ACIT-3, Mathura V. Shree Maheshwari Industries, Mathura

ITA 314/AGR/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9124 (ITAT-AGRA)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 07-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SAHU
• Assessee Lawyers: M M AGARWAL
• Keywords: Unexplained cash credit; Principle of natural justice; Retrospective amendment; Additional evidence; Corroborative evidences; Reassessment proceedings
• Section: 143(3); 147; 68; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, SMC, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.314/AGR/2009 ASST. YEAR: 2002-03 ASSTT. C.I.T 3, VS. SHREE MAHESHWARI INDUSTR IES, MATHURA. 4, RAS BEHARI SADAN, HARI NIKUNJ CROSSING, VRINDABAN, MATHURA. (PAN : AAHFS 7159 R). C.O. NO.38/AGR/2009 (IN ITA NO.314/AGR/2009) ASST. YEAR: 2002-03 SHREE MAHESHWARI INDUSTRIES, VS. ASSTT. C.I.T 3, MATHURA. 4, RAS BEHARI SADAN, HARI NIKUNJ CROSSING, VRINDABAN, MATHURA. (PAN : AAHFS 7159 R). (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI S.R. SAHU, JR. D.R. ASSESSEE BY : SHRI M.M. AGARWAL, C.A. ORDER THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE HAVE BEEN FILED AGAINST THE ORDER OF THE CIT(A) DATED 14.05.2009. ITA NO.314/AGR/2009 - BY THE REVENUE 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS :- 1) THAT THE LD. CIT (APPEALS)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITIONS IN RESPECT OF LOAN CREDITS IN THE NAMES OF M/S DHOOT GUM & CHEMICALS, JODHPUR, M/S GA NGA YAMUNA FINVEST CO., M/S HINDUSTAN TRADING CO., SMT. VIDHYA DEVI JA IN, SHRI RAMESH DHOOT, SMT. BINDIYA DHOOT OF JODHPUR ACCEPTING FRESH SOME EVIDE NCES WHICH WERE NOT 2 PRODUCED BEFORE THE AO, IN VIOLATION OF RULE 46A AN D IGNORING THE FACT THAT EVEN ON REMAND FOR VERIFICATION OF SUCH LOANS THE ASSESS EE HAS FAILED TO PRODUCE THE BOOKS AND SUPPORTING EVIDENCES FOR VERIFICATION OF SUCH LOAN CREDITS. 1 A) IN DOING SO , THE CIT(A)-1, AGRA HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE LUMP SUM ADDITION IN RESPECT OF THE MISC. CLAIMS WITHOUT PROPER SUPPORTING DOCUMENTS TO THE E XTENT OF RS.2,50,000/-. 1 B) IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DIRECTING THE AO TO TR EAT THE IMPUGNED INCOME OF RENT FROM FACTORY BUILDING AND MACHINERY UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN CONTRARY TO THE SAME HELD TO BE AS BUS INESS INCOME BY THE AO. 2. THAT THE ORDER OF THE CIT(APPEALS)-1, AGRA BEING ERRONEOUS IN LAW AND ON FACTS BE SET ASIDE AND THAT THE ORDER OF THE ASSESS ING OFFICER BE RESTORED. C.O. NO.38/AGR/2009 - BY THE ASSESSEE 3. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS :- 1. BECAUSE, LEARNED CIT (APPEALS) HAS ERRED IN LAW IN NOT ADJUDICATING THE VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 148 OF THE ACT AND IN NOT QUASHING THE INITIATION OF PROCEEDINGS ITSELF MORE PARTICULARLY IN VIEW OF THE FACT THAT :- (A) THE PROCEEDINGS WERE INITIATED ON THE BASIS OF FINDINGS RECORDED BY THE AO FOR ASSESSMENT YEAR 2005-06 THAT RENTAL INCOME DECLARED BY THE ASSESSEE WAS REQUIRED TO BE ASSESSED AS PROFITS AN D GAINS OF BUSINESS AND PROFESSION. (B) THE SAID FINDINGS RECORDED BY THE AO FOR ASSE SSMENT YEAR 2005-06 WERE WRONG IN THE FACTS AS WELL AS UNDER THE LAW. (C) THE SAID FINDINGS WERE REVERSED BY ORDER DATED 20.04.2009 PASSED BY HONBLE TRIBUNAL IN ITA NO.153/JU/2009, WHO DIRECTE D THE INCOME TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . (D) IN VIEW OF THE FINDINGS OF HONBLE TRIBUNAL FOR ASSESSMENT YEAR 2005-06, THE REASONS FOR INITIATING PROCEEDINGS UNDER SECT ION 148 WERE VITIATED UNDER LAW AND THE SAID PROCEEDINGS COULD NOT BE ALL OWED BE CONTINUED. 3 2. BECAUSE, ON A DUE CONSIDERATION OF LEGAL POSITIO N, LEARNED CIT (APPEALS) HAS ERRED IN NOT APPRECIATING THAT ONCE THE ADDITIO N/DISALLOWANCE IN RESPECT OF AMOUNT FOR WHICH PROCEEDINGS FOR ASSESSMENT/RE-ASSE SSMENT WERE INITIATED, IS DELETED, NO OTHER INCOME COULD BE ASSESSED. 3. BECAUSE, ON DUE CONSIDERATION OF LEGAL POSITION, LEARNED CIT(APPEALS) ERRED IN NOT HOLDING THAT VARIOUS ADDITIONS./DISALL OWANCES AGGREGATING TO RS.1,758,900 IN RESPECT OF FOLLOWING ITEMS WERE BEY OND THE SCOPE OF ASSESSMENT/RE-ASSESSMENT PROCEEDINGS AND COULD NOT BE SUBJECT MATER OF ADDITION/DISALLOWANCE IN THESE PROCEEDINGS :- 1 CREDIT OF DHOOT GUM, & CHEMICALS 970,000 2 CREDIT OF GNAGA JAMUNA FINVEST CO. 200,000 3 CREDIT OF HINDUSTAN TRADING CO. 200,000 4 CREDIT OF SMT. VIDHYA DEVI 23,900 5 CREDIT OF SHRI RAMESH DHOOT 32,500 6 CREDIT OF SMT. BINDIYA DHOOT 32,500 7 DISALLOWANCE VIDE PARA5 TO COVER REVENUE LEAKAGE S 300,000 TOTAL 1,758,900 4. BECAUSE, ON DUE CONSIDERATION OF UNDISPUTED FACT S TO THE EFFECT THAT :- (A) THERE WAS NO CHANGE IN THE CONSTITUTION OF THE ASSESSEE NECESSITATING IT TO FILE CERTIFIED COPY OF PARTNERSHIP DEED, WHICH IS R EQUIRED FOR THE YEAR, WHEN THERE IS CHANGE IN THE TERMS OF PARTNERSHIP AS PER PROVISIONS CONTAINED UNDER SECTION 184(2) OF THE ACT. (B) CERTIFIED COPY OF PARTNERSHIP DEED WAS FILED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000. (C) COPY OF PARTNERSHIP DEED WAS FILED BEFORE LEARN ED CIT (APPEALS) AND THE ORIGINAL THEREOF WAS AVAILABLE WITH THE ASSESSEE DU RING THE COURSE OF APPELLATE PROCEEDINGS. (D) THE REMUNERATION RECEIVED BY THE PARTNERS WAS A SSESSED IN THEIR HANDS AND SUCH MATERIAL WAS PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. LEARNED CIT (APPEALS) HAS ERRED IN FACTS AS WELL AS IN LAW IN SUSTAINING THE DISALLOWANCE OF RS.50,000 TOWARDS REMUNERATION PAYABLE TO THE PARTNERS OF THE ASSESSEE. 5. BECAUSE, ASSESSMENT ORDER DATED 31.12.2007 PASSE D BY THE AO IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION AND LIABLE TO B E QUASHED. 4 6. BECAUSE, VARIOUS ADDITIONS/DISALLOWANCES MADE IN THE ASSESSMENT ORDER DATED 31.12.2007 ARE BASED ON CONJECTURES AND SURMI SES AND UNSUSTAINABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN L AW. 4. THE FACTS RELATING TO FIRST GROUND OF APPEAL OF REVENUE ARE THAT THE A.O. MADE THE ADDITION IN RESPECT OF THE FOLLOWING CASH CREDITS I N THE INCOME OF THE ASSESSEE ON THE BASIS OF ANNEXURE-C TO FORM- 3CD AS THE ASSESSEE FAILED TO P RODUCE IN PERSON THE PARTIES FOR VERIFICATION. EVEN THEN, THE ASSESSEE HAS, IN SOME CASES FURNISHE D COPY OF THE BANK ACCOUNT AND CONFIRMATION. THE DETAILS OF SUCH CASH CREDITS ARE AS UNDER:- 1. M/S. DHOOT GUM & CHEMICALS, JODHPUR RS.9,70,000/- COPY OF THE ACCOUNTS OF THE PARTY WAS FILED COPY OF BANK ACCOUNT WAS NOT FILED. 2. M/S. GANGA JAMUNA FINVEST CO., JODHPUR RS.2,00,000/- COPY OF THE ACCOUNTS OF THE PARTY WAS FILED. COPY OF BANK ACCOUNT WAS NOT FILED. 3. M/S. HINDUSTAN TRADING CO., JODHPUR RS.2,00,000/- COPY OF CONFIRMATION AND COPY OF BANK ACCOUNT NOT FURNISHED COPY OF ACCOUNT IN THE BANK OF ASSESSEE WAS FURNISHED 4. SMT. VIDHYA DEVI JAIN, JODHPUR RS.23,900/- COPY OF BANK ACCOUNT PRODUCED WHICH SHOWS CASH DEPOSIT OF RS.23,900/- ON 11.05.2001 ITSELF 5. M/S. RAMESH DOOT, JODHPUR RS.32,500/- NEITHER CONFIRMATION NOR COPY OF BANK ACCOUNT WAS FURNISHED 6. SMT. BINDIYA DHOOT, JODHPUR RS.32,500/- NEITHER CONFIRMATION NOR COPY OF BANK ACCOUNT WAS FURNISHED. 5. THE ASSESSEE WENT IN APPEAL AGAINST THE ADDITION OF THE SAID CASH CREDITS BEFORE THE CIT(A). THE ASSESSEE SUBMITTED FRESH EVIDENCE AS P ER RULE 46A IN RESPECT OF THESE CASH CREDITORS BEFORE THE CIT(A). THE CIT(A) ASKED FOR THE REPORT OF THE A.O. VIDE LETTER DATED 5 04.03.2008. THE A.O. SUBMITTED THE REPORT VIDE LET TER DATED 20.10.2008 AND 03.03.2009. IN THE LETTER DATED 03.03.2009 THE A.O. POINTED OUT THAT T HE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS AND IN THE ABSENCE OF WHICH NO EVIDENCE OR EXPLANATION GIVEN BY THE ASSESSEE IS VERIFIABLE. THE CIT(A) SUBSEQUENTLY DELETED THE AD DITION BY RELYING ON THE FRESH EVIDENCE FILED BY THE ASSESSEE WITHOUT RECORDING THE REASONS FOR A DMITTING THE FRESH EVIDENCE. 6. I HAVE HEARD THE RIVAL SUBMISSION AND PERUSED TH E MATERIAL ALONGWITH THE ORDER OF THE CIT(A). I NOTED THAT THE ASSESSEE MADE AN APPLICAT ION UNDER RULE 46A FOR ADMISSION OF THE FRESH EVIDENCE. THE CIT(A) THEREON CALLED FOR THE REPORT OF THE A.O. ESPECIALLY ON THE FOLLOWING POINTS :- (I) ADMISSION OF ADDITIONAL EVIDENCE U/S.46A OF I.T . RULES, 1962 WITH REGARD TO THE UNSECURED LOANS TREATED AS UNEXPLAINED CASH CREDITS IN THE ASSESSMENT ORDERS FOR WHICH BANK STATEMENTS AND CON FIRMATIONS HAVE NOW BEEN FURNISHED BY THE APPELLANT. (II) IN A.Y. 2003-04 AMOUNT OF RS.2 LAC ADDED TOWAR DS LOAN RECEIVED FROM SHREE RAM GUM & CHEMICALS, JODHPUR, IS STATED TO BE ADVANCE RECEIVED AGAINST SALE OF GOODS MADE ON 28.03.2003, TO THE SA ME PARTY AND HENCE ACCOUNTED FOR IN SALES. THIS FACT SHOULD BE VERIFI ED FROM THE BOOKS OF ACCOUNT. (III) IN THE CONTEXT OF CERTAIN ADDITIONS ON ACCOUN T OF UNSECURED LOANS, THE AO HAS OBSERVED THAT THERE WAS CASH DEPOSIT IN THE BAN K ACCOUNT OF THE CONCERNED CREDITORS. HENCE, THE AVAILABILITY OF CA SH IN THE HANDS OF THE CREDITORS ON THE DATE OF DEPOSIT SHOULD BE VERIFIED . (IV) IN A.Y. 2003-04, ADDITION OF RS.1 LAC HAS BEEN MADE ON ACCOUNT OF CREDIT STANDING IN THE NAME OF SMT. VIDYA DEVI JAIN OF JOD HPUR. THE SAME IS STATED TO HAVE BEEN ERRONEOUSLY MADE ON ACCOUNT OF WRONG NARRATION OF ENTRIES. THIS FACT SHOULD BE VERIFIED. (V) SUPPORTING EVIDENCE/MATERIAL/REASONS TO JUSTIFY THE ABOVE AND OTHER ADDITIONS VIS-A-VAIS THE ARGUMENTS MADE BY THE APPE LLANT IN DETAIL IN THE PAPER BOOK SHOULD BE FORWARDED TO THIS OFFICE. 6 FOR THE ABOVE PURPOSE, THE CASE RECORDS FOR A.Y. 20 02-03 TO 2005-06 ARE RETURNED HEREWITH TO BE RE-SENT ALONG WITH THE REQU ISITE REPORT. THE PAPER BOOK IS ALSO ENCLOSED HEREWITH. THE CASE RECORDS SHOULD BE RE-SENT TO THIS OFFICE ALONG WITH THE REQUISITE REPORT BY 04.02.2009. 7. IN REPLY THERETO, THE A.O. SUBMITTED A REPORT DA TED 03.03.2009. THE RELEVANT PARAGRAPH IS REPRODUCED BELOW :- THE ASSESSEE HAS FAILED AGAIN TO SUBSTANTIATE THE CLAIMS EVEN IN THE REMAND PROCEEDINGS AND TO PRODUCE THE BOOKS OF ACCO UNTS IN THE ABSENCE OF WHICH NO EVIDENCE OR EXPLANATION IS VERIFIABLE. HE NCE, ANY SORT OF FRESH EVIDENCE SHOULD NOT BE ACCEPTED AND THE ORDERS OF THE ASSESS ING OFFICER DESERVE TO BE UPHELD. IT IS FOUND THAT THE AO HAD CORRECTLY APPR ECIATED THE FACTS OF THE CASE AND HAD APPLIED THE PROVISIONS OF THE ACT IN A RIGHT MA NNER. HENCE, THE GROUND AND OBJECTIONS RAISED BY THE ASSESSEE ARE MISPLACED AND LIABLE TO BE REJECTED. 8. THE CIT(A) SUBSEQUENTLY AFTER GIVING OPPORTUNITY TO THE ASSESSEE, DELETED THE ADDITION IN EACH OF THE CASE MADE UNDER SECTION 68 OF THE ACT. I NOTED THAT RULE 46A(2) REQUIRES THE CIT(A), BEFORE ADMISSION OF THE FRESH EVIDENCE UNDER RULE 4 6A(1), TO RECORD HIS REASONS IN WRITING FOR THE ADMISSION OF THE FRESH EVIDENCE. IN THIS CASE, THE CIT(A) HAS NOT RECORDED ANY REASONS FOR ADMITTING THE FRESH EVIDENCE. FURTHER, I NOTED THA T IN THE REMAND PROCEEDINGS, THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS AS DESIRED BY THE A.O. AS THE CIT(A) IN THE REMAND PROCEEDINGS HAS ASKED THE A.O. TO VERIFY CERTAIN FA CTS. THESE FACTS, IN MY OPINION, COULD HAVE BEEN VERIFIED ONLY AFTER VERIFYING THE BOOKS OF ACC OUNTS. THUS, I AM OF THE VIEW THAT IT IS A CASE WHERE THE CIT(A) HAS ACCEPTED THE FRESH EVIDENCE AN D DECIDED THE APPEAL ON THE BASIS OF THE FRESH EVIDENCE WITHOUT GIVING PROPER OPPORTUNITY TO THE A.O. TO EXAMINE THESE EVIDENCES OR DOCUMENTS. RULE 46A(3) OF THE INCOME-TAX RULES, 19 62 MAKES IT OBLIGATORY ON THE PART OF THE CIT(A) TO ALLOW REASONABLE AND PROPER OPPORTUNITY T O THE A.O. TO EXAMINE THE EVIDENCE OR 7 DOCUMENTS OR TO CROSS-EXAMINE THE WITNESS PRODUCED BY THE ASSESSEE OR TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDIT IONAL EVIDENCE PRODUCED BY THE ASSESSEE. THE A.O. IN THE REMAND PROCEEDINGS HAS ASKED THE ASSESS EE TO PRODUCE THE BOOKS OF ACCOUNTS BUT THE ASSESSEE SINCE DID NOT PRODUCE THOSE BOOKS, IN MY O PINION, IN THE ABSENCE OF NON-PRODUCTION OF THE BOOKS OF ACCOUNTS BY THE ASSESSEE BEFORE THE A. O. WILL NOT BE REGARDED THAT THE A.O. HAD THE PROPER OPPORTUNITY TO EXAMINE THE EVIDENCE OR DOCUM ENT WHICH WERE PRODUCED BY THE ASSESSEE BEFORE THE CIIT(A). NATURAL JUSTICE DEMANDS THAT I F THE ASSESSEE PRODUCED ANY DOCUMENT OR EVIDENCE BEFORE THE CIT(A), THE A.O. SHOULD HAVE BE EN GIVEN PROPER OPPORTUNITY TO EXAMINE THOSE EVIDENCES. EVEN AN ASSESSMENT UNDER SECTION 143(3) HAS TO BE PASSED ON THE BASIS OF THE EVIDENCE OR THE BOOKS OF ACCOUNTS PRODUCED BY THE A SSESSEE. THE CIT(A) HAS ASKED THE A.O. TO REMAND ON THE SPECIFIC POINT AS HAS BEEN REPRODUCED HEREINABOVE. IN MY OPINION, WITHOUT VERIFYING THE BOOKS OF ACCOUNTS, THE REPORT COULD H AVE NOT BEEN GIVEN BY THE A.O. NO DOUBT, THE ACCOUNTS OF THE ASSESSEE HAS DULY BEEN AUDITED BUT NEITHER SECTION 142 NOR SECTION 145 NOWHERE PROVIDES THAT IN CASE THE ACCOUNTS ARE AUDITED BY A CHARTERED ACCOUNTANT UNDER SECTION 44AB, THE A.O. WILL NOT HAVE THE POWER TO EXAMINE THE BOO KS OF ACCOUNTS UNDER SECTION 142 OR UNDER SECTION 145 OF THE ACT. NON PRODUCTION OF THE BOOK S OF ACCOUNTS BY THE ASSESSEE, IN MY OPINION, WILL TANTAMOUNT TO THAT THE ASSESSEE EITHER DOES NO T HAVE ANY BOOK OR THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT CORRECT OR ARE N OT COMPLETE OR THE METHOD OF ACCOUNTING HAS NOT BEEN PROPERLY FOLLOWED. THE INFERENCE WILL BE DRAWN AGAINST THE ASSESSEE AS THE ASSESSEE FAILED TO DISCHARGE THE OBLIGATION CAST ON HIM IN V IEW OF THE PROVISIONS STATED UNDER SECTION 142(1)(II). THE AUDITOR, IN MY OPINION, CARRIED OU T THE AUDIT UNDER SECTION 44AB OF THE ACT CANNOT ENTER INTO THE SHOE OF THE A.O. AND HIS SATI SFACTION OF THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE IS NOT BINDING ON THE A.O. THE A.O., UNDER SECTION 145(3) READ WITH 8 SECTION 142(1)(II) IS EMPOWERED TO EXAMINE THE ACCO UNTS OF THE ASSESSEE INDEPENDENTLY AND HAS TO ARRIVE AT A FINDING ON HIS OWN SATISFACTION ABOU T THE ACCOUNTS OF THE ASSESSEE. BEFORE ME, THERE IS NO ASSERTION ON BEHALF OF THE ASSESSEE THAT IT W AS NOT GIVEN FAIR AND ADEQUATE OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNTS. PROCEEDINGS UNDER T HE INCOME TAX ACT ARE DIFFERENT FROM THE CRIMINAL PROCEEDINGS. IN CRIMINAL PROCEEDINGS, THE ORAL EVIDENCE IS RELEVANT TO DECIDE WHETHER THE ACCUSED HAS COMMITTED ANY OFFENCE OR NOT BUT TH IS IS NOT THE CASE. IN INCOME TAX PROCEEDINGS, THE INCOME CANNOT BE DETERMINED ON THE BASIS OF THE ORAL EVIDENCE AND ON SOME OF THE ASSESSEES THAT IT HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS WITHOUT PRODUCING THE SAME BEFORE THE A.O. FOR HIS EXAMINATION/VERIFICATION. THE CIT (A) HAS ASKED FOR THE REPORT OF THE ASSESSEE WHY FACTUAL ASPECT RELATING TO THE ENTRIES IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE IN RESPECT OF CERTAIN CREDITORS. THE A.O. ASKED THE ASSESSEE TO PRODUCE THE BOOKS BUT THE ASSESSEE DID NOT PRODUCE THE BOOKS BUT THE CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE WITHOUT TAKING THE COGNIZANCE THAT IN FACT THE VERIFICATION WHICH WAS DESIRED BY HIM FROM THE A.O. REMAINS INCOMPLETE DUE TO THE NON-COOPERATION OF THE ASSESS EE. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, I NOTED THAT THE ASSESSEE HAS FILED DETAI LED EVIDENCE BEFORE THE CIT(A), THE COPY OF WHICH IS AVAILABLE BEFORE ME TO PROVE THE IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF EACH OF THE CREDITOR BU T, IN MY OPINION, NO PREJUDICE WILL BE CAUSED TO THE ASSESSEE IF THESE EVIDENCES ARE VERIFIED BY THE A.O. AS IT WILL MEET THE END OF NATURAL JUSTICE. I, ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) S O FAR GROUND NO.1 OF REVENUES APPEAL IS CONCERNED AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTION THAT THE ASSESSEE WILL FILE ALL THE NECESSARY EVIDENCES WHICH HAS BEEN SUB MITTED BEFORE THE CIT(A) TO PROVE THE IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR. THE ASSESSEE IS ALSO FREE TO PRODUCE ANY EVIDENCE ON WH ICH HE MAY RELY SO THAT HE CAN DISCHARGE THE 9 ONUS AS ENVISAGED UNDER SECTION 68 OF THE ACT TO PR OVE THAT ALL THE 3 INGREDIENTS INBUILT UNDER SECTION 68 OF THE ACT. THUS, THIS GROUND IS ALLOWE D FOR STATISTICAL PURPOSES. 9. THE SECOND GROUND RELATES TO THE LUMPSUM DISALLO WANCE MADE BY THE A.O. OF SUM OF RS.3,00,000/- TO COVER-UP THE LEAKAGE OF REVENUE IN RESPECT OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. 10. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) A GAINST THE LUMPSUM DISALLOWANCE. THE CIT(A), AFTER CONSIDERING THE SUBMISSION OF THE ASS ESSEE AND VERIFYING THE NATURE OF THE VARIOUS EXPENSES, REDUCED THE DISALLOWANCE TO RS.50,000/-. 11. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. I AM OF THE OPINION THAT THE ASSESSEE HAS SUBMITTED THE DETAILS IN RESP ECT OF EACH AND EVERY EXPENDITURE. THE A.O., WITHOUT SPECIFICALLY POINTING OUT ANY EXPENDITURE T O WHICH THE ASSESSEE FAILED TO PROVE OR WHICH HAS NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS, MADE A LUMPSUM DISALLOWANCE ON ADHOC BASIS FOR A SUM OF RS.3,00,000/-. ONCE THE ASSESSEE HAS SUBMITTED THE DETAILS OF THE EXPENDITURE, IN MY OPINION, THE ONUS GETS SHIFTED TO THE REVENUE TO PO INT OUT THE SPECIFIC EXPENDITURE WHICH HAS NOT BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOS E OF BUSINESS. NO ADHOC DISALLOWANCE CAN BE MADE MERELY ON THE BASIS OF SUSPICION AND CONJECTUR E. UNDER THESE FACTS, I AM OF THE VIEW THAT THE CIT(A) WAS CORRECT IN LAW IN REDUCING THE DISAL LOWANCE TO RS.50,000/- AND I, ACCORDINGLY, CONFIRM THE ORDER OF THE CIT(A). THUS, THIS GROUND OF APPEAL IS DISMISSED. 10 12. THE THIRD GROUND RELATES TO THE HEAD INCOME FR OM HOUSE PROPERTY. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS SHOWN THE RENT AMOUN TING TO RS.7,32,000/- FROM LETTING OUT A PART OF THE FACTORY PREMISES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND CLAIMED DEDUCTION UNDER SECTION 24(A) AMOUNTING TO RS.2,19,600/-. DURING T HE A.Y. 2005-06 ALSO SUCH RENTAL INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DIRECTED THE A.O. TO ASSESS THE SAID INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ALLOWED THE DEDUCTION TO THE ASSESSEE UNDER SEC TION 24(A) OF THE ACT. 13. AT THE TIME OF HEARING, THE LD. A.R. DRAWN OUR ATTENTION TOWARDS PAGE NOS.68 TO 72 OF THE ORDER OF I.T.A.T., JODHPUR BENCH IN THE CASE OF ASS ESSEE NAMELY SHREE MAHESHWARI INDUSTRIES IN ITA NO.153/JU/2009 DATED 20.04.2009 IN WHICH THE TR IBUNAL HAS TAKEN THE VIEW THAT THE RENTAL INCOME IN THE CASE OF THE ASSESSEE WILL BE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY. THE RELEVANT FINDING OF THE HONBLE TRIBUNAL IN THE A.Y . 2005-06 ARE REPRODUCED AS UNDER:- I HAVE HEARD THE PARTIES AND HAVE CAREFULLY PERUSE D THE MATERIAL ON RECORD. THE ASSESSEES CLAIM BEFORE THE AUTHORITIE S BELOW WAS THAT THE FACTORY HAD PERMANENTLY BEEN CLOSED WITH NO SCOPE OF REVIVA L AND AS SUCH THE PROPERTY WAS LET OUT AND YIELDED INCOME FROM HOUSE PROPERTY. THE ASSESSING AUTHORITY THUS HAS ERRED IN BRINGING TO TAX THE INCOME AS THE INCO ME FROM BUSINESS OF THE ASSESSEE WITHOUT CONSIDERING THE SUBSEQUENT EVENTS THAT ESTABLISH THE CORRECTNESS OF CLAIM OF THE ASSESSEE. IT IS BY NOW A WELL SETT LED LAW BY THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF RABINDRA KUMAR VS. STATE OF WEST BENGAL AIR 1975 SC 1409 THAT EVENTS OR CIRCUMSTANCES COMIN G INTO EXISTENCE AFTER COMMENCEMENT OF THE PROCEEDINGS WHICH HAVE IMPACT O N THE RIGHT TO RELIEF MUST BE CONSIDERED AND JUDGED. EVEN OTHERWISE THE JUDGE MENT RENDERED BY HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HOTEL R ATANADA INTERNATIONAL PVT. LTD. (2007) 293 ITR 557 SUPPORTS THE CLAIM OF THE A PPELLANT FOR BRINGING TO TAX THE INCOME FROM HOUSE PROPERTY. I, THEREFORE, ALLOW TH E GROUND IN APPEAL RAISED BY THE ASSESSEE. 11 14. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH, I AM OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT( A) IN DIRECTING THE A.O. TO ASSESS THE RENTAL INCOME BY LETTING OUT A PART OF THE PREMISES OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS, THIS GROUND OF APPEAL IS ALSO DIS MISSED. 15. SINCE GROUND NO.1 OF THE CROSS OBJECTION HAS NO T BEEN PRESSED BY THE ASSESSEE, THE SAME IS DISMISSED AS NOT PRESSED. 16. THE SECOND AND THIRD GROUNDS OF CROSS OBJECTION ARE LEGAL GROUNDS. THE LD. A.R. VEHEMENTLY CONTENDED THAT THE ASSESSMENT HAS BEEN R EOPENED BY THE A.O. BY RECORDING THE REASONS THAT THE ASSESSEE HAS, IN COMPUTATION OF TH E INCOME, CLAIMED THE STANDARD DEDUCTION UNDER SECTION 24(A) @ 30% OUT OF THE RENT RECEIVED, WHILE THE INCOME FROM THE RENT SHOULD HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS . IF THE INCOME WOULD HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS, THE ASSESSEE WOULD NOT BE ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 24(A) AND ACCORDINGLY THERE WAS AN ES CAPEMENT OF INCOME. FOR THIS, OUR ATTENTION WAS DRAWN TO PAGE NO.66 OF THE PAPER BOOK. IT WAS CONTENDED THAT THE REASONS, ON THE BASIS OF WHICH THE ASSESSMENT WAS REOPENED, NO MORE REMAINS IN EXISTENCE AS THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 24(A) WAS DELETED BY THE CIT (A) HOLDING THAT THE INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . ONCE THE ADDITION IN RESPECT OF WHICH THE ASSESSMENT WAS REOPENED GOT DELETED BY THE APPE LLATE AUTHORITY, THE A.O. IS NOT EMPOWERED TO MAKE ANY OTHER DISALLOWANCE OR ADDITION. THEREF ORE, THE REASSESSMENT STANDS VITIATED. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF HON BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHRI RAM SINGH, 217 CTR (RAJ) 345 : 8 DTR 118, COPY OF WHICH IS PLACED AT PAGE NOS.126 12 TO 132 OF THE PAPER BOOK. THE BENCH POINTED OUT AT THE TIME OF HEARING THAT THE FACTS IN THAT CASE ARE DIFFERENT. IN THAT CASE, THE A.O. HAS NOT MAD E ANY ADDITION IN RESPECT OF THE ESCAPED INCOME FOR WHICH THE REASONS HAS BEEN RECORDED BY HIM. BU T IN THE CASE BEFORE ME, THE ADDITION HAS BEEN MADE BY THE A.O. BUT IT WAS DELETED BY THE APP ELLATE AUTHORITY. ON THIS, THE LD. A.R. RELIED ON THE DECISION OF AGRA BENCH IN THE CASE OF ITO VS . SANJAY GOYAL (ITA NO.149/AGR/2008) AND SANJAY GOYAL VS. ITO (C.O. NO.48/AGR/2008) AND CONT ENDED THAT IN THAT CASE THE A.O. MADE THE ADDITION IN RESPECT OF WHICH THE REASONS WERE RECOR DED FOR THE ESCAPEMENT OF INCOME BUT THAT ADDITION WAS DELETED IN APPEAL AND THE TRIBUNAL ACC ORDINGLY, FOR THE OTHER ADDITION, TOOK THE VIEW THAT ONCE THE ADDITION IN RESPECT OF WHICH THE ASSE SSMENT WAS REOPENED GOT DELETED BY THE APPELLATE AUTHORITY, THE OTHER ADDITIONS OR DISALLO WANCE CANNOT BE MADE IN THE REASSESSMENT PROCEEDINGS AND THE REASSESSMENT STANDS VITIATED. THE BENCH POINTED OUT THAT NOW WITH RETROSPECTIVE EFFECT EXPLANATION HAS BEEN ADDED UND ER SECTION 147 TO NULLIFY THE DECISION OF RAJASTHAN HIGH COURT AND DUE TO THE ADDITION OF THE EXPLANATION 3, EVEN THE DECISION OF THE AGRA BENCH GETS OVERRULED. THE LD. A.R. ON READING THE EXPLANATION 3 HAS STILL RELIED ON THE ORDER OF THE RAJASTHAN HIGH COURT AS WELL AS THIS TRIBUNAL I N THE CASE OF ITO VS. SANJAY GOYAL. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE EXPLANATION 3 TO SECTION 147 OF THE ACT. 17. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD. IT IS A FACT ON RECORD THAT THE REASSESSMENT PROCEEDINGS HAS BEEN INITIATED BY RECORDING THE REASONS THAT THE ASSESSEE WAS ALLOWED STATUTORY ALLOWANCE O UT OF THE RENTAL INCOME @ 30% UNDER SECTION 24(A) OF THE ACT AND THE RENTAL INCOME IS TO BE ASS ESSED UNDER THE HEAD INCOME FROM BUSINESS. THE APPELLATE AUTHORITY HAD DECIDED THAT THE RENTAL INCOME IS TO BE ASSESSED IN THE CASE OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE TRIBUNAL HAS ALSO EARLIER DECIDED 13 THIS ISSUE IN FAVOUR OF THE ASSESSEE WHICH HAS BEEN REFERRED BY ME WHILE DISPOSING OF GROUND NO.3 IN THE PRECEDING PARAS OF REVENUES APPEAL. I HAVE ALSO FOLLOWED THE DECISION OF THE TRIBUNAL AND DISMISSED THE GROUND OF THE REVENUE HOLDING THA T THE RENTAL INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN VIEW OF THIS, THE BASIS OF THE ESCAPED INCOME, FOR WHICH THE REASONS TO BELIEVE WERE RECORDED, NO MORE REMAINS IN EXISTENCE. SECTION 147 EMPOWERS THE A.O. TO ASSESS OR REASSESS SUCH INCOME (FOR WHICH THE REASONS WERE RECORDED) AND OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED AS SESSMENT. EXPLANATION 3, WHICH WAS INSERTED IN SECTION 147 BY FINANCE ACT, 2009, W.E.F . 01.04.1989, READS AS UNDER :- [ EXPLANATION 3. FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDE R THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR R EASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH I SSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLU DED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 148 ] . 18. FROM THE READING OF THE SAID EXPLANATION, IT IS APPARENT THAT IF SUBSEQUENT TO THE INITIATION OF THE REASSESSMENT PROCEEDINGS THE A.O. COMES TO K NOW ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT BUT FOR WHICH REASONS HAVE NOT BEEN RECO RDED UNDER SECTION 148(2), HE CAN ASSESS OR REASSESS SUCH INCOME. I AM OF THE VIEW THAT ONCE T HE EXPLANATION 3 WAS INSERTED UNDER SECTION 147 WHICH HAS A RETROSPECTIVE APPLICATION, THE DECI SION OF RAJASTHAN HIGH COURT AND THAT OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SANJAY GOYAL (SUPRA) WILL NOT HELP THE ASSESSEE. WHEN THESE DECISIONS WERE DELIVERED, THE EXPLANATIO N 3 WAS NOT IN EXISTENCE UNDER SECTION 147. THERE IS NO ARGUMENT BEING ADVANCED BY THE LD. A.R. THAT THE EXPLANATION 3 IS NOT CLARIFICATORY AND, THEREFORE, IT CANNOT HAVE A RETROSPECTIVE APPL ICATION. I, THEREFORE, HOLD THAT THE A.O., IN VIEW OF EXPLANATION 3 TO SECTION 147, CAN ASSESS ANY OTH ER INCOME EVEN IF THE ASSESSMENT HAS NOT BEEN 14 REOPENED ON THE BASIS OF THAT INCOME AND THERE HAD BEEN NO ADDITION MADE BY THE A.O. IN RESPECT OF THE INCOME FOR WHICH THE ASSESSMENT HAS BEEN REO PENED. THUS, THESE GROUNDS STAND DISMISSED. 19. THE FOURTH GROUND OF CROSS OBJECTION HAS NOT BE EN PRESSED BY THE ASSESSEE AND THE SAME IS, THEREFORE, DISMISSED AS NOT PRESSED. 20. THE FIFTH & SIXTH GROUNDS OF CROSS OBJECTION AR E GENERAL IN NATURE, DO NOT REQUIRE ANY ADJUDICATION. 21. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHILE THE CROSS OBJECTION OF THE ASSESSEE STANDS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18.02.2010) SD/- (P.K. BANSAL) ACCOUNTANT MEMBER PLACE: AGRA DATE: 18 TH FEBRUARY, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, AGRA TRUE COPY