REMEX PHARMACEUTICALS LTD, MUMBAI V. ACIT CIR 9(3), MUMBAI

ITA 3556/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55465 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 01-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR SR
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Unexplained cash credit; Business income; Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NOS.3556 & 3557/MUM/2009 A.YRS.2004-05 & 2005-06 REMEX PHARMACEUTICALS LTD., GROUND FLOOR, GHIYA COMPOUND, 2 ND HANSNABAD LANE, SANTACRUZ [W], MUMBAI 400 054. PAN: AAACR 1769 C VS. ASST. COMMISSIONER OF I.T., CIRCLE 9(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : DR. K. SHIVRAM & SHRI RAHUL HAKANI. RESPONDENT BY : SHRI C.G.K.NAIR, SR. AR. DATE OF HEARING: 19-09-2011 DATE OF PRONOUNCEMENT: O R D E R PER T.R.SOOD, AM: THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST T HE ORDERS OF THE CIT(A) FOR THE A.YRS. 2004-05 AND 2005-06. THEY ARE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. 2. I.T.A.NO.3556/M/09 A.Y 2004-05 : IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE DISALLOWANCE OF RS.253557/- TOWARDS PROVIDENT F UND AND RS.16132/- TOWARDS ESIC SHOULD BE DELETED. 2. THE DISALLOWANCE OF RS.248500/- TOWARDS NON-PAYMENT OF UNEXPLAINED CASH CREDITS SHOULD BE DELETED. 3. THE DISALLOWANCE OF RS.71,86,500/- TOWARDS UNEXPLAI NED CASH CREDIT SHOULD BE DELETED. 3. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS PAID CONTRIBUTION TOWARDS PROVIDENT FUND AND ESIC LATE. THE DETAILS OF ITA NOS.3556-3557 OF 2009 2 PAYMENTS HAVE BEEN EXTRACTED AT PARA-5 OF THE AOS ORDER. SINCE THE PAYMENTS HAVE BEEN MADE LATE, THEREFORE, AO DISALLO WED THE PAYMENTS. 4. ON APPEAL, THE ADDITION WAS CONFIRMED BY THE LD. CIT(A) 5. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILI NG OF THE RETURN AND, THEREFORE, SAME COULD NOT HAVE BEEN DISALLOWED . IN THIS REGARD, HE RELIED ON THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF CIT VS. ALOM EXTRUSION LTD. [319 ITR 306] AND CIT VS. AIMIL LTD [35 DTR 68]. HE POINTED OUT THAT THIS ISSUE WAS ALSO CO NSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHARAT I SHIPYARD LTD. VS. DCIT, I.T.A.NO.2404/M/09 [COPY FILED ON RECORD] AND FOLLOWING THE ABOVE TWO DECISIONS IT WAS HELD THAT DISALLOWANCE C OULD NOT BE MADE. 6. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, AND IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSION LTD. [SUPRA] AND DECISION OF HON'BLE DELH I HIGH COURT IN THE CASE OF AIMIL LTD. [SUPRA] WE ARE OF THE OPINION TH AT IF PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILING OF THE RETU RN, THEN NO DISALLOWANCE CAN BE MADE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ALLOW THE PAYMENTS OF PROVIDENT AND ESIC. 8. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS AO NOTICED FROM THE TAX AUDIT REPORT THAT ITA NOS.3556-3557 OF 2009 3 ASSESSEE HAD RECEIVED A LOAN OF RS.2,48,500/- IN CA SH FROM M/S. VIR ENTERPRISES AND HAD ALSO REPAID A SUM OF RS.1,40,00 0/- IN CASH. IN RESPONSE TO A QUERY, IT WAS EXPLAINED VIDE LETTER D ATED 22-11-06 AS UNDER: AMOUNT TAKEN FROM AND GIVEN TO M/S. VIR ENTERPRISE S : 423, MEDICINE MARKET, NEAR BONNY PARLOUR, PALDI, CHAR RASTA, AHNE DABAD 380007: M/S. REMEX PHARMACEUTICALS LTD. HAD THIS PARTY AS I TS CONSIGNEE AGENT AT AHMEDABAD THROUGH WHOM THE COMPANY USED TO MARKE T ITS PRODUCT THERE AND AMOUNT RECEIVED IN CASH OF RS.2,4 8,500/- AND PAID IN CASH RS. 140,000/- WAS ACTUALLY TOICARDS BUSINES S TRANSACTIONS. TOTAL SALES ACHIEVED BY THE COMPANY DURING THE YEAR THROUGH M/S. VIR ENTERPRISES WAS RS. 1.01 LACS. HOWEVER, AS OF NOW T HE M/S. VIR ENTERPRISES HAS SHIFTED IT BASE FROM AHMEDABAD AND REMEX PHARMACEUTICALS HAS NO SALES TRANSACTIONS FROM M/S. VIR ENTERPRISES, THEREFORE IT IS NOT POSSIBLE TO TRACE THE CURRENT A DDRESS OF M/S. VIR ENTERPRISES. AO AFTER CONSIDERING THE SAME, OBSERVED THAT THE AB OVE CONTENTION IS NOT ACCEPTABLE BECAUSE IN EARLIER DETAILS SUBMITTED VIDE LETTER DATED 111-7-2006 ASSESSEE HAD SHOWN SALES MADE TO M/S. VI R ENTERPRISES AT RS.5,46,459/-, WHEREAS IN THE SUBSEQUENT SUBMISSION S IT WAS SUBMITTED THAT SALES MADE THROUGH M/S. VIR ENTERPRI SES ARE OF RS.7 LAKHS. ON THE OTHER HAND, IN THE TAX AUDIT REPORT I T WAS MENTIONED THAT ASSESSEE HAD TAKEN A LOAN FROM M/S. VIR ENTERPRISES AMOUNTING TO RS.4,30,000/-, OUT OF WHICH A LOAN OF RS.2,48,500/- WAS IN CASH AND ASSESSEE HAD REPAID AN AMOUNT OF RS.2,30,000/- OUT OF WHICH RS.1,40,000/- WAS IN CASH. WHEN ASSESSEE WAS CONFRO NTED WITH THESE EARLIER SUBMISSIONS AND OBSERVATIONS NO FURTHER REP LY WAS GIVEN. THE AO INVOKED PROVISIONS OF SEC.69D AND MADE AN ADDITI ON OF RS.2,48,500/-. 9. BEFORE THE LD. CIT(A) IT WAS MAINLY SUBMITTED TH AT M/S. VIR ENTERPRISES IS A CONSIGNING AGENT AND COMPANY AND H AS SOLD ITS ITA NOS.3556-3557 OF 2009 4 PRODUCT AS PRINCIPAL TO CONSIGNING AGENT AND THE AO HAS WRONGLY INTERPRETED THE TRANSACTION AS LOAN. THE LD. CIT(A) AFTER CONSIDERING THE OBSERVATIONS DECIDED THE ISSUE AGAINST THE ASSESSEE VIDE PARA-15 WHICH READS AS UNDER: 15. HAVE CAREFULLY CONSIDERED THE REASONING OF THE AO A WELL AS SUBMISSION OF THE APPELLANT. SINCE THE APPELLANT HA S FAILED TO PRODUCE THE CONFIRMATION FROM THE PARTY I.E. M/S. VIR ENTER PRISES THE EXPLANATION OF THE APPELLANT THAT M/S. JEER ENTERP RISES WAS ACTING AS A CONSIGNEE AGENT ONLY AND THE TRANSACTION AS ENTER ED INTO BY THE APPELLANT IN RESPECT OF THE CONSIGNMENT CANNOT BE A CCEPTED. THERE IS A CONTRADICTION IN THE AMOUNT OF SALES AS MADE BY T HE APPELLANT THROUGH M/S. VIR ENTERPRISES. THEREFORE THE APPELLA NT EVEN IN THE APPELLATE PROCEEDINGS HAS NOT BEEN ABLE TO EXPLAIN THE SATISFACTORY FACTUAL ASPECTS AND CONTRADICTIONS AS NOTICED BY TH E AO IN THE ASSESSMENT ORDER. THEREFORE FOR THE REASONS AS MENT IONED IN THE ASSESSMENT ORDER I AM OF THE CONSIDERED VIEW THAT N O INTERFERENCE IS CALLED FOR IN THE ACTION OF THE AO AND ACCORDINGLY ADDITION AS MADE BY THE AO IS HEREBY CONFIRMED 10. BEFORE US, LD. COUNSEL OF THE ASSESSEE REFERRED TO THE LETTER DATED 14-1-2011 FOR ADMISSION OF ADDITIONAL EVIDENC E WHEREIN AT POINT NO.2 ASSESSEE IS SEEKING TO FILE ADDITIONAL EVIDENC E IN THE FORM OF COPY OF AGREEMENT WITH M/S. VIR ENTERPRISES, DETAILS OF GOODS SENT TO M/S. VIR ENTERPRISES, COPIES OF SALE BILLS AND COPY OF T HE LEDGER ACCOUNT. HE SUBMITTED THAT THESE EVIDENCES COULD NOT BE COLLECT ED BECAUSE M/S. VIR ENTERPRISES WAS NOT TRACEABLE. HE SUBMITTED THAT TH IS FIRM WAS ONLY A CONSIGNEE AGENT AND THERE WAS NO LOAN TRANSACTION W ITH THIS FIRM. HOWEVER, IN RESPONSE TO A QUERY BY THE BENCH, HE AD MTITED THAT TAX AUDITOR HAS SHOWN THE AMOUNT OF RS.4,30,000/- AS LO AN FROM THIS PARTY WHICH INCLUDED LOAN OF RS.2,48,500/- IN CASH. 11. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED TH E ORDER OF THE CIT(A) AND SUBMITTED THAT NO PURPOSE WOULD BE SERVE D EVEN IF ADDITIONAL EVIDENCE IS ADMITTED AND THE MATTER IS R EMANDED BECAUSE IT ITA NOS.3556-3557 OF 2009 5 HAS BEEN STATED OUT THAT M/S. VIR ENTERPRISES IS NO T TRACEABLE AND, THEREFORE, EVEN AO CANNOT MAKE ANY ENQUIRY. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DEC LINE TO ADMIT THE ADDITIONAL EVIDENCE BECAUSE IT IS IN THE FORM OF CO PY OF AN AGREEMENT WITH M/S. VIR ENTERPRISES, DETAILS OF GOODS SENT TO M/S. VIR ENTERPRISES, COPIES OF THE SALE BILLS AND COPY OF THE LEDGER ACC OUNTS. ALL THESE DOCUMENTS ARE PART OF THE ASSESSEES RECORDS AND TH ESE COULD HAVE EASILY BEEN PRODUCED BEFORE THE AO. IN ANY CASE, ON CE THE ADDITION WAS MADE BY THE AO, ASSESSEE SHOULD HAVE TAKEN CARE TO PRODUCE THESE DOCUMENTS ATLEAST BEFORE THE LD. CIT(A). NO C ONVINCING REASON HAS BEEN GIVEN BEFORE US AS TO WHY THESE DOCUMENTS COULD NOT BE PRODUCED EVEN BEFORE THE LD. CIT(A). OTHERWISE ALSO NO PURPOSE WOULD BE SERVED EVEN IF THE MATTER IS RESTORED BECAUSE, A DMITTEDLY, M/S. VIR ENTERPRISES IS NOT TRACEABLE. IN ANY CASE, ASSESSEE HAS BEEN SHIFTING ITS STAND BEFORE THE AO BY CHANGING THE SALES FIGURES I N RESPECT OF M/S. VIR ENTERPRISES . WHEN ASSESSEES OWN AUDITOR HAD GIVEN THE PARTICULARS OF LOAN, ASSESSEE SHOULD HAVE TAKEN CARE TO FILE SOME EVIDENCE AT LEAST BEFORE THE CIT(A) THAT SUCH FIGURES DO NOT REPRESEN T THE LOANS AND OBSERVATIONS OF THE AUDITORS ARE WRONG. THEREFORE, WE FIND NOTHING WRONG IN THE ORDER OF THE LD. CIT(A) AND CONFIRM TH E SAME. 13. GROUND NO.3 : DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAS TAKEN A LOAN OF RS.70,05,000/- FR OM SHRI ZAFIR EBRAHIM AND LOAN OF RS.4,30,000/- FROM M/S. VIR ENT ERPRISES. THE ASSESSEE HAS PRODUCED THE LOAN CONFIRMATION FROM SH RI ZAFIR EBRAHIM AND SUBMITTED THAT HE IS AN NRI. THE ASSESSEE WAS A SKED TO FURNISH ITA NOS.3556-3557 OF 2009 6 DETAILS IN RESPECT OF CREDITWORTHINESS OF THE NRI L OAN CREDITOR AS HE IS NOT ASSESSED TO TAX IN INDIA. VARIOUS OPPORTUNITIES WERE GIVEN TO FILE THIS INFORMATION AND CONFIRMATION FROM M/S. VIR ENT ERPRISES, BUT NOTHING WAS FILED. LATER ON VIDE LETTER DATED 22-11 -2006 THE FOLLOWING INFORMATION WAS GIVEN IN RESPECT OF LOAN FROM SHRI ZAFIR EBRAHIM: 2. ADDRESS OF NRE A/C.15173 OF INDIAN OVERSEAS BAN K OF MR. ZAFIR T. EBRAHIM IS FORT BRANCH, V10, VEERNARIM AN ROAD, FORT, MUMBAI 100 023. 3. DETAILS OF NRO A/C OF MR. ZAFIR T. EBRAHIM IS AS FOLLOWS. NRO A/C. 019-226596-006 OF I-ISBC BANK OF MR. ZAFIR T. EBRAHIM 4. PRESENT .4DDRESS OF MR. ZAFIR T. EBRAHIM IS ROB INSON APARTMENTS, ROBINSON ROAD, HONG KONG, HONG KONG. MR. ZAFIR 7 FBRAHIM IS A BUSINESSMAN IN HONGKONG AN D HAVE SUFFICIENT FUND OUT OF WHICH HE HAS GRANTED LOAN TO M/S. REMEX PHARMACEUTICALS LIMITED. AFTER NOTING THE ABOVE AO OBSERVED THAT THE SUBMISS ION OF THE ASSESSEE IS NOT ACCEPTABLE BECAUSE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN RESPECT OF THE SOURCE OF INCOME OF SHRI ZAFIR EBRAHIM. SIMILARLY, NO CONFIRMATION HAS BEEN FILED ON BEHALF OF M/S. VIR ENTERPRISES. THE AO DISCUSSED VARIOUS CASE LAWS AS TO HOW THE BURDEN WAS ON THE ASSESSEE TO PROVE THE CREDITWORTHINESS O F THE PARTY FROM WHOM THE LOAN HAS BEEN TAKEN AND ULTIMATELY, AO MAD E AN ADDITION ON ACCOUNT OF UNPROVED LOANS. THE AO REDUCED THE SUM O F RS.2,48,500/- ALREADY ADDED U/S.69D ON ACCOUNT OF M/S. VIR ENTERP RISES AND MADE A NET ADDITION OF RS.71,86,500/- [RS.4,30,000 + RS.7- ,05,000 RS.2,48,500]. 14. BEFORE THE LD. CIT(A) IT WAS MAINLY CONTENDED T HAT LOAN CONFIRMATIONS OF SHRI ZAFIR EBRAHIM AND A COPY OF H IS BANK STATEMENT OF NRI ACCOUNT WITH FULL ADDRESS HAD ALREADY BEEN FURN ISHED BEFORE THE ITA NOS.3556-3557 OF 2009 7 AO. IT WAS EXPLAINED THAT SHRI ZAFIR EBRAHIM IS A LE ADING BUSINESSMAN IN HONG KONG AND IT WILL TAKE TIME TO FURNISH THE C OPIES OF PASS PORT AND CERTIFICATE FROM THE BANK, CERTIFYING THE CREDI TWORTHINESS. THE LD. CIT(A) DID NOT ACCEPT THIS SUBMISSION AND DECIDED T HE ISSUE AGAINST THE ASSESSEE VIDE PARA-18 WHICH IS AS UNDER: 18. I HAVE CAREFULLY CONSIDERED THE REASONING OF T HE AO AS WELL AS SUBMISSION OF THE APPELLANT. IN THE APPELLATE PROCE EDINGS ALSO THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY EVIDENCE WHICH WOULD CORROBORATE THE GENUINENESS AID CREDITWORTHINESS OF THE LOAN AS TAKEN BY THE APPELLANT FROM MR ZAFIR ABRAHIM. ONUS OF PRO VING THE SOURCE OR CREDITWORTHINESS OR GENUINENESS OF THE CREDITOR SQU ARELY LIES ON THE APPELLANT AND THE APPELLANT HAS NOT BEEN ABLE TO DI SCHARGE ITS ONUS AND A S SUCH FIND NOTHING WRONG ON THE PART OF THE AO TO MAKE THE IMPUGNED ADDITION III THE HANDS OF THE APPELLANT IN RESPECT OF THE ALLEGED CREDITOR IN THE NAME OF -MR. ZAFIR ABRAHIM. THEREFORE ON ACCOUNT OF THE REASONS AS DISCUSSED BY THE AO IN TH E ASSESSMENT ORDER AND THE FACT THAT THE APPELLANT AGAIN HAS NOT BEEN ABLE TO PROVE THE GENUINENESS OF THE CREDITOR AND THE TRANSACTION S THE ADDITION AS MADE BY THE AO IS HEREBY CONFIRMED. 15. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTE D THAT COPY OF THE BANK ACCOUNT OF SHRI ZAFIR EBRAHIM WAS SUBMITTE D BEFORE THE AO AND SAME IS PLACED AT PAGES 61 TO 64 OF THE PAPER B OOK. FURTHER, CONFIRMATION FOR A.YRS. 2004-05 AND 2005-06 WERE AL SO FURNISHED AND COPIES OF THE SAME ARE PLACED AT PAGES 65 & 66 OF T HE PAPER BOOK. HE ALSO SUBMITTED THAT ASSESSEE HAD ALSO FILED CREDITW ORTHINESS OF SHRI ZAFIR EBRAHIM IN THE FORM OF A NOTE, COPY OF WHICH IS AVAILABLE AT PAGE- 67 OF THE PAPER BOOK. THIS SHOWS THAT SHRI ZAFIR EB RAHIM WITH HIS FAMILY AS A DONOR DONATED A SUM OF RS.3.68 CRORES F OR CONSTRUCTION OF NAZAM BAUG. THIS CLEARLY SHOWS THAT SHRI ZAFIR EBRA HIM WAS MAN OF MEANS. THEN HE REFERRED TO APPLICATION DATED 14-1-1 1 FOR ADMISSION OF ADDITIONAL EVIDENCE THROUGH WHICH CONFIRMATION OF L OAN GIVEN BY SHRI ZAFIR EBRAHIM, COPY OF THE PASS PORT AND CERTIFICAT E FROM BANKERS UBS ITA NOS.3556-3557 OF 2009 8 IS BEING ENCLOSED. THEREFORE, THE MATTER MAY BE SET ASIDE IN VIEW OF THESE ADDITIONAL EVIDENCES. WHEN IT WAS POINTED OUT THAT THERE IS NO EVIDENCE TO SHOW THE SOURCE OF INCOME, THE LD. COUN SEL OF THE ASSESSEE SUBMITTED THAT AO MAY REQUEST HIS COUNTER PART IN HONG KONG TO FILE THE DETAILS. 16. ON THE OTHER HAND, LD. DR POINTED OUT THAT FIRS T OF ALL FOR TAKING A LOAN FROM AN NRI PERMISSION FROM RESERVE BANK OF INDIA WAS REQUIRED, WHICH HAS NOT BEEN TAKEN. IN ANY CASE, TH E COPY OF THE PASS PORT AT PAGE-103 OF THE PAPER BOOK IS ONLY BASICALL Y A COPY OF THE VISA AND DOES NOT SHOW WHICH AUTHORITY HAS ISSUED SUCH P ASS PORT AND THE LETTER FROM UBS DOES NOT SHOW THAT ASSESSEE IS HAVI NG ANY SOURCE OF INCOME. FOR PROVING THE CREDITWORTHINESS THE BURDEN IS ON THE ASSESSEE TO SHOW WHAT IS THE SOURCE OF INCOME WHICH HAS NEVE R BEEN DISCLOSED EARLIER OR EVEN THROUGH ADDITIONAL EVIDENCE. THE AS SESSEE HAS NOT GIVEN ANY DETAILS WHERE HE IS BEING ASSESSED AND, T HEREFORE, AO CANNOT FIND OUT ANY DETAILS ON HIS OWN. IN ANY CASE, NO SU CH REQUEST WAS MADE DURING THE ORIGINAL PROCEEDINGS. MOREOVER, GOV ERNMENT OF INDIA DOES NOT HAVE ANY TAX TREATY WITH THE GOVERNMENT OF HONG KONG AND, THEREFORE, IT IS NOT POSSIBLE TO OBTAIN SUCH DETAIL S. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. NO DOUBT COPY OF THE BANK ACCOUNT WAS FILED BEFORE THE AO DU RING THE ASSESSMENT PROCEEDINGS ALONG WITH THE CONFIRMATION. HOWEVER, IT IS SETTLED LAW THAT FOR PROVING A LOAN TRANSACTION THR EE INGREDIENTS HAVE TO BE PROVED BY THE ASSESSEE I.E. (I) AN IDENTITY OF T HE PARTY, (II) GENUINENESS OF THE TRANSACTION AND (III) CREDITWORT HINESS OF SUCH ITA NOS.3556-3557 OF 2009 9 PERSON. A BANK STATEMENT WOULD PROVE ONLY AN IDENTI TY AND GENUINENESS OF THE TRANSACTION BUT NOT THE CREDITWO RTHINESS OF THE PARTY. FOR CREDITWORTHINESS IT WAS STATED VIDE LETT ER DATED 26-12-2008 [COPY OF WHICH IS AT PAGE-67 OF THE PAPER BOOK] AS UNDER: 1) CREDIT WORTHINESS OF MR. EBHRAHIM ZAFIR : WE AR E ENCLOSING HEREWITH THE FORM NO. FC 3 OF THE PARTY WHEREIN THE SAID MR. EBRHIM ZAFIR WITH HIS FAMILY AS A DONOR DONATED A SUM OF R S. 368 CRORES FOR CONSTRUCTION OF NAZANI BAUG, WHICH PRIMA-FACIE SHOW S THE FINANCIAL STATUS, SOLVENCY AND CREDIT WORTHINESS OF THE SAID PARTY AS PER ANNEXURE I FURTHER, IN THE ADDITIONAL EVIDENCE ONLY A CONFIRMA TION OF LOAN AND ONE PAGE OF PASS-PORT HAS BEEN FILED. THE PASS PORT SEE MS TO BE A COPY OF THE VISA BECAUSE IT DOES NOT SHOW WHERE AND WHEN TH E PASSPORT HAS BEEN ISSUED. FOR CREDITWORTHINESS A LETTER DATED 6- 1-2011 FROM UBS AG HAS BEEN FILED WHICH READS AS UNDER: 06 JANUARY 2011 REMEX PHARMACEUTICALS LIMITED GHIYA COMPOUND 2ND HASANABAD LANE SANTACRUZ (WEST) MUMBAI 400 054 INDIA DEAR SIRS, BANK REFERENCE FOR BUSINESS LOAN WE HAVE BEEN ASKED TO PROVIDE A REFERENCE LETTER IN CONNECTION WITH MR. ZAF II TAHER EBRAHIM. WE CONFIRM THAT ZAFIR TAHER EBRAHIM PASSPORT NO.: 761302571 HAS BEEN A CLIENT OF OURS SINCE SEPTEMBER 1996 AND DURING THIS TIME MR. EBRAHIM HAS HAD A SATISFACTORY BANKING RELATION SHIP WITH US. AS AT 05 JANUARY 2011, THE FUNDS INVOLVED IN THIS BANKING RELATIONSHIP ARE NOT LESS THEN USD 500,000. THE ABOVE INFORMATION IS BASED ON OUR EXPERIENCE OF THIS BANKING RELATIONSHIP AS AT CURRENT DATE AND IS GIVEN IN CON FIDENCE FOR YOUR PRIVATE USE ONLY, WITHOUT ANY RESPONSIBILITY ON THE PART OF UBS AG OR ITS EMPLOYEES. THIS LETTER MAY ONLY BE USED IN THE BUSINESS CONTEXT OUTLINED AT THE BEGINNING OF THIS LETTER AND DOES N OT CONSTITUTE A ITA NOS.3556-3557 OF 2009 10 GUARANTEE OR ANY OTHER OBLIGATION ON THE PART OF UB S AG. IN PARTICULAR, WE ARE UNDER NO OBLIGATION TO INFORM YOU OF ANY SUB SEQUENT CHANGE OF CIRCUMSTANCES IN THIS BANKING RELATIONSHIP. YOURS FAITHFULLY, FOR AND ON BEHALF OF UBS AG HONG KONG BRANCH A CAREFUL READING OF THE ABOVE LETTER DOES NOT SHOW ANYTHING ABOUT THE SOURCE OF INCOME OF SHRI ZAFIR EBRAHIM. THOUGH A SU BMISSION WAS MADE BEFORE THE AO THAT HE ALONG WITH HIS FAMILY HA S DONATED A SUM OF RS.3.68 CRORES FOR CONSTRUCTION OF NAZANI BAUG BUT NO EVIDENCE FOR THE SAME HAS BEEN FILED. IT IS ALSO NOT CLEAR AS TO HOW MUCH DONATION WAS GIVEN BY SHRI ZAFIR EBRAHIM, BECAUSE IT WAS STA TED IN THE ABOVE LETTER THAT DONATION HAS BEEN MADE BY SHRI ZAFIR EB RAHIM ALONG WITH HIS FAMILY. IT WAS ALSO STATED DURING THE HEARING T HAT SHRI ZAFIR EBRAHIM IS SON OF ONE OF THE MAIN SHAREHOLDERS OF THE ASSES SEE COMPANY. IN THIS CONTEXT, WE FAIL TO UNDERSTAND AS TO WHAT HAS STOPPED THE ASSESSEE FROM OBTAINING THE DETAILS REGARDING THE S OURCE OF INCOME OF SHRI ZAFIR EBRAHIM. IN THE ABSENCE OF THE SOURCE, I T CANNOT BE SAID THAT CREDITWORTHINESS OF SHRI ZAFIR EBRAHIM HAS BEEN PRO VED. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE REGARDING THE SOURCE OF INCOME, EVEN IN THE APPLICATION FOR ADDITIONAL EVIDENCE, NOTHING CA N BE PROVED. THE STATEMENT MADE BEFORE US, THAT AO MAY REQUISITION D ETAILS OF INCOME OF SHRI ZAFIR EBRAHIM FROM HONK KONG AUTHORITIES, I S NOT TENABLE BECAUSE NO SUCH REQUEST WAS MADE IN THE ORIGINAL PR OCEEDINGS. MOREOVER, THERE IS NOTHING ON RECORD TO SHOW ANY PA RTICULARS OF ASSESSMENT IN HONG KONG ON THE BASIS OF WHICH AO CA N POSSIBLY MAKE ENQUIRIES. FURTHER, IT HAS NOT BEEN CONTROVERTED BY THE LD. COUNSEL OF THE ASSESSEE THAT GOVERNMENT OF INDIA DOES NOT HAVE ANY TREATY WITH ITA NOS.3556-3557 OF 2009 11 THE GOVERNMENT OF HONG KONG AND, THEREFORE, ANY SUC H REQUEST MAY NOT BE ENTERTAINED BY THE HONG KONG AUTHORITIES. IN THIS BACKGROUND, WE ARE OF THE OPINION THAT NO PURPOSE WOULD BE SERV ED EVEN IF THE MATTER IS SET ASIDE. IN FACT, THAT WOULD AMOUNT TO ONLY GIVING UNNECESSARY OPPORTUNITIES TO IMPROVE THE ASSESSEES CASE WITHOUT ANY EVIDENCE BEFORE US. 18. AS FAR AS THE ISSUE REGARDING LOAN FROM M/S. VI R ENTERPRISES IS CONCERNED, EVEN COPY OF CONFIRMATION WAS NOT FILED AND RATHER IT WAS POINTED OUT THAT THE PARTY IS NOT TRACEABLE. THEREF ORE, IN THESE CIRCUMSTANCES, WE CONFIRM THE ORDER OF THE LD. CIT( A). 19. IN THE RESULT, ASSESSEES APPEAL IN I.T.A.NO.35 56/M/09 IS PARTLY ALLOWED. 20. I.T.A.NO.3557/M/09 A.Y 2005-06: IN THIS APPEA L THE ASSESSEE HAS RAISED THE FOLLOWING GROUND: 1) ON THE FACTS OF THE CASE AND IN CIRCUMSTANCES O F THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN CONFIRMING THE DIS ALLOWANCE BY THE ASSESSING OFFICER A SUM OF RS. 42,50,000/- TAKEN FR OM MR. ZAFIR IBRAHIM . IT MAY BE STATED THAT THE ENTIRE AMOUNT H AS BEEN RECEIVED BY THE COMPANY BY THE A/C PAYEE CHEQUE BY NRE AND N RC ACCOUNT WHEREIN HUGE SUM OF MONEY WAS LYING CREDIT IN THE A CCOUNT OF MR. ZAFIR T IBRAHIM. HENCE THE ADDITION OF RS. 42,50,000/-IS TOTALLY UNW ARRANTED AND AGAINST THE PRINCIPLE OF JUSTICE AND HENCE SHOULD B E DELETED.. 2 ) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND 9IVELETE ANY GROUND (S) OF APPEAL EITHER BEFORE OR DURING THE CO URSE OF HEARING OF THE APPEAL. 21. BOTH THE PARTIES SUBMITTED THAT THE ABOVE ISSUE IS IDENTICAL TO THE ISSUE INVOLVED IN GROUND NO.3 FOR A.Y 2004-05 R AISED IN I.T.A.NO.3559/M/09 AND, THEREFORE, SAME MAY BE DECI DED IN THE LIGHT OF THAT DECISION. ITA NOS.3556-3557 OF 2009 12 22. WHILE ADJUDICATION THE APPEAL FOR A.Y 2004-05, WE HAVE ALREADY CONFIRMED THE ADDITION ON ACCOUNT OF UNEXPLAINED CA SH CREDIT FROM SHRI ZAFIR EBRAHIM VIDE PARA-17 AND FOLLOWING THE SAME W E CONFIRM THE ADDITION OF RS.42,50,000/- FOR A.Y 2005-06. 23. IN THE RESULT, ASSESSEES APPEAL IN I.T.A.NO.35 57/M/09 FOR A.Y 2005-06 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 23/9/2011. SD/- SD/- (N.V.VASUDEVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 23/9/2011. P/-*