URE. THE BURDEN IS ON THE ASSESSEE TO TAKE THE PLEA THAT , EVEN IF THE EXPLANATION IS NOT ACCEPTABLE, THE MATERIAL AND ATTENDING CIRCUMSTANCE S AVAILABLE ON RECORD DO NOT JUSTIFY THE SUM FOUND CREDITED IN THE BOOKS BEING T REATED AS A RECEIPT OF INCOME NATURE. THE ASSESSEE RECEIVED FOREIGN GIFTS FROM ONE COMMON DONOR. THE PAYMENTS WERE MADE TO THEM BY INSTRUMENTS ISSUED BY FOREIGN BANKS AND CREDITED TO THE RESPECTIVE ACCOUNT OF THE ASSESSEE BY NEGOTIATION T HROUGH A BANK IN INDIA. MOST OF THE CHEQUES SENT FROM ABROAD WERE DRAWN IN THE C ITIBANK, N.A. SINGAPORE. THE EVIDENCE INDICATED THAT THE DONOR WAS TO RECEIVE SU ITABLE COMPENSATION FROM THE ASSESSEE. ON THIS MATERIAL THE ASSESSING OFFICER HE LD THAT THE GIFTS THOUGH APPARENT WERE NOT REAL AND ACCORDINGLY TREATED ALL THOSE AMOUNTS WHICH WERE CREDITED IN THE ACCOUNT BOOKS OF THE ASSESSEES AS T HEIR INCOME APPLYING SECTION 68 OF THE INCOME-TAX ACT, 1961. THE ASSESSEES DID N OT CONTEND THAT EVEN IF THEIR EXPLANATION WAS NOT SATISFACTORY THE AMOUNTS WERE N OT OF THE NATURE OF INCOME. THE COMMISSIONER (APPEALS) CONFIRMED THE ASSESSMENT . ON FURTHER APPEAL, THERE WAS A DIFFERENCE OF OPINION BETWEEN THE TWO MEMBERS OF THE APPELLATE TRIBUNAL AND THE MATTER WAS REFERRED TO THE VICE PRESIDENT W HO CONCURRED WITH THE FINDINGS AND CONCLUSIONS OF THE ASSESSING OFFICER AND THE CO MMISSIONER (APPEALS). ON APPEAL THE HIGH COURT RE-APPRECIATED THAT EVIDENCE AND SUBSTITUTED ITS OWN FINDINGS AND CAME TO THE CONCLUSION THAT THE REASON S ASSIGNED BY THE TRIBUNAL WERE IN THE REALM OF SURMISES, CONJECTURE AND SUSPI CION.' 8.1 THE HON'BLE SUPREME COURT HELD, REVERSING TH E DECISION OF THE HIGH COURT, THAT THE FINDINGS OF THE ASSESSING OFFICER, THE CIT (A) AND THE TRIBUNAL WERE BASED ON THE MATERIAL ON RECORD AND NOT ON ANY CONJECTURE S AND SURMISES; AND THAT THE FACT THAT MONEY CAME BY WAY OF BANK CHEQUES AND WAS PAID THROUGH THE PROCESS OF BANKING TRANSACTIONS WAS NOT BY ITSELF O F ANY CONSEQUENCE. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 13 8.2. THE AFORESAID DECISION GOVERNS THE PRESEN T CASE DIRECTLY. IN THE INSTANT CASE, THE OPINION OF THE ASSESSING OFFICER AGAINST THE ASSESSEE HAS NOT BEEN PROVED TO BE NOT FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL ON RECORD. WHILE FORMING SUCH OPINION, THE ASSESSING OFFICER H AS DULY APPLIED HIS MIND. THE ONUS TO PROVE HIS EXPLANATION SATISFACTORILY TO THE ASSESSING OFFICER WAS ON THE ASSESSEE. THE ASSESSEE MISERABLY FAILED TO DISCHARG E SUCH ONUS. FROM THE ABOVE DECISION, IT IS APPARENT THAT THE GENUINENESS OF THE GIFT TRANSACTIONS CANNOT BE DETERMINED WITHOUT LOOKING INTO THE HUMAN PROBAB ILITY ASPECTS, SURROUNDING CIRCUMSTANCES SUCH AS RELATIONSHIP OF THE DONOR AND DONEE AND IF ASSESSEE FAILS TO ESTABLISH ANY OF THESE FACTORS, THE GIFT TRANSAC TION CANNOT BE TREATED AS GENUINE. IN THIS REGARD WE MAY REFER TO THE DECISIO N IN SAJAN DASS AND SONS V. CIT [2003] 264 ITR 435 (DELHI) WHEREIN THE HON'BLE DELHI HIGH COURT HELD THAT MERE IDENTIFICATION AND SHOWING MOVEMENT THROUGH BA NKING CHANNELS IS NOT SUFFICIENT. SIMILAR VIEW WAS TAKEN IN SANDEEP KUMAR V. CIT (293 ITR 294) (DEL), JASPAL SINGH 290 ITR 306 (P & H), YASH PAL GOEL ,31 0 ITR 75/76(P&H) AND RAJEEV TANDON VS. ASSISTANT COMMISSIONER OF INCOME TAX IN ITA NO. 77 OF 2007 DATED 13.7.2007 AS ALSO IN SUBHASH CHANDER SEK HRI V. DEPUTY CIT [2007] 290 ITR 300 (P&H).IN THE PRESENT CASE ALSO, IT IS NOT ESTABLIS HED THAT DONORS HAD CAPACITY TO MAKE GIFTS. THEREFORE, THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS) WAS JUSTIFIED IN UPHOLDING THE ADDITION OF THE AMOUNT CLAIMED AS GIFT. IN RAM LAL AGRAWAL V. CIT [2006] 280 ITR 547 (ALL), TH E HON'BLE ALLAHABAD HIGH COURT HELD THAT WHERE THERE IS A FINDING GIVEN BY T HE INCOME-TAX AUTHORITIES THAT CREDITWORTHINESS OF DEPOSITORS WAS NOT PROVED, THE AMOUNT COULD BE ASSESSED AS INCOME OF THE ASSESSEE.IN SUNIL SIDDHARTHBHAI V. CI T [1985] 156 ITR 509 (SC), THE HON'BLE SUPREME COURT HELD THAT IT IS THE RIGHT OF THE INCOME-TAX AUTHORITIES TO CONSIDER GENUINENESS OF THE TRANSACTIONS AND TO PEN ETRATE THE VEIL AND ASCERTAIN THE TRUTH. IT IS WITHIN THEIR POWER TO CONSIDER WHE THER A PARTICULAR TRANSACTION WAS TO EVADE TAX. IN K. RAMASAMY V. CIT [2003] 261 ITR 358 (MAD),IT WAS HELD THAT VEIL CAN BE PIERCED IN EXCEPTIONAL CIRCUMSTANCES. T HE INCOME-TAX AUTHORITIES ARE ENTITLED TO LOOK AT THE REALITY OF THE TRANSACTION. MOREOVER, THE DECISIONS IN ITO V. DIZA HOLDINGS P. LTD. [2002] 255 ITR 573 (KER); RAU NAQ RAM NAND LAL V. CIT [2002 254 ITR 617 (P & H); SMT. IVA GOGOI V. CIT [2 002] 254 ITR 576 (GAUHATI); ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 14 CIT V. PRECISION FINANCE PVT. LTD. [1994] 208 ITR 4 65 (CAL); RAJSHREE SYNTHETICS PVT. LTD. V. CIT [2002] 256 ITR 331 (RAJ); R. B. MI TTAL V. CIT [2000] 246 ITR 283 (AP) ; CIT V. UNITED COMMERCIAL AND INDUSTRIAL CO. P. LTD. [1991] 187 ITR 596 (CAL); M. A. UNNEERI KUTTY V. CIT [1992] 198 ITR 14 7 (KER); NEMI CHAND KOTHARI V. CIT [2003] 264 ITR 254 (GAUHATI); AND HINDUSTHAN TEA TRADING CO. LTD. V. CIT [2003] 263 ITR 289 (CAL) SUPPORT THE VIEW THAT REVE NUE AUTHORITIES ARE ENTITLED TO CONSIDER GENUINENESS OF THE TRANSACTIONS AND TO PEN ETRATE THE VEIL IN ORDER TO ASCERTAIN THE TRUTH. THEY ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITIES OF THE TRANSACTIONS SHOWN TO HAVE BEEN ENTERED INTO BY THE PARTIES. THE OTHER RELEVANT FACTORS ARE RELATIONSHI P, OCCASION FOR GIVING GIFTS, AND GIFTS NOT GIVEN BY THE DONEE TO THE FAMILY MEMBERS OF THE DONOR ETC. IN TIRATH RAM GUPTA, 6 SOT 703 ,CHANDIGARH BENCH ,IT WAS HELD THAT THE GIFT IS GENERALLY GIVEN OUT OF LOVE AND AFFECTION AND IT DENOTES CLOS ENESS BETWEEN THE DONOR AND THE DONEE. A GIFT IS ALWAYS GRATIS AND IS GIVEN WIT HOUT ANY MOTIVE, EXPECTATION OR RECIPROCATION BY VIRTUE OF ITS INHERENT NATURE. IN THE PRESENT CASE ALSO, ALL THESE FACTORS PUT TOGETHER LEAVE NO DOUBT THAT IT IS A FI T CASE WHERE FORM HAS TO BE IGNORED AND ONE HAS TO GO INTO THE REALITIES OF THE TRANSACTION. THE AFORESAID DECISION HAS BEEN UPHELD BY THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THEIR DECISION IN TIRATH RAM GUPTA VS. CIT,304 ITR 145. H ONBLE RAJASTHAN HIGH COURT IN CHAINSUKH RATHI VS. CIT (2009) 270 ITR 360 (RAJ. ) HELD THAT EVEN OCCASION IS RELEVANT FOR FINDING OUT WHETHER GIFT IS GENUINE. I F THERE IS NO OCCASION, GIFT CANNOT BE ACCEPTED AS GENUINE. APPLYING THE RATIO OF AFORE SAID DECISIONS OF THE HONBLE S.C. AND HIGH COURTS, AS REFERRED ABOVE, WE ARE OF THE OPINION THAT :- (I) MERE IDENTIFICATION OF DONOR AND SHOWING MOVEME NTS OF GIFT AMOUNT THROUGH BANKING CHANNELS IS NOT SUFFICIENT TO PROVE THE GEN UINENESS OF THE GIFT; (II) SINCE THE CLAIM OF THE GIFT IS MADE BY THE ASS ESSEE, THE ONUS LIES ON HIM NOT ONLY TO ESTABLISH THE IDENTITY OF THE PERSON MAKING THE GIFT BUT ALSO HIS CAPACITY TO MAKE SUCH A GIFT. THE ASSESSEE HAS TO PROVE THAT TH E MONEY HAS ACTUALLY BEEN RECEIVED AS A GIFT FROM DONOR; (III) IT IS THE BURDEN OF THE ASSESSEE TO SHOW AND DEMONSTRATE WHAT KIND OF RELATIONSHIP OR WHAT KIND OF LOVE AND AFFECTION THE DONOR HAS WITH THE ASSESSEE, AND TO EXPLAIN CIRCUMSTANCES IN WHICH GIFTS WERE MA DE; ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 15 IV) IF THE EXPLANATION AS REGARDS THE CLAIM OF THE GIFT OFFERED BY THE ASSESSEE IS NOT PROPER, REASONABLE AND ACCEPTABLE ONE, AN INEVI TABLE CONCLUSION WOULD BE DRAWN THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANA TION, AS THE EXPRESSION 'THE ASSESSEE OFFERS NO EXPLANATION' MEANS THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION (SEE P. MOHAN AKALA 291 ITR 278 (SC); (V) THE OPINION OF THE A.O. FOR NOT ACCEPTING THE E XPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY OR PROPER OR REASONABL E OR ACCEPTABLE IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTH ER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF THE A.O. IS REQ UIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION BY THE A.O; AND (VI) IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE OF THE MONEY RECEIVED BY THE ASSESSEE IS NOT SATISFACTORY, THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ, THE RECE IPT OF MONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME, AND, IF HE FAILS TO REBUT IT, IT CAN BE HELD AGAINST THE ASSESSEE THAT IT WAS A RECEIPT OF AN INCOME NAT URE, 8.3 IN THE PRESENT CASE, EXPLANATION OFFERED B Y THE ASSESSEE ABOUT THE GIFT IS NOT SATISFACTORY BECAUSE (1) CREDITWORTHINESS OF TH E DONOR IS NOT PROVED THROUGH INDEPENDENT SOURCES (2) THERE IS NO OCCASION OR REA SONS FOR GIVING GIFT TO THE ASSESSEE. (3) THERE IS NO MATERIAL ,ESTABLISHING T HAT THE AFORESAID THREE DONORS HAD ANY ACQUAINTANCE OR ANY LOVE AND AFFECTION FOR THE ASSESSEE. AS STATED ABOVE, MERE RECEIPT OF AMOUNT THROUGH BANKING CHANN ELS IS BY ITSELF NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE GIFT. THE BURDEN OF PROVING THE GENUINENESS OF GIFT IS HEAVY VIS-A-VIS THE BURDEN IN THE CASE OF C REDIT TO BE TAXED U/S. 68 BECAUSE IN GIFT, DONOR FORGOES LIEN OVER THE MONEY FOREVER WHEREAS IN THE CASE OF LOAN/CASH CREDIT, THE CREDITOR RETAINS THE RIGHT TO RECOVER THE MONEY FROM THE ASSESSEE AND HE MAY HAVE SUITABLE EVIDENCE TO PROVE THAT HE HAS GIVEN CREDIT. THEREFORE, MERELY BY SAYING THAT MONEY IS TRANSFERR ED THROUGH BANKING CHANNELS WILL NOT BE SUFFICIENT TO DISCHARGE THE BURDEN LAYI NG ON THE ASSESSEE. UNLESS SAID BURDEN IS DISCHARGED, AO CANNOT BE ASKED TO ACCEPT THE APPARENT. IN THE CASE OF CIT VS. R.S. SIBAL, (2004) 187 CTR (DEL) 291 : (200 4) 269 ITR 429 (DEL) : (2004) 135 TAXMAN 492, THEIR LORDSHIPS OF HONBLE DELHI HI GH COURT HELD AS UNDER: THERE IS NO QUARREL WITH THE PROPOSITION THAT A ME RE IDENTIFICATION OF THE DONOR AND MOVEMENT OF THE GIFT AMOUNT THROUGH BANKING CHA NNELS IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE GIFT AND SINCE THE CLA IM OF THE AMOUNT HAVING BEEN ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 16 RECEIVED AS A GIFT IS MADE BY THE ASSESSEE, ONUS LI ES ON HIM NOT ONLY TO ESTABLISH THE IDENTITY OF THE DONOR BUT HIS CAPACITY TO MAKE SUCH A GIFT. 8.4 IN THE CASE OF COMMISSIONER OF INCOME TAX, WE ST BENGAL II VS. DURGA PRASAD MORE, [1971] 82 ITR 540 (SC), THEIR LORDSHIP S LAYING DOWN THE SIGNIFICANCE OF HUMAN PROBABILITIES HELD AS UNDER: THAT THOUGH AN APPARENT STATEMENT MUST BE CONSIDER ED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE A PPARENT WAS NOT THE REAL, IN A CASE WHERE A PARTY RELIED ON SELF-SERVIN G RECITALS IN DOCUMENTS, IT WAS FOR THAT PARTY TO ESTABLISH THE TRUTH OF THOSE RECITALS : THE TAXING AUTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUND ING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS. 8.5 THEIR LORDSHIPS OF THE APEX COURT IN THE CASE OF SUMATI DAYAL VS. CIT REPORTED IN 214 ITR 801 OBSERVED AS UNDER: DISMISSING THE APPEAL, THAT THE SETTLEMENT COMMISS ION AFTER CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAD RIGHTLY CONCLUDED THAT THE APPELL ANTS CLAIM ABOUT THE AMOUNT BEING HER WINNINGS FROM THE RACES WAS NOT GE NUINE. 8.6 SIMILARLY, LAYING IMPORTANCE ON THE RELATIONSHIP OF DONOR AND DONEE FOR DETERMINING THE GENUINENESS OF THE GIFT, THEIR LORD SHIPS OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAL CHAND KALRA V. CIT RE PORTED IN [1981] 22 CTR 135 HAVE HELD THAT WHERE THERE WAS NO OCCASION AND THE ALLEGED DONOR WAS A STRANGER, THE AMOUNT RECEIVED IN A GIFT REPRESENTS CONCEALED INCOME OF THE ASSESSEE. 8.7 IN THE DECISION RELIED UPON BY THE LD . AR I N MURLIDHAR LAHORIMAL'S CASE [2006] 280 ITR 512 (GUJ), THE ASSESSEE FILED A RETURN OF INCOME SHOWI NG A SUM OF RS. 50,000 AS GIFT RECEIVED. THE DONOR HAD FILED A RETURN OF GIFT IN RESPECT OF THE GIFT OF RS. 50,000 AND THE ASSESSMENT CAME TO BE CO MPLETED UNDER SECTION 15(3) OF THE GIFT-TAX ACT, 1958. THE DONOR PRODUCED EVIDE NCE IN SUPPORT OF THE SOURCE FROM WHICH THE FUNDS FOR MAKING THE GIFT WERE AVAIL ABLE WITH HIM. THE HON'BLE GUJARAT HIGH COURT TAKING INTO CONSIDERATION THAT T HE DONOR HAD EXPLAINED THE SOURCE OF INCOME AND HAD ALSO PAID THE GIFT-TAX, HE LD THAT THE ASSESSEE HAD PROVED THE AMOUNT RECEIVED BY GIFT. THE LD. AR HAS NOT EXPLAINED BEFORE US AS TO HOW THIS DECISION IS APPLICABLE IN THE FACTS AND CI RCUMSTANCES OF THE PRESENT ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 17 CASE, ESPECIALLY WHEN NOT AN IOTA OF EVIDENCE HAS B EEN PLACED BEFORE US REGARDING FINANCIAL CAPACITY OF THE AFORESAID DONO RS TO MAKE SUCH GIFT, AS WELL AS, THE GENUINENESS OF THE GIFT TRANSACTION. SIMILARLY OTHER TWO DECISIONS RELIED UPON BY THE LD. AR WERE RENDERED ON DIFFERENT FACTS AND CIRCUMSTANCES OF THE CASE AND IN OUR OPINION, ARE NOT RELEVANT TO THE ISSUE OF GI FTS BEFORE US. THE LD. AR DID NOT DEMONSTRATE BEFORE US AS TO HOW THE AFORESAID DECIS IONS RELIED UPON BY HIM, ARE RELEVANT TO THE ISSUE BEFORE US. THE GENUINENESS OF THE GIFT TRANSACTION CANNOT BE DETERMINED WITHOUT LOOKING INTO THE ASPECT OF HUMAN PROBABILITIES, RELATIONSHIP OF DONOR AND DONEE, OCCASION FOR MAKING THE GIFT AND E XISTENCE OF RECIPROCITY, IF ANY. 8.8 IN VIEW OF THE FOREGOING , ESPECIALLY WHEN T HE LD. AR ON BEHALF OF THE ASSESSEE DID NOT PLACE ANY MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.5 IN THE APPEALS O F THE ASSESSEE FOR THE AY 2000-01 & 2002-03 ARE DISMISSED . 9. NOW ADVERTING TO GROUND NOS.1 & 3 IN THE APPEA L OF THE REVENUE FOR THE AY 2003-04 RELATING TO AN ADDITION OF RS.20 ,60,573/- AND GROUND NOS. 3A & 4 IN THEIR APPEAL FOR THE AY 2004- 05 RELATING TO AN ADDITION OF RS.61,10,366/- , THE AO NOTICED ON PERU SAL OF THE TRADING AND P&L ACCOUNT OF KUTIR BUILDERS IN THE AY 2003-04 THAT THE ASSESSEE HAD SHOWN WORK IN PROGRESS OF RS.2,91,15,0 02/- WHILE NET PROFIT WAS RS.2,68,627/- ONLY. SINCE THE NET PROFIT WAS ABNORMALLY LOW, THE ASSESSEE VIDE NOTICE U/S. 142(1) DATED 17- 11-2006 WAS SHOWCAUSED AS TO WHY THE NET PROFIT SHOULD NOT BE D ETERMINED AT- LEAST AT 8% OF THE WORK IN PROGRESS. IN RESPONSE , THE ASSESSEE VIDE HIS WRITTEN SUBMISSION DATED 8-12-2006 SUBMITTED TH AT THE ASSESSEE HAD MAINTAINED REGULAR AND COMPLETE BOOKS OF ACCOUN TS AND THE SUPPORTING EVIDENCES IN SUPPORT OF THE TRANSACTIONS NOTED THEREIN. THE BOOKS OF ACCOUNTS REFLECTED THE CORRECT STATE O F AFFAIRS AND THE PROFIT DISCLOSED WAS CORRECT AND TRUE. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE ON THE GROU ND THE ASSESSEE DID NOT MAINTAIN ANY DAY-TO-DAY STOCK REGISTER OF DIFFERENT MATERIALS PURCHASED AND ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 18 CONSUMED IN TERMS OF QUANTITY NOR MAINTAINED DAY-TO -DAY DETAILS OF CONSUMPTION OF BUILDING MATERIALS. ACCORDINGLY, THE AO REJECTE D BOOK RESULTS, INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMAT ED THE ASSESSEE'S NET INCOME FROM CONSTRUCTION BUSINESS AT 8% OF THE WORK IN PRO GRESS, WHICH WORKED OUT TO RS.23,29,200/-. AS A RESULT, AN AMOUNT OF RS.20,60, 573/- WAS ADDED . 9.1 SIMILARLY, AN AMOUNT OF RS. 61,10,366 WAS ADDED IN THE AY 2004-05 10 ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON IN THE AY 2003-04 IN THE FOLLOWING TERMS:- 5.2 ON CONSIDERATION OF THE ASSESSMENT ORDER AND THE ABOVE SUBMISSIONS I NOTICE THAT THE ADDITION IS MADE BY I NVOKING SECTION 145(3) MAINLY ON THE GROUND THAT THE DAY TO DAY CONSUMPTIO N RECORD OF BUILDING MATERIAL IS NOT MAINTAINED. ON THE OTHER HAND THE A PPELLANT HAS EXPLAINED THAT ITS BOOKS ARE REGULARLY MAINTAINED AND ARE AUD ITED U/S.44AB. THE AO HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS NOR AU DITORS HAVE GIVEN ANY ADVERSE REMARKS. I APPRECIATE THESE ARGUMENTS OF TH E APPELLANT AND HOLD THAT AS THE APPELLANT HAS MAINTAINED BOOKS OF ACCOU NT AND NO DEFECTS ARE FOUND IN THE BOOKS BY THE AUDITORS OR BY THE A.O., HE IS NOT JUSTIFIED IN ESTIMATING THE PROFIT AT 8% WHICH IS PROFIT STATED U/S.44AB. THE SAID PROVISIONS ALSO PROVIDE FOR OPTION OF ADOPTING PROF IT AT 8% WHEN THE BOOKS ARE NOT MAINTAINED. IN THE APPELLANT'S CASE THE BOO KS ARE MAINTAINED AND ARE SUPPORTED BY THE VOUCHERS AND SUPPORTING BILLS ETC. HENCE THE A.O. WAS NOT JUSTIFIED IN APPLYING SECTION 145 (3) AND E STIMATING THE PROFIT. THE ADDITION IS DIRECTED TO BE DELETED. 10.1 LIKEWISE, THE LD. CIT(A) DELETED THE ADD ITION IN THE AY 2004-05. 11. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE OR DER OF THE AO WHILE RELYING UPON DECISIONS IN S. N. NAMASIVAYAM CHETTIAR. VS CI T,38 ITR 579, AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS.VS CIT,210 I TR 406 & COMMISSIONER OF INCOME TAX. VS SUPER SCIENTIFIC CL OCK CO.,238 ITR 731(GUJ). ON THE OTHER HAND, THE LEARNED AR ON BEHA LF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT( A) AND RELIED ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 19 UPON DECISION IN ASHOKE REFRACTORIES P LTD. VS. CIT ,279 ITR 457(ALL). 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. UNDISPUTEDLY, THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOUNTS AND NO DEFECTS HAVE BEEN POINTED OUT BY THE AO IN THE PURCHASES OR SALES AND EVEN IN THE EXPENSES. THERE IS NO FINDING OR OPINION EITHER THAT THE RECORDS WERE INCORRECT AND INCOMPLE TE OR THAT THE METHOD APPLIED WAS SUCH THAT THE INCOME COULD NOT BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE ASSESSEE . SIMPLY BECAUSE STOCK REGISTER OR CONSUMPTION RECORD S DESIRED BY THE AO ARE NOT MAINTAINED , BOOKS CAN NOT BE REJECT ED UNLESS INGREDIENTS OF PROVISIONS OF SEC. 145 OF THE ACT ARE FULFILLED. WE ARE OF THE OPINION THAT THE DECISION IN S.N. NAMASIVAYAM CHETTIAR [1960] 38 ITR 579 (SC) RELIED UPON BY THE LD. DR IS NOT APPLICABLE IN THE FACTS AND CIRC UMSTANCES OF THIS CASE. SIMILARLY, THE DECISION IN AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS V. CIT [1994] 210 ITR 406 (ALL) ALSO DOES NOT APPLY IN THE PRESENT CASE IN V IEW OF THE FACT THAT IN THAT DECISION THE ACCOUNT BOOKS WERE REJECTED BECAUSE THERE WAS NO STOCK REGISTER AND THE SALES WERE FOUND UNVERIFIABL E IN THE ABSENCE OF THE CASH MEMOS WHILE THE VOUCHERS OF EXPENSES WERE ALSO NOT FORTHCOMING AND THE INCOME RETURNED WAS RIDICULOUSLY LOW AS COMPARED TO THE EXORBITANT TURNOVER AND THE EXTENT OF THE BUSINESS CARRIED ON BY THE ASSESS EE. TAKING ALL THESE ASPECTS IN TO ACCOUNT AND THE MATERIALS INTO CONSIDERATION, THE TRIBUNAL FOUND IN THE CITED CASE THAT THE CLAIM OF THE ASSESSEE FOR ACCEPTANCE OF THE ACCOUNT BOOKS WAS NOT SUSTAINABLE AND THAT SUCH FINDING WAS A FINDING OF FACT AND NO QUESTION OF LAW AROSE THEREFROM. BUT, IN THE INSTANT CASE, THE FACT S ARE DISTINGUISHABLE, THERE BEING NO DEFECT AT ALL IN THE BOOKS OF ACCOUNT NOR THERE IS A FINDING OR OPINION EITHER THAT THE RECORDS WERE INCORRECT AND INCOMPLE TE OR THAT THE METHOD APPLIED WAS SUCH THAT THE INCOME COULD NOT BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE ASSESSEE. EVEN THE DECISION IN SUPER SCIENTIFIC CLOCK CO.(SUPRA) IS OF NO ASSISTANCE BECAUSE IN THE SAID DECISION THE ASSESSE E EMPLOYED FOR PART OF THE TRANSACTIONS OR EVENTS RELATING TO ONE SOURCE OF IN COME, DIFFERENT SYSTEM OF ACCOUNTING, WHICH IS NOT SO IN THE INSTANT CASE. TH EREFORE, THIS DECISION HAS NOT ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 20 LAID DOWN ANY RATIO THAT THE ABSENCE OF STOCK BOOK WOULD ITSELF BE SUFFICIENT TO REJECT THE BOOKS OF ACCOUNT. IT IS DIFFICULT TO CAT ALOGUE VARIOUS TYPES OF DEFECTS IN THE ACCOUNT BOOKS OF AN ASSESSEE WHICH MAY RENDER R EJECTION OF ACCOUNTS ON THE GROUND THAT ACCOUNTS ARE NOT COMPLETE FROM WHICH TH E CORRECT PROFIT CANNOT BE DEDUCED. WHETHER PRESENCE OR ABSENCE OF STOCK REGIS TER IS MATERIAL OR NOT WOULD DEPEND UPON THE TYPE OF BUSINESS?. IT IS TRUE THAT ABSENCE OF STOCK REGISTER OR CASH MEMOS IN A GIVEN SITUATION MAY NOT PER SE LEAD TO AN INFERENCE THAT ACCOUNTS ARE FALSE OR INCOMPLETE. HOWEVER, WHERE TH E ABSENCE OF STOCK REGISTER, CASH MEMOS ETC. IS COUPLED WITH OTHER FACTORS LIKE PURCHASE AND SALES MADE WHICH NOT BEING PROVED TO BE GENUINE AND PROFIT BEI NG LOW OR LOSS, MAY GIVE RISE TO LEGITIMATE INFERENCE THAT ALL IS NOT WELL WITH T HE BOOKS . SUCH IS NOT THE SITUATION IN THE INSTANT CASE . THE LD. CIT(A) FOUND THAT NO DEFECTS WERE POINTED OUT BY THE AO IN THE BOOKS NOR ANY SUCH DEFECTS HAVE BEEN BROU GHT TO OUR NOTICE. THE LD. DR DID NOT REFER US TO ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF FACTS RECORDED BY THE LD. CIT(A). THE DECISION RELIED UPO N BY THE LD. AR IN ASHOKE REFRACTORIES P LTD.(SUPRA) SUPPORTS THE CASE OF THE ASSESSEE.IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THERE WAS NO GROUND FOR REJECTING THE BOOK RESULTS AND MAKING AN Y TRADING ADDITION. HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. AMITBHAI GUNWANTBHAI, 129 ITR 573 HELD THAT IF THERE WAS NO CHALLENGE TO THE TRANSACT IONS REPRESENTED IN THE BOOKS THEN IT IS NOT OPEN TO REVENUE TO CONTEND THAT WHAT IS SHOWN BY THE ENTRIES IS NOT THE REAL STATE OF AFFAIRS. SECONDLY, EVEN IF FOR S OME REASON, THE BOOKS ARE REJECTED IT IS NOT OPEN TO THE AO TO MAKE ANY ADDIT ION ON ESTIMATE BASIS OR ON PURE GUESS WORK. THE BURDEN OF SHOWING THAT THE APP ARENT STATE OF AFFAIRS IS NOT THE REAL ONE IS VERY HEAVY ON THE DEPARTMENT [BEDI & CO. PVT. LTD. VS. CIT,144 ITR 352(KARN) AFFIRMED BY HONBLE SUPREME COURT IN 230 ITR 580]. NO MATERIAL HAS BEEN PLACED BEFORE US TO DOUBT THE NATURE OF T HE TRANSACTIONS RECORDED IN THE BOOKS AND AS MENTIONED BY THE LD. CIT(A), NO S PECIFIC DISCREPANCIES OR DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAV E BEEN POINTED OUT NOR WAS ANY MATERIAL BROUGHT TO OUR NOTICE TO ESTABLISH THA T PURCHASES WERE INFLATED OR RECEIPTS SUPPRESSED. IN THESE CIRCUMSTANCES , THERE WAS NO JUSTIFICATION IN INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT [ VIKRAM PLASTICS,239 ITR ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 21 161(GUJ) AND ESTIMATING THE PROFITS. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THERE IS NO MATERIAL BEFORE US FOR TAKING A DIFFE RENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NOS. 1 & 3 IN THE APPEAL OF THE REVENUE FOR THE AY 2003-04 AND GROUND NOS. 3A & 4 IN THEIR APPEAL FOR THE AY 2004-05 ARE DISMISSED. 13. GROUND NO.2 IN THIS APPEAL OF THE REVENUE FOR T HE AY 2003-04 RELATES TO ADDITION OF RS.60,237/- ON ACCOUNT OF I NTEREST . THE AO NOTICED THAT IN THE BOOKS OF RAJ GUEST HOUSE THE AS SESSEE DEBITED INTEREST OF RS.60.237/- ON CAR LOAN. HOWEVER, THE A SSESSEE HAD ALSO GIVEN INTEREST-FREE ADVANCES TO DIFFERENT PERSONS. THE AO , THEREFORE, OBSERVED THAT THE ASSESSEE CREATED ARTI FICIAL DEFICIENCY OF FUNDS AND COULD HAVE AVOIDED BORROWINGS BY RECOVERY OF INTEREST FREE ADVANCES. SINCE THE ASSESSEE FAILED TO ESTABLI SH NEXUS BETWEEN INTEREST FREE FUNDS AVAILABLE WITH HIM AND THE INTEREST FREE ADVANCES GIVEN BY HIM, THE AO WHILE LYING UPON DEC ISIONS IN CIT VS. MOTOR GENERAL FINANCE LTD., 254ITR 449(DEL.),CIT VS . H.R. SUGAR FACTORY, 187 ITR 363(ALL.), K. SOMASUNDARAM & BROTH ERS, 238 ITR 939(MAD.),CIT VS. V.I BABY & CO., 254 ITR 248(KERAL A) AND CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 1(P&H).CONCLUDED T HAT THE INTEREST PAID BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF BUS INESS, RESULTING IN DISALLOWANCE OF RS. 60,237/-. 14 ON APPEAL, THE LEARNED CIT(A) DELETED THE DISALL OWANCE IN THE FOLLOWING TERMS:- 6.1 IN THIS CONNECTION, THE APPELLANT SUBMITTED TH AT IT IS THE ONUS OF THE AO TO PROVE THAT THE BORROWED FUNDS WERE DIVERTED F OR NON-BUSINESS PURPOSE, BEFORE MAKING ANY DISALLOWANCE. THE AO HAS NOT ESTABLISHED ANY NEXUS OF THE BORROWED FUNDS WITH THE INTEREST F REE ADVANCES. IN THE CIRCUMSTANCES, IN VIEW OF THE DECISION OF ITAT, AHM EDABAD IN THE CASE OF TORRENT FINANCIERS REPORTED AT 73 TTJ 684 THERE WAS NO JUSTIFICATION FOR DISALLOWANCE OF INTEREST. THE AMOUNT STATED TO BE I NTEREST FREE ADVANCES ARE IN THE NATURE OF CURRENT ACCOUNT AND NOT ADVANC E OF LOAN. CONSIDERING THE ABOVE, THE DISALLOWANCE IS NOT JUSTIFIED. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 22 6.2 ON CONSIDERATION OF THE FACTS OF THE CASE IT I S FOUND THAT AS ACCEPTED BY THE AO THE LOAN HAS BEEN USED FOR CAR FINANCE. T HUS, IT IS IN RESPECT OF BUSINESS ASSET AND NOT FOR ADVANCING INTEREST-FREE LOANS. HENCE INTEREST PAID ON SUCH LOAN IS ADMISSIBLE AS BUSINESS EXPENDI TURE U/S 36(1)(III). THE ADDITION MADE IS DELETED. 15. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPP ORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASS ESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 16. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE AO DISALLOWED THE CLAIM FOR INTEREST ON THE GROUND THAT THE ASSESSEE ADVANCED HUGE INTEREST FREE FUNDS OF RS.2,33,33,734/- TO THE PARTIES MENTIONED IN PARA 6 OF THE ASSESSMENT ORDER AND THAT THE ASSESSEE FAILED TO ES TABLISH ANY NEXUS BETWEEN INTEREST FREE FUNDS AVAILABLE WITH HI M AND INTEREST FREE ADVANCES. INTER ALIA, THE AO RELIED UPON A NUM BER OF DECISIONS. THE LD. CIT(A),WITHOUT RECORDING ANY FINDINGS ON T HE ISSUES RAISED BY THE AO, DELETED THE DISALLOWANCE ON THE GROUND THAT LOAN HAS BEEN USED FOR CAR FINANCE AND THEREFORE, INTEREST I S ALLOWABLE U/S 36(1)(III) OF THE ACT . THERE IS NO FINDING THAT B ORROWED FUNDS HAVE NOT BEEN UTILIZED FOR THE AFORESAID INTEREST FREE ADVANCES OR THAT SUFFICIENT INTEREST FREE ADVANCES WERE AVAILABLE WI TH THE ASSESSEE FOR MAKING THE AFORESAID ADVANCES. EVEN THE DATE OF ADVANCES IS NOT EVIDENT FROM THE IMPUGNED ORDERS. AS IS APPARENT FR OM THE IMPUGNED ORDERS, BEFORE THE AO OR THE LD. CIT(A), THE ASSES SEE DID NOT PLACE ANY EVIDENCE AS TO HOW THE FUNDS BORROWED BY IT HAD BEEN UTILIZE D AND WHAT WAS THE COMMERCIAL EXPEDIENCY IN SUCH BORROWINGS. IN THIS CONNECTION, THE RELEVANT PROVISIONS OF SECTION 36(1)(III) OF THE ACT PROVIDE FOR DEDUCTION OF INTEREST ON THE BORROWED FUNDS RAISED FOR BUSINESS PURPOSES. ONCE T HE ASSESSEE CLAIMS ANY SUCH DEDUCTION, THE ONUS IS ON THE ASSESSEE TO SATI SFY THE AO THAT LOANS RAISED BY THE ASSESSEE WERE USED FOR BUSINESS PURPOSES. IF IN THE PROCESS OF ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 23 EXAMINATION OF CLAIM FOR SUCH A DEDUCTION, IT TRANS PIRES THAT THE ASSESSEE HAD DIVERTED CERTAIN FUNDS TO ASSOCIATES OR RELATED PER SONS AND SISTER CONCERNS WITHOUT ANY INTEREST, THERE WOULD BE A VERY HEAVY ONUS ON THE ASSESSEE TO BE DISCHARGED BEFORE THE AO TO THE EFFECT THAT IN SPIT E OF PENDING LOANS ON WHICH THE ASSESSEE WAS INCURRING THE LIABILITY TO PAY INTERE ST, STILL THERE WAS JUSTIFICATION FOR DIVERSION OF FUNDS TO ASSOCIATE OR SISTER CONCERNS FOR NON-BUSINESS PURPOSES . IN MADHAV PRASAD JATIA V. CIT [1979] 118 ITR 200 (SC) HONBLE SUPREME COURT OBSERVED THAT UNDER S. 10(2)(III) OF THE 1922 ACT( NOW SEC. 36(1)(III) OF THE 1961 ACT), THREE CONDITIONS WERE REQUIRED TO BE SATISFIE D IN ORDER TO ENABLE THE ASSESSEE TO CLAIM A DEDUCTION IN RESPECT OF INTERES T ON BORROWED CAPITAL, NAMELY, (A) THAT MONEY (CAPITAL) MUST HAVE BEEN BORROWED BY THE ASSESSEE, (B) THAT IT MUST HAVE BEEN BORROWED FOR THE PURPOSE OF BUSINESS , AND (C) THAT THE ASSESSEE MUST HAVE PAID INTEREST ON THE SAID AMOUNT AND CLAI MED IT AS A DEDUCTION. IT WAS ALSO HELD THAT THE EXPRESSION 'FOR THE PURPOSE OF B USINESS' OCCURRING UNDER THE PROVISION IS WIDER IN SCOPE THAN THE EXPRESSION 'FO R THE PURPOSE OF EARNING INCOME, PROFITS OR GAINS'. IN THE CASE UNDER CONSID ERATION, THERE IS NOTHING IN THE ORDER OF LOWER AUTHORITIES TO SUGGEST THAT THE ASSE SSEE DISCHARGED THE ONUS LAID DOWN UPON HIM THAT BORROWED FUNDS HAD INDEED BEEN UTILIZED FOR THE PURPOSE OF ITS BUSINESS SO AS TO ENTITLE IT TO CLAIM DEDUCTION U/S 36(1)(III) OF THE ACT. IN CASE THE ASSESSEE HAD SOME SURPLUS AMOUNT WHICH, ACCORDI NG TO HIM, COULD NOT BE REPAID PREMATURELY TO ITS CREDITORS, STILL THE SAME WAS EITHER REQUIRED TO BE CIRCULATED AND UTILISED FOR THE PURPOSE OF BUSINESS OR TO BE INVESTED IN A MANNER IN WHICH IT GENERATES INCOME AND NOT THAT THESE WE RE DIVERTED TOWARDS ASSOCIATE OR SISTER CONCERNS FREE OF INTEREST . THIS WOULD R ESULT IN NOT PRESENTING THE TRUE AND CORRECT PICTURE OF THE ACCOUNTS OF THE ASSESSEE AS AT THE COST BEING INCURRED BY THE ASSESSEE, THE ASSOCIATE OR RELATED PERSONS A ND SISTER CONCERNS WOULD BE ENJOYING THE BENEFITS THEREOF. IT CANNOT BE HELD T HAT THE FUNDS TO THE EXTENT DIVERTED TO ASSOCIATE CONCERNS WITHOUT CHARGING ANY INTEREST, WERE REQUIRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS AND LO ANS TO THAT EXTENT WERE REQUIRED TO BE RAISED. AS ALREADY STATED , SINCE TH E LD. CIT(A) HAVE NOT RECORDED ANY FINDINGS ON THE ISSUES RAISED BY THE AO, APPAR ENTLY THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 24 NATURAL JUSTICE, NAMELY, THAT EVERY JUDICIAL/QUASI- JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. TH E APPLICATION OF MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST IT SELF IN THE ORDER. SECTION 250(6) OF THE INCOME TAX ACT ,1961 MANDATES THAT TH E ORDER OF THE CIT(A) WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHA LL STATE THE POINTS FOR DETERMINATION, THE DECISION THEREON AND THE REASON FOR THE DECISION. THE REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATI ON THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDUR E. THE REQUIREMENT OF RECORDING OF REASONS BY THE QUASI-JUDICIAL AUTHORITIES IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIT Y, CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZ ES ARBITRARINESS IN THE DECISION-MAKING PROCESS. WE MAY REITERATE THAT A D ECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB, (1995)1SCC 760(SC)]. AS IS APPARENT, THE IMPUGNED ORDER SUFFERS FROM LACK OF R EASONING AND IS NOT A SPEAKING ORDER. IN VIEW OF THE FOREGOING, ESPECIA LLY WHEN THE LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER ON THE ISSUE RAISED IN TH IS GROUND, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. C IT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THESE ISSUES AFRESH IN ACCOR DANCE WITH LAW, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLES S TO SAY THAT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKIN G ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF T HE ACT . WITH THESE OBSERVATIONS, GROUND NO. 2 IN THE APPEAL OF THE RE VENUE FOR THE AY 2003-04 IS DISPOSED OF. 17. GROUND NOS.1 TO 3 IN THIS APPEAL OF THE REVENUE FOR THE AY 2004-05 RELATE TO AN ADDITION OF RS.1,24,81,500/- U/S 68 OF THE ACT, VIOLATION OF RULE 46A OF THE IT RULES,1962 AND INAD EQUATE OPPORTUNITY WHILE GROUND NO.1 IN THE CORRESPONDING CO RELATES TO ADDITION OF RS.2,80,027/- ON ACCOUNT OF ALLEGED GIF T FROM JASU BAROT. ON PERUSAL OF THE BALANCESHEET OF THE ASSESSEE, THE AO NOTICED THAT ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 25 THE ASSESSEE ACCEPTED VARIOUS DEPOSITS / CASH CRED ITS FROM DIFFERENT PARTIES. TO A QUERY BY THE AO SEEKING LIST OF DEPOS ITORS WITH THEIR FULL NAMES AND ADDRESSES INDICATING THEIR OPENING BALANC E, ADDITION DURING THE YEAR, REPAYMENT, INTEREST PAID / CREDITE D, TDS MADE AND CLOSING BALANCE AT THE YEAR END AS ALSO COPY OF ACC OUNT, CONTRA ACCOUNT, PAN OF THE DEPOSITORS AND SQUARED UP ACCO UNTS DURING THE YEAR BESIDES ASKING THE ASSESSEE TO PRODUCE ALL THE DEPOSITORS FOR EXAMINATION / VERIFICATION OF GENUINENESS OF THE DE POSITS, THE ASSESSEE DID NOT FILE CONFIRMATIONS WITH FULL ADDRE SSES AND PAN NOR PRODUCED THE DEPOSITORS. THE DETAILS OF CASH CREDI TS RECEIVED DURING THE YEAR AND THE INFORMATION FURNISHED BY THE ASSES SEE IN RESPECT OF THE DEPOSITORS ARE SUMMARIZED BY THE AO ON PAGES 5 & 6 THE ASSESSMENT ORDER. SINCE THE ASSESSEE FAILED TO ESTA BLISH THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS/DEPOSITORS AN D GENUINENESS OF THE TRANSACTIONS, RELYING UPON DECISIONS IN CIT VS. R.S. RATHOD,212 ITR 390 (RAJ.), ROSHAN D. HATTI VS. CIT,107 ITR 938(SC) , KALEKHAN MOHAMMAED HANIF VS. CIT,50 ITR 1 (SC), SHANKAR INDUSTRIES VS. CIT,114 ITR 689 (CAL),CIT VS. BAISHNAB CHARAN MOHANTRY,212 ITR 199 (ORRISA.), CIT VS. PRECISION FINANCE (P) LTD.,208 ITR 465(CAL), NANAKCHAND LAXMANDAS VS. CIT,140 ITR 151 (ALL.), CIT VS. M. GANAPATHI MUDALIAR, 53 ITR 623(SC), CIT VS. DEVI PRASAD VISHWANATH PRASAD, 72 ITR 194(SC), CIT VS. DURGA PR ASAD MORE, 72 ITR 807(S.C), CIT VS. MADHAVNAGAR COTTON MILLS LTD. 104 ITR 493(BOM.), CIT VS. BANARSI LAL DHAWAN 109 ITR 360 (MAD.), CIT VS. SOPH IA FINANCE LTD. 205 ITR 98 (DELHI) (FB), CIT VS. PRATIK FINANCE & INVT. CO. LTD. 215 ITR 272(DELHI), SUMATI DAYAL VS. CIT 214 ITR 801 (S.C) AND REFERRIN G TO PROVISIONS OF SEC. 106 & 114 OF THE INDIAN EVIDENCE ACT, THE AO ADDED THE A FORESAID AMOUNT OF RS.1,24,81,500/- BESIDES RS.2,80,027/- U/S 68 OF TH E ACT IN THE HANDS OF THE ASSESSEE. 18. ON APPEAL, THE LEARNED CIT(A) AFTER HAVING A RE MAND REPORT FROM THE AO REDUCED THE ADDITION IN THE FOLLOWING T ERMS:- ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 26 4.1 THE APPELLANT FURNISHED COPIES OF DECLARATION OF GIFTS AND ALSO CONTRA ACCOUNT FROM CREDITORS. SO FAR AS THE CREDIT S IN THE ACCOUNT OF DEPOSITORS ARE CONCERNED, THE APPELLANT HAD FURNISH ED COPIES OF ACCOUNT OF THE CONCERNED PERSONS AND THEIR CONTRA ACCOUNTS ALO NG WITH CONFIRMATION. IT WAS ALSO STATED THAT THE AMOUNTS WERE RECEIVED B Y ACCOUNT PAYEE CHEQUES. IT IS SUBMITTED THAT THE MATTER BEING VERY OLD, THE APPELLANT WAS UNABLE TO OBTAIN THE CONFIRMATION BEFORE THE ASSESS MENT WAS COMPLETED ON ACCOUNT OF INADEQUATE TIME AVAILABLE TO HIM. THU S ADEQUATE TIME WAS NOT PROVIDED. HOWEVER, IT IS SUBMITTED THAT THE ABO VE DETAILS MAY BE ADMITTED AS ADDITIONAL EVIDENCE AND THE SAME MAY BE CONSIDERED FOR THE FOLLOWING REASONS: 'NOW COMING ON TO OUR SUBMISSION WE FIRST OF ALL AG REE WITH THE PRINCIPLE OF LAW MENTIONED IN THE ORDER THAT THE BURDEN IS ON TH E ASSESSEE TO PROVE THE LOAN/CREDIT TAKEN DURING THE YEAR IN BOOKS OF ACCOU NTS. BUT FOR PROVING THE CREDITS SOME TIME HAS TO BE GIVEN MORE SO IN TYPE OF CASES AS THIS ONE WHERE SIMULTANEOUS SIX YEARS ASSESSMENT PR OCEEDINGS WERE COMPLETED IN APPELLANTS CASE ALONG WITH 6 OT HER GROUP CONCERNS NAMELY SHRI DIPAK THAKKAR, SMT MANJULABEN SACHDEV, SMT KINJALBEN THAKKAR, SHRI HIRALAL THAKKAR, SHRI. SANJ AY THAKKAR AND DHARRNADEV FINANCE PVT LTD WITHIN THE SHORT SPAN OF THREE TO FOUR MONTHS. AS THE PROCEEDINGS IN ALL THE GROUP CONCERNS ALON G WITH THE APPELLANT WAS GOING ON SIMULTANEOUSLY DUE TO LACK OF TIME CE RTAIN DETAILS REQUIRED BY ASSESSING OFFICER COULD NOT BE PRODUCED IN TIME ALLOTTED. ALSO IT IS WORTH WHILE TO MENTION THAT WHATEVER DETAILS POSSIBLE IN FORM OF COPY OF ACCOUNT OF PARTIES, CONFIRMATION OF THE PARTIES, NAME, ADDR ESS OF THE PARTIES ETC WERE PRODUCED BEFORE THE ASSESSING OFFICER VIDE LET TER DATED 15/12/06 WHICH WERE NOT CONSIDERED IN THE ASSESSMENT ORDER A T PRESENT WE CAN PRODUCE THE SAME BEFORE YOUR HONOUR AS ADDITIONAL E VIDENCES AND WHICH NEEDS TO .BE ACCEPTED CONSIDERING THE FACTS NARRATE D EARLIER. AS FROM THE ABOVE NARRATION OF FACTS YOUR HONOUR WI LL AGREE THAT NO ADEQUATE OPPORTUNITY HAS BEEN GIVEN TO THE APPELLAN T TO PROVE HIS STAND BY GIVING EVIDENCES. SO ALL THE EVIDENCES WE WANT TO P RODUCE IN SUPPORT OF OUR GROUNDS OF APPEAL FILLED BEFORE YOUR HONOUR SHO ULD BE ACCEPTED AS ADDITIONAL EVIDENCE BECAUSE OUR CASE CLEARLY FALLS UNDER FOLLOWING SUB- CLAUSE OF RULE 46AOF INCOME TAX RULES, 1962. '(D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO TH E APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL .' THUS CLAUSE (D) ABOVE SUPPORTS OUR PRAYER THAT ALL THE EVIDENCES WHICH ARE PRODUCED WITH THIS SUBMISSION NEEDS TO BE ACCEPTED BY YOUR HONOUR SO AS TO ARRIVE AT FAIR CONCLUSION ON THE ISSUES INVOLVED IN THE APPEAL. IT WAS FURTHER SUBMITTED THAT ACCEPTANCE OF DEPOSITS ETC. ARE THROUGH BANKING CHANNEL AND THE INFORMATION WAS ALREADY AVAILABLE W ITH AN INDEPENDENT AGENCY BANKS, BUT WAS NOT AVAILABLE TO THE APPELLAN T AS RECORDS BEING OLD ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 27 AND THERE BEING NO QUESTION OF AFTER THOUGHT THESE EVIDENCES SHOULD BE ADMITTED. . FURTHER IT IS WORTHWHILE TO MENTION THE NO TINGS OF BOMBAY HIGH COURT 'IN FAMOUS CASE OF PRABHAVATI S. SHAH V/S CIT 231 ITR 1 WHERE THE COURT HAS GONE ONE STEP FURTHER IN THE INTEREST OF THE JUSTIC E BY OBSERVING THAT RULE 46A DOES NOT DEAL WITH THE POWERS OF THE COMMISSION ER (APPEALS) TO MAKE FURTHER ENQUIRY AND IT ONLY PUTS RESTRICTION ON THE APPELLANT TO PRODUCE ADDITIONAL EVIDENCE. THE COMMISSIONER (APPEALS) HAS ENOUGH POWERS U/S 250(4) TO ASK FOR AND ACCEPT THE EVIDENCE WHICH HE FEELS NECESSARY SO AS TO PASS THE ORDER. FURTHER RECENTLY KERALA HIGH COURT IN CASE OF C.I.T V/S K. RAVINDRANATHAN NAIR 131 TAXMANN 743 HAS ALSO HELD THAT CIT (APPEAL S) HAVE APART FROM RULE 46A HAS ENOUGH POWERS BY VIRTUE O.' SECTION 25 0(4) SO AS TO ADMIT ANY EVIDENCE WHICH HE FEELS NECESSARY FOR ARRIVING AT THE CONCLUSION ON THE GROUNDS OF APPEAL FILLED BY THE APPELLANT. CONSIDERING THE FACTS OF OUR CASE THE DETAILS HEREU NDER SHOULD BE TAKEN INTO ACCOUNT BEFORE ARRIVING TO ANY DECISION BY YOU R HONOUR. KEEPING APART ABOVE SUBMISSION WHICH WE BELIEVE MAK ES OUR CASE CLEARLY ELIGIBLE FOR ACCEPTANCE OF ADDITIONAL EVIDENCE IT I S WORTHWHILE TO MENTION THAT THE ASSESSING ORDER STATING THAT IN RESPECT OF CASH CREDITS ' DETAILS WERE NOT FURNISHED AND THERE WAS NON COMPLIANCE. IT IS SUBMITTED THAT AS SUCH THERE WAS NO NON COMPLIANCE ON THE PART OF THE APPELLANTS. IT MAY BE NOTED THAT FIRST NOTICE U/S 142 (1) REFERRED BY THE ASSESSING OFFICER IS DATED 8/09/06 AND IN RESPONSE THERETO THE APPELLANT HAD F ILED DETAILS AND COPIES OF ACCOUNTS WITH THE ASSESSING OFFICER. FURTHER THE APPELLANT HAD ALSO GIVEN BEFORE ASSESSING OFFICER THE DETAILS VIDE LETTER DA TED 15/12/06.' 4.2 HAVING REGARD TO ABOVE SUBMISSIONS I FOUND THAT AT THE TIME OF ASSESSMENT, THE APPELLANT WAS UNABLE TO FURNISH THE REQUIRED CONFIRMATIONS AND IT WAS FOR THE INADEQUATE TIME. M OREOVER THE EVIDENCES WERE ALREADY AVAILABLE DUE TO (HE TRANSACTIONS BEIN G THROUGH BANKING CHANNEL THERE CANNOT BE AN ALLEGATION OF AFTER THOU GHT OR MANIPULATION. HENCE THE EVIDENCE PRODUCED BEFORE ME WERE ADMITTED FOR JUSTICE AND THE A.O. WAS GIVEN AN OPPORTUNITY TO VERILY THE SAME AN D FURNISH HIS COMMENTS ON THE SAID EVIDENCES. 4.3 THE ASSESSING OFFICER HAS IN HIS REMAND REPORT DATED.24.5.2007 STATED AS UNDER: '3.1. IN THE ASSESSMENT, ADDITION ON ACCOUNT OF UNE XPLAINED CASH CREDITS AMOUNTING TO RS.1,27,61,527/- WAS MADE WHICH INCLUDES ADDITION OF PS.2,80,027/-, MADE ON ACCOUNT OF ADDITIONAL CAPITAL INTRODUCED IN THE FORM OF GIFT R ECEIVED FROM ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 28 JASUBHAI BAROT, IN THE PERSONAL BOOKS OF ACCOUNTS O F THE ASSESSEE. IN THIS REGARD THE ASSESSEE HAS NOT FURNI SHED ANY SORT OF CONFIRMATION OR DECLARATION FROM THE DONOR. HE H AS ALSO NOT FURNISHED DETAILS REGARDING SOURCES OF INCOME AND B USINESS ACTIVITIES OF THE DONOR, ADDRESS PROOF AND PHOTO ID OF (HE DONOR, PA NUMBER AND COPY OF BANK PASSBOOK DEMONSTRATING THE AVAILABILITY OF FUNDS AT THE RELE VANT POINT OF TIME. IN ABSENCE OF THESE BASIC INFORMATION, GIFT O F RS.2,80,027/- CANNOT BE TREATED AS GENUINE. 3.2. FURTHER, IN ASSESSMENT, ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITS OF RS.1,08,81,500/- IN THE BOOKS OF KANT ENTERPRISE WAS MADE. HOWEVER, DURING THE COURS E OF VERIFICATION, THE ASSESSEE HAS CONTENDED THAT NO CA SH CREDITS WERE ACCEPTED IN THIS PROPRIETARY CONCERN. IN FACT, THE BALANCES IN DIFFERENT NAMES IN THE BOOKS OF THIS PR OPRIETARY CONCERN ARE AGAINST THE AMOUNT OF BOOKINGS RECEIVED FROM DIFFERENT PARTIES. IN THIS REGARD, THE ASSESSEE HAS FURNISHED NECESSARY CONFIRMATION, COPY OF A/C, ALLOTMENT LETT ER ARID SALES/RECEIPTS A/C DEMONSTRATING THE AMOUNT OF SALE PROCEEDS 7 BOOKINGS RECEIVED FROM DIFFERENT MEMBERS . THUS IT IS CLEAR THAT THESE ARE NOT CASH CREDITS. IN FACT T HE SAME ARE PART OF SALE PROCEEDS / BOOKING AMOUNT WHICH HAVE B EEN DULY OFFERED AND DISCLOSED IN THE BOOKS OF ACCOUNTS . IN OTHER WORDS, THE ADDITION OF RS.1,08,81,500/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS STANDS EXPLAINED. 3.2.1. FURTHER, THE ASSESSEE HAS FURNISHED COPY OF A/C, CONFIRMATION AND CONTRA A/C IN RESPECT OF DEPOSIT O F RS.10 LAKH RECEIVED FROM SAHAJANAND ENTERPRISE PVT. LTD. THE ASSESSEE HAS ALSO FURNISHED THE PA NUMBER OF THE PA RTY. IT IS ALSO SEEN THAT THERE IS DEPOSIT OF RS.4 LAKH IN THE NAME OF NEEL UMANG THAKAKAR IN THE PERSONAL BOOKS OF ASSESSEE. I T HAS BEEN EXPLAINED THAT THIS DEPOSIT WAS ACTUALLY RECEI VED FROM NEEL NATRA NTC AND THE SAME WAS WRONGLY CREDITED IN THE NAME OF NEEL UMANG THAKAKR. THE ASSESSEE HAS FURNIS HED COPY OF A/C AND CONTRA A/C, BANK STATEMENT OF NEEL NETRA NTC, WHICH CLARIFIES THE FACTUAL POSITION AS CLAIME D BY THE ASSESSEE. FURTHER, THE AMOUNT OF ADDITION INCLUDES CASH CREDIT OFRS.2 LAKHS RECEIVED FROM HEERA CONSTRUCTION. HOWE VER, ON PERUSAL OF THE COPY OF A/C, IT IS SEEN THAT THERE I S OPENING BALANCE IN THE NAME OF THIS PARTY AND NO CASH CREDI T WAS RECEIVED DURING THE YEAR. THE ASSESSEE HAS ALSO FIL ED CONFIRMATION OF THE DEPOSITOR WITH FULL ADDRESS AND PA NUMBER. 'IN VIEW OF THE SUPPORTING DOCUMENTS, THE C ASH ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 29 CREDITS' AMOUNTING TO RS.1,24,81,500/- STANDS EXPLA INED. THE IDENTITY OF THE DEPOSITORS, GENUINENESS OF THE TRAN SACTIONS AND CREDIT WORTHINESS OF THE DEPOSITORS ARE PROVED. 4. THUS OUT OF TOTAL ADDITION OF RS.1,27,61,527/-, AN AMOUNT OF RS.L,24,81,500/- STANDS EXPLAINED.' 4.4 THE ABOVE REMAND REPORT WAS GIVEN TO THE APPELL ANT'S REPRESENTATIVE. HO SUBMITTED THAT THE DONORS HAVING CONFIRMED THE GIFTS AND THE GIFTS HAVING BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES THERE IS NO- REASON FOR HOLDING THE GILLS AS NON-GENUINE. 4.5 ON CONSIDERATION OF THE ASSESSMENT ORDER AND TH E ABOVE SUBMISSIONS I FIND THAT THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN THE GIFT BY WAY OF THE CREDIT WORTHINESS OF THE DONORS TO GI FT RS.2,80,027/-. THE APPELLANT, HAS-PRODUCED CONFIRMATION AND THAT THE A MOUNT IS RECEIVED BY CHEQUE WHICH SHOWS THE GENUINENESS OF THE TRANSACTI ON. BUT CREDITWORTHINESS AND CAPACITY OF DONOR HAS NOT BEEN PROVED. IN VIEW OF THE ABOVE POSITION THE ADDITION OF RS.2,80,027/- MADE B Y THE ASSESSING OFFICER IS CONFIRMED. CONSIDERING THE REMAND REPORT THE BAL ANCE ADDITIONS OF RS.1,24,81,500/- ARE DIRECTED TO BE DELETED. 19. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A) AND HAS CHALLENGED D ELETION OF THE ADDITION OF RS.1,24,81,500/-. THE ASSESSEE IS DISPU TING THE ADDITION OF RS.2,80,027/- ON ACCOUNT GIFT. THE LEAR NED DR SUPPORTED THE ORDER OF THE AO WHILE CONTENDING THAT THE LD. C IT(A) WAS NOT JUSTIFIED IN ADMITTING ADDITIONAL EVIDENCE.ON THE O THER HAND, THE LD. AR ON BEHALF OF THE ASSESSEE REITERATED THEIR SUBMI SSIONS BEFORE THE LD. CIT(A). 20. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE LD. CIT(A) ON THE BASIS OF REPORT OF THE AO DELETED THE ADDITION ON ACCOUNT OF DEPOSITS OF RS. RS.1,24,81,500/-, THE AO HAVING FOUND THE DEPOSITS EXPLAINED. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT NO INTERFERENCE IS CALLE D FOR IN THE ORDER OF THE LEARNED CIT(A). THE ASSESSEE EX PLAINED BEFORE THE LEARNED CIT(A) THAT DUE TO INADEQUATE TIME, HE WAS PREVENT ED FROM PRODUCING THE REQUIRED EVIDENCES BEFORE THE AO AND REQUEST WAS MA DE TO ADMIT THE ADDITIONAL ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 30 EVIDENCES. THE LEARNED CIT(A), CONSIDERING THE EXPL ANATION OF THE ASSESSEE IN THE LIGHT OF RULE 46 A OF THE IT RULES,1962, ADMITT ED THE ADDITIONAL EVIDENCE AND ASKED THE AO TO FURNISH HIS COMMENTS ON SUCH ADDIT IONAL EVIDENCES. THE AO EXAMINED THE ADDITIONAL EVIDENCES AND ACCEPTED THE GENUINENESS OF THE CASH CREDITS. THEREFORE, THE LEARNED CIT(A) ON PROPER AP PRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY ADMITTED THE ADDITIONAL EVIDENCES AT THE APPELLATE STAGE. THE HONBLE PUNJAB & HARYANA HIGH COURT IN T HE CASE OF KULDEEP INDUSTRIAL CORPORATION, 209 CTR 400 HELD THAT THE AO WAS PRESENT BEFORE THE LEARNED CIT(A) AND DID NOT RAISE ANY OBJECTION FOR ADMISSION OF ADDITIONAL EVIDENCES, RULE 46A NOT VIOLATED. IN THE PRESENT CASE, THE AO IN THE REMAND REPORT ACCEPTED CASH CREDITS TO THE EXTENT OF RS.1, 24,81,500/-. IN THE CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIR MITY IN THE APPROACH OF THE LEARNED CIT(A). SINCE THE AO ADMITTED THAT THE ASSE SSEE HAS PROVED GENUINENESS OF CASH CREDITS IN A SUM OF RS.1,24,81, 500/-, THEREFORE, NO FAULT CAN BE FOUND IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION TO THAT EXTENT. AS REGARDS ADDITION OF RS.2,80,027/- ON ACCOUNT OF ALLEGED GIF T FROM JASU BAROT,SINCE THE ASSESSEE DID NOT ESTABLIS H CAPABILITY OF THE DONOR, THE AO & THE LD. CIT(A) CONCLUDED THAT THE CAPACITY OF THE DONOR OR GENUINENESS OF THE TRANSACTIONS WAS NO T ESTABLISHED. NOT AN IOTA OF EVIDENCE WAS PLACED BEFORE THE AO IN SUPPORT OF GENUINENESS OF THE GIFTS OR EVEN CAPACITY OF THE DONORS TO MAKE THE GIFTS. EVEN NO EVIDENCE IN SUPPORT OF ANY ACQUAIN TANCE OR LOVE OR AFFECTION BETWEEN THE DONOR AND THE ASSESSEE HAS BEEN FILED B EFORE THE LOWER AUTHORITIES NOR BROUGHT TO OUR NOTICE. THERE ARE NO REASONS OR ANY OCCASION AT ALL FOR GIVING GIFTS BY THE AFORESAID THE DONOR, EXCEPT RELYING ON THE DECISIONS REFERRED TO ABOVE. IN VIEW OF OUR REASONS GIVEN IN PARA 8 TO 8.4 ABOV E AND THE DECISIONS REFERRED TO THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE FINDIN GS OF THE LD. CIT(A). THEREFORE, GROUND NOS.1 TO 3 IN THIS APPEAL OF THE REVENUE FOR THE AY 2004-05 AND GROUND NO.1 IN THE CORRESPONDING CO ARE DISMISS ED. 21. GROUND NO.5 IN THE APPEAL OF THE REVENUE FOR TH E AY 2004-05 RELATES TO ADDITION OF RS.2,50,000/-. PAGE NOS. 6 TO 44 OF ANNEXURE- ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 31 A1 SEIZED ON 9.2.2005 FROM THE RESIDENCE OF THE AS SESSEE REVEALED THAT THE FOLLOWING WORK WAS GOT DONE BY THE ASSESSE E :- PAGE NO. DATE NATURE OF WORK VENDOR / CONTRACTOR 6 TO 14 & 31 5.2.2004 EARTH FILLING WORK IN RESPECT OF SAHAJANANT- II, SARKHEJ SHRI BHIKHABHAI BARWAD, TRACTOR NO.7844 15 TO 17, 24 & 32 TO 36 -- EARTH FILLING WORK IN RESPECT OF SAHAJANANT- II, SARKHEJ BHARAT TEJA VANAJARA 18 TO 23 & 26 TO 30 2.2.2004 & 5.2.2004 EARTH FILLING WORK IN RESPECT OF SAHAJANANT- II, SARKHEJ MANGILAL VANJARA TRACTOR NO.5836 25 & 37 TO 44 3.2.2004 EARTH FILLING WORK IN RESPECT OF SAHAJANANT- II, SARKHEJ GULAB BHARWAD TO A QUERY BY THE AO, THE ASSESSEE SUBMITTED THAT EXPLANATION WITH REGARD TO BOOKS OF ACCOUNTS AND DOCUMENTS SEIZ ED FROM THE RESIDENCE IS UNDER PREPARATION AND SHALL BE SUB MITTED TO YOU SHORTLY .HOWEVER, THE ASSESSEE DID NOT SUBMIT ANY SUCH EXP LANATION AND ACCORDINGLY, THE AO ESTIMATED THE EARTH FILLIN G WORK AT RS.2,50,000/- AND ADDED THE SAME TO THE TOTAL INCOM E OF THE ASSESSEE. 22. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDIT ION IN THE FOLLOWING TERMS:- 7. IN THIS CONNECTION THE APPELLANT HAD SUBMITTED THA T THE NAME OF THE APPELLANT IS NOT MENTIONED ON ABOVE PAP ER. THE APPELLANT WAS NOT RELATED TO NILKANTH ESTATE SCHEME OF RAJEND RA THAKKAR WHERE THESE TRANSACTIONS ARE RECORDED. IT IS STATED THAT IT CANNOT BE SAID THAT EARTH FILLING WORK BELONGED TO APPELLANT AND NOT RA JENDRA THAKKAR. IT IS ALSO CLAIMED THAT THE TRANSACTIONS ARE RECORDED IN THE B OOKS OF RAJENDRA THAKKAR AND IT IS ACCEPTED IN THE ASSESSMENT OF THE SAID PERSON. THE EXPENSES ARE ADDED ON ESTIMATE BASIS AND NO FIGURE IS GIVEN FOR THE EXPENSES IN THE SEIZED MATERIAL. HENCE THE ADDITION IS NOT JUSTIFIED. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 32 7.1 ON CONSIDERATION OF THE FACTS I FIND THAT THE A PPELLANT HAS CLAIMED THAT THE EXPENSES ARE RELATING TO RAJENDRA THAKKAR AND NOT THE APPELLANT. IT IS RECORDED IN THE BOOKS OF RAJENDRA THAKKAR. TH E AO HAS NOT GIVEN ANY COMMENTS IN HIS REMAND REPORT ON THIS ASPECT. THERE FORE, IN THE INTEREST OF JUSTICE I DIRECT THE AO TO VERIFY THESE FACTS STATE D BY THE APPELLANT AND IF IT IS FOUND TO BE CORRECT HE SHOULD DELETE THE ADDITIO N. 23. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPP ORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASS ESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 24. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. SINCE THE LD. CIT(A) HAS MERELY DIRECTED THE AO TO VERIFY AS TO WHETHER OR NOT THESE EXPENSES ARE ACCOUNTED F OR IN THE BOOKS OF RAJENDRA THAKKAR AND IF SO, DELETE THE ADDITION WHI LE THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE APPROA CH OF THE LD. CIT(A) . IN VIEW THEREOF, GROUND NO.5 IN THE APPEAL OF THE REVENUE F OR THE AY 2004-05 IS DISMISSED. 25. GROUND NO.6 IN THE APPEAL OF THE REVENUE FOR TH E AY 2004-05 RELATES TO ADDITIONS OF RS.32,50,000/- AND RS.2,10, 964/-. ON PERUSAL OF PAGE NOS. 74 TO 79 OF ANNEXURE-A-20, IMPOUNDED F ROM THE OFFICE OF THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE IN HIS OWN HANDWRITING RECORDED TRANSACTIONS OF DEPOSITS RECEI VED FROM SHRI PRAVINBHAI MISTRY (RCCWALA). THE ASSESSEE HAS WRITT EN THE TRANSACTIONS ON THE LETTERHEAD OF DHARAMDEV FINANCE PVT. LTD. AND SIGNED AT THE END OF EACH NOTING. THE NOTING ON THE SE PAGES REVEAL AS UNDER:- PAGE NO. DATE AMOUNT NAME OF DEPOSITOR REMARKS 74 17-11-03 500000 200000 200000 PRAVINBHAI MISTRY DEPOSITS ACCEPTED IN HAREKRISHNA ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 33 BUILDERS 75 6-4-03 100000 350000 750000 PRAVINBHAI BHAGYALAKSHMI AMI BUILDERS DEPOSITS ACCEPTED IN HAREKRISHNA BUILDERS (INTEREST PAID IN CASH FOR THE PERIOD UPTO 30- 9-03 TO 24-10- 03) 76 7-6-03 150000 50000 AMI BUILDERS C/O PRAVINBHAI DEPOSITS ACCEPTED IN HAREKRISHNA BUILDERS (INTEREST PAID IN CASH FOR THE PERIOD UPTO 30- 9-03 TO 24-10- 03) 77 17-1-04 800000 PRAVINBHAI MISTRI INTEREST @ 12% AGREED 78 7-4-03 150000 PRAVINBHAI MISTRI - 79 - 210964 WORKING OF INTEREST ON THE AMOUNT ACCEPTED AS MENTIONED ON PAGES NO.74 TO 78 TO A QUERY BY THE AO, VIDE NOTICE DATED 20.11.2006 , THE ASSESSEE DID NOT CARE TO FURNISH ANY EXPLANATION IN THE MATT ER. THE AO ACCORDINGLY HELD AS UNDER:- 8.3. FROM THE SEIZED PAPERS IT IS SEEN THAT THE AS SESSEE HAS ARRANGED HUGE LOANS FOR HAREKRISHNA BUILDERS, A PROPRIETARY CONCERN OF SHRI RAKESH H. THAKKAR - SON OF THE ASSESSEE. THE SEIZED DOCUME NTS ARE MORE OR LESS IN THE NATURE OF PROMISSORY NOTES WHEREIN THE ASSES SEE HIMSELF HAS SIGNED AND ACCEPTED THE DEPOSITS FROM PRAVINBHAI MISTRI & OTHERS. ALL THE DEPOSITS WERE ACCEPTED IN THE NAME OF HAREKRISHNA B UILDERS. HOWEVER, ON PAGE NO.77 & 78, NO NAME IS WRITTEN. BUT IF ALL THE SE PAPERS ARE CO-RELATED, IT IS CLEAR THAT THE DEPOSITS ON PAGE NO.77 & 78 AL SO ARE IN RESPECT OF HAREKRISHNA BUILDERS, WHEREAS PAGE NO.79 REFLECTS T HE WORKING OF INTEREST PAID IN CASH AMOUNTING TO RS.2,10,964/-. ON THESE P AGES, AFTER RECEIVED THE DEPOSITS, THE DETAILS OF AMOUNTS REPAID ARE ALS O NOTED. THESE PAPERS ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 34 CLEARLY SUGGEST THAT THE ASSESSEE, THOUGH HAD USED THE LETTER PAD OF DHARAMDEV FINANCE LTD., BUT ACCEPTED THE DEPOSITS F ROM PRAVINBHAI MISTRI AND OTHERS. TRE'7 DEPOSITS AMOUNTED TO RS.32,50,000 /- AND INTEREST PAID IN CASH ON THE AMOUNT OF DEPOSITS IS RS.2,10,964/-. SINCE, EXCEPT ON TWO PAGES, PAGE NO.77 & 78, ON ALL OTHER PAGES THE DEPO SITS ARE ACCEPTED IN THE NAME OF HAREKRISHNA BUILDERS. THE SUBSTANTIVE A DDITION OF RS.32,50,000/- AS PER THE PROVISIONS OF SECTION 68 AND UNEXPLAINED EXPENDITURE ON ACCOUNT OF INTEREST PAYMENT OF RS.2, 10,9647- AS PER THE PROVISIONS OF SECTION 69-C ARE MADE IN THE HANDS OF SHRI RAKESH H THAKKAR, PROPRIETOR OF HAREKRISHNA BUILDERS. HOWEVE R, THE SAME ADDITION ON PROTECTIVE BASIS IS ALSO MADE IN THE CASE OF THE ASSESSEE. 26. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDIT ION IN THE FOLLOWING TERMS:- 8.1 THE APPELLANTS AR ARGUED THAT MAJORITY OF THE SE TRANSACTIONS ARE RECORDED IN THE BOOKS OF HAREKRISHNA BUILDERS, A PR OPRIETARY CONCERN OF RAKESH THAKKAR AND, THEREFORE, THERE IS NO QUESTION OF TAXING IT IN THE HANDS OF THE APPELLANT. IT IS STATED THAT ON THE BA SIS OF SAME MATERIAL ADDITION IS ALSO MADE IN THE CASE OF RAKESH THAKKAR FOR THE SAME AMOUNT. THUS SAME SEIZED MATERIAL IS CONSIDERED FOR ADDITIO N IN TWO HANDS AND HENCE ALSO ADDITION SHOULD BE DELETED. 8.2 ON CONSIDERATION OF THE FACTS, AS NOTICED FROM THE SEIZED MATERIAL BY THE AO THE TRANSACTIONS RELATE TO HAREKRISHNA BUILD ERS, A PROPRIETARY CONCERN OF RAKESH THAKKAR. HENCE THE ADDITION IN TH E CASE OF APPELLANT ON THE BASIS SAID MATERIAL IS NOT JUSTIFIED. ACCORDING LY THIS ADDITION IS DIRECTED TO BE DELETED. 27. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPP ORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASS ESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 28. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT IN THE CASE OF RAKESH HIRALA L THAKKAR IN CO NO.363/AHD/2007 (AY 2004-05), THE TRIBUNAL WHILE AD JUDICATING THE SUBSTANTIVE ADDITION IN PARA-10.3 OF THEIR ORDER DA TED 30-11-2010, HELD AS UNDER:- ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 35 10.3 IN THE ASSESSMENT YEAR 2004-05 THE LD. CIT(A ) RESTORED THE ADDITION OF RS.32,50,000/- TO THE FILE OF AO FOR RE -ADJUDICATION. THIS IS OBJECTED BY THE ASSESSEE VIDE GROUND NO.2 OF CROSS OBJECTION. IN OUR OPINION, THE LD. CIT(A) HAS GIVEN COGENT REASONS FO R SETTING ASIDE THIS ISSUE TO THE FILE OF AO. GROUND NO.2 OF CROSS OBJEC TION FOR THE AY 2004-05 IS ACCORDINGLY REJECTED. 28.1 SINCE THE SUBSTANTIVE ADDITION IN THE CAS E OF SHRI RAKESH HIRALAL THAKKAR IS RESTORED TO THE FILE OF THE AO FOR RECONSIDERATION, WE CONSIDER IT FAIR AND APPROPRIATE TO RESTORE THE ISSUE RELATING TO THESE ADDITIONS TO THE FILE OF THE AO WITH THE DIR ECTIONS TO READJUDICATE THE ISSUE IN THE LIGHT OF HIS FINDINGS IN THE CASE OF RAKESH HIRALAL THAKKAR AFTER ALLOWING SUFFICIENT O PPORTUNITY TO THE ASSESSEE. WITH THESE OBSERVATIONS, GROUND NO. 6 IN THE APPEAL OF THE REVENUE FOR THE AY 2004-05 IS DISPOSED OF. 29. GROUND NOS.1 TO 3 IN THIS APPEAL OF THE REVEN UE FOR THE AY 2005-06 RELATE TO AN ADDITION OF RS.83,85,405/- U/S 68 OF THE ACT AND VIOLATION OF RULE 46A OF THE IT RULES,1962 AND INADEQUATE OPPORTUNITY WHILE GROUND NO.1 IN THE CORRESPONDING CO RELATES TO ADDITION OF RS.50,000/-. ON PERUSAL OF THE BALANCES HEET OF THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE ACCEPTE D VARIOUS DEPOSITS / CASH CREDITS FROM DIFFERENT PARTIES. TO A QUERY BY THE AO SEEKING LIST OF DEPOSITORS WITH THEIR FULL NAMES AN D ADDRESSES INDICATING THEIR OPENING BALANCE, ADDITION DURING T HE YEAR, REPAYMENT, INTEREST PAID / CREDITED, TDS MADE AND C LOSING BALANCE AT THE YEAR END AS ALSO COPY OF ACCOUNT, CONTRA ACC OUNT, PAN OF THE DEPOSITORS AND SQUARED UP ACCOUNT DURING THE YEAR B ESIDES ASKING THE ASSESSEE TO PRODUCE ALL THE DEPOSITORS FOR EXAM INATION / VERIFICATION OF GENUINENESS OF THE DEPOSITS, THE AS SESSEE DID NOT FILE CONFIRMATIONS WITH FULL ADDRESSES AND PAN NOR PRO DUCED THE DEPOSITORS. THE DETAILS OF CASH CREDITS RECEIVED D URING THE YEAR AND THE INFORMATION FURNISHED BY THE ASSESSEE IN RESPEC T OF THE DEPOSITORS ARE SUMMARIZED BY THE AO ON PAGE 5 OF TH E ASSESSMENT ORDER. SINCE THE ASSESSEE FAILED TO ESTABLISH THE I DENTITY AND ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 36 CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTIONS, RELYING UPON DECISIONS IN CIT VS. R.S . RATHOD,212 ITR 390 (RAJ.), ROSHAN D. HATTI VS. CIT,107 ITR 938(SC), KA LEKHAN MOHAMMAED HANIF VS. CIT,50 ITR 1 (SC), SHANKAR INDUSTRIES VS. CIT,1 14 ITR 689 (CAL),CIT VS. BAISHNAB CHARAN MOHANTRY,212 ITR 199 (ORRISA.), CIT VS. PRECISION FINANCE (P) LTD.,208 ITR 465(CAL), NANAKCHAND LAXMANDAS VS. CIT ,140 ITR 151 (ALL.), CIT VS. M. GANAPATHI MUDALIAR, 53 ITR 623(SC), CIT VS. DEVI PRASAD VISHWANATH PRASAD, 72 ITR 194(SC), CIT VS. DURGA PRASAD MORE, 72 ITR 807(S.C), CIT VS. MADHAVNAGAR COTTON MILLS LTD. 104 ITR 493(BOM.), CI T VS. BANARSI LAL DHAWAN 109 ITR 360 (MAD.), CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 (DELHI) (FB), CIT VS. PRATIK FINANCE & INVT. CO. LTD. 215 ITR 272(DEL HI), SUMATI DAYAL VS. CIT 214 ITR 801 (S.C) AND REFERRING TO PROVISIONS OF SEC. 1 06 & 114 OF THE INDIAN EVIDENCE ACT, THE AO ADDED THE AFORESAID AMOUNT OF RS.84,35,405/- U/S 68 OF THE ACT. 30.. ON APPEAL, THE LEARNED CIT(A) AFTER HAVING A R EMAND REPORT FROM THE AO REDUCED THE ADDITION TO RS. 50,000/- IN RESPECT OF DEPOSIT FROM PANNABEN P THAKKAR, THE AO HAVING ADMI TTED THAT CASH CREDITS OF RS.83,85,405/- HAD BEEN EXPLAINED . 31. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A) AND HAS CHALLENGED D ELETION OF THE ADDITION OF RS.83,85,405/-. THE ASSESSEE IS DISPUTI NG THE ADDITION OF RS.50,000/-. THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE CONTENDING THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ADMITTING ADDITIONAL EVIDENCE.ON THE OTHER HAND, THE LD. AR O N BEHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LD . CIT(A). 32. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE LD. CIT(A) ON THE BASIS OF REPORT OF THE AO DELETED THE ADDITION ON ACCOUNT OF DEPOSITS OF RS. 83,85,405/-, THE AO HAVING FOUND THE DEPOSITS EXPLAINED. IN THES E CIRCUMSTANCES, WE ARE OF THE OPINION THAT NO INTERFERENCE IS CALLE D FOR IN THE ORDER OF THE LEARNED ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 37 CIT(A). THE ASSESSEE EXPLAINED BEFORE THE LEARNED C IT(A) THAT DUE TO INADEQUATE TIME, HE WAS PREVENTED FROM PRODUCING TH E REQUIRED EVIDENCES BEFORE THE AO AND REQUEST WAS MADE TO ADMIT THE ADDITIONA L EVIDENCES. THE LEARNED CIT(A),CONSIDERING THE EXPLANATION OF THE ASSESSEE IN THE LIGHT OF RULE 46 A OF THE IT RULES,1962, ADMITTED THE ADDITIONAL EVIDENCE AND ASKED THE AO TO FURNISH HIS COMMENTS ON SUCH ADDITIONAL EVIDENCES. THE AO EXAM INED THE ADDITIONAL EVIDENCES AND ACCEPTED THE GENUINENESS OF THE CASH CREDITS. THEREFORE, THE LEARNED CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY ADMITTED THE ADDITIONAL EVIDENCES AT THE APPELLATE STAGE. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KULDEEP INDUSTRIA L CORPORATION 209 CTR 400 HELD THAT THE AO WAS PRESENT BEFORE THE LEARNED CIT(A) AND D ID NOT RAISE ANY OBJECTION FOR ADMISSION OF ADDITIONAL EVIDENCES, RU LE 46A NOT VIOLATED. IN THE PRESENT CASE, THE AO IN THE REMAND REPORT ACCEPTED CASH CREDITS TO THE EXTENT OF RS. 83,85,405/-. IN THE CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE APPROACH OF THE LEARNED CIT(A). SINCE THE A O ADMITTED THAT THE ASSESSEE HAS PROVED GENUINENESS OF CASH CREDIT IN A SUM OF R S. 83,85,405/-, THEREFORE, NO FAULT CAN BE FOUND IN THE ORDER OF THE LEARNED C IT(A) IN DELETING THE ADDITION TO THAT EXTENT. AS REGARDS ADDITION OF RS.50,000/- ATTRIBUTED TO DEPOSIT OF PANNABEN P THAKKAR, SINCE THE ASSESSEE DID NOT ESTA BLISH CAPABILITY OF THE DEPOSITOR NOR SHE WAS ASSESSED TO TAX, THE A O & THE LD. CIT(A) CONCLUDED THAT THE CAPACITY OF THE DEPOSIT OR OR GENUINENESS OF THE TRANSACTIONS WAS NOT ESTABLISHED. NOT AN IOT A OF EVIDENCE WAS PLACED BEFORE THE AO/LD. CIT(A) OR EVEN BEFORE US IN SUPPORT OF GENUINENESS OF THE AMOUNT OR EVEN CAPACITY OF THE DEPOSITOR. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY I N THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NOS.1 TO 3 IN THIS APPEAL OF THE REVENUE FOR THE AY 2005-06 AND GROUND NO.1 IN THE CORRESPONDING CO ARE DISMISSED. 33. GROUND NOS.4 TO 6 IN THIS APPEAL OF THE REVENUE FOR THE AY 2005-06 RELATE TO AN ADDITION OF RS.1,44,56,390/-. ON PERUSAL OF PAGE NOS.138 TO 140 OF ANNEXURE-A-20 IMPOUNDED FROM THE OFFICE OF DHARAMDEV FINANCE PVT. LTD., THE AO NOTICED THAT TH ERE WERE NOTING ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 38 OF SOME FINANCIAL TRANSACTIONS FOR THE PERIOD FROM 1-8-2004 TO 3-12- 2004 AND THE ASSESSEE RECEIVED IN ALL AN AMOUNT OF RS.87 LACS TILL 31-10-2004. THEREAFTER, THE ASSESSEE RECEIVED AN AM OUNT OF RS. 51 LACS BETWEEN 3.11 TO 3.12. THUS THE TOTAL AMOUNT R ECEIVED CAME TO RS.1,38,00,000/-. THE ASSESSEE ALSO RECEIVED INTERE ST OF RS.88,300/- (UPTO 31.10) AND RS.12,600/- (UPTO 2.12). THUS, AS PER THE NOTING ON PAGE NO.139, THE TOTAL RECEIPTS IN THE HANDS OF THE ASSESSEE WERE TO THE EXTENT OF RS.1,39,00,900/-. THE AO FOUND FURTHE R ON PERUSAL OF PAGE NO.138 THAT THE CLOSING BALANCE OF PAGE NO.139 HAD BEEN BROUGHT FORWARD AS OPENING ENTRY AND AN AMOUNT OF R S. 5 LACS WAS RECEIVED ON 2.12 BESIDES INTEREST OF RS.55,490/- FO R THE PERIOD UPTO 20-01-2005. THUS, THE PAGE NO.138 REFLECTED TOTAL R ECEIPTS OF RS.5,55,490/-. SIMILARLY PAGE NO.140 AND BACKSIDE O F PAGE NO.138 REFLECTED CALCULATION OF INTEREST OF RS.88,300/- BE SIDES RS.12,600/- AND RS.55,490/- AS MENTIONED ON PAGE NO.138 AND 139 . THUS, THE ASSESSEE RECEIVED TOTAL AMOUNT OF RS.1,44,56,390/- .TO A QUERY BY THE AO, THE ASSESSEE SIMPLY SUBMITTED THAT THE LOOS E PAPER FILE, ANNEXURE-A-20, PERTAINED TO F.Y.2004-05, I.E. A.Y.2 005-06 AND IS NOT COVERED BY THE PERIOD OF THE NOTICE ISSUED. SUB SEQUENTLY, DURING THE COURSE OF HEARING ON 27-10-2006, THE ASSESSEE W AS AGAIN REQUESTED TO EXPLAIN THE SAID TRANSACTIONS, BUT TH E ASSESSEE DID NOT CARE. SINCE THE ASSESSEE DID NOT DISCHARGE THE ONUS CAST UPON HIM, THE AO CONCLUDED AS UNDER:- 9.3. IN THIS REGARD, 'IT IS NOT OUT OF THE PLACE T O MENTION HERE THAT ON PAGE NO.139 AN AMOUNT OF RS.50,00,000/- HAS BEEN SH OWN AS ADVANCE GIVEN TO RAKESHBHAI ON 1.9.2004. IN THIS REGARD, SH RI RAKESH H. THAKKAR, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN HIS CASE, WAS ASKED TO CLARIFY AND EXPLAIN THE NATURE OF TRANSACTIONS AND ITS ACCOUNTING TREATMENT IN HIS BOOKS OF ACCOUNTS. SHRI RAKESH THAKKAR, IN H IS REPLY VIDE SUBMISSION DATED 7.9.2006 HAS ATTEMPTED TO EXPLAIN THAT ALL THE TRANSACTIONS RECORDED ON PAGE NO. 138 & 139 PERTAIN S TO HIM ONLY. HE TRIED TO EXPLAIN THAT THE CASH TRANSACTIONS AS NOTE D ON THESE PAGES TOOK PLACE BETWEEN HIS PROPRIETARY CONCERN SATYA DEVELOP ERS AND RAKESH HIRALAL THAKKAR (IND.). HE, THEREFORE, RECORDED ALL THESE CASH TRANSACTIONS IN THE BOOKS OF ACCOUNT OF SATYA DEVELOPERS AND PER SONAL SETS OF BOOKS OF ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 39 ACCOUNTS OF RAKESH H. THAKKAR (IND.). THE CORRESPON DING RECEIPTS AND PAYMENTS WERE SHOWN IN THE ACCOUNTS OF THESE ENTITI ES. BUT THE CONTENTION OF SHRI RAKESH THAKKAR IS NOT FOUND BELIEVABLE BECA USE IF THE TRANSACTIONS TOOK PLACE BETWEEN TWO PROPRIETARY CONCERNS OF THE SAME ASSESSEE, THEN WHAT WAS THE NECESSITY OF RECORDING THESE TRANSACTI ONS AND CHARGING INTEREST ON SUCH TRANSACTIONS? FURTHER IT IS SEEN T HAT ON PAPER NO. 138 & 139, TRANSACTIONS IN THE NAMES OF BHARATBHAI & PULI N SETH, INTEREST OF SUSHILABA AND PAYMENT OF ELECTRIC BILL OF RATANPOLE ETC. ARE FOUND NOTED, WHEREAS SHRI RAKESH H. THAKKAR COULD NOT EXPLAIN TH E NATURE OF THESE TRANSACTIONS. HAD THESE BEEN THE TRANSACTIONS OF IN TRA-FIRM, THE NAMES OF ABOVE MENTIONED PERSONS WOULD ;T HAVE APPEARED ON T HESE SEIZED PAGES. FURTHER, ON THESE PAPERS NOWHERE THE NAME OF SATYA DEVELOPERS IS RECORDED. THEREFORE, IT IS SURPRISING THAT ON WHAT BASIS SHRI RAKESH H. THAKKAR HAS INCORPORATED THESE TRANSACTIONS IN THE BOOKS OF HIS PROPRIETARY CONCERN M/S. SATYA DEVELOPERS. THIS CLEARLY SHOWS T HAT AT THE TIME OF SEARCH, THE BOOKS OF ACCOUNTS OF SHRI RAKESH H. THA KKAR OF HIS DIFFERENT PROPRIETARY CONCERNS WERE INCOMPLETE, THEREFORE, HE INCORPORATED ALL THE TRANSACTIONS IN THE FORM OF RECEIPTS AND PAYMENT IN HIS PERSONAL BOOKS AS CASH RECEIVED AND PAID FROM ONE ENTITY TO ANOTHER. IN THIS WAY HE TRIED TO HIDE THE TRUE NATURE OF THE TRANSACTIONS. THE THEOR Y PUT FORTH BY SHRI RAKESH H. THAKKAR HAS BEEN REJECTED IN HIS CASE. TH EREFORE, NO COGNIZANCE IS TAKEN OF THE EXPLANATION GIVEN BY HIM DURING ASSESSMENT PROCEEDINGS IN HIS CASE. 9.4. SINCE THESE TRANSACTIONS HAVE NOT BEEN EXPLAIN ED BY THE ASSESSEE, IT IS CLEAR THAT THE ASSESSEE HAS NOTHING TO EXPLAIN. FURTHER ON ANALYSIS OF THE TRANSACTIONS RECORDED ON PAGE NO. 138 TO 140, IT IS CLEAR THAT THE ASSESSEE HAD GIVEN HUGE ADVANCES ON INTEREST, WHICH HE RECOV ERED WITH INTEREST AS PER THE DETAILS GIVEN ON SEIZED PAPERS. THIS VIEW G ETS FURTHER STRENGTHENED FROM THE FACT THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF FINANCE IN THE NAME OF DHARAMDEV FINANCE PVT. LTD. HE IS ALSO RUNN ING PARALLEL BUSINESS OF FINANCING, WHICH IS NOT DISCLOSED IN THE BOOKS O F ACCOUNTS. HE HAS ADVANCED LOANS TO VARIOUS PERSONS ON INTEREST. THUS IT IS CLEAR THAT THE AMOUNT OF RS.1,44,56,3907- AS FOUND RECORDED ON PAG E NO.138 TO 140 WHICH IS INCLUSIVE OF INTEREST, IS THE UNDISCLOSED INCOME OF THE ASSESSEE, WHICH HE HAS BEEN USING IN ADVANCING LOANS TO VARIO US PERSONS. THE ASSESSEE HAS NOT BEEN DISCLOSING THE PRINCIPAL AMOU NT AS WELL AS INTEREST THEREON. THUS IT IS HELD THAT THE AMOUNT OF RS.1,44 ,56,390/- IS HIS UNDISCLOSED INCOME WHICH THE ASSESSEE HAS BEEN USIN G TOWARDS BUSINESS OF FINANCE, NOT DISCLOSED IN THE BOOKS OF ACCOUNTS. THE SAME IS THEREFORE ADDED TO HIS TOTAL INCOME AS UNDISCLOSED INCOME FOR THE A.Y.2005-06 ON PROTECTIVE AND SUBSTANTIVE ADDITION HAS BEEN MADE I N THE HANDS OF M/S. DHARAMDEV FINANCE PVT. LTD. 34 ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON IN THE FOLLOWING TERMS:- ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 40 10.2 THE APPELLANT HAS RELIED UPON THE SUBMISSION S MADE IN THE CASE OF DHARAMDEV FINANCE PVT. LTD. IT IS CLAIMED THAT THE ENTRIES IN THE LOOSE PAPERS ARE REPRESENTING TRANSACTIONS BETWEEN RAKESH THAKKAR AND HIS PROPRIETARY CONCERN SATYA DEVELOPERS. AS THE TRANSA CTIONS ARE RECORDED IN THEIR BOOKS, THERE IS NO REASON FOR MAKING ADDITION ON THE BASIS OF LOOSE PAPERS IN THE APPELLANTS CASE. 10.3 ON CONSIDERATION OF THE FACTS AND THE SUBMISS IONS, I FIND THAT ON THE BASIS OF SAME LOOSE PAPERS ADDITION WAS MADE IN THE CASE OF DHARAMDEV FINANCE PVT. LTD. IN THAT CASE, AFTER DETAILED DISC USSION IN THE APPELLATE ORDER FOR AY 2005-06 I HAVE DELETED THE ADDITION MA DE. FOR THE SAME REASON THE PROTECTIVE ADDITION MADE HERE ALSO DESER VES TO BE DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 35 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPP ORTED THE FINDINGS OF THE AO AND CONTENDED THAT THE FATE OF THE SUBSTANTIVE ADDITION IN THE CASE OF DHARAMDEV FINANCE PVT. LTD. OR RAKESH THAKKAR IS STILL UNDECIDED. THE LEARNED AR ON BEHALF OF THE AS SESSEE, ON OTHER HAND, SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 36. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS CONTENDED BY THE LD. DR SINCE THE FATE OF THE SUBSTANTIVE ADDITION IN THE CASE OF DHARAMDEV FINAN CE PVT. LTD. OR RAKESH THAKKAR IS STILL UNDECIDED , IN THE INTEREST OF J USTICE, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A ) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE ISSUES RAISED IN THESE GROUNDS IN THE APPEAL OF THE REVENUE FOR THE AY 2005-06, AFRESH IN ACCORDAN CE WITH LAW IN THE LIGHT OF FINAL OUTCOME OF THE SUBSTANTIVE ADDITIONS IN THE C ASE OF DHARAMDEV FINANCE PVT. LTD. AND RAKESH THAKKAR , AFTER ALLOWING SUFFICIEN T OPPORTUNITY TO THE ASSESSEE. WITH THESE DIRECTIONS, GROUND NOS. 4 TO 6 IN THE AP PEAL OF THE REVENUE FOR THE AY 2005-06 ARE DISPOSED OF . 37. NOW ADVERTING TO THE CO NO. 307/AHD./2007 FOR T HE AY 2003-04. AT THE TIME OF HEARING OF THESE APPEALS, THE LEARNE D AR ON BEHALF OF THE ASSESSEE SOUGHT TO WITHDRAW THIS CROSS OBJECTIO N. THE LEARNED ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 41 DR DID NOT RAISE ANY OBJECTION TO SUCH WITHDRAWAL. IN THESE CIRCUMSTANCES, CO FOR THE AY 2003-04 IS DISMISSED AS WITHDRAWN. 38. GROUND NO.2 IN THE CO NO.308/AHD/2007 FOR TH E AY 2004-05 RELATES TO AN ADDITION OF RS.60,000/- ON ACCOUNT O F HOUSEHOLD EXPENSES.ON PERUSAL OF CAPITAL ACCOUNT IN PERSONAL BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN THE BOOKS OF KUTIR BUILDERS AND KANT ENTERPRISE, THE AO NOTICED THAT THE ASSESSEE D ID NOT SHOW ANY WITHDRAWAL FOR HOUSEHOLD EXPENSES. THE ASSESSEE WAS REQUESTED TO FURNISH THE DETAILS REGARDING SIZE OF FAMILY AND HO USEHOLD EXPENSES, GIVING COMPLETE BREAK-UP OF THE EXPENDITURE INCURRE D FOR THE PURPOSE OF SCHOOL FEES, SERVANTS SALARY, PETROL EXPENSES, ELECTRIC EXPENSES, TELEPHONE EXPENSES, HOUSE TAX, INSURANCE PREMIUM ET C. THE ASSESSEE SUBMITTED THAT HIS FAMILY CONSISTED OF TH E ASSESSEE AND HIS WIFE AND BOTH OF THEM WERE ASSESSED TO TAX SEPA RATELY AND THERE WERE NO SUCH EXPENSES ON ACCOUNT OF SCHOOL FEES, SE RVANTS SALARY ETC.. THE AO NOTICED THAT IN THE IMMEDIATELY PRECE DING ASSESSMENT YEAR 2003-04, THE ASSESSEE HAD ARGUED THAT DURING T HE RELEVANT PERIOD HE WAS STAYING WITH HIS SON AND THEREFORE, T HERE WAS NO HOUSEHOLD EXPENDITURE. THE AO OBSERVED THAT THE ASS ESSEE AND HIS SONS WERE LIVING SEPARATELY. ALL OF THEM WERE HAVIN G THEIR INDEPENDENT HOUSES. IN THE PAST, THE ASSESSEE HAD SHOWN HOUSEHOLD WITHDRAWALS IN THE RANGE OF RS.42,000/- P ER ANNUM IN THE AYS 2000-01 TO 2002-03. SINCE THE ASSESSEE WAS HAVI NG SEPARATE RESIDENTIAL HOUSE, CONSIDERING HIS SOCIAL AND FAMI LY STATUS, BEING THE HEAD AND ELDEST IN THE FAMILY, THE AO WAS OF T HE OPINION THAT THE POSSIBILITY OF EXPENDITURE ON ACCOUNT OF SOCIAL AND FAMILY OCCASIONS COULD NOT BE RULED OUT. ACCORDINGLY, CONSIDERING PA ST HISTORY OF THE ASSESSEE AND THE INFLATION , THE AO ADDED AN AMOUN T OF RS.60,000/- . ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 42 39. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITI ON IN THE LIGHT OF HIS FINDINGS IN THE AY 1999-2000. 40. THE ASSESSEE HAS CHALLENGED THE ADDITION IN T HIS CO. THE LEARNED AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUND WHILE THE LEARNED DR, ON THE OTHER H AND SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 41. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. SINCE THE ASSESSEE FAILED TO FURNISH ANY COGENT EXPLANATION FOR NOT REFLECTING ANY WITHDRAWAL TOWA RDS HOUSE HOLD EXPENSES AT ALL NOR IT IS KNOWN AS TO HOW THE ASSE SSEE HAS BEEN MEETING HIS EXPENSES TOWARDS PROVISIONS FOR HOUSE H OLD, SOCIAL OBLIGATIONS AND ELECTRICITY, TELEPHONE, MEDICAL ETC ., WE ARE OF THE OPINION THAT THE LOWER AUTHORITIES WERE JUSTIFIED I N SUSTAINING THE ADDITION. SINCE THERE IS NO MATERIAL BEFORE US TO N OT TAKE A DIFFERENT VIEW IN THE MATTER WHILE SIMILAR ADDITION MADE IN T HE AY 2003-04 HAVING BECOME FINAL, WE ARE NOT INCLINED TO INTERFE RE. THEREFORE, GROUND N.2 IN THE CO FOR THE AY 2004-05 IS DISMISSE D. 42. GROUND NO.2 IN THE CO.NO.309/AHD/2007 FOR THE A Y 05-06 RELATES TO AN ADDITION OF RS.1,28,863/-. THE AO NOT ICED ON PERUSAL OF PAGE NO.1 OF ANNEXURE A-2 SEIZED FROM THE RESIDENCE OF SHRI SANJAY H THAKKAR, THAT THE PAPER IS IN-PATIENT SUMMARY BI LL, INDICATED AN AMOUNT OF RS.1,28,863/- INCURRED FOR MEDICAL TREAT MENT. THOUGH THE NAME OF THE PATIENT WAS NOT WRITTEN, BUT AT THE TO P OF THE SEIZED PAPER, AGAINST AGE / GENDER, THE MARKING WAS 62 YEARS / FEMALE. SHRI SANJAY THAKKAR WAS ASKED TO EXPLAIN THE NATURE OF EXPENDITURE. IN RESPONSE, HE SUBMITTED THAT THIS PERTAINED TO TR EATMENT OF HIS MOTHER AND THE SAME WILL BE EXPLAINED BY SHRI HIRAL AL D THAKKAR (THE ASSESSEE). DESPITE REQUEST MADE BY THE AO TO EXPLAI N THE SOURCE OF EXPENDITURE, THE ASSESSEE DID NOT EXPLAIN. IN THE ABSENCE OF ANY ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 43 INFORMATION/REPLY, THE AO ADDED THE AMOUNT OF 1,28, 863/- U/S 69C OF THE ACT. 43. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADD ITION IN THE FOLLOWING TERMS:- 8.1. THE NEXT DISPUTED ADDITION IS OF RS.1,28,863 MADE ON ACCOUNT OF MEDICAL EXPENSES. THE ASSESSING OFFICER HAS REFERRE D TO ANNEXURE A-2 PAGE NO. 1 FOUND FROM THE RESIDENCE OF SANJAY THAKK AR AND STATED THAT IT CONTAINS PATIENT SUMMARY BILL FOR RS.1,28,863. THE NAME OF PATIENT WAS NOT MENTIONED BUT AGE WAS SHOWN AS 62 YEARS AND WAS IN RESPECT OF A FEMALE. SANJAY THAKKAR HAD EXPLAINED THAT IT WAS IN RESPECT OF TREATMENT OF HIS MOTHER AND WOULD BE EXPLAINED BY HIRALAL D. THA KKAR. THE APPELLANT HAD NOT GIVEN ANY CLARIFICATION IN THE COURSE OF TH E ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS OBSERVED THA T ON THE BILL NO DATE IS MENTIONED AND HENCE IT IS CONSIDERED FOR THE ADD ITION IN A.Y. 2005-06. IN THIS CONNECTION THE APPELLANT- SUBMITTEDAS UNDER: 'AGAINST THE ABOVE WE WOULD LIKE TO SUBMIT THAT AS MENTIONED EARLIER THE REQUIRED DETAILS CANNOT BE FURNISHED BE FORE ASSESSING OFFICER BECAUSE OF THE COMPLETION OF THE ASSESSMENT PROCEEDINGS WITHIN SHORT SPAN OF TIME OF 20 DAYS. ACTUALLY THE FACT IS THAT THE WIFE OF APPELLANT IS ALSO ASSESSED TO TAX AND HAD FILLED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. SHE HAS SH OWN IN HER ACCOUNTS THE EXPENSE INCURRED TOWARDS MEDICAL TREAT MENT AMOUNTING RS1,28,863. SO IT IS AN UNDISPUTED FACT T HAT THE EXPENSE PERTAINING TO NOTINGS ON PAPER FOUND HAS BEEN INCUR RED BY THE WIFE OF THE APPELLANT AND ON HER TREATMENT, HENCE IF ANY ADDITION TO BE MADE FOR WANT OF SOURCE CAN BE MADE AFTER VERIFYING THE RECORDS ONLY IN THE HANDS OF THE WIFE AND NOT IN THE HANDS OF THE APPELLANT. NECESSARY PROOF IS ENCLOSED HEREWITH, CONSIDERING THESE FACTS WE BELIEVE THAT YOUR HONOUR WILL AGREE THAT THE ADDITIONS OF RS.128,863 MADE IN THE HANDS OF TH E APPELLANT DESERVES TO BE DELETED STRAIGHTWAY.' 8.2 ON CONSIDERATION OF THE ABOVE SUBMISSIONS I FIN D THAT THE APPELLANT HAS NOT EXPLAINED THE SOURCE OF THE ABOVE PAYMENT. THE FACT THAT THE BILL RELATES TO TREATMENT OF APPELLANT'S WIFE IS NOT DEN IED. SANJAY THAKKAR FROM WHOM THE BILL WAS SEIZED HAS CLARIFIED THAT IT CAN BE EXPLAINED BY THE APPELLANT. MERELY BECAUSE THE DATE IS NOT MENTIONED ON THE BILL IT CANNOT BE SAID THAT IT IS NOT UNEXPLAINED EXPENDITURE. THE ADDITION IS CONFIRMED. ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 44 44. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED A R ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUN D WHILE THE LEARNED DR SUPPORTED THE FINDINGS OF THE LEARNED C IT(A). 45. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE FAILED TO EXPL AIN THE SOURCE OF EXPENDITURE BEFORE THE AO . EVEN BEFORE THE LD. CI T(A), NO COGENT EVIDENCE SEEMS TO HAVE BEEN PLACED. SINCE THE ASSES SEE FAILED TO FURNISH ANY COGENT EXPLANATION IN RESPECT OF AFORE SAID EXPENDITURE WHILE THERE IS NO NOTHING TO SUGGEST THAT EXPENDITU RE WAS REFLECTED IN THE ACCOUNTS OF WIFE OF THE ASSESSEE , WE ARE O F THE OPINION THAT THE LOWER AUTHORITIES WERE JUSTIFIED IN SUSTAINING THE ADDITION. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THERE IS NO M ATERIAL BEFORE US TO NOT TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.2 IN THE CO FOR THE AY 05-06 IS DISMISSED. 46. GROUND NO.6 IN THE TWO APPEALS OF THE ASSESSE E RELATES TO LEVY OF INTEREST U/S 234B OF THE ACT THE LD. AR ON BEHAL F OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THESE GROUNDS. THE LEVY OF INTEREST U/S 234B & 234C OF THE ACT BEING MANDATORY [COMMISSIONER OF INCOME TAX. VS ANJUM M. H. GHASWALA AND OTHERS,252 ITR 1(SC), AFFIRMED BY HON' BLE APEX COURT IN THE CASE OF CIT V. HINDUSTAN BULK CARRIERS [2003] 259 ITR 449 (SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564 (SC) ], THESE GROUNDS ARE DISMISSED. HOWEVER, THE AO MAY ALLOW CONSEQUENT IAL RELIEF ,IF ANY, WHILE GIVING EFFECT TO THIS ORDER. 47. GROUND NOS.4 & 5 IN THE APPEAL OF THE REVENU E FOR THE AY 2003-04 AND GROUND NOS. 7 & 8 IN THEIR APPEALS FO R THE AYS 2004- 05 & 2005-06,BEING MERE PRAYER, DO NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF RESIDUARY GROUND NO.7 IN THE TWO APPEALS OF THE ASSESSEE AND ITA NOS.3137- 3138 & 3409 TO3411/AHD/2007 AND CO NOS.307 TO 309/AHD./2007 45 GROUND NO.2 IN THE CO FOR THE AY 2003-04 AS ALSO GR OUND NO.3 IN THE COS FOR THE AY 2004-04 & 2005-06, ALL THESE GROUNDS ARE DISMISSED. 48. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FOR THE AYS. 2000-01 & 2002-03 AND COS FOR THE AYS 2003-04 TO 20 05-06 ARE DISMISSED WHILE THE APPEALS OF THE REVENUE FOR THE AYS 2003-04 TO 2005-06 ARE PARTLY ALLOWED, BUT FOR STATISTICAL PUR POSES. ORDER PRONOUNCED IN THE COURT TODAY ON 18-03-2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 18-03-2011 COPY OF THE ORDER FORWARDED TO: 1. HIRALAL DAYARAM THAKKAR, PROP. RAJ GUEST HOUSE, B/12, SHREEJI BAPA COMPLEX, VASNA, AHMEDABAD 2. DCIT, CENTRAL CIRCLE-1, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-I, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD