SITU SHASTRI, MUMBAI V. CIT 39, MUMBAI

ITA 3890/MUM/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8526 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2001-2002
• Appeal Filed On: 23-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH K SINGH
• Keywords: Unexplained cash credit; Opportunity of being heard; Earning of tax free income; Additional evidence; Corroborative evidences
• Section: 143(3); 14A; 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER ITA NO. 3890 / MUM/2015 ( ASSESSMENT YEAR : 20 0 1 - 02 ) SITU SHASTRI 1 ST FLOOR, SILVE LINE S.B. MARG, J.G. NAGAR ANDHERI (E), MUMBAI 400 059 PAN AAEPS6130M . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 20(3), MUMBAI . RESPONDENT ASSESSEE BY : SHRI MADHUR AGRAWAL REVENUE BY : SHRI MANISH K. SINGH DATE OF HEARING 09 . 1 0 .2018 DATE OF ORDER 31.12.2018 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER DATED 27 TH MARCH 2015, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 39, MUMBAI, FOR THE ASSESSMENT YEAR 2001 02. 2 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 46,853, REPRESENTING EMPLOYERS CONTRIBUTION TO PROVIDENT FUND. 3 . BRIEF FACTS ARE, THE ASSESSEE AN INDIVIDUAL FILED HIS RETURN OF 2 SITU SHASTRI INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31 ST OCTOBER 2001, DEC LARING TOTAL INCOME OF ` 12,11,498. INITIALLY, THE ASSESSMENT WAS COMPLETED IN CASE OF THE ASSESSEE UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) VIDE ORDER DATED 29 TH MARCH 2004, ASSESSING THE TOTAL INCOME AT ` 3,24,62,340, AFTER MAKING VARIOUS ADDITIONS / DISALLOWANCES INCLUDING THE AFORESAID DISALLOWANCE. AGAINST THE ASSESSMENT ORDER SO PASSED, THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AND THEREAFTER BEFORE THE TRIBUNAL. THE TRIBUNAL, VI DE ORDER DATED 6 TH JULY 2011, IN ITA NO.3387/MUM./ 2006, DISPOSED OFF THE APPEAL BY RESTORING THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION. IN THE ASSESSMENT PROCEEDINGS, IN PURSUANCE TO THE DIRECTIONS OF THE TRIBUNAL, THE ASSESSI NG OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF CONTRIBUTION MADE TO PROVIDENT FUND. AS OBSERVED BY THE ASSESSING OFFICER, THE ASSESSEE COULD NOT FURNISH THE REQUIRED DETAILS RELATING TO EMPLOYERS CONTRIBUTION TO PROVIDENT FUND. ACCORDINGLY, HE DISALLOWED THE AMOUNT OF ` 46,850. WHILE DECIDING THE ASSESSEES APPEAL ON THE ISSUE THE LEARNED COMMISSIONER (APPEALS) ALSO UPHELD THE DISALLOWANCE EXCEPT THE REASONING OF THE ASSESSING OFFICER. 4 . THE LEARNED AUTHORISED REPRESENTATIVE FAIRLY SUBMITTED THAT EVEN AT THIS STAGE ALSO, THE ASSESSEE DOES NOT HAVE ANY SUPPORTING EVIDENCE TO JUSTIFY ITS CLAIM. IN VIEW OF THE AFORESAID SUBMISSIONS OF THE LEARNED 3 SITU SHASTRI AUTHORISED REPRESENTATIVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF THE LEARNED CO MMISSIONER (APPEALS). THIS GROUND IS DISMISSED. 5 . IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF PROFESSIONAL CHARGES OF ` 2,17,140. 6 . B RIEF FACTS ARE, IN C OURSE OF ASSESSMENT PROCEEDINGS IN PURSUANCE TO THE DIRECTIONS OF THE TRIBUNAL, THE A.O. AGAIN CONDUCTED ENQUIRY BY ISSUING NOTICES U/S 133(6) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) TO THE PARTIES TO WHOM THE ASSESSEE CLAIMED TO HAVE PAID PROFESSIONAL CHARGES. AS OBSERVED BY THE A.O., THE NOTICE ISSUED TO SHRI M.B. AGARWAL, RETURNE D UNSERVED BY THE POSTAL AUTHORITIES. WHEREAS, THE NOTICED ISSUED TO M/S. YASH CONSULTANTS, THOUGH, WAS SERVED, HOWEVER, NO REPLY WAS RECEIVED. THE ASSESSING OFFICER OBSERVED , PAYMENT MADE TO M/S. YASH CONSULTANTS WAS FOR FINANCIAL SERVICES WHICH ACCORDING TO THE ASSESSING OFFICER WERE FOR RAISING LOANS AND NOT FOR EARNING TAXABLE INCOME. FURTHER , ALLEGING THAT NO NEW DETAILS WERE FILED BY THE ASSESSEE TO JUSTIFY THE CLAIM , THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF ` 2,17,140. 7 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE COMMISSIONER (APPEALS), HOWEVER, HE ALSO SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 4 SITU SHASTRI 8 . LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS SUBMITTED CONFIRMATION FROM M/S YESH CONSULTANT. HE SUBMITTED , BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE SUBMITTED CONF IRMATION FROM SHRI M.B. AGARWAL. IN THIS CONT EXT, HE DREW OUR ATTENTION TO A COPY OF THE SAID CONFIRMATION AT PAGE - 39A OF THE PAPER BOOK. THUS, HE SUBMITTED , WHEN THE CONCERNED PARTIES TO WHOM PAYMENT WAS MADE HAVE CONFIRMED OF HAVING RECEIVED THE PAYMENT AND SUCH PAYMENT HAVING BEEN MADE FOR THE PUR POSE OF BUSINESS , NO DISALLOWANCE SHOULD HAVE BEEN MADE. 9 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 10 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON R ECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, WHILE RESTORING THE ISSUE TO THE ASSESSING OFFICER IN THE FIRST ROUND OF LITIGATION, THE TRIBUNAL HAS OBSERVED THAT THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT THE PAYMENT MADE WAS FOR THE PURPOSE OF BUSI NESS. FROM THE FACTS ON RECORD, IT IS EVIDENT , THE PAYMENT OF ` 1,11,640, TO SHRI M.B. AGARWAL, IS FOR SUPERVISION AND FINALIZATION OF ASSESSEES ACCOUNT. THEREFORE, THE EXPENDITURE INCURRED IS FOR THE PURPOSE OF ASSESSEES BUSINESS , HENCE, HAS TO BE ALLOWED. AS REGARDS THE PAYMENT MADE TO 5 SITU SHASTRI M/S. YASH CONSULTANTS, IT IS A FACT THAT THE ASSESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS HAD FURNISHED C ONFIRMATION FROM THE SAID PARTY. THE ASSESSING OFFICER HAS DISALLOWED THE PAYMENT ONLY ON THE REASONING THAT IT WAS PAID FOR RAISING FINANCE. IN OUR VIEW, THIS CANNOT BE A REASON TO DISALLOW THE PAYMENT. WHEN THE PARTY HAS CONFIRMED THE PAYMENT AND HAS ALSO SHOWN THE PURPOSE FOR WHICH PAYMENT WAS MADE, IT CANNOT BE DISALLOWED MERELY ON PRESUMPTION AND SURMISES. ACCORDINGLY, WE DELETE THE ADDITION. THIS GROUND IS ALLOWED. 11 . IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED ADDITION OF ` 80,10,000, MADE UNDER SECTION 68 OF THE ACT. 12 . BRIEF FACTS ARE, IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER O N EXAMINING THE BALANCE SHEET OF THE ASSESSEE FOUND THAT THE ASSESSEE HAD SHOWN UNSECURED LOANS OF ` 4,50,08,791. ALLEGING THAT IN RESPONSE TO QUERY MADE BY HIM THE ASSESSEE FAILED TO FURNISH NECESSARY AND REQUIRED DETAILS TO PROVE THE GENUINENESS OF CERTA IN LOAN TRANSACTIONS, THE ASSESSING OFFICER ADDED BACK AN AMOUNT OF ` 2,51,90,050, UNDER SECTION 68 OF THE ACT. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY WHO REDUCED IT TO ` 94,10,000. WHEN THE ASSESSEE WENT IN FURTHER APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION IN THE ORDER REFERRED TO ABOVE. IN THE FRESH 6 SITU SHASTRI ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER AGAIN CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE LOAN TRANSACTION CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) IN THE FIRST ROUND. AS OBSERVED BY THE ASSESSING OFFICER, THE ASSESSEE THOUGH SUBMITTED DETAILS OF LOAN TRANSACTION, HOWEVER, WHEN THE ASSESSING OFFICER WANTED TO CROSS VERIFY ASSESSE ES CLAIM BY ISSUING NOTICES UNDER SECTION 133(6) OF THE ACT, ONLY SEVEN LOAN CREDITORS FOR AN AGGREGATE LOAN TRANSACTION OF ` 14 LAKH FILED THEIR CONFIRMATION LETTERS. IN RESPECT OF THE OTHER LENDERS EITHER NO REPLY WAS RECEIVED DESPITE SERVICE OF NOTICE UNDER SECTION 133(6) OF THE ACT OR SUCH NOTICES RETURNED BACK UNSERVED. THUS, OUT OF THE UNSECURED LOAN OF ` 94,10,000 , WHICH WAS CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) EARLIER, THE ASSESSING OFFICER ACCEPTED UNSECURED LOAN OF ` 14 LAKH TO BE GENUINE. THEREFORE , THE BALANCE UNSECURED LOAN AMOUNT ING TO ` 80,10,000 WAS TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 13 . IN THE COURSE OF HEARING BEFORE LEARNED COMMISSIONER (APPEALS), THOUGH, THE ASSESSEE CONTESTED THE ADDITION BY SUBM ITTING THAT HE HAS FURNISHED LOAN CONFIRMATION S BEFORE THE ASSESSING OFFICER FOR AN AMOUNT OF ` 47,35,000, AND SUBSEQUENTLY, CONFIRMATIONS FOR ` 6 LAKH. HOWEVER , ONLY BECAUSE THE LENDERS HAVE NOT REPLIED OR ATTENDED, THE 7 SITU SHASTRI UNSECURED LOANS CANNOT BE TREATED A S EXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, OBSERVED THAT THE ASSESSEE WAS UNABLE TO DISCHARGE THE INITIAL BURDEN OF ESTABLISHING THE IDENTITY OF THE LENDER, CAPACITY TO ADVANCE LOAN AND GENUINENESS OF LOAN TRANSACTION, THUS, HE HELD THAT THE ADDITION MADE OF ` 8,10,000, CANNOT BE DELETED. 14 . LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE HAD FURNISHED CONFIRMATION LETTERS FROM THE LENDER S FOR AN AMOUNT OF ` 47,35,000. DRAWING OUR ATTENTION TO A COPY OF THE REMAND REPORT DATED 31 ST JANUARY 2005 FURNISHED BY THE ASSESSING OFFICER DURING THE PENDENCY OF APPEAL BEFORE THE FIRST A PPELLATE AUTHORITY AGAINST THE ORIGINAL ASSESSMENT ORDER, THE AUTHORISED REPRESENTATIVE SUBMITTED , IN THOSE CASES WHERE SUMMONS UNDER SECTION 131 OF THE ACT COULD NOT BE SERVED REPRESENTING SEVEN LENDERS WITH AGGREGATE UNSECURED LOAN OF ` 38,50,000, THE AS SESSEE HAD SUBSEQUENTLY, REPAID THE LOAN AMOUNT IN RESPECT OF THREE CREDITORS VIZ. ABDUL SHAKOOR R. KAZI, FOR ` 20 LAKH, SILVER SAND CONSTRUCTION CO., ` 3 LAKH AND SHRI JOSEPH DSILVA, ` 6 LAKH. HE SUBMITTED , THOUGH , BEFORE THE DEPARTMENTAL AUTHORITIES THE ASSESSEE COULD NOT PRODUCE THE COPIES OF THE BANK ACCOUNT SHOWING RE - PAYMENT OF THE L OAN AMOUNT, HOWEVER, AT PRESENT THE ASSESSEE IS IN POSSESSION OF THE BANK ACCOUNT COPIES AND WANTS TO PRODUCE THEM AS 8 SITU SHASTRI ADDITIONAL EVIDENCE. THUS, HE SUBMITTED , THE GENUINE NESS OF LOAN TRANSACTION RELATING TO THESE THREE CREDITORS REQUIRES TO BE RE - EXAMINED KEEPING IN VIEW THE FACT THAT THE ASSESSEE HAS RE - PAID THE LOAN AMOUNT AND THE SUPPORTING THE ADDITIONAL EVIDENCE TO PROVE SUCH FACTS. AS REGARDS THE LENDERS ON WHOM SUMM ONS UNDER SECTION 131 OF THE ACT WERE SERVED, REPRESENTING AGGREGATE LOAN AMOUNT OF ` 8,85,000 , THE AUTHORISED REPRESENTATIVE SUBMITTED , THE VERY FACT THAT THE SUMMONS ISSUED UNDER SECTION 131 OF THE ACT WERE SERVED UPON THEM ESTABLISH THEIR IDENTITY. HE S UBMITTED , CONSIDERING THE AMOUNT OF LOAN ADVANCED BY EACH LENDER THE CREDITWORTHINESS ALSO CANNOT BE DOUBTED. THUS, HE SUBMITTED , THE UNSECURED LOAN OF ` 8,85,000 , SHOULD BE ALLOWED. 15 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , DESPITE MORE THAN SUFFICIENT OPPORTUNITY BEING GIVEN TO PROVE THE GENUINENESS OF THE UNSECURED LOANS , THE ASSESSEE HAS FAILED TO PROVE . THEREFORE, THE ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE SHOULD NOT BE ADMITTED AND THE ADDITION MADE SHOULD BE CO NFIRMED. 16 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE DISPUTED ADDITION UNDER SECTION 68 OF THE ACT IS ` 80,10,000. IT IS APPARENT ON RECORD, OUT OF THE AFORESAID AMOUNT, THE ASSESSEE COULD FURNISH CONFIRMATION IN RESPECT OF UN SECURED LOAN 9 SITU SHASTRI AMOUNTING TO ` 47,35,000 ONLY. THEREFORE, IT IS ESTABLISHED ON RECORD THAT OUT OF THE ADDITION OF ` 80,10,000, THE ASSESSEE COULD NOT EVEN FILE CONFIRMATION S IN RESPECT OF UNSECURED LOAN OF ` 32,75,000. IN COURSE OF HEARING BEFORE US, LEARNED AUTHORISED REPRESENTATIVE HAS ALSO CONCEDED THE AFORESAID FACTUAL POSITION AND FAIRLY SUBMITTED THAT IN RESPECT OF UNSECURED LOAN OF ` 32,75,000, THE ASSESSEE HAS NO SUPPORTING EVIDENCE TO PROVE THE LOAN TRANSACTION. HOWEVER, AS REGARDS THE BALANCE AMOUNT OF ` 47,35,000, LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE HAD FURNISHED CONFIRMATION S FROM EACH OF SUCH LOAN CREDITOR . FROM THE MATERIAL ON RECORD, IT IS FOUND THAT DURING THE PENDENCY OF ASSESSEES APPEAL BEFORE THE FIRST APPELLATE AUTHOR ITY AGAINST THE ORIGINAL ASSESSMENT ORDER, THE FIRST APPELLATE AUTHORITY HAD DIRECTED THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM OF GENUINENESS OF THE LOAN TRANSACTION RELATING TO LENDERS IN WHOSE CASE THE ASSESSEE HAD FILED CONFIRMATION LETTER S. ON A PERUSAL OF THE REMAND REPORT DATED 31 ST MAY 2005 FURNISHED BY THE ASSESSING OFFICER , A COPY OF WHICH IS AT PAGE - 41 OF THE PAPER BOOK, IT IS NOTICED THAT TO VERIFY THE GENUINENESS OF THE LOAN TRANSACTIONS THE ASSESSING OFFICER ISSUED SUMMONS UNDER SECTION 131 OF THE ACT TO ALL LENDERS WHOSE CONFIRMATION S WERE FILED BY THE ASSESSEE. AS OBSERVED BY THE ASSESSING OFFICER IN THE REMAND REPORT , IN RESPECT OF SEVEN LENDERS REPRESENTING AGGREGATE LOAN AMOUNT OF ` 38,50,000, THE 10 SITU SHASTRI SUMMONS ISSUED COULD NOT BE SERVED. IN THIS CONTEXT, THE SUBMISSION OF THE AUTHORISED REPRESENTATIVE BEFORE US IS, IDENTITY / EXISTENCE OF THREE CREDITORS VIZ. ABDUL SHAKOOR R. KAZ I, SILVER SAND CONSTRUCTION CO. AND SHRI JOSEPH DSILVA, AS WELL AS GENUINENESS CAN BE ESTABLISHED FROM THE FACT THAT THE ASSESSEE HAD RE - PAID THE LOANS SUBSEQUENTLY. HE SUBMITTED , THOUGH , THE FACT OF RE - PAYMENT OF LOAN IN RESPECT OF THESE THREE LENDERS WERE SUBMITTED BEFORE THE LEARNED COMMISSIONER (APPEALS), HOWEVER, NO SUPP ORTING DOCUMENTARY EVIDENCE WAS FILE D SINCE THE LEARNED COMMISSIONER (APPEALS) DID NOT CALL FOR ANY EVIDENCE. IT IS RELEVANT TO OBSERVE , BEFORE US LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED COPIES OF THE BANK STATEMENTS INDICATING RE - PAYMENT OF LOAN AND HAS SOUGHT PERMISSION TO PRODUCE THEM AS ADDITIONAL EVIDENCE. THUS, FROM THE SUBMISSIONS OF LEARNED AUTHORISED REPRESENTATIVE IT IS EVIDENT THAT OUT OF THE LOAN AMOUNT OF ` 38,50,000, IN RESPECT OF SEVEN CREDITORS ON WHOM THE SUMMONS ISSUED UNDER SECTION 131 OF THE ACT COULD NOT BE SERVED , THE ASSESSEE HAS FAILED TO SATISFY THE THREE INGREDIENTS OF SECTION 68 OF THE ACT VIZ. IDENTITY OF CREDITORS, CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF TRANSACTION IN RESPECT OF FOUR CREDITORS REPRESENTING AGGREGATE LOAN AMOUNT OF ` 9,50,000. I N VIEW OF THE AFORESAID FACTUAL POSITION, ADDITION OF ` 9,50,000, HAS TO BE CONFIRMED. 17 . AS REGARDS UNSECURED LOAN OF ` 29 LAKH, AVAILED FROM THREE CREDITORS, IT IS THE SPECIFIC CONTENTION OF THE ASSESSEE THAT IN 11 SITU SHASTRI SUBSEQUENT PERIOD THE ASSESSEE HAS RE - PAID THE LOAN AMOUNT AND IN THIS CONTEXT, THE AUTHORISED REPRESENTATIVE HAS FURNISHED BEFORE US THE COPIES OF THE BANK STATEMENTS AND OTHER DOCUMENT AS ADDITIONAL EVIDENCE. IN OUR VIEW, THE ADDITIONAL EVIDENCES PRODUCE D AT THIS STAGE MAY HAVE A CRUCIAL BEARING IN ESTABLISHING THE GENUINENESS OF LOAN TRANSACTION. THEREFORE, WE ARE INCLINED TO ADMIT THEM. HOWEVER, SINCE THE DEPARTMENTAL AUTHORITIES NEVER HAD THE OCCASION TO VERIFY THE AUTHENTIC ITY OF THESE DOCUMENTS, WE A RE INCLINED TO RESTORE THE ISSUE RELATING TO ADDITION OF UNSECURED LAON AVAILED FROM ABDUL SHAKOOR R. KAZI, SILVER SAND CONSTRUCTION CO. AND SHRI JOSEPH DSILVA, TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER VERIFYING THE ADDITIONAL EVIDENCES FIL ED BY THE ASSESSEE. IT IS MADE CLEAR , WE HAVE NOT EXPRESSED ANY OPINION EITHER ON THE AUTHENTICITY OF THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE OR THE GENUINENESS OF THE LOAN TRANSACTION CONCERNING THE AFORESAID LENDERS. THE ASSESSING OFFICER IS DI RECTED TO DECIDE THE ISSUE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND IN ACCORDANCE WITH LAW AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 18 . AS REGARDS THE LENDERS UPON WHOM THE SUMMONS UNDER SECTION 131 OF THE ACT WERE SERVED , IT IS NOTICED THAT THEY HAVE ADVANCED UNSECURED LOAN OF ` 8,85,000 IN TOTAL. FROM THE REMAND REPORT AS WELL AS OTHER FACTS ON RECORD, IT IS EVIDENT THAT IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS NOT ONLY FILED CONFIRMATION LETTERS BUT 12 SITU SHASTRI THE SUMMONS ISSUED UNDE R SECTION 131 OF THE ACT WERE ALSO SERVED UPON THEM. THUS, THE IDENTITY OF THE LENDERS STAND ESTABLISHED. IT APPEARS, ONLY BECAUSE THESE LENDERS EITHER DID NOT APPEAR BEFORE THE ASSESSING OFFICER OR DID NOT RESPOND TO THE NOTICES ISSUED UNDER SECTION 133(6 ) OF THE ACT IT HAS BEEN HELD THAT CREDITWORTHINESS OF THESE LENDERS ARE NOT PROVED. KEEPING IN VIEW FACTS OF THE CASE AS WELL AS THE QUANTUM OF LOAN ADVANCED BY EACH LENDER, WE ARE OF THE OPINION THAT BENEFIT OF DOUBT WITH REGARD TO CREDITWORTHINESS OF LE NDERS ADVANCING UNSECURED LOAN OF LESS THAN ONE LAKH CAN BE GIVEN TO THE ASSESSEE . HOWEVER, IN RESPECT OF UNSECURED LOAN OF ` 1 LAKH OR ABOVE, THE ASSESSEE WAS REQUIRED TO PROVE THE CREDITWORTHINESS OF THE LENDERS. SINCE , THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF THE LENDER S THE UNSECURED LOAN ADVANCED OF ` 1 LAKH AND ABOVE REMAIN UNPROVED. ACCORDINGLY, ADDITION UNDER SECTION 68 OF THE ACT IN RESPECT OF SUCH LOAN HAS TO BE SUSTAINED. THUS, ON FINAL ANALYSIS, WE DIRECT THE ASSESSING OFFICER TO ACCEPT THE FOLLOWING LOAN AMOUNT AND DELETE THE ADDITION MADE UNDER SECTION 68 OF THE ACT IN RESPECT OF THEM, THE DETAILS OF WHICH ARE AS UNDER: - SR.NO. NAME OF PARTY AMOUNT 1. SHWETA VORA ` 50,000 2. K.P. VORA ` 50,000 3. JYOTI V. SHAH ` 35,000 4. P.V. KHANOLKAR ` 75,000 TOTAL: - ` 2,10,000 13 SITU SHASTRI 19 . ADDITION MADE UNDER SECTION 68 OF THE ACT IN RESPECT OF THE FOLLOWING LENDERS IS RESTORED TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION. SR.NO. NAME OF PARTY AMOUNT 1. ABDUL SHAKOOR R. KAZI ` 20,00,000 2. SILVER SAND CONSTRUCTION CO. ` 3,00,000 3. JOSEPH DSILVA ` 6,00,000 TOTAL: - ` 2 9 , 00 ,000 20 . ADDITION MADE UNDER SECTION 68 OF THE ACT IN RESPECT OF BALANCE LOAN AMOUNT IS HEREBY CONFIRMED. THIS GROUND IS PARTLY ALLOWED. 21 . IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF INTEREST EXPENDITURE OF ` 43,77,778 UNDER SECTION 14A OF THE ACT. 22 . DURING THE ASSESSMENT PROCEEDING S THE ASSESSING OFFICER NOTICED THAT OUT OF THE UNSECURED LOAN AVAILED THE ASSESSEE HAS MADE INVESTMENT IN SHARES AND ALSO ADVANCED LOANS TO VARIOUS PARTIES INCLUDING SISTER CONCERN, FRIENDS AND RELATIVES WITHOUT CHARGING INTEREST, WHEREAS IT HAS PAID INTEREST ON THE UNSECURED LOAN. THEREFORE, H E CALLED UPON THE ASSES SEE TO EXPLAIN WHY INTEREST EXPENDITURE SHOULD NOT BE DISALLOWED UNDER SECTION 14A OF THE ACT. ALLEGING THAT THE ASSESSEE FAILED TO JUSTIFY ITS CLAIM THROUGH PROPER 14 SITU SHASTRI DOCUMENTARY EVIDENCE, HE DISALLOWED THE AMOUNT OF ` 43,77,778. L EARNED COMMISSIONER (APPEAL S) ALSO SUSTAINED THE DISALLOWANCE WHILE DECIDING THE APPEAL OF THE ASSESSEE. 23 . LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE DISALLOWANCE UNDER SECTION 14A OF THE ACT HAS TO BE RESTRICTED TO INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR. IN THIS CONTEXT, HE RELIED UPON THE SPECIAL BENCH DECISION OF THE TRIBUNAL, DELHI BENCH, IN ACIT V/S VIREET INVESTMENT PVT. LTD. [2017] 165 ITD 27 (DEL.). 24 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS). 25 . HAVING CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD, WE ARE OF THE OPINION THAT ASSESSEES CL AIM THAT DISALLOWANCE UNDER SECTION 14A OF THE ACT HAS TO BE RESTRICTED TO INVESTMENT S YIELDING EXEMPT INCOME DURING THE RELEVANT FINANCIAL YEAR , REQUIRES TO BE CONSIDERED KEEPING IN VIEW THE SPECIAL BENCH DECISION OF THE TRIBUNAL, DELHI BENCH, IN VIREET I NVESTMENT PVT. LTD. (SUPRA). ACCORDINGLY, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 26 . IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF BROKERAGE AND FINANCE CHARGES OF ` 2,73,491. 15 SITU SHASTRI 27 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE VERIFYING ASSESSEES CLAIM OF BROKERAGE AND FINANCE CHARGES AMOUNTING TO ` 2,73,491, HELD THAT SINCE THE LOANS WERE NOT UTILIZED FOR BUSINESS PURPOSE, THE BROKE RAGE AND FINANCE CHARGES CANNOT BE ALLOWED. ACCORDINGLY, HE DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE. L EARNED COMMISSIONER (APPEALS) ALSO UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 28 . L EARNED AUTHORISED REPRESENTATIVE SUBMITTED , LET PROPORTIONATE DISALLOWANCE BE MADE BY RESTRICTING IT TO THE AMOUNT UTILIZED FOR NON - BUSINESS PURPOSES. 29 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 30 . HAVING CONSI DERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD, WE ARE OF THE VIEW THAT ASSESSEES CONTENTION THAT DISALLOWANCE FROM BROKERAGE AND FINANCE CHARGES SHOULD BE RESTRICTED TO THE QUANTUM OF LOAN UTILIZED FOR NON - BUSINESS PURPOSE REQUIRES CONSIDERATION. ACCORDINGLY, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16 SITU SHASTRI 31 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2018 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 31.12.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI