DCIT, Trivandrum V. Sri. R.Reghu, Kollam

ITA 367/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73872 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 11-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 04-06-2013
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Principle of natural justice; Retrospective amendment; Onus to prove
• Section: 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 290-292/COCH/2013 ASSESSMENT YEARS : 2003-04 TO 2005-06 SHRI R. RAGHU, MADATHIL FINANCIERS, KAVANADU P.O., KOLLAM-691 003. [PAN: ADGPG 5520K] VS. THE ASSISTANT DIRECTOR OF INCOME- TAX (INTERNATIONAL TAXATION), TRIVANDRUM. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT ) I.T.A. NOS. 366-368/COCH/2013 ASSESSMENT YEARS : 2003-04 TO 2005-06 THE DEPUTY DIRECTOR OF INCOME- TAX (INTERNATIONAL TAXATION), TRIVANDRUM. VS. SHRI R. RAGHU, MADATHIL FINANCIERS, KAVANADU P.O., KOLLAM-691 003. [PAN: ADGPG 5520K] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT ) ASSESSEE BY SHRI T.M. SREEDHARAN, ADVOCATE REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 11/12/2013 DATE OF PRONOUNCEMENT 31/01/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE O RDERS PASSED BY LD CIT(A), TRIVANDRUM AND THEY RELATE TO THE ASSESSMENT YEARS 2003-04 TO 2005-06. AS THE ISSUES CONTESTED IN THESE APPEALS ARE IDENTICAL IN NATURE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE FACTS RELATED TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS A NON- RESIDENT INDIAN. HE IS CARRYING ON MONEY LENDING B USINESS IN INDIA. THE I.T.A, NOS. 290-292 & 366-368/COCH/2013 2 DEPARTMENT CARRIED OUT SURVEY OPERATIONS U/S 133A O F THE ACT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 29.11.2006. SUBSEQUENT LY, THE ASSESSMENTS OF THE THREE YEARS UNDER CONSIDERATION WERE TAKEN UP FOR S CRUTINY. THE AO COMPLETED THE ASSESSMENTS BY MAKING FOLLOWING TYPES OF ADDITI ONS IN ALL THE THREE YEARS:- (A) DISALLOWANCE U/S 40(A)(IA) OF THE ACT. (B) ADDITION TOWARDS SUPPRESSION OF INTEREST INC OME. (C) ADDITION RELATING TO UNEXPLAINED CASH DEPOSI TS FOUND IN BANK. (D) ADDITION RELATING TO UNEXPLAINED CHEQUE DEPO SITS FOUND IN BANK. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DELETED THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT IN ASSESSMENT YEARS 2003-04 AN D 2004-05, BUT CONFIRMED THE SAID DISALLOWANCE MADE IN ASSESSMENT YEAR 2005- 06. THE LD CIT(A) ALSO DELETED DISALLOWANCE RELATING TO UNEXPLAINED CASH D EPOSITS FOUND IN THE BANK ACCOUNT OF THE ASSESSEE IN ALL THE THREE YEARS. TH E LD CIT(A) GRANTED PARTIAL RELIEF IN RESPECT OF THE ADDITION RELATING TO CHEQU E DEPOSITS FOUND IN THE BANK IN ASSESSMENT YEAR 2003-04 AND CONFIRMED THE SAID DISA LLOWANCE IN OTHER TWO YEARS. AGGRIEVED BY THE ORDERS PASSED BY LD CIT(A), BOTH THE PARTIES HAVE FILED THESE APPEALS BEFORE US. 3. THE FIRST ISSUE RELATES TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. THE LD CIT(A) DELETED THE SAID DISALLOWANCE MADE IN ASSESSMENT YEARS 2003-04 AND 2004-05 ON THE REASONING THAT THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT CAME INTO EFFECT ONLY FROM THE ASSESSMENT YEAR 2005 -06 ONLY AND HENCE THE SAID PROVISION DOES NOT HAVE APPLICATION FOR THE ASSESSM ENT YEARS 2003-04 AND 2004- 05. THE REVENUE IS NOT CONTESTING THE SAID DECISIO N OF THE LD CIT(A) IN BOTH THE YEARS. 3.1 IN ASSESSMENT YEAR 2005-06, THE AO NOTICED THAT THE ASSESSEE HAS MADE FOLLOWING PAYMENTS WITHOUT DEDUCTING TAX AT SOURCE AS REQUIRED UNDER THE ACT. (A) INTEREST PAID TO SMT. K.P. JAYASREE, ASSESSEE S WIFE RS.3,87,428/- (B) INTERNAL AUDIT FEE PAID TO SHRI G.VENUGOPAL -- RS.1,14,000/- I.T.A, NOS. 290-292 & 366-368/COCH/2013 3 HENCE, THE AO DISALLOWED BOTH THE PAYMENTS CITED AB OVE BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. THE LD CI T(A) ALSO CONFIRMED THE DISALLOWANCES MADE BY THE AO. HENCE THE ASSESSEE I S IN APPEAL BEFORE US ON THIS ISSUE. 3.2 THE LD A.R SUBMITTED THAT THE RECIPIENTS OF THE AMOUNTS, CITED ABOVE, HAVE DULY DISCLOSED THE SAME IN THEIR RESPECTIVE IN COME TAX RETURNS AND HAVE ALSO PAID THE TAX DUE THEREON AND HENCE THERE CANNO T BE ANY CASE OF LOSS OF REVENUE. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT SHOULD BE INTERPRETED IN A FAIR, JUST AND EQUITABLE MANNER AND THE INTERPRETATION PLACED ON THE PROVISIONS SHOULD NOT RESULT IN INJUS TICE AND CREATE TAX LIABILITIES. THE LD A.R SUBMITTED THAT, SINCE THE RECIPIENTS HAV E ALREADY PAID THE TAX DUE ON THE ABOVE SAID INCOME, IT MAY NOT BE CORRECT TO PEN ALIZE THE ASSESSEE AGAIN. ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO-COLA BEVERAGES PVT LTD VS. C IT (2007)(293 ITR226), THE LD A.R SUBMITTED THAT BOTH THE ADDITIONS MAY BE VAC ATED. THE LD A.R, IN THE ALTERNATIVE, SUBMITTED THAT THE FINANCE ACT, 2012 H AS INSERTED SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT, AS PER WHICH IF THE RECI PIENT HAS DISCLOSED THE RECEIPTS IN HIS RETURN OF INCOME AND PAID TAX THEREON, THEN THERE IS NO REQUIREMENT OF MAKING DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE LD A.R SUBMITTED THAT THIS PROVISO IS CLARIFICATORY IN NATURE AND HENCE IT SHO ULD BE CONSTRUED AS HAVING RETROSPECTIVE EFFECT AND SHOULD BE APPLIED FOR THE YEAR UNDER CONSIDERATION ALSO. 3.2 ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE ABOVE SAID PAYMENTS AND HENCE THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE CLAIMS MADE BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. I.T.A, NOS. 290-292 & 366-368/COCH/2013 4 3.3 WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISS UE AND PERUSED THE RECORD. WE NOTICE THAT THE LD CIT(A) HAS HELD THAT THE ASSESSE E CANNOT TAKE SUPPORT OF THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF HINDUSTAN COCO-COLA BEVERAGES PVT LTD, SINCE THE SAID DECISION WAS REND ERED IN THE CONTEXT OF SEC. 201 OF THE ACT. SINCE THE ISSUE BEFORE US IS WITH REGARD TO THE DISALLOWANCE TO BE MADE U/S 40(A)(IA) OF THE ACT, IN OUR VIEW ALSO, TH E ASSESSEE CANNOT TAKE SUPPORT OF THE DECISION OF HONBLE SUPREME COURT, REFERRED ABOVE. HOWEVER, THE LD A.R HAS CONTENDED THAT THE SECOND PROVISO INSERTED BY F INANCE ACT, 2012 SHALL BE APPLICABLE TO THE FACTS OF THE INSTANT CASE. HE AL SO CONTENDED THAT THE SAID PROVISO SHALL HAVE RETROSPECTIVE EFFECT, SINCE IT W AS CLARIFICATORY IN NATURE. HOWEVER, WE NOTICE THAT THIS CONTENTION IS URGED BE FORE US FOR THE FIRST TIME AND HENCE, IN OUR VIEW, THE SAME NEEDS TO BE EXAMINED A T THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THIS ALTERNATIV E CONTENTION TO THE FILE OF THE ASSESSING OFFICER FOR HIS EXAMINATION AND FOR TAKIN G APPROPRIATE DECISION. 4. THE NEXT ISSUE PERTAINS TO THE SUPPRESSION OF INTEREST INCOME. ACCORDING TO THE AO, THE ASSESSEE HAS ACCOUNTED ONLY THE INTE REST RECEIVED ON THE GOLD LOANS, WHICH WERE FULLY REDEEMED DURING THE YEAR. WITH REFERENCE TO THE GOLD LOANS PARTLY CLOSED AND PENDING, ACCORDING TO THE A O, THE ASSESSEE HAS CHARGED INTEREST AFTER COMPLETION OF 3 MONTHS OF WAITING PE RIOD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE T O FURNISH THE BREAK UP DETAILS OF FULLY CLOSED AND PARTLY CLOSED LOANS. H OWEVER, THE ASSESSEE COULD NOT FURNISH THE REQUIRED PARTICULARS. FURTHER THE AO N OTICED FROM THE IMPOUNDED MATERIALS THAT THE ASSESSEE HAS BEEN CHARGING INTER EST OVER AND ABOVE THE PRESCRIBED RATE. HENCE, THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF EXCESS INTEREST RECEIPTS, PARTICULARLY WITH REFEREN CE TO THE IMPOUNDED MATERIALS KRSA (15) AND KRSA (16). 4.1 THE ASSESSEE SUBMITTED THAT MAJOR PORTION O F INTEREST RECEIPTS CONSISTS OF INTEREST RECEIVED ON FULLY CLOSED LOANS. ONLY ABOU T 20% OF THE TOTAL INTEREST I.T.A, NOS. 290-292 & 366-368/COCH/2013 5 RECEIPTS MAY PERTAIN TO PARTIALLY CLOSED / PENDING LOANS. HE FURTHER SUBMITTED THAT THE PRESCRIBED RATE IN RESPECT OF PARTIALLY CL OSED / PENDING LOANS HAS ALSO BEEN DULY ACCOUNTED. ONLY THE INTEREST COLLECTED O VER AND ABOVE THE PRESCRIBED RATE WAS SUPPRESSED AND IT MAY CONSTITUTE ABOUT 1/5 TH OF THE INTEREST PERTAINING TO PARTIALLY CLOSED / PENDING LOANS. THE ASSESSEE FURTHER SUBMITTED THAT HE HAS OFFERED ADDITIONAL INCOME IN EACH OF THE THREE YEAR S IN THE RETURN OF INCOME AND THE SAME IS MORE THAN THE PROBABLE SUPPRESSION, REF ERRED ABOVE. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD OFFERED ADDITIONAL IN COME OF RS.6.00 LAKHS IN ASSESSMENT YEAR 2003-04 AND RS.5.50 LAKHS EACH IN A SSESSMENT YEARS 2004-05 AND 2005-06. HOWEVER, THE AO WAS NOT INCLINED TO A CCEPT THE EXPLANATIONS GIVEN BY THE ASSESSEE, SINCE THE ASSESSEE WAS MAKIN G ONLY ESTIMATES OF SUPPRESSED INCOME AND COULD NOT GIVE EXACT DETAILS. THE AO ALSO DECLINED TO TAKE COGNIZANCE OF THE ADDITIONAL INCOME OFFERED IN EACH OF THE YEARS ON THE REASONING THAT THE BOOKS OF ACCOUNTS OF THE ASSESSE E ARE NOT FULLY RELIABLE. ACCORDINGLY, THE AO PROCEEDED TO ESTIMATE THE SUPPR ESSED INTEREST RECEIPTS @ 20% OF THE GROSS INTEREST RECEIPTS AND ASSESSED THE AMOUNT SO ESTIMATED BY HIM. 4.2 THE LD CIT(A) NOTICED THAT THE AO DID NOT G IVE ANY BASIS FOR ESTIMATING THE SUPPRESSED INTEREST AT 20% OF THE GROSS INTERES T RECEIPTS. THE LD CIT(A) ALSO NOTICED THAT THE SUPPRESSED RECEIPTS ESTIMATED BY THE ASSESSEE WORKED OUT TO ABOUT 4% OF THE GROSS INTEREST RECEIPTS. HENCE, THE LD CIT(A) FIXED THE SUPPRESSION, VIA MEDIA, AT 15% OF THE GROSS INTERES T RECEIPTS. THE LD CIT(A) ALSO GAVE SET OFF OF ADDITIONAL INCOME OFFERED BY T HE ASSESSEE. ACCORDINGLY, HE GRANTED PARTIAL RELIEF TO THE ASSESSEE. THE SUPPRE SSION OF RECEIPTS WORKED OUT BY THE ASSESSEE, THE ADDITION MADE BY THE AO, THE ESTI MATE MADE BY LD CIT(A) AND THE INCOME SUSTAINED BY LD CIT(A) ARE TABULATED BEL OW:- I.T.A, NOS. 290-292 & 366-368/COCH/2013 6 ASST. YEAR SUPPRESSION AS PER ASSESSEE ADDITION MADE BY ASSESSING OFFICER SUPPRESSION AS PER CIT(A) SET OFF OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE ADDITION SUSTAINED BY LD CIT(A) 2003-04 1,93,865 9,69,323 7,26,992 6,00,000 1,26,99 2 2004-05 2,52,163 12,60,816 9,45,612 5,50,000 3,95,6 12 2005-06 2,58,603 12,93,017 9,69,763 5,50,000 4,19,7 63 BOTH THE PARTIES ARE AGGRIEVED BY THE DECISION OF L D CIT(A). WHILE THE ASSESSEE IS AGGRIEVED IN PARTIALLY CONFIRMING THE ADDITION, THE REVENUE IS AGGRIEVED IN GRANTING PARTIAL RELIEF TO THE ASSESSEE. 4.3 THE LD A.R SUBMITTED THAT THE ASSESSEE HAS ACCOUNTED FOR ALL INTEREST RECEIPTS EXCEPT A SMALL FRACTION RELATING TO THE PA RTIALLY CLOSED/PENDING LOANS. HE SUBMITTED THAT THE ASSESSEE DID NOT SUPPRESS ANY PA RT OF INTEREST PERTAINING TO FULLY CLOSED LOANS, WHICH FORMS MAJOR PORTION OF TH E GROSS INTEREST RECEIPTS. THE LD A.R SUBMITTED THAT IN CASE OF PARTIALLY CLOSED L OANS/PENDING LOANS ALSO, THE ASSESSEE HAS ACCOUNTED FOR THE INTEREST COLLECTED A T THE PRESCRIBED RATE. HE SUBMITTED THAT THE ASSESSEE WAS COLLECTING EXCESS I NTEREST @ 3% WHEN THE LOAN WAS NOT CLOSED WITHIN SIX MONTHS AND THE ASSESSEE D ID NOT ACCOUNT FOR THE EXCESS INTEREST SO COLLECTED. HE SUBMITTED THAT TH E ASSESSEE HAS WORKED OUT THE RATIO OF INTEREST RECEIVED ON PARTIALLY CLOSED/PEND ING LOANS TO THE TOTAL INTEREST RECEIPTS AND THE SAME WORKED OUT TO 18.45%. THE AV ERAGE OF THE PRESCRIBED RATE PREVAILING IN THE THREE YEARS UNDER CONSIDERAT ION WAS 18%, I.E., AVERAGE OF 24% + 18% + 12% DIVIDED BY 3 = 18%. THE EXCESS INT EREST OF 3% SHALL WORK OUT AS 1/6 TH PORTION OF THE ABOVE SAID AVERAGE RATE OF 18%. HE NCE, THE ASSESSEE HAS TAKEN THE AVERAGE AT 1/5 TH PORTION (HIGHER THAN ACTUAL AVERAGE). I.T.A, NOS. 290-292 & 366-368/COCH/2013 7 ACCORDINGLY, THE ASSESSEE HAS ESTIMATED THE SUPPRES SION AT 1/5 TH OF THE INTEREST RECEIVED ON PARTIALLY CLOSED / PENDING LOANS, WHICH WAS TAKEN AS 20% OF THE GROSS INTEREST RECEIPTS. ACCORDINGLY, THE LD A.R C ONTENDED THAT THE AO AS WELL AS THE LD CIT(A) WAS NOT JUSTIFIED IN ESTIMATING THE S UPPRESSED INTEREST AS A PERCENTAGE OF THE ENTIRE AMOUNT OF GROSS INTEREST R ECEIPTS, INSTEAD OF COMPUTING THE SAME ON THE PORTION PERTAINING TO PARTIALLY CLO SED / PENDING LOANS. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAD OFFERED ADDITIONAL INCOME IN ALL THE THREE YEARS ONLY TO TAKE CARE OF ALL DEFICIENCIES, INCLUDING SUPPRESSION OF INTEREST AND THE SAID OFFER WAS MORE THAN THE SUPPRESSED INT EREST COMPUTED BY THE ASSESSEE. ACCORDINGLY, THE LD A.R SUBMITTED THAT T HE TAX AUTHORITIES ARE NOT JUSTIFIED IN MAKING FURTHER ADDITION OVER AND ABOVE THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. 4.4 ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE IMPOUNDED MATERIALS HAVE REVEALED ABOUT THE FACT OF SUPPRESSION OF INCOME. FURTHER, THE ASSESSEE COULD NOT COLLATE DETAILS OF EXACT AMOUNT OF SUPPRESSED I NCOME, EVEN THOUGH HE WAS MAINTAINING REGULAR BOOKS OF ACCOUNT. THE ASSESSEE ALSO DID NOT FURNISH THE BREAK-UP DETAILS OF PENDING LOANS AND CLOSED LOANS. UNDER THESE CIRCUMSTANCES, THE AO HAD NO OTHER OPTION, BUT TO RESORT TO MAKE E STIMATE OF THE SUPPRESSED INTEREST RECEIPTS. SINCE THE ASSESSEE DID NOT FURN ISH THE DETAILS, THE AO ALSO REJECTED THE CLAIM FOR SET OFF OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE. 4.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WITH REGARD TO INTEREST INCOME, WE NOTICE THAT THE ASSESSEE HAS FURNISHED TWO LETTERS BEFORE THE ASSESSING OFFICER CLARIFYING THE POSITION RELAT ING TO THE INTEREST RECEIPTS. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE CONTE NTS OF BOTH THE LETTERS: (A) FIRST LETTER DATED 30-01-2007:- FROM K.RAGHU, MADATHIL FINANCIERS, KAVANADU P.O. I.T.A, NOS. 290-292 & 366-368/COCH/2013 8 KOLLAM-691 003. TO THE ADDITIONAL DIRECTOR OF INCOME-TAX, (INVESTIGATION), TRIVANDRUM. DEAR SIR, SUB: INTEREST RATE ON GOLD LOAN CHARGED FOR VARIOUS YEARS. REF: NO. G-95/ADDL. DIT(INV.)/TVM/06-07 JANUARY 12, 2007. INTEREST CHARGED BY US FOR THE YEARS FROM 01-04-200 2 TO STILL DATE ARE DESCRIBED IN THE FOLLOWING TABLE. FROM TO INTEREST ACTUALLY CHARGED IF RATE AT WHICH INTEREST DISCLOSED IN IT RETUR N IS LESS THAN ACTUALLY CHARGED, TH E RATE DISCLOSED. 01-04-2002 30-06-2003 WITHIN SIX MONTHS 24% MORE THAN 6 MONTHS 27% WHOLE - 24 % 01-07-2003 30-09-2003 WITHIN 6 MONTHS -18% MORE THAN 6 MONTHS -21% WHOLE - 1 8% 01-10-2003 31-03-2005 WITHIN 6 MONTHS 12% MORE THAN 6 MONTHS 15% WHOLE - 12 % 01-04-2005 STILL DATE WITHIN 1 MONTH 10.80% 1 TO 6 MONTHS - 12% WHOLE - 12% MORE THAN 6 MONTHS 15% STATUTORY GOLD LOAN REGISTER FOR THE REQUIRED PE RIOD HAD ALREADY SUBMITTED FOR YOUR VERIFICATION. (B) SECOND LETTER DATED 23.12.2009 :- THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), TRIVANDRUM. SIR, SUB: INCOME TAX ASSESSMENT OF SHRI R. R EGHU, MADATHIL FINANCIERS, POOVANPUZHA, KOLLAM P.A. NO. ADGPG 552 0K ASSESSMENT YEARS 2003-04 TO 200 5-06 FURNISHING OF OBJECTIONS - REG - I.T.A, NOS. 290-292 & 366-368/COCH/2013 9 .. IN CONNECTION WITH THE INCOME TAX ASSESSMENTS OF TH E ABOVE ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 TO 2005-06, WE ARE SUBMITTING THE FOLLOWING:- 1) PROPOSAL TO ESTIMATE THE INTEREST SUPPRESSION AT 1/5 TH OF THE AMOUNT DISCLOSED. THE PROPOSAL TO ESTIMATE THE INTEREST SUPPRESSION A T 1/5 TH OF THE DECLARED AMOUNT IS ABSOLUTELY UNJUSTIFIED. IT MAY PLEASE BE SEEN THAT THE INTEREST RECEIVED ON GOLD LOAN CONSISTS OF THE FOLLOWING:- A) INTEREST ON CLOSED GOLD LOAN S. B) INTEREST ON GOLD LOANS NOT C LOSED (PART PAYMENT) C) SERVICE CHARGES D) NOTICE CHARGES. IN RESPECT OF INTEREST ON CLOSED GOLD LOANS THERE I S NO DISPUTE AND THERE IS NO ALLEGATION THAT THERE IS SUPPRESSION ON THIS ACC OUNT BY THE SURVEY TEAM. HENCE THE SUPPRESSION IS ONLY IN RESPECT OF PART PAYMENTS OF INTEREST IN RESPECT OF GOLD LOANS NOT CLOSED. THIS IS WHAT IS REFLECTED IN THE REGISTERS IMPOUNDED AND REFERRED TO AS KRS-A(15),(1 6),(7) AND (8) ETC. IT MAY PLEASE BE NOTED THAT THE INTEREST RECEIVED O N GOLD LOANS NOT CLOSED (I.E. PART PAYMENT) CONSTITUTES ONLY A SMALL PORTIO N OF THE TOTAL INTEREST RECEIPTS. WE ARE FILING HEREWITH THE BREAK UP OF INTEREST RE CEIPTS FOR A PERIOD OF THREE MONTHS (FROM 11-9-2004 TO 23-12-200 4), THE RECORDS OF WHICH WERE PRODUCED BEFORE YOU DURING THE COURSE OF HEARING. THE BREAK UP OF INTEREST FOR THE THREE MONTHS PERIOD IS AS FO LLOWS:- INTEREST ON CLOSED GOLD LOANS 230953 INTEREST ON GOLD LOANS NOT CLOSED 53916 SERVICE CHARGES 6288 NOTICE CHARGES 953 TOTAL 292110 THE INTEREST ON GOLD LOANS NOT CLOSED WORKS OUT TO 18.45% OF THE TOTAL INTEREST RECEIPTS. THUS THE INTEREST ON GOLD LOANS NOT CLOSED CONSTITUTES LESS THAN 20% (APPROXIMATELY) OF THE TOTAL INTEREST RECEIPTS. THE INTEREST SUPPRESSION, IF ANY, ON THIS ACCOUNT CONSIDERING TH E 1/5 TH PROPOSED BY WILL BE AS UNDER:- I.T.A, NOS. 290-292 & 366-368/COCH/2013 10 (1) (2) (3) (4) (5) ASST YEAR TOTAL INTEREST INTEREST ON PROBABLE AMOUNT ADDIL. DECLARED GOLD LOANS N OT OF SUPPRESSION INCOME CLOSED AT 1/5 TH OF (3) OFFERED (ESTIMATED AT FOR ASS T. 20% OF 92 ) .. 1) 2003-04 48,46,616 9,69,323 1,93,865 6,00,000 2) 2004-045 63,04,080 12,60,816 2,52,163 5,50,000 3) 2005-06 64,65,085 12,93,017 2,58,603 5,50,000 AS THE ASSESSEE HAS ALREADY OFFERED ADDITIONAL AMOU NTS ON ACCOUNT OF THE DIFFERENCE IN INTEREST ACCOUNTED AT THE AMOUNTS MEN TIONED IN COL.(5) AND THIS BEING MUCH MORE THAN THE PROBABLE AMOUNT OF SU PPRESSION AS WORKED OUT IN COL (4), NO ADDITION IS CALLED FOR IN THIS R ESPECT. IT MAY KINDLY BE SEEN FROM THE ABOVE FACTS AND SUBMISSIONS THAT THE PROPOSAL TO ESTIMATE 1/5 TH OF THE TOTAL INTEREST RECEIPT AS SUPPRESSED IS UNJ USTIFIED AND UNWARRANTED AND HENCE THE PROPOSAL MAY PLEASE BE DR OPPED. 4.6 A CAREFUL PERUSAL OF BOTH THE LETTERS CITED ABOVE WOULD INDICATE THAT THE ASSESSEE IS ACCEPTING THE FACT OF SUPPRESSION OF PA RT OF INTEREST RECEIPTS. HOWEVER, THE DISPUTE ARISES WITH REGARD TO THE QUAN TUM OF SUPPRESSION. IN THE FIRST LETTER CITED ABOVE, THE ASSESSEE HAS SUBMITTE D THAT THE INTEREST RATE APPLICABLE ON LOANS FOR THE PERIOD EXCEEDING SIX MO NTHS WOULD GO UP BY 3%. ACCORDING TO LD A.R, THE ASSESSEE WAS SUPPRESSING O NLY THE EXCESS INTEREST COLLECTED AT 3% ONLY, I.E., ACCORDING TO THE ASSESS EE, HE HAS DULY ACCOUNTED INTEREST RECEIPTS UP TO 24% / 18% / 12%, AS THE CAS E MAY BE. FURTHER ACCORDING TO THE ASSESSEE, MAJOR PORTION OF INTERES T RECEIPTS CONSISTED OF INTEREST COLLECTED ON GOLD LOANS FULLY CLOSED WITHIN A PERIO D OF SIX MONTHS AND THE INTEREST REALIZED THEREON HAS BEEN DULY ACCOUNTED FOR. ACCO RDINGLY, IT WAS SUBMITTED THAT THERE WAS NO SUPPRESSION ON INTEREST PERTAINING TO FULLY CLOSED LOANS. HENCE, IN THE SECOND LETTER, THE ASSESSEE HAS WORKED OUT THE RATIO OF INTEREST COLLECTED FROM PARTLY CLOSED / PENDING LOANS TO THE GROSS INT EREST COLLECTIONS AND THE SAME WORKED OUT TO 18.45% OF THE TOTAL RECEIPTS OR APPRO XIMATELY 20%. IN RESPECT OF THIS PORTION OF INTEREST RECEIPT ALSO, THE SUPPRESS ION WAS RELATED TO THE EXCESS I.T.A, NOS. 290-292 & 366-368/COCH/2013 11 INTEREST COLLECTION @ 3% ONLY, WHICH WAS TAKEN AS 1 /5 TH OF AVERAGE RATE. HENCE THE ASSESSEE HAS ESTIMATED THE SUPPRESSED INTEREST RECEIPT AT 1/5 TH OF THE 20% OF THE GROSS INTEREST RECEIPTS. THE ASSESSEE HAS P OINTED OUT IN THE SECOND LETTER THAT THE IMPOUNDED MATERIALS POINT OUT TO THIS POSI TION ONLY. FURTHER, ACCORDING TO THE ASSESSEE, THE ADDITIONAL INCOME HAS BEEN OFF ERED BY HIM ONLY TO COVER UP THE SUPPRESSION. 4.7 WE NOTICE THAT THE ASSESSING OFFICER AS WEL L AS THE LD CIT(A) HAS FAILED TO CONSIDER THESE FACTUAL ASPECTS, WHICH WERE CLEARLY BROUGHT OUT BY THE ASSESSEE IN THE TWO LETTERS CITED ABOVE. AT THIS JUNCTURE, IT IS PERTINENT TO EXTRACT THE FOLLOWING OBSERVATIONS MADE BY LD CIT(A) IN THE ORD ER RELATING TO THE ASSESSMENT YEAR 2005-06:- IN THE ASSESSMENT ORDER AS WELL AS THE REMAND REPO RT, THE A.O HAS NOT FURNISHED ANY INFORMATION AS TO HOW THE EXCESS INTE REST ON PARTLY CLOSED LOAN OF RS.12,93,017/- WAS ESTIMATED BY HIM ON THE BASIS OF IMPOUNDED MATERIAL. IN THE ASSESSMENT ORDER ITSELF THE A.O H AS MENTIONED AS UNDER:- INTEREST ESTIMATED BY ASSESSEE - RS.64,65,085/- 1/5 TH ESTIMATED - RS.12,93,017/- THE ABOVE WORKING ITSELF SHOW THAT THE AO RESORTED TO ESTIMATION OF THE SUPPRESSED AMOUNT OF INTEREST ON THE PARTLY CLOSED LOAN ON THE BASIS OF INTEREST ADMITTED BY THE ASSESSEE. THE ASSESSEE HA S ALSO CONTENDED THAT WHEN THE BOOKS OF ACCOUNT AND AUDITED STATEMENTS WE RE WITH THE AO, HE WAS REQUIRED TO WORK OUT THE AMOUNT OF SUPPRESSION FROM THE BOOKS OF ACCOUNT AT THE TIME OF ASSESSMENT. HOWEVER, HAVING MADE ABOVE SAID OBSERVATIONS, THE L D CIT(A) HAS ALSO RESORTED TO ESTIMATE THE SUPPRESSION OF INTEREST RECEIPT AT 15% OF THE GROSS INTEREST RECEIPTS, I.E., IN THE PLACE OF 20% ADOPTED BY THE AO, THE LD CIT(A) HAS ADOPTED 15%. 4.8 WE NOTICE THAT THE LD CIT(A) HAS ALSO FAILE D TO TAKE NOTE OF THE FACT THAT THE SUPPRESSION OF INTEREST RECEIPT WAS ONLY WITH R EGARD TO THE PARTLY CLOSED/PENDING LOANS, WHERE THE PERIOD OF LOAN EXCE EDED SIX MONTHS, THAT TOO I.T.A, NOS. 290-292 & 366-368/COCH/2013 12 WITH REGARD TO THE EXCESS PORTION OF INTEREST ONLY. THE ASSESSEE, IN HIS SECOND LETTER, HAS CLEARLY POINTED OUT THAT THE IMPOUNDED MATERIALS REVEAL THIS FACTUAL ASPECT ONLY. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER DID NOT MAKE ANY ATTEMPT TO VERIFY THE SAID SUBMISSIONS OF THE ASSES SEE BY REFERRING TO THE IMPOUNDED MATERIALS. WE ALSO NOTICE THAT THE AO HA S ALSO NOT MADE ANY ATTEMPT TO DISPROVE THE SUBMISSIONS MADE BY THE ASS ESSEE. BEFORE LD CIT(A), THE ASSESSEE HAS SUBMITTED THAT HE WAS NOT ABLE TO FURNISH THE BREAK UP DETAILS, SINCE ALL THE BOOKS OF ACCOUNT HAVE BEEN IMPOUNDED BY THE AO AND THEY WERE AVAILABLE WITH THE AO. HENCE, THE ASSESSEE HAS TRI ED TO ASCERTAIN THE RATIO OF INTEREST RECEIPTS RELATING TO PARTLY CLOSED LOANS T O THE GROSS INTEREST RECEIPTS ON THE BASIS OF INTEREST RECEIVED FOR THREE MONTHS PER IOD, I.E., 11.9.2004 TO 23.12.2004 AND ACCORDINGLY ESTIMATED THE SUPPRESSED INTEREST RECEIPT AS 1/5 TH OF THE 20% OF THE GROSS INTEREST RECEIPTS. IN THE ABS ENCE OF ANY MATERIAL TO THE CONTRARY, IN OUR VIEW, THE SUPPRESSED INTEREST WORK ED OUT BY THE ASSESSEE, APPEARS TO BE REASONABLE, SINCE THE ASSESSEE HAS WO RKED OUT THE SAME ON THE BASIS OF RATIO / PERCENTAGE COLLATED FROM THE BOOKS OF ACCOUNTS. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE UNABLE TO SUSTAIN THE ESTIMATE MADE BY LD CIT(A), IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORD INGLY, WE SET ASIDE THE ORDER OF THE LD CIT(A) AND ALSO BY THE AO WITH REGARD TO THE COMPUTATION OF SUPPRESSED INTEREST RECEIPTS IN ALL THE THREE YEARS AND DIRECT THE AO TO ADOPT THE SUPPRESSED INTEREST INCOME AS WORKED OUT BY THE ASS ESSEE IN ALL THE THREE YEARS. 4.9 THE LD CIT(A) HAS GIVEN SET OFF OF THE ADDI TIONAL INCOME OFFERED BY THE ASSESSEE AGAINST THE SUPPRESSED RECEIPTS ESTIMATED BY HIM. THE REVENUE IS OBJECTING TO THE SAID DECISION TAKEN BY LD CIT(A). THE ASSESSEE HAS POINTED OUT THAT HE HAS OFFERED THE ADDITIONAL INCOME OF RS.6.0 0 LAKHS IN ASSESSMENT YEAR 2003-04 AND RS.5.50 LAKHS EACH IN THE ASSESSMENT YE ARS 2004-05 AND 2005-06 ONLY TO COVER UP THE SUPPRESSION. WHEN THE ASSESSE E IS OFFERING ADDITIONAL INCOME TO COVER UP DEFICIENCIES, IN THE INTEREST OF NATURAL JUSTICE, THE SAME IS REQUIRED TO BE TELESCOPED WITH THE SPECIFIC DEFICIE NCIES. OTHERWISE, IT WOULD I.T.A, NOS. 290-292 & 366-368/COCH/2013 13 RESULT IN ASSESSMENT OF SAME INCOME TWICE, WHICH IS NOT INTENDED UNDER THE ACT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) IN GIVING SET OFF OF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE AG AINST THE SUPPRESSED INTEREST RECEIPTS. ACCORDINGLY, WE DIRECT THE AO TO SET OFF OF THE SUPPRESSED INTEREST RECEIPTS DISCUSSED IN THE PRECEDING PARAGRAPH AGAIN ST THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. 5.0 THE NEXT ISSUE RELATES TO THE ADDITION IN RESPE CT OF UNEXPLAINED CASH FOUND DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESS EE TO FURNISH CASH FLOW STATEMENT FOR ALL THE THREE YEARS. IN THE CASH FLOW STATEMENT, THE ASSESSEE HAD SHOWN WITHDRAWALS FROM BANK ACCOUNT AS THE MAJOR SO URCE OF CASH INFLOW. THE AGGREGATE AMOUNT OF CASH DEPOSITS MADE INTO THE BAN K ACCOUNT IN ALL THE THREE YEARS IS MENTIONED IN THE ASSESSMENT ORDER AS DETAI LED BELOW. 1) ASSESSMENT YEAR 2003-04 RS. 13,70,000 /- 2) ASSESSMENT YEAR 2004-05 RS. 82,22,0 00/- 3) ASSESSMENT YEAR 2005-06 RS.1, 02,20,000/- THE ASSESSEE GAVE A GENERAL REPLY IN THIS REGARD AN D THE SAME IS EXTRACTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. FOR THE SAKE OF CONVENIENCE, WE ALSO EXTRACT THE SAME BELOW: THE REMITTANCES AND WITHDRAWALS FROM THE O.D. ACCO UNT ARE ALREADY REFLECTED IN THE CASH FLOW STATEMENTS. THE ASSESSE E IS NOT HAVING ANY BUSINESS OTHER THAN WHAT HAS BEEN DISCLOSED. THE RE MITTANCES INTO THE O.D. ACCOUNT ARE MAINLY BY WAY OF FOREIGN REMITTANCES AN D CASH DEPOSITS. THERE ARE ALSO CERTAIN CLEARING REMITTANCES REPRESENTING THE REPAYMENTS OF LOANS GIVEN TO FRIENDS AND RELATIVES. THE ASSESSEE HAS GI VEN FINANCIAL ASSISTANCE TO SOME OF HIS FRIENDS AND RELATIVES ON THE SECURITY O F CHEQUES ISSUED TO HIM BY THEM. THERE IS NO MONEY LENDING BUSINESS OTHER THAN GOLD LOANS. THE WITHDRAWALS FROM THE O.D. ACCOUNT FAR EXCEEDED THE REMITTANCES INTO THE O.D. ACCOUNT AND HEREIN THERE IS NO EXCESS TO BE EX PLAINED. 5.1 THE ASSESSEE ALSO CONTENDED BEFORE THE ASSESSIN G OFFICER THAT THE AMOUNT WITHDRAWN ON EARLIER OCCASION FROM THE BANK WAS RE- DEPOSITED SUBSEQUENTLY. THE ASSESSEE FURNISHED A CASH FLOW CHART LISTING OU T CASH WITHDRAWALS AND I.T.A, NOS. 290-292 & 366-368/COCH/2013 14 DEPOSITS DATE WISE IN ALL THE THREE YEARS IN ORDER TO SUBSTANTIATE HIS CONTENTION THAT THE CASH WITHDRAWN EARLIER WAS RE-DEPOSITED. BASED ON THE SAID STATEMENT, THE ASSESSEE CONTENDED THAT THERE WAS NO NEGATIVE C ASH BALANCE, SINCE THE WITHDRAWALS MADE EARLIER WAS SUFFICIENT TO EXPLAIN THE DEPOSITS MADE IN THE SUBSEQUENT PERIOD. HOWEVER, THE ASSESSING OFFICER REFUSED TO ACCEPT THE SAID CONTENTIONS. ACCORDINGLY, THE ASSESSING OFFICER AS SESSED THE CASH DEPOSITS REFERRED ABOVE AS THE INCOME OF THE ASSESSEE IN THE RESPECTIVE YEARS. 5.2 IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) WA S CONVINCED WITH THE EXPLANATIONS GIVEN BY THE ASSESSEE. ACCORDINGLY, H E DELETED THE ADDITIONS MADE IN THE ASSESSMENT YEARS 2003-04 AND 2004-05, SINCE THE CASH CHART PREPARED BY THE ASSESSEE DID NOT SHOW ANY NEGATIVE CASH BALANCE . HOWEVER, IN THE ASSESSMENT YEAR 2005-06, THERE WAS NEGATIVE CASH BA LANCE OF RS.4,30,000/- AS ON 13.09.2004. ACCORDINGLY, THE LD. CIT(A) CONFIRM ED THE ADDITION TO THE EXTENT OF RS. 4,30,000/- IN THE ASSESSMENT YEAR 2005-06 AN D DELETED THE REMAINING AMOUNT. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US ON THIS POINT IN ALL THE THREE YEA RS. THE ASSESSEE IS ALSO AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMIN G THE ADDITION TO THE EXTENT OF RS.4,30,000/- IN ASSESSMENT YEAR 2005-06. 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND CAREFULLY PERUSED THE RECORD. A PERUSAL OF THE CASH CHART PREPARED B Y THE ASSESSEE, ON THE BASIS OF CASH WITHDRAWALS AND CASH DEPOSITS MADE IN THE B ANK ACCOUNT OF THE ASSESSEE, WOULD SHOW THAT THE CASH WITHDRAWALS MADE ON EARLIER OCCASIONS WERE SUFFICIENT TO EXPLAIN THE CASH DEPOSITS MADE IN THE SUBSEQUENT PERIODS, EXCEPT FOR AN AMOUNT OF RS.4,30,000/- IN ASSESSMENT YEAR 2 005-06. HENCE, THE LD. CIT(A) HAS TAKEN THE VIEW THAT THE CASH DEPOSITS MA DE INTO THE BANK ACCOUNT STAND EXPLAINED. FOR THE SAKE OF CONVENIENCE, WE E XTRACT BELOW THE OBSERVATIONS MADE BY THE LD. CIT(A) ON THIS ISSUE IN THE ORDER P ASSED FOR THE ASSESSMENT YEAR 2003-04 : I.T.A, NOS. 290-292 & 366-368/COCH/2013 15 14.0 THE NEXT ISSUE IS ADDITION ON ACCOUNT OF UN EXPLAINED CASH CREDITS IN THE FORM OF CASH DEPOSITS IN THE BANK OD ACCOUNT OF THE APPELLANT. THE TOTAL AMOUNT OF ADDITION ON THIS ACCOUNT IS RS.13,7 0,000/-. IN THE REPLY BEFORE THE A.O. THE APPELLANT SUBMITTED THAT THE RE MITTANCE AND WITHDRAWALS IN THE OD ACCOUNT HAVE ALREADY BEEN REF LECTED IN THE CASH FLOW STATEMENT AND THE ASSESSEE WAS NOT HAVING ANY OTHER BUSINESS OTHER THAN THE DISCLOSED ONE. IT WAS ALSO SUBMITTED THAT THE CASH WITHDRAWALS FROM THE OD ACCOUNT EXCEED THE REMITTANCES IN CASH IN THE OD ACCOUNT AND HENCE THERE WAS NO EXCESS TO BE EXPLAINED. THE A.O. WAS OF THE VIEW THAT THE SOURCE OF DEPOSITS IN THE BANK ACCOUNT IN THE FORM OF CASH WAS NOT SATISFACTORILY EXPLAINED AND THEREFORE HE ADDED THE AFORESAID AMOUNT U/S. 68/69A OF THE I.T. ACT. AS PER THE PERSONAL C ASH AND FUNDS FLOW STATEMENT FOR THE YEAR UNDER CONSIDERATION FILED BE FORE THE A.O. THE CASH DEPOSITS IN THE O.D. ACCOUNT HAVE BEEN EXPLAINED WI TH REFERENCE TO THE DRAWINGS FROM THE SAME ACCOUNT. THE REPLY GIVEN BY THE APPELLANT THAT THE CASH DEPOSITS ARE OUT OF THE CASH WITHDRAWN FRO M THE BANK IS A REASONABLE REPLY. WHEN THE SAID REPLY WAS FURNISHE D BY THE APPELLANT, ONUS GOT SHIFTED UPON THE A.O. TO PROVE THAT ON THE DATES OF DEPOSITS, CASH OUT OF BANK WITHDRAWALS WAS NOT AVAILABLE WITH THE APPELLANT. IN THE WEALTH TAX ASSESSMENT ORDER FOR A.Y. 2003-04, PERSO NAL CASH BALANCE OF MORE THAN RS. 55 LAKHS AS ON 31.3.2003 HAS BEEN ASS ESSED. THEREFORE IT CANNOT BE SAID THAT APPELLANT DID NOT KEEP ANY CASH WITH HIM. IT IS SEEN FROM THE CHART SHOWN CASH AVAILABILITY FILED BY THE APPELLANT THAT THE ASSESSEE WAS HAVING SUFFICIENT CASH FOR MAKING CASH DEPOSIT IN BANK FROM THE BANK WITHDRAWALS MADE BY IT BEFORE THE DATES OF DEPOSITS. FOR EXAMPLE FROM THE DATE OF OPENING OF OD ACCOUNT (I.E . 11.12.2002) TO 15.1.2003 HE HAD WITHDRAWN TOTAL AMOUNT OF CASH OF RS.23,20,000/- ON VARIOUS DATES. THE ASSESSEE MADE DEPOSIT OF RS. 32 0000 ON 15.1.2003. THIS DEPOSIT COULD BE MADE FROM THE SAID CASH OF RS . 23,20,000/- AVAILABLE WITH THE ASSESSEE. IN MY OPINION, THE AP PELLANT HAS EXPLAINED THE SOURCE OF CASH DEPOSITS. THEREFORE, THE ADDITI ON MADE BY THE A.O. IS DELETED. IN ASSESSMENT YEAR 2004-05 ALSO, THE LD CIT(A) DELE TED THE ADDITION ON IDENTICAL REASONING. AS STATED EARLIER, IN ASSESSMENT YEAR 2 005-06, THE LD CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS.4,30,000 /-, THERE WAS NEGATIVE CASH BALANCE OF RS.4,30,000/- ON ONE PARTICULAR DAY. 5.4 THE UNDISPUTED FACTS REMAIN THAT THE ASSESS EE IS A NRI AND IS ALSO ASSESSED TO WEALTH TAX. IT WAS ALSO STATED THAT TH E ASSESSEE DID NOT HAVE ANY OTHER BUSINESS OTHER THAN MONEY LENDING ON THE PLED GE OF GOLD. IN THE WEALTH I.T.A, NOS. 290-292 & 366-368/COCH/2013 16 TAX ASSESSMENTS, THE CASH BALANCE OF RS.55.00 LAKHS , RS.48.00 LAKHS AND RS.16.00 LAKHS RESPECTIVELY HAVE BEEN ASSESSED IN A SSESSMENT YEARS 2003-04, 2004-05 AND 2006-07. THE MAIN CONTENTION OF THE ASSESSEE IS THAT HE WAS HELPING HIS FRIENDS AND RELATIVES BY GIVING MONEY T O THEM AND THE AMOUNT RETURNED BY THEM WERE RE-DEPOSITED INTO HIS BANK AC COUNT. IT IS ALSO THE ASSESSEES CONTENTION THAT HE DID NOT CHARGE ANY IN TEREST ON THE LOANS SO GIVEN. IN THE CASH FLOW STATEMENT FURNISHED BY THE ASSESSE E BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS DISCLOSED RECEIPT OF MONE Y FROM DUBAI, BESIDES SHOWING THE CASH WITHDRAWALS MADE FROM AND CASH DEPOSITS MA DE INTO THE BANK ACCOUNT. IN ADDITION TO THE CASH FLOW STATEMENT, THE ASSESSE E HAS ALSO FURNISHED A CASH FLOW CHART BEFORE THE AO AND THE AO HAS REJECTED TH E SAME WITHOUT EXAMINING IT. HOWEVER, THE LD CIT(A), ON EXAMINATION OF THE CASH CHARTS, HAS GIVEN A FINDING THAT THE CASH WITHDRAWALS MADE ON EARLIER OCCASIONS WAS SUFFICIENT TO EXPLAIN THE DEPOSITS MADE IN THE SUBSEQUENT PERIODS. ONLY IN T HE YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06, THERE WAS NEGATIVE CASH BA LANCE TO THE TUNE OF RS.4,30,000/- ON A PARTICULAR DAY. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSEE WAS CARRYING ON ANY OTHER BUSINESS AND FURTHER THE CASH WITHDRAWN FROM THE BANK HAD BEEN SPENT AWAY, IT WOULD BE REAS ONABLE TO PRESUME THAT THE WITHDRAWALS MADE IN THE EARLIER PERIOD WAS USED TO MAKE DEPOSITS IN THE SUBSEQUENT PERIOD, PARTICULAR IN VIEW OF THE SHORT TIME PERIOD BETWEEN WITHDRAWALS AND SUBSEQUENT DEPOSITS. THE SHORTER T IME GAP WOULD SUPPORT THE EXPLANATION OF THE ASSESSEE THAT HE WAS GIVING SHOR T TERM LOANS TO HIS FRIENDS AND RELATIVES. ACCORDINGLY, IN OUR VIEW, THERE IS NO INFIRMITY IN THE DECISION TAKEN BY LD CIT(A) ON THIS ISSUE IN ASSESSMENT YEARS 2003 -04 AND 2004-05. 5.5 IN ASSESSMENT YEAR 2005-06, THE LD CIT(A) H AS CONFIRMED THE ADDITION TO THE TUNE OF RS.4,30,000/-. IN THAT YEAR, THE ASSES SEE HAD OFFERED ADDITIONAL INCOME OF RS.5,50,000/- AND THE SAME HAS ALSO BEEN ACCEPTED BY THE ASSESSING OFFICER, WHICH MEANS THAT THE ASSESSEE WOULD BE HAV ING CASH INFLOW TO THE TUNE OF RS.5,50,000/- WITH HIM, WHICH COULD BE TREATED A S THE SOURCE FOR THE ABOVE I.T.A, NOS. 290-292 & 366-368/COCH/2013 17 SAID AMOUNT OF RS.4,30,000/-. ACCORDINGLY, IN OUR VIEW, THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE SUFFICIENTLY EXPLAINS THE N EGATIVE CASH BALANCE OF RS.4,30,000/- FOUND IN THE CASH FLOW CHART PREPARED BY THE ASSESSEE, I.E., IT WOULD BE REASONABLE TO GIVE TELESCOPING BENEFIT OF CASH AVAILABLE UPON OFFERING OF ADDITIONAL INCOME AGAINST THE NEGATIVE CASH BALA NCE NOTICED IN THE CASH CHART PREPARED BY THE ASSESSEE. ACCORDINGLY, WE MODIFY T HE ORDER OF THE LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELE TE THE ENTIRE ADDITION RELATING TO CASH DEPOSITS MADE INTO THE BANK ACCOUNT IN ASSESSM ENT YEAR 2005-06.. 5.5 THIS ISSUE MAY BE LOOKED FROM ANOTHER ANGLE . IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS GENERATING CASH THROUGH SOME SOURCES O R DID THE ASSESSEE CARRY SOME OTHER BUSINESS ACTIVITY. WE HAVE ALSO NOTICED THAT THE REPETITIVE TRANSACTIONS OF CASH WITHDRAWALS AND CASH DEPOSITS ACTUALLY SUPPORT THE EXPLANATION OF THE ASSESSEE THAT HE WAS INDULGING I N GIVING SHORT TERM LOANS TO HIS FRIENDS AND RELATIVES. UNDER THESE CIRCUMSTANC ES, IN OUR VIEW, IT MAY POSSIBLE TO PRESUME THAT THE ASSESSEE MIGHT HAVE CHARGED INT EREST ON SUCH LOANS, THOUGH THE CONTENTION OF THE ASSESSEE WAS THAT HE WAS MAKI NG SHORT TERM LENDING TO HIS FRIENDS AND RELATIVES FREE OF INTEREST. IN THAT CA SE, THE WITHDRAWALS MADE FROM THE BANK ACCOUNT MIGHT HAVE BEEN USED FOR GIVING SH ORT TERM LOANS AND THE REPAYMENTS RECEIVED BACK MIGHT HAVE BEEN RE-DEPOSIT ED INTO THE BANK ACCOUNT. IN THAT CASE ALSO, THE EARLIER WITHDRAWALS CONSTITU TE THE SOURCE FOR SUBSEQUENT DEPOSITS AND HENCE NO ADDITION IS CALLED FOR. EVEN IF IT IS PRESUMED FOR A MOMENT THAT THE ASSESSEE MIGHT HAVE CHARGED INTEREST ON SU CH KIND OF SHORT TERM LOAN GIVEN, THEN ONE HAS TO ESTIMATE THE NET INCOME REAL IZED ON SUCH TRANSACTIONS. FOR THAT PURPOSE, ONE MAY HAVE TO COMPUTE THE AVERA GE FUND EMPLOYED IN SHORT TERM MONEY LENDING ACTIVITY AND THEN COMPUTE THE NE T INTEREST INCOME. WE HAVE NOTICED THAT THE ASSESSEE HAS ALREADY OFFERED ADDIT IONAL INCOME IN EACH OF THE THREE YEARS AND THE INCOME SO OFFERED WAS MORE THAN THE INTEREST SUPPRESSED ON PARTIALLY CLOSED/ PENDING LOANS. HENCE, IN OUR VIE W, IT MAY BE REASONABLE TO GIVE I.T.A, NOS. 290-292 & 366-368/COCH/2013 18 TELESCOPING BENEFIT OF THE BALANCE AMOUNT OF ADDITI ONAL INCOME AGAINST THE POSSIBLE NET INCOME REALIZED ON THE SHORT TERM MONE Y LENDING ACTIVITY, IF ANY. IN THAT CASE, ALL THE CASH DEPOSITS SHOULD BE CONSIDER ED AS REPAYMENT OF LOAN GIVEN EARLIER AND HENCE, ON THAT ANGLE ALSO, THE ADDITION RELATING TO CASH DEPOSIT DESERVES TO BE DELETED. 6. THE NEXT ISSUE RELATES TO THE ADDITION RELATING TO UNEXPLAINED CHEQUE DEPOSITS MADE INTO THE BANK ACCOUNT. WE SHALL DEAL WITH THIS ISSUE ASSESSMENT YEAR WISE. IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04, THE ASSESSING OFFICER ADDED A SUM OF RS. 5,99,000/- AS UNEXPLAINE D CHEQUE DEPOSITS. THE DETAILS OF THE SAME ARE GIVEN BELOW: CANARA BANK, KOLLAM BRANCH CHEQUE DEPOSIT DATE AMOUNT 07.01.2003 3000 17.01.2003 10000 23.01.2003 3000 23.01.2003 247500 23.01.2003 247500 29.01.2003 35000 04.03.2003 3000 13.03.2003 50000 TOTAL 5,99,000 6.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE FURNISHED DETAILS OF MAJOR LOANS RECEIVED BY HIM AS UNDER:- MR. SYED SIDDIK 13.03.2003 - 50,000 MR. KESHAVAN CHANDRA MOHAN 23.1.2003 - 2,47, 500 MR. MOHAMMED RAFI 23.01.2003 - 2,47,500 IN THE REMAND PROCEEDINGS, THE ASSESSEE PRODUCED SH RI KESHAVAN CHANDRA MOHAN AND SHRI MOHAMMED RAFI BEFORE THE ASSESSING O FFICER AND THEY ALSO CONFIRMED ABOUT THE PAYMENTS MADE TO THE ASSESSEE. ACCORDINGLY, IN THE REMAND REPORT, THE ASSESSING OFFICER STATED THAT HE WAS SATISFIED WITH THE I.T.A, NOS. 290-292 & 366-368/COCH/2013 19 GENUINENESS OF THE LOANS RECEIVED FROM THE ABOVE SA ID TWO PERSONS. HOWEVER, THE LD. CIT(A) ACCEPTED THE LOAN RECEIVED FROM SHRI KESHAVAN CHANDRA MOHAN ONLY. IN RESPECT OF LOAN RECEIVED FROM SHRI MOHAMM ED RAFI, THE LD.CIT(A) REFUSED TO ACCEPT THE RECOMMENDATIONS MADE BY THE A SSESSING OFFICER ON THE TECHNICAL GROUND THAT HE DID NOT REFER THE MATTER O F VERIFICATION OF SHRI MOHAMMED RAFI TO THE ASSESSING OFFICER IN THE REMAN D PROCEEDINGS. ACCORDINGLY, THE LD. CIT(A) GRANTED RELIEF OF RS. 2 ,47,800/- ( THE AMOUNT MENTIONED BY THE AO IN THE REMAND REPORT) PERTAININ G TO SHRI KESAVA CHANDRA MOHAN AND CONFIRMED THE REMAINING ADDITION. AGGRIE VED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 6.2 WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND PERUSED THE RECORD. OUT OF THE TOTAL CHEQUE DEPOSIT OF RS. 5,99,000/-, THE MAJOR AMOUNTS CONSISTED OF LOANS RECEIVED FROM SHRI KESHAVAN CHANDRA MOHAN AND SHRI MOHAMMED RAFI. IT IS A FACT THAT THE ASSESSEE HAD PRODUCED BOTH TH E CREDITORS BEFORE THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS AND THE ASSESSING OFFICER WAS SATISFIED WITH THE GENUINENESS OF BOTH THE CREDITS. WE HAVE ALSO NOTICED THAT THE LD. CIT(A) HAS REJECTED THE GENUINENESS OF THE LOAN RECEIVED FROM SHRI MOHAMMED RAFI ONLY ON TECHNICAL REASONS. HOWEVER, THE FACT REMAINS THAT SHRI MOHAMMED RAFI HAS APPEARED BEFORE THE ASSESSING OFF ICER AND ALSO CONFIRMED THE FACT OF PAYMENT OF LOAN TO THE ASSESSEE. THE A SSESSING OFFICER WAS ALSO SATISFIED WITH THE GENUINENESS OF THE LOAN RECEIVED FROM SHRI MOHAMMED RAFI. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, IT MAY NOT BE PROPER TO REJECT THE GENUINENESS OF LOAN ON TECHNICAL REASONS. ACCORDIN GLY, IN OUR VIEW AND IN THE FACTS AND CIRCUMSTANCES DISCUSSED SUPRA, THE GENUIN ENESS OF LOAN RECEIVED FROM SHRI MOHAMMED RAFI NEEDS TO BE ACCEPTED. ACCORDING LY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) IN RESPECT OF THE LOAN RECEIVED F ROM SHRI MOHAMMED RAFI AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.2,47,500/- RELATING THERETO. I.T.A, NOS. 290-292 & 366-368/COCH/2013 20 6.3 WE NOTICE THAT THE REMAINING CREDITS ARE SMA LL ITEMS OF CREDITS AGGREGATING TO RS. 1,04,000/-. BEFORE THE AO, THE ASSESSEE HAS SUBMITTED THAT THEY REPRESENT REPAYMENT OF SHORT TERM LOANS GIVEN TO FR IENDS AND RELATIVES AND ALSO FOREIGN REMITTANCES. HOWEVER, THE SAID EXPLANATION WAS NOT ACCEPTED BY BOTH THE TAX AUTHORITIES. WE HAVE ALREADY NOTICED THAT THE LD A.R HAS SUBMITTED THAT THE ASSESSEE HAS DECLARED ADDITIONAL INCOME OF RS. 6.00 LAKHS DURING THIS YEAR TO COVER THE SUPPRESSION OF INTEREST AND OTHER DEFICIE NCIES. THE AO HAS IGNORED THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE ON THE GR OUND THAT THE BOOKS OF ACCOUNTS ARE NOT FULLY RELIABLE. THE SAID REASON G IVEN BY THE AO IS NOT CONVINCING TO US. IT IS A WELL SETTLED PRINCIPLE T HAT THERE CANNOT BE DOUBLE TAXATION OF SAME ITEM OF INCOME. 6.4 WE HAVE ALREADY HELD THAT THE SUPPRESSION O F INTEREST RECEIPTS FOR THE YEAR UNDER CONSIDERATION SHOULD BE TAKEN AS THAT WORKED OUT BY THE ASSESSEE. WE HAVE ALSO NOTICED THAT THE ASSESSEE HAS WORKED OUT THE AMOUNT OF SUPPRESSION OF INTEREST AT RS.1,93,865/-. AFTER SETTING OFF TH IS AMOUNT AGAINST THE ADDITIONAL INCOME OF RS. 6.00 LAKHS OFFERED BY THE ASSESSEE, T HERE WOULD REMAIN A BALANCE AMOUNT OF ABOUT RS.4.00 LAKHS, WHICH CAN BE SET OFF AGAINST THE ADDITION RELATING TO UNEXPLAINED CHEQUE DEPOSIT OF RS.1,04,000/- CITE D ABOVE. SUCH A SET OFF WOULD STILL LEAVE A BALANCE OF RS.2,96,000/- WHICH CAN ALSO BE TAKEN AS NET INTEREST INCOME REALIZED ON SHORT TERM MONEY LENDIN G ACTIVITY, IF ANY, OF THE ASSESSEE DISCUSSED SUPRA. ACCORDINGLY, WE DO NOT FIND ANY NECESSITY TO SUSTAIN THE ADDITION OF RS. 1,04,000/-. ACCORDINGLY, WE SE T ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFIC ER TO DELETE THE AMOUNT OF RS. 1,04,000/- ALSO. IN THE RESULT, THE ENTIRE ADDITIO N RELATING TO CHEQUE DEPOSITS STANDS SET ASIDE. 7. IN THE ASSESSMENT YEAR 2004-05, THE ASSESSING OF FICER HAS ADDED A SUM OF RS.21,23,017/- AS UNEXPLAINED CHEQUE DEPOSITS. BEF ORE THE LD. CIT(A), THE I.T.A, NOS. 290-292 & 366-368/COCH/2013 21 ASSESSEE FURNISHED THE NAME AND ADDRESSES OF PERSON S WHO GAVE THE CHEQUES TO THE ASSESSEE. THE DETAILS FURNISHED BY THE ASSESSE E ARE EXTRACTED BELOW: NAME & ADDRESS DT. OF LOAN GIVEN AMOUNT IN RS. MR. PRATHEESH ECHAKKUNNATH, E.K. HOUSE, PANAYATHAM, OARAMBIL, EDAYANNUR (P.O.), KANNUR, KERALA- 670595. 19.4.2003 245000 MR. BIJU GOPALAKRISHNAN NAIR, TEKKE ALUMMOOTTIL,KONNI, IRAVON, PATHANAMTHITTA, KERALA- 689691 19.4.2003 98000 MR. RATHEESH KIZHAKKE KALANKOT MUNDAYATTU KOTTATH VALAPPIL ADUTHILA EAST, PAYANGADI P.O., KANNUR, KERALA-670303 21.4.2003 49000 MR. RATHEESH KIZHAKKE KALANKOT MUNDAYATTU KOTTATH VALAPPIL ADUTHILA EAST, PAYANGADI P.O., KANNUR, KERALA-670303 4.6.2003 69000 MR. HASHIM CHEENICKAL SOOPY, CHEENICKAL HOUSE, ATHIYODE (P.O.), KOORACHUNDU, KOZHIKODE, KERALA-673527 4.6.2003 250000 MR. THANKARAJ PNDIYAN, A-2, ARIJANA COLONY, PENNAKONAM (P.O.), PERAMBALUR, TAMIL NADU- 621108 1.7.2003 40000 MR. SHIJIMON THANNICKAL, THANNICKAL HOUSE UZHAVOOR (P.O.), KOTTAYAM, KERALA-686634 1.7.2003 100000 MR. SHYJU THEKKE MAMMALIMMAL, THUDIPARAMBATH HOUSE, PONNIAM EST (P.O.), KADIRUR, KANNUR, KERALA 13.8.2003 200000 MR. UNNIKRISHNAN PUTHENVEETTIL, KURUNGODAN, PRASANNALAYAM, PONMERY PARAMBIL (P.O.), VILLIAPPALLI, KOZHIKODE, KERALA 300000 MR. RAJESH PAYYAN PUTHENVEETTIL, PAYYANPUTHAN VEEDU HOUSE, ANCHAMPEEDIKA (P.O.), MOTTAMMAL, KANNUR, KERALA 25.10.2003 160000 I.T.A, NOS. 290-292 & 366-368/COCH/2013 22 MR. SANAL KUMAR POLA, POLA HOUSE (S.N. NIVAS), EMBATE, PARIYARAM P.O. KANNUR, KERALA 13.1.2004 40000 MR. SANTHOSH KOLLIKKOLAVIL JOSEPH, 4/567, PERIYANGANAM P.O., NILESHWAR, KASARAGOD, KERALA 13.1.2004 30000 MR. MANI KUTTIYADUKKAM, KUTTIYADUKAM HOUSE, PERIYE (P.O.) KAYAKKULAM PALLIKERA, KASARAGOD, KERALA 23.3.2004 65000 MR. RAJESH PAYYAN PUTHENVEETTIL, PAYYANPUTHAN VEEDU HOUSE, ANCHAMPEEDIKA (P.O.), MOTTAMMAL, KANNUR, KERALA. 24.3.2004 40000 MR. SANAL KUMAR POLA, POLA HOUSE, (S.N. NIVAS), EMBATE, PARIYARAM P.O., KANNUR, KERALA 24.3.2004 80000 MR. MANI KUTTIYADUKKAM, KUTTIYADUKAM HOUSE, PERIYE (P.O.), KAYAKKULAM, PALLIKERA, KASARAGOD, KERALA 30.3.2004 175000 TOTAL 1941000 THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER ISSUED COMMISSIONS TO SEVEN CREDI TORS AND FURNISHED THE RESULT OF THE COMMISSIONS AS UNDER: SR. NO. NAMES & ADDRESSES OF THE DEPOSITOR AMOUNT (RS.) OFFICER TO WHOM COMMISSION ISSUED AND RESULT 1. MR. PRATHEESH ECHAKUNNATH, E.K. HOUSE, PANAYATHAM, OARAMBIL, EDAYANNUR P.O.,KANNUR. 245000 ITO, WARD-1, KANNUR. ENQUIRY ABOUT MR. MANI REVEALS THAT HE IS WORKING ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION COULD NOT BE VERIFIED. 2. MR. HASHIM CHEENICKAL SOOPHY, CHEENICKAL HOUSE, ATHIYODE P.O., KOORACHUNDU, KOZHIKODE. 250000 ITO, WARD-2(1), KOZHIKODE. SHRI HASHIM STATED BEFORE THE OFFICER ON OATH THAT HE WAS AN EMPLOYEE OF MR. REGHU AT DUBAI AN DHE HAS NOT ACCEPTED/PAID ANY LOAN/DEPOSIT TO MR. REGHU. 3. MR. SHIJUMON THANNICKAL, THANNICKAL HOIUSE, 100000 ITO, WARD-1, KANNUR. ENQUIRY ABOUT MR. MANI REVEAL THAT HE IS WORKING I.T.A, NOS. 290-292 & 366-368/COCH/2013 23 UZHAVOOR P.O., KOTTAYAM. ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION COULD NOT BE VERIFIED. 4. MR. SHYJU THEKKE MAMMALIMMAL THUDIPARAMBATH HOUSE, POONIYAM EAST, KANNUR 200000 ITO, WARD-1, KANNUR. ENQUIRY ABOUT MR. MANI REVEALS THAT HE IS WORKING ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION COULD NOT BE VERIFIED. 5. MR. UNNIKRISHNAN, PUTHEN VEETTIL , KURUGODAN, PRASANNALAYAM, PONMERIPARAMBIL P.O., VILLIAPALLI,KOZHIKODE. 300000 THE ITO, WARD-2(2), KOZHIKODE. AFTER VERIFICATION THE OFFICER REPORTED THAT THE NOTICE ISSUED TO MR. UNNIKRISHNAN RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN. THEREAFTER ENQUIRY THROUGH INCOME TAX INSPECTOR ALSO MADE. ALL THE ENQUIRIES REVEAL THAT THERE IS NO SUCH PERSON IN THE GIVEN ADDRESS. 6. MR. RAJESH PAYYAN, PUTHENVEETTIL P.O., AYYABOUOTHEN VEEDU HOUSE, ANCHAMPEEDIKA P.O., MOTTAMMAL, KANNUR 160000 ITO, WARD-1, KANNUR. SHRI RAJESH STATED BEFORE THE OFFICER ON OATH THAT HE WAS AN EMPLOYEE OF MR. REGHU AT DUBAI AND HE WAS NOT ACCEPTED/PAID ANY LOAN/DEPOSIT TO MR. REGHU DURING THE PERIOD IN QUESTION. HE ACCEPTED A LOAN AMOUNTING TO RS. 1 LAKH ACCEPTED DURING 2007-08 & THIS WAS REPAID DURING 2008 JULY. HE ALSO STATED THAT HE HAS NOT KNOWN MR. REGHU DURING THE PERIOD 2003-04. HE WAS UNEMPLOYED DURING THE PERIOD 2003-04. 7. MR. MANI KUTTIYADUKKAM, KUTTIYADUKKAM HOUSE, PERIYE P.O., KAYAKKULAM, PALLIKKARA, KASARAGOD. 175000 ITO, WARD-1, KASARGODE. ENQUIRY ABOUT MR. MANI REVEAL THAT HE IS WORKING ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION COULD NOT BE VERIFIED. IN RESPONSE TO THE REMAND REPORT, THE ASSESSEE FURN ISHED THE FOLLOWING DETAILS BEFORE THE LD. CIT(A): B) CHEQUE DEPOSIT THE A.O. AS PER HIS REMAND REPORT HAS STATED THAT, OUT OF 16 PERSONS WHO HAD GIVEN/REFUNDED LOAN, COMMISSION TO EXAMINE 7 PE RSONS WERE ISSUED. 1. REGARDING MR. PRATHEESH THE REPORT STATES THAT THE I.T.O., WARD-1, KANNUR. ENQUIRY ABOUT MR. MANI REVEALS THAT HE IS W ORKING ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION CANNOT BE VERIFI ED. THIS IS A MISTAKE OF I.T.A, NOS. 290-292 & 366-368/COCH/2013 24 IDENTITY AND HENCE BASED ON THIS NO DISALLOWANCE CA N BE MADE. WE ARE ATTACHING A CONFIRMATION LETTER AND A COPY OF HIS P ASSPORT OF MR PRATHEESH ECHAKKUNNATH AS ANNEXURE-I TO SHOW THAT HE IS WORKIN G IN UAE. THIS MAY BE THE REASON FOR RETURNING THE SUMMONS. 2. REGARDING MR. SHIJIMON THE REPORT STATES THAT THE I.T.O., WARD-1, KANNUR. ENQUIRY ABOUT MR. MANI REVEALS THAT HE IS WO RKING ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION CANNOT BE VERIFI ED. THIS IS A MISTAKE OF IDENTITY AND HENCE BASED ON THIS NO DISALLOWANCE CA N BE MADE. WE HAVE OBTAINED A CONFIRMATION LETTER AND COPY OF THE PASS PORT FROM MR. SHIJIMON THANNICKAL AS ANNEXURE-II TO SHOW THAT HE IS WORKIN G IN UAE. THIS MAY BE THE REASON FOR RETURNING THE SUMMONS. 3. REGARDING MR. SHYJU TEHKKE THE REPORT STATES THAT THE I.T.O., WARD- 1, KANNUR. ENQUIRY ABOUT MR. MANI REVEALS THAT HE IS WORKING ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION CANNOT BE VERIFI ED. THIS IS A MISTAKE OF IDENTITY AND HENCE BASED ON THIS NO DISALLOWANCE CAN BE MADE. WE HAVE OBTAINED A CONFIRMATION LETTER AND COPY OF THE PASS PORT FROM MR. SHYJU THEKKE AS ANNEXURE-III TO SHOW THAT HE WORKING IN U AE. THIS MAY BE THE REASON FOR RETURNING THE SUMMONS. 4. REGARDING MR. UNNIKRISHNAN- THE I.T.O., WARD- 2(2), KOZHIKODE. ALL THE ENQUIRIES SHOW THAT THERE IS NO SUCH PERSON IN THE ABOVE ADDRESS. WE HAVE OBTAINED A CONFIRMATION LETTER AND COPY OF THE PASS PORT FROM MR. UNNIKRISHNAN AS ANNEXURE-IV TO SHOW THAT HE IS WORK ING IN UAE. THIS MAY BE THE REASON FOR RETURNING THE SUMMONS. 5. REGARDING MR. RAJESH PAYYAN-THE REPORT STATES T HAT THE I.T.O., WARD- 1, KANNUR. THAT MR. RAJESH PAYYAN HAS STATED THAT H E HAS GIVEN LOAN TO THE APPELLANT DURING 2007-08 AND THIS WAS RETURNED DURI NG 2008-09. HE FURTHER STATED THAT HE WAS NOT KNOWN MR. REGHU DURING 2003- 04. WE HAVE OBTAINED A CONFIRMATION LETTER AND A COPY OF HIS PA SSPORT FROM MR. RAJESH PAYYAN, ATTACHED AS ANNEXURE-V, TO SHOW THAT HE IS WORKING WITH CALIFORNIA HOTEL AS SUPERVISOR CLERK IN DUBAI, UAE. THIS MAY B E THE REASON FOR RETURNING THE SUMMONS. THE APPELLANT MAY BE GIVEN AN OPPORTUNITY TO CROSS EXAMINE HIM BEFORE ACCEPTING THE STATEMENT. 6. REGARDING MR. MANI- THE REPORT STATES THAT TH E I.T.O., WARD-1, KANNUR. ENQUIRY ABOUT MR. MANI REVEALS THAT IS WORKI NG ABROAD. HENCE THE GENUINENESS OF THE TRANSACTION CANNOT BE VERIFIED. HE IS NOW WORKING IN DUBAI, UAE AND WE ARE ENCLOSING A CONFIRMATION LETTE R AND A COPY OF THE PASSPORT TO PROVE HIS CREDENTIALS AS ANNEXURE-VI. T HIS MAY BE THE REASON FOR RETURNING THE SUMMONS. I.T.A, NOS. 290-292 & 366-368/COCH/2013 25 SINCE THE CONFIRMATIONS ARE SUBMITTED THE LOAN MA Y BE ALLOWED AND ADDITION MAY BE DELETED. 7.1 SINCE THE ASSESSEE FURNISHED THE CONFIRMATION L ETTERS OBTAINED FROM THOSE CREDITORS ALONG WITH THE REPLY TO THE REMAND REPORT , THE LD. CIT(A) ADMITTED THEM AS FRESH EVIDENCES AND FORWARDED THEM TO THE A SSESSING OFFICER FOR FURNISHING A REMAND REPORT AGAIN. HOWEVER, IN THE REMAND PROCEEDING, THE ASSESSEE COULD NOT PRODUCE SIX CREDITORS FROM WHOM THE CONFIRMATION LETTERS WERE OBTAINED AND HENCE THE ASSESSING OFFICER APPEA RS TO HAVE DECLINED TO ACCEPT ABOUT THE GENUINENESS OF THE CREDITS. SINCE THE ASSESSEE COULD NOT PRODUCE THE CREDITORS BEFORE THE ASSESSING OFFICER, THE LD. CIT(A) ALSO TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CREDITWORTHINESS OF THE CREDITORS IN RESPECT OF THOSE PERSONS FROM WHOM THE CONFIRMATION LETTERS WERE OBTAINED. IN RES PECT OF REMAINING CREDITS, THE ASSESSEE DID NOT FILE ANY EVIDENCE TO PROVE THE CASH CREDITS. ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE ENTIRE ADDITION OF RS. 21, 23,017/-. 7.2 WE HAVE HEARD RIVAL CONTENTIONS ON THIS IS SUE AND PERUSED THE RECORD. BEFORE THE AO, THE ASSESSEE HAS SUBMITTED THAT THEY REPRESENT REPAYMENT OF SHORT TERM LOANS GIVEN TO FRIENDS AND RELATIVES AND ALSO FOREIGN REMITTANCES. HOWEVER, THE SAID EXPLANATION WAS NOT ACCEPTED BY B OTH THE TAX AUTHORITIES. BEFORE THE LD CIT(A), THE ASSESSEE HAS FURNISHED BR EAK UP DETAILS OF CHEQUES RECEIVED BY HIM DURING THE YEAR UNDER CONSIDERATION FOR A SUM OF RS.19,41,000/- AS AGAINST THE AGGREGATE AMOUNT OF RS.21,23,017/-. HOWEVER, THE AO CHOSE TO EXAMINE ONLY SEVEN CREDITORS, OUT OF THE LIST OF 19 CREDITORS AND FURNISHED THE REMAND REPORT. THE ASSESSEE, IN REPLY TO THE REMAN D REPORT, HAS POINTED OUT THE LAPSES IN THE REPORT SUBMITTED BY THE AO, I.E., AGA INST THE CREDITORS VIZ., MR. PRATHEESH, MR. SHIJUMON, MR. SHYJU THEKKE, THE AO H AS FURNISHED THE RESULTS OF ENQUIRIES MADE FOR ANOTHER CREDITOR NAMED MR. MANI. HENCE, IT IS CLEAR THAT THERE WERE LAPSES IN THE ENQUIRIES CONDUCTED BY THE AO. I.T.A, NOS. 290-292 & 366-368/COCH/2013 26 7.3 WE NOTICE THAT THE ASSESSEE HAS ALSO FURNIS HED CONFIRMATION LETTERS OBTAINED FROM THE FOLLOWING PERSONS ALONG WITH THE COPIES OF THEIR RESPECTIVE PASS PORTS BEFORE LD CIT(A) TO PROVE THE CREDITS. SHRI PRATHEESH - 2,45,000 SHRI SHIJUMON THANNICKAL - 1,00,000 SHRI SHYJU THEKKE - 2,00,000 SHRI UNNIKRISHNAN - 3,00,000 SHRI RAJESH PAYYAN - 1,60,000 SHRI MANI KUTTIYADUKKAM - 1,75,000 -------------- 11,80,000 ======== THE LD CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS FI LED CONFIRMATION LETTERS FOR AN AMOUNT OF RS.10,85,000/-, WHICH APPEARS TO BE NO T CORRECT IN VIEW OF THE DETAILS FURNISHED ABOVE. THE LD CIT(A) HAS ADMITTE D THE CONFIRMATION LETTERS AND COPIES OF PASS PORTS FURNISHED BY THE ASSESSEE BEFORE HIM AS FRESH EVIDENCES AND FORWARDED THEM TO THE AO FOR HIS COMMENTS. THE ASSESSING OFFICER, VIDE HIS REPORT DATED 26.4.2011, HAS FURNISHED A CONSOLIDATE D REPLY COVERING THE ASSESSMENT YEARS 2003-04 TO 2005-06. IT APPEARS TH AT THE ASSESSEE, IN THE REMAND PROCEEDINGS, COULD PRODUCE ONLY TWO CREDITOR S FROM WHOM FUNDS WERE RECEIVED DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04. HENCE, THE AO ACCEPTED THE GENUINENESS OF THE CREDITS RECEIVED FROM THOSE TWO PERSONS. THE ASSESSEE COULD NOT PRODUCE OTHER PERSONS, OBVIO USLY FOR THE REASONS THAT THEY ARE WORKING ABROAD. HENCE, THE AO HAS REPORT ED AS UNDER IN HIS REMAND REPORT IN RESPECT OF OTHER CREDITS:- THE ASSESSEE DID NOT PRODUCE THE OTHER CREDITORS F OR VERIFICATION STATING THEIR INABILITY TO APPEAR OWING TO THEIR EMPLOYMENT ABROAD. THE RELEVANT MISCELLANEOUS RECORDS ARE ENCLOSED HEREWITH. IT CAN BE NOTICED THAT THE ASSESSING OFFICER DID NO T EXPRESS ANY OPINION ABOUT THE CREDITS, BUT HAS ONLY MADE OBSERVATION ABOUT THE IN ABILITY OF THE ASSESSEE TO PRODUCE THE PERSONS FOR THE REASON THAT THEY ARE EM PLOYED ABROAD. THE ASSESSING OFFICER DID NOT COMMENT ABOUT THE ADEQUAC Y OF THE CONFIRMATION LETTERS GIVEN BY THE SIX PERSONS LISTED ABOVE. I.T.A, NOS. 290-292 & 366-368/COCH/2013 27 7.4 THE LD CIT(A) HAS, HOWEVER, DECLINED TO ACC EPT THE CREDITS WITH THE FOLLOWING OBSERVATIONS:- IT IS SEEN FROM THE REMAND REPORT THAT THE TWO LOA N CREDITORS PRODUCED BEFORE THE A.O NAMELY SHRI CHANDRA MOHAN AND SHRI M OHAMMED RAFI WERE ALSO EMPLOYEES OF THE APPELLANT AND WERE WORKI NG ABROAD AND THEY CAME TO INDIA SPECIFICALLY AS WITNESS TO PROVE THE CREDITS. THE APPELLANT FILED CONFIRMATIONS IN SUPPORT OF THE GENUINENESS O F THE CREDITS ON 16.2.2011. SINCE THEN THE APPEAL HAS BEEN FIXED FO R HEARING ON SEVERAL DATES AND SO FAR THE APPELLANT, WHO WAS ALSO AN EMP LOYER OF THE LOAN CREDITORS AND THEREFORE COULD EXERCISE ENOUGH INFLU ENCE ON THESE CREDITORS, COULD PRODUCE ONLY TWO SUCH CREDITORS. THE FACT THE OTHER LOAN CREDITORS WERE NOT PRODUCED, ITSELF CAST A SERIOUS DOUBT ON THE GENUINENESS OF THE CONFIRMATION LETTERS SUBMITTED B Y THE APPELLANT. FURTHER, THE APPELLANT HAS NOT SOUGHT ANY FURTHER T IME FOR THE PRODUCTION OF REMAINING LOAN CREDITORS. IN VIEW OF THE ABOVE, IT IS HELD THAT THE APPELLANT HAS FAILED TO ESTABLISH THE GENUINENESS O F THE TRANSACTIONS AS WELL AS THE CREDIT WORTHINESS OF THE CASH CREDITORS IN RESPECT OF SIX PARTIES FROM WHOM IT IS CLAIMED TO HAVE RECEIVED CHEQUES. A PERUSAL OF THE ORDER OF LD CIT(A) ON THIS ISSUE, WOULD SHOW THAT THE ASSESSING OFFICER HAS ACCEPTED THE GENUINENESS OF THE CREDITS OF TWO PERSONS, SINCE THEY APPEARED BEFORE HIM AND CONFIRMED THE PAYMENT. IT IS PERTINENT TO NOTE THAT THEY WERE ALSO EMPLOYEES OF THE ASSESSEE WORKING AB ROAD. IN RESPECT OF THE SIX CREDITS, THE LD CIT(A) HAS FAILED TO ACCEPT THE CRE DITS FOR THE REASON THAT (A) THE CONCERNED PERSONS WERE NOT PRODUCED BEFOR E THE AO (B) THEY COULD BE INFLUENCED BY THE ASSESSEE, SINCE THEY ARE HIS EMPLOYEES. BUT THE FACT REMAINS THAT THE TWO PERSONS WHO APPEA RED BEFORE THE AO WERE ALSO EMPLOYEES OF THE ASSESSEE AND THE SAID FACT DI D NOT COME IN THE WAY OF THE TAX AUTHORITIES IN ACCEPTING THE GENUINENESS OF THE CREDITS. HENCE, IN EFFECT, THE FUNDS RECEIVED FROM THE SIX PERSONS LISTED ABOVE WE RE NOT ACCEPTED ONLY FOR THE REASON THAT THEY WERE NOT PRODUCED BEFORE THE AO FO R EXAMINATION. I.T.A, NOS. 290-292 & 366-368/COCH/2013 28 7.5 HOWEVER, THE FACT REMAINS THAT THE SIX PERS ONS, REFERRED ABOVE, WERE WORKING ABROAD AND THE ASSESSEE HAS EXPRESSED HIS I NABILITY TO PRODUCE THEM ONLY FOR THAT REASON. WE NOTICE THAT NO WHERE IT I S STATED THAT THE AO SHOULD NECESSARILY EXAMINE ALL THE CREDITORS IN PERSON IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF CREDITS. SINCE THE SIX PERSONS, REFERRED ABOVE, WERE WORKING ABROAD, IT MAY NOT BE ALWAYS POSSIBLE FOR THE ASSES SEE TO PRODUCE THEM BEFORE THE AO, SINCE IT INVOLVES HUGE TRAVELLING EXPENSES. HENCE, IN OUR VIEW, IT MAY NOT BE PROPER TO COMPEL THE ASSESSEE TO PRODUCE THE CREDITORS IN SUCH TYPE OF CIRCUMSTANCES. HOWEVER, THE FACT REMAINS THAT THE ASSESSEE HAS FILED COPIES OF PASS PORTS AND ALSO CONFIRMATION LETTERS OBTAINED F ROM THEM TO PROVE THE CREDITS. WE HAVE ALREADY NOTICED THAT THE AO DID NOT FIND AN Y FAULT WITH THE ABOVE SAID DOCUMENTS FILED BY THE ASSESSEE, WHICH IMPLIEDLY WO ULD MEAN THAT THE ASSESSING OFFICER WAS SATISFIED WITH THOSE DOCUMENTS. HOWEVE R, THE LD CIT(A) HAS EXPRESSED THE VIEW THAT THE ASSESSEE COULD INFLUENC E THESE CREDITORS, SINCE THEY WERE HIS EMPLOYEES. IN OUR VIEW, THE FACT THAT THE Y WERE EMPLOYEES OF THE ASSESSEE GOES TO SUPPORT THE CASE OF THE ASSESSEE. I.E., ACCORDING TO THE ASSESSEE, THE CREDITS REPRESENT MAINLY REPAYMENT OF LOANS GIVEN BY HIM TO HIS FRIENDS AND RELATIVES EARLIER. SINCE THESE SIX PER SONS ARE SAID TO BE EMPLOYEES OF THE ASSESSEE, IT IS QUIET POSSIBLE THAT THE ASSESSE E MIGHT HAVE GIVEN LOANS TO THEM EARLIER AND THEY MIGHT HAVE RETURNED THE MONEY TO THE ASSESSEE HERE. IT IS PERTINENT TO NOTE THAT THE LD CIT(A) HAS ALSO NOT E XAMINED THE DOCUMENTS FILED BY THE ASSESSEE TO PROVE THE CREDITS. SINCE THE AO DID NOT MAKE ANY ADVERSE COMMENT ON THE DOCUMENTS FILED BY THE ASSESSEE AND FURTHER SINCE THERE IS VALID EXPLANATION FOR NOT PRODUCING THE SIX PERSONS BEFOR E THE AO, IN OUR VIEW, THERE IS NO REASON TO SUSPECT THE GENUINENESS OF THE FUNDS C LAIMED TO HAVE BEEN RECEIVED FROM THE SIX PERSONS STATED ABOVE. ACCORD INGLY, WE SET ASIDE THE ORDER OF LD CIT(A) IN RESPECT OF THE SIX CREDITS AND DIRE CT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.11,80,000/- RELATING TO THE SIX CREDITS. I.T.A, NOS. 290-292 & 366-368/COCH/2013 29 7.6 IN RESPECT OF THE REMAINING AMOUNTS, THE FA CT REMAINS THAT THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENT TO SHOW THAT THEY WE RE RECEIVED FROM THE RESPECTIVE PERSONS. HENCE, IN THE ABSENCE OF SUPPO RTING EVIDENCES, IN OUR VIEW, MERE ORAL STATEMENTS WOULD NOT DISCHARGE THE ASSESS EE FROM PRIMARY BURDEN PLACED UPON HIM U/S 68 OF THE ACT. ACCORDINGLY, W E CONFIRM THE ADDITION OF BALANCE AMOUNT OF RS.9,43,017/-. 8. IN THE ASSESSMENT YEAR 2005-06, THE ASSESSI NG OFFICER HAS ADDED A SUM OF RS.42,08,255/- AS UNEXPLAINED CHEQUE DEPOSITS. BEFO RE THE LD. CIT(A), THE ASSESSEE FURNISHED THE NAME AND ADDRESSES OF PERSON S FOR AN AGGREGATE AMOUNT OF RS.18,64,730/-, WHO GAVE THE CHEQUES TO THE ASSE SSEE. HE FURTHER SUBMITTED THAT ONE CHEQUE DEPOSITED ON 26.10.2004 FOR AN AMOU NT OF RS.15.00 LAKHS GOT BOUNCED. HE FURTHER SUBMITTED THAT TWO ITEMS OF DE POSITS LISTED OUT BY THE AO, VIZ., RS.6,50,000/- AND RS.1,10,000/- FELL WITHIN T HE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06. ACCORDINGLY, THE ASSESSEE SUBMITTED EXPLANATIONS FOR A SUM OF RS.41,24,730/-. 8.1 THE LD CIT(A) CALLED FOR A REMAND REPORT FR OM THE ASSESSING OFFICER. HOWEVER, THE AO EXPRESSED THE VIEW THAT THE ASSESSE E COULD HAVE MAINTAINED PROPER BOOKS OF ACCOUNTS AND RECORDS IN SUPPORT OF THE TRANSACTIONS. ACCORDINGLY HE SUPPORTED THE ADDITION MADE BY THE AO IN THE ASS ESSMENT PROCEEDINGS. 8.2 IN REPLY TO THE REMAND REPORT, THE ASSESSEE SUBMITTED THAT HE HAS GIVEN FULL DETAILS BEFORE THE AO IN THE REMAND PROCEEDING S. BEFORE THE LD CIT(A) THE ASSESSEE ALSO FURNISHED CONFIRMATION LETTERS AND CO PY OF PASS PORT OBTAINED FROM THE FOLLOWING PERSONS TO PROVE THE CHEQUE RECEIPTS TO THE TUNE OF RS.14,89,730/-. RAGESH PUTHIYAPURAYIL 89,730 RAGESH PUTHIYAPURAYIL 50,000 SANKAR KALIYAPERUMAL 1,30,000 SANKAR KALIYAPERUMAL 2,50,000 I.T.A, NOS. 290-292 & 366-368/COCH/2013 30 SANKAR KALIYAPERUMAL 1,00,000 CHANDRA KOTRACHAL 1,50,000 BALAKRISHNAN 1,50,000 NARAYANAN VANIYAN 1,90,000 AJESH PUTHESSERY 2,00,000 MANI KUTTIYADUKKAM 1,80,000 ------------------ 14,89,730 ======== THESE CONFIRMATION LETTERS WERE ADMITTED AS FRESH E VIDENCES BY THE LD CIT(A) AND HENCE THE FIRST APPELLATE AUTHORITY CALLED FOR A REMAND REPORT FROM THE AO ON THE FRESH DOCUMENTS FILED BY THE ASSESSEE. HOWEVER , SINCE THE ASSESSEE DID NOT PRODUCE THE ABOVE SAID PERSONS BEFORE HIM DURING TH E COURSE OF REMAND PROCEEDINGS, THE AO DID NOT OFFER ANY COMMENT ON TH E FRESH EVIDENCES. THE REPLY GIVEN BY THE ASSESSING OFFICER IS EXTRACTED B ELOW:- THE ASSESSEE DID NOT PRODUCE THE OTHER CREDITORS F OR VERIFICATION STATING THEIR INABILITY TO APPEAR OWING TO THEIR EMPLOYMENT ABROAD. THE RELEVANT MISCELLANEOUS RECORDS ARE ENCLOSED HEREWITH. 8.3 THE LD CIT(A) ALSO TOOK THE VIEW THAT THE A SSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CREDIT WORTHINESS OF THE ABOVE SAID PERSONS, SINCE THEY WERE NOT PRODUCED BEFORE T HE AO. THE LD CIT(A), ON EXAMINATION OF THE BANK STATEMENT, WAS NOT CONVINCE D WITH THE CLAIM OF BOUNCING OF CHEQUE FOR RS.15,00,000/-. WITH REGAR D TO THE AMOUNT OF RS.6,50,000/- AND RS.1,10,000/- ADDED BY THE AO, TH E LD CIT(A) NOTICED THAT THE SUBMISSION OF THE ASSESSEE THAT THEY WERE NOT RECEI VED DURING THE YEAR UNDER CONSIDERATION WAS ALSO NOT FOUND TO BE CORRECT, I.E ., ACCORDING TO LD CIT(A), THERE WAS TYPOGRAPHICAL ERROR IN MENTIONING THE DAT ES OF THE ABOVE CITED TWO CHEQUES. THE LD CIT(A) ALSO NOTICED THAT THE ASSES SEE DID NOT FURNISH ANY TYPE OF EXPLANATION FOR AN AMOUNT OF RS.83,525/-. ACCOR DINGLY HE CONFIRMED THE ADDITION OF RS.42,08,255/- MADE BY THE ASSESSING OF FICER. I.T.A, NOS. 290-292 & 366-368/COCH/2013 31 8.4 WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISS UE. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS ALONG WITH THE COPY OF PASS PORT FOR AN AGGREGATE AMOUNT OF RS .14,89,730/-. WE HAVE DEALT WITH AN IDENTICAL ISSUE IN THE PRECEDING PARA GRAPHS FOR THE IMMEDIATELY PRECEDING YEAR. THE FACTS PREVAILING IN THE INSTAN T CASE IS IDENTICAL WITH THAT PREVAILED IN THE IMMEDIATELY PRECEDING YEAR. WE H AVE DEALT WITH THE ISSUE IN DETAIL AND HAVE TAKEN THE VIEW THAT THE ADDITION IS NOT CALLED FOR WHEN THE ASSESSEE COULD SATISFACTORILY EXPLAIN AS TO WHY HE COULD NOT PRODUCE THE CREDITORS FOR EXAMINATION AND WHEN THERE WAS NO ADVERSE COMME NT MADE ON THE DOCUMENTS FILED BY THE ASSESSEE. IN THE INSTANT YE AR ALSO, THE AO DID NOT EXPRESS ANY VIEW ABOUT THE GENUINENESS OF THE LOAN AND DID NOT FIND ANY FAULT WITH THE DOCUMENT FILED BY THE ASSESSEE. HENCE, FO R THE REASONS STATED IN THE PRECEDING PARAGRAPHS FOR THE IMMEDIATELY PRECEDING YEAR ON THE IDENTICAL ISSUE, WE HOLD THAT THE ASSESSEE HAS DISCHARGED THE PRIMAR Y BURDEN OF PROOF TO THE EXTENT OF RS.14,89,730/-. ACCORDINGLY, WE SET ASI DE THE ORDER OF LD CIT(A) WITH REGARD TO THIS AMOUNT AND DIRECT THE AO TO DELETE T HE ADDITION OF RS.14,89,730/- CITED ABOVE. 8.5 WITH REGARD TO THE BALANCE AMOUNT OF ADDITI ON, THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO SUBSTANTIATE HIS CONTENTION S THAT A CHEQUE FOR AN AMOUNT OF RS.15.00 LAKHS GOT DISHONOURED AND FURTHER THERE WERE TWO ENTRIES WHICH WERE RELATING TO EARLIER YEARS. WE NOTICE THAT THE LD C IT(A) HAS GIVEN A SPECIFIC FINDING THAT THE ABOVE SAID CLAIM OF THE ASSESSEE IS NOT BO RNE OUT OF RECORD. HENCE, WE HAVE NO OTHER OPTION BUT TO CONFIRM THE ADDITION OF BALANCE AMOUNT OF CHEQUE RECEIPTS RELATING TO THE ASSESSMENT YEAR 2005-06. I.T.A, NOS. 290-292 & 366-368/COCH/2013 32 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE FOR ASSESSMENT YEAR 2003-04 IS ALLOWED. THE APPEAL FILED BY THE ASSESSEE FOR O THER TWO YEARS ARE PARTLY ALLOWED. ALL THE THREE APPEALS FILED BY THE REVENU E ARE DISMISSED. PRONOUNCED ACCORDINGLY ON 31-01-2014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 31ST JANUARY, 2014 GJ COPY TO: 1. SHRI R. RAGHU, MADATHIL FINANCIERS, KAVANADU P.O ., KOLLAM-691 003. 2. THE ASSISTANT DIRECTOR OF INCOME-TAX (INTERNATIO NAL TAXATION), TRIVANDRUM. 3. THE DEPUTY DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION), TRIVANDRUM. 4.THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVANDR UM. 5. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN