The ACIT, Circle-2, V. Shri Hasmukhraj Jugatram Rawal,

ITA 404/RJT/2005

• Counselvise Citation: 40424914 RSA 2005
• Duration Of Justice: 6 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 07-04-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREM PRAKASHAVINASH KUMAR
• Assessee Lawyers: J C RANPURA
• Keywords: Business income; Source of fund; Cost of acquisition; Reasonable cause; Valuation report; Notional interest; Surrender of tenancy right; Set aside
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.277/RJT/2006 - AY 1995-1996 I.T.A. NO.278/RJT/2006 - AY 1999-2000 I.T.A. NO.279/RJT/2006 - AY 1999-2000 I.T.A. NO.280/RJT/2006 - AY 2000-2001 I.T.A. NO.281/RJT/2006 - AY 2000-2001 SHRI HASMUKH JUGATRAM RAWAL VS ACIT, CIR.2 PROP SHRI NUTAN SAURASHTRA RAJKOT SADAR BAZAR, RAJKOT PAN : ABNPR7512G (APPELLANT) (RESPONDENT) I.T.A. NO.284/RJT/2006 - AY 1999-2000 I.T.A. NO.285/RJT/2006 - AY 2000-2001 I.T.A. NO.404/RJT/2005 - AY 1995-1996 THE ACIT, CIR.2 VS SHRI HASMUKH JUGATRAM RAWAL RAJKOT RAJKOT (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JC RANPURA REVENUE BY : S/SHRI PREM PRAKASH/AVINASH KUMAR O R D E R PER N.R.S. GANESAN, JM APPEALS IN ITA NOS 277 TO 281/RJT/2006 ARE FILED B Y THE ASSESSEE WHEREAS APPEALS IN ITA NOS 284, 285/RJT/2006 AND 404/RJT/20 05 ARE FILED BY THE REVENUE. APPEALS FILED BY THE REVENUE PERTAIN TO ASSESSMENT YEARS 1999-2000, 2000-01 AND 1995-96, RESPECTIVELY. THE APPEALS FILED BY TH E ASSESSEE IN ITA NOS 277, 279 & 281/RJT/2006 ARE PENALTY APPEALS PERTAINING T O ASSESSMENT YEARS 1995-96, 1999-2000 & 2000-01, RESPECTIVELY WHEREAS THE APPEA LS FILED BY THE ASSESSEE IN ITA NOS 278 & 280/RJT/2006 ARE QUANTUM APPEALS AND PERTAIN TO ASSESSMENT YEARS 1999-2000 & 2000-01, RESPECTIVELY. ALL THE A PPEALS ARE DIRECTED AGAINST THE INDEPENDENT ORDERS PASSED BY THE CIT(A)-III, RA JKOT. SINCE ALL THE APPEALS PERTAIN TO SAME ASSESSEE AND THE ISSUES AGITATED IN THE APPEALS ARE MORE OR LESS ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 2 COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS COMMON ORDER. ITA NO.404/RJT/2005 APPEAL BY REVENUE 2. LET US FIRST TAKE THE APPEAL FILED BY THE REVENU E IN ITA NO.404/RJT/2005 FOR THE ASSESSMENT YEAR 1995-96. THE FIRST ISSUE ARISE S FOR CONSIDERATION IN THIS APPEAL IS COMPUTATION OF LONG TERM CAPITAL GAIN. 3. SHRI PREM PRAKASH, THE LD.DR SUBMITTED THAT THE ASSESSEE HAS RECEIVED RS.1 CRORE ON SURRENDERING OF TENANCY RIGHT. REFER RING TO THE ORDER OF THE ASSESSING OFFICER, MORE PARTICULARLY TO PAGE 6, PAR AGRAPH 10, THE LD.DR SUBMITTED THAT THE ASSESSEE HAS FILED A XEROX COPY OF LETTER DATED 23-01-1971 WHICH SHOWED THAT THE ASSESSEE HAD PURCHASED THE MACHINER Y AND THE TENANCY RIGHT FOR RS.15 LAKHS. HOWEVER, THE ORIGINAL DOCUMENT WA S NOT PRODUCED BEFORE THE ASSESSING OFFICER. ACCORDING TO THE LD.DR, SINCE T HE ASSESSEE HAS NOT PRODUCED THE ORIGINAL DOCUMENT FOR PURCHASE OF THE MACHINERY AND THE TENANCY RIGHT, IT HAS TO BE PRESUMED THAT THE ASSESSEE HAD NO VIABILITY F OR PAYMENT OF RS.15 LAKHS IN THE YEAR 1970 1972. THEREFORE THE ASSESSING OFFI CER TOOK THE COST OF THE TENANCY RIGHT AT NIL. HOWEVER, ON APPEAL, THE CIT( A) FOUND THAT THE ASSESSEE HAS PRODUCED PHOTOCOPY OF THE AGREEMENT DATED 30-10-197 2 WHICH SHOWED THAT THE ASSESSEE HAS TAKEN THE PREMISES ON LEASE; HOWEVER, THE ORIGINAL COPY OF THE AGREEMENT WAS NOT PRODUCED. THE ASSESSEES EXPLANA TION WAS THAT THE ORIGINAL AGREEMENT WAS LOST IN FLOOD AT MUMBAI AND THAT THIS FACT WAS ALSO DEPOSED BEFORE THE DDIT(INV), WHICH WAS FOUND ACCEPTABLE TO THE CIT(A). ACCORDING TO THE LD.DR, SINCE THE ORIGINAL AGREEMENT WAS NOT PRO DUCED EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A), IT CANNOT B E SAID THAT THE ASSESSEE HAS TAKEN THE TENANCY RIGHT FOR A CONSIDERATION OF RS.1 5 LAKHS. THEREFORE, THE COST OF ACQUISITION OF THE TENANCY RIGHT HAS TO BE TAKEN AT NIL AND THE ENTIRE SUM OF RS.1 CRORE HAS TO BE BROUGHT TO TAX. ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 3 4. ON THE CONTRARY, SHRI JC RANPURA, THE LD.REPRESE NTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS PRODUCED A COPY OF THE LETTER DATED 23-01-1971 AND THE COPY OF THE AGREEMENT DATED 30-10-1972. TH E AGREEMENT DATED 30-10- 1972 WAS ENTERED INTO BETWEEN THE ASSESSEE AND M/S MAHARAHTRA PAPER PVT LTD. XEROX COPY OF ANOTHER AGREEMENT DATED 31-08-1994 WA S ALSO PRODUCED BEFORE THE ASSESSING OFFICER. THE VALUATION REPORT DATED 19-01-2002 AS ON 01-04-1981 WAS ALSO FILED BEFORE THE ASSESSING OFFICER. THE A SSESSING OFFICER REJECTED THE SAME ON THE GROUND THAT THE ORIGINAL COPY OF THE AG REEMENT WAS NOT PRODUCED BEFORE HIM. ACCORDING TO THE LD.REPRESENTATIVE, TH E ASSESSEE COULD NOT FILE THE ORIGINAL AGREEMENT SINCE IT WAS LOST IN THE FLOOD. HOWEVER, THE XEROX COPY WAS TAKEN ONLY FROM THE ORIGINAL AND THEREFORE, IT CANN OT BE REJECTED. REFERRING TO THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSES SEE WAS NOT VIABLE TO MAKE THE PAYMENT OF RS.15 LAKHS, THE LD.REPRESENTATIVE POINT ED OUT THAT THE ASSESSEE WAS ASSESSED TO TAX AND HE HAS BEEN FILING THE RETURNS OF INCOME SINCE 25 YEARS. IN FACT, A COPY OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1966-67 PASSED ON 27- 08-1970 WAS ALSO FILED BEFORE THE LOWER AUTHORITIES . THEREFORE, IT CANNOT BE CORRECT TO SAY THAT THE ASSESSEE HAD NO VIABILITY T O MAKE PAYMENT OF RS.15 LAKHS. REFERRING TO THE ORDER OF THE CIT(A), MORE PARTICUL ARLY, PAGE 10, THE LD.REPRESENTATIVE SUBMITTED THAT THE RENTAL PREMISE S WAS A COMMERCIAL PREMISE LOCATED IN THE PRIME BUSINESS AREA AT WORLI, MUMBAI . THEREFORE, NO ONE WOULD GIVE THE PREMISES FREE OF COST. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS TAKEN THE LAND AT FREE OF COST, THE AS SESSING OFFICER CANNOT SAY THAT THE PROPERTY WAS OBTAINED FREE OF COST. WHEREAS TH E AGREEMENT AND THE OTHER DOCUMENTS AVAILABLE ON RECORD SUGGEST THAT THE ASSE SSEE HAS PAID RS.15 LAKHS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE QUES TION ARISES FOR CONSIDERATION IS, WHAT IS THE COST OF ACQUISITION OF THE TENANCY RIGHT FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN. THE ASSESSI NG OFFICER REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ORIGINAL AGREEM ENT DATED 30-10-1972 WAS NOT FILED BEFORE HIM. HOWEVER, IT IS ADMITTED FACT THAT A XEROX COPY WAS FILED ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 4 BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). THE OTHER GROUND FOR REJECTION OF THE CLAIM OF THE ASSESSEE WAS THAT THE ASSESSEE HAD NO SOURCE OR VIABILITY FOR MAKING THE PAYMENT OF RS.15 LAKHS. 5.1 INCOME-TAX PROCEEDINGS IS SUMMARY PROCEEDING. THEREFORE, THE PROVISIONS OF INDIAN EVIDENCE ACT ARE NOT STRICTLY APPLICABLE TO THE PROCEEDINGS UNDER THE INCOME-TAX ACT. IT IS COMMON KNOWLEDGE T HAT INDIAN EVIDENCE ACT WAS AMENDED BY INFORMATION TECHNOLOGY ACT, 2000 WHICH P ROVIDES FOR ADMISSION OF XEROX COPIES AND DOCUMENTS DOWNLOADED FROM THE COMP UTERS. THEREFORE, EVEN IN THE REGULAR CIVIL PROCEEDINGS THE XEROX COPIES T AKEN FROM THE ORIGINAL COPY CAN BE MATERIAL EVIDENCE. WHEN THAT IS THE LAW AS FAR AS THE REGULAR CIVIL PROCEEDINGS IS CONCERNED, INSISTING THE ASSESSEE TO PRODUCE THE ORIGINAL DOCUMENT, ESPECIALLY WHEN THE ASSESSEE CLAIMS THAT THE ORIGINAL DOCUMENT WAS LOST IN THE FLOOD, IS NOT JUSTIFIED, AT ALL. WHEN THE ASSESSEE CLAIMS THAT T HE XEROX COPY WAS TAKEN FROM THE ORIGINAL AND IT WAS PRODUCED BEFORE THE ASSESSI NG OFFICER, IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO EXAMINE THE SAME. TH EREFORE, REJECTION OF THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE O RIGINAL DOCUMENT WAS NOT FILED BEFORE THE ASSESSING OFFICER IS NOT JUSTIFIED. THE REFORE, IN OUR OPINION, THE CIT(A) HAS RIGHTLY FOUND THAT THE ORDER OF THE ASSESSING O FFICER WITH REGARD TO NON PRODUCTION OF ORIGINAL DOCUMENT IS NOT WELL FOUNDED . 5.2 NOW COMING TO THE SOURCE OF FUNDS, ADMITTEDLY, THE PAYMENTS WERE MADE IN THE YEAR 1970 1972. THE ASSESSEE HAS PRODUCED DOCUMENTARY EVIDENCE TO SHOW THAT THEY ARE ASSESSED TO TAX. MOREOVER, AS R IGHTLY POINTED OUT BY THE LD.REPRESENTATIVE FOR THE ASSESSEE AND AS OBSERVED BY THE CIT(A) THAT NO ONE WOULD GIVE THE TENANCY RIGHT IN MUMBAI FREE OF COST . WHEN THE AGREEMENT AND THE LETTER DATED 23-01-1971 SHOWS THE PAYMENT OF RS .15 LAKHS, IN OUR OPINION, THE TENANCY RIGHT AND MACHINERY WAS ACQUIRED FOR RS .15 LAKHS. THEREFORE, THE CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER T O TAKE THE COST OF ACQUISITION AS DECLARED BY THE ASSESSEE. ACCORDINGLY, WE DO NOT F IND ANY INFIRMITY IN THE ORDER ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 5 OF THE LOWER AUTHORITY. ACCORDINGLY THE ORDER OF T HE CIT(A) ON THIS ISSUE IS CONFIRMED. GROUND NO.1 OF THE REVENUE FAILS. 6. THE OTHER EFFECTIVE GROUND IN THE APPEAL OF THE REVENUE PERTAINS TO DELETION OF ADDITION OF RS.5,83,333 MADE ON ACCOUNT OF INTEREST INCOME. 7. THE LD.DR SUBMITTED THAT THE ASSESSEE HAS RECEIV ED RS.1 CRORE ON SURRENDER OF TENANCY RIGHT. HOWEVER, THE ASSESSEE HAS NOT DISCLOSED ANY INTEREST INCOME FROM THE ABOVE AMOUNT. ACCORDING T O THE LD.DR THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF INVESTMENT OF THIS RS.1 CRORE RECEIVED ON SURRENDER OF TENANCY RIGHT. THEREFORE, THE ASSESSI NG OFFICER HAS ESTIMATED THE INTEREST INCOME @10% P.A. 8. ON THE CONTRARY, SHRI JC RANPURA, THE LD.REPRESE NTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT INVESTED THE AM OUNT RECEIVED ON SURRENDER OF TENANCY RIGHT IN ANY BANK OR FINANCIAL INSTITUTI ON. THEREFORE, THERE IS NO QUESTION OF DECLARING ANY INTEREST INCOME NOR WAS I T OPEN TO THE ASSESSING OFFICER TO ESTIMATE ANY NOTIONAL INCOME ON THIS AMOUNT OF R S.1 CRORE. UNLESS AND UNTIL THE ASSESSEE EARNS ANY SUCH INCOME, THE QUESTION OF ESTIMATING NOTIONAL INCOME WOULD NOT ARISE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSI NG OFFICER ASSUMED THAT RS.1 CRORE RECEIVED BY THE ASSESSEE ON SURRENDER OF TENA NCY RIGHT COULD HAVE BEEN UTILIZED FOR EARNING INTEREST INCOME. HOWEVER, NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS INVESTED THE AMOUN T IN ANY BANK OR FINANCIAL INSTITUTION. UNLESS AND UNTIL THE ASSESSING OFFICE R BRINGS ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS EARNED OR HAS RECEIVED I NTEREST INCOME FROM INVESTMENT OF THE SAID SUM OF RS.1 CRORE, THE QUEST ION OF ASSESSING ANY NOTIONAL INCOME TOWARDS INTEREST WOULD NOT ARISE FOR CONSIDE RATION. IN THE ABSENCE OF ANY DETAILS WITH REGARD TO INVESTMENT AND EARNING OF IN TEREST INCOME, IN OUR OPINION, ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 6 THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. THERE FORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THE ORDER OF CIT(A) ON THIS ISSUE IS HEREBY CONFIRMED AND THE GROUND OF THE REVENUE R EJECTED. 10. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NOS.277/RJT/2006 ASSESSEES APPEAL 11. IN THIS APPEAL THE ASSESSEE CHALLENGES THE PENA LTY IMPOSED U/S 221(1) OF THE ACT WHICH WAS CONFIRMED BY THE CIT(A). 12. THE LD.REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 1995-96 ON 17-12-2002 DECLARING A LOSS OF RS. 34,68,000; HOWEVER, THE ASSESSING OFFIC ER DETERMINED AN INCOME OF RS. 1,07,83,383 AND RAISED A DEMAND OF RS. 94,91,90 2. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). AS THE ASSESSEE WAS NOT IN A POSITION TO PAY THE DEMAND RAISED BY THE ASSESSING OFFICER, A STAY APPL ICATION WAS FILED BEFORE THE ASSESSING OFFICER AS WELL BEFORE THE JCIT FOR STAY OF THE RECOVERY OF THE DEMAND. HOWEVER, BOTH THE AUTHORITIES REJECTED THE STAY APP LICATION. THEREFORE, THE ASSESSEE FILED APPLICATION FOR STAY OF RECOVERY OF DEMAND BEFORE THE COMMISSIONER OF INCOME-TAX. THE CIT, VIDE ORDER DA TED 13-01-2004 STAYED THE RECOVERY OF THE DEMAND ON CONDITION THAT THE ASSESS EE PAY 40% OF THE DEMAND IN FOUR INSTALMENTS. HOWEVER, THE ASSESSEE COULD N OT MAKE THE PAYMENT DUE TO FINANCIAL CONSTRAINTS. BEFORE THE EXPIRY OF THE TI ME GRANTED BY THE COMMISSIONER FOR MAKING PART PAYMENT, THE ASSESSING OFFICER TREA TED THE ASSESSEE AS AN ASSESSEE IN DEFAULT BY ISSUING NOTICE U/S 221(1) OF THE ACT ON 12-03-2004. THE ASSESSING OFFICER LEVIED PENALTY WITHOUT GIVING ANY FURTHER OPPORTUNITY TO THE ASSESSEE. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE HAS REASONABLE CAUSE FOR NOT MAKING THE PAYMENT. IN FACT, THE CIT ALLOWED THE ASSESSEE TO MAKE THE PAYMENT IN INSTALMENTS. THEREFORE, THE AS SESSING OFFICER IS NOT JUSTIFIED IN TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT BEFORE EXPIRY OF THE TIME GRANTED BY THE CIT. ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 7 13. ON THE CONTRARY, SHRI AVINASH KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE HAS NOT PAID THE DEMAND RAISED BY THE ASSE SSING OFFICER. THEREFORE, THE ASSESSEE IS IN DEFAULT IN MAKING THE PAYMENT. AS SUCH, THE ASSESSING OFFICER HAS RIGHTLY LEVIED THE PENALTY. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. NO DOUBT TH E ASSESSING OFFICER IS EMPOWERED TO LEVY PENALTY IN RESPECT OF DEFAULT IN PAYMENT OF THE DEMAND. HOWEVER, THE LEGISLATURE INTRODUCED SECOND PROVISO TO SECTION 221(1) WHICH CLEARLY STATES THAT WHEN THE ASSESSEE PROVES TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE DEFAULT WAS FOR GOOD AND SUFFICIEN T REASONS, NO PENALTY SHALL BE LEVIED. IN THIS CASE, IT IS NOT IN DISPUTE THAT TH E ASSESSEE HAS ALREADY FILED AN APPEAL AGAINST THE ASSESSMENT ORDER BEFORE THE CIT( A) AND THE ADMINISTRATIVE COMMISSIONER HAS GRANTED INSTALMENTS FOR MAKING PAR T OF THE PAYMENT. BEFORE THE EXPIRY OF THE TIME LIMIT GRANTED BY THE COMMISS IONER FOR MAKING THE PART PAYMENT, THE ASSESSING OFFICER APPEARS TO HAVE LEVI ED PENALTY WITHOUT GIVING ANY FURTHER OPPORTUNITY, AFTER ISSUE OF NOTICE U/S 221( 1). WHEN THE APPEAL WAS PENDING BEFORE THE APPELLATE COMMISSIONER, WE MAY N OT BE ABLE TO SAY THAT THE ASSESSEE HAS COMMITTED A DEFAULT. THE APPEAL BEFOR E THE APPELLATE COMMISSIONER IS A STATUTORY APPEAL, THEREFORE, DURI NG THE PENDENCY OF THE APPEAL, IN ALL FAIRNESS, THE ASSESSING OFFICER HAS TO WAIT FOR THE DECISION OF THE APPELLATE COMMISSIONER. THEREFORE, DURING THE PEND ENCY OF APPEAL, LEVY OF PENALTY MAY NOT BE JUSTIFIED. IN VIEW OF THE ABOVE , THE ORDER OF THE LOWER AUTHORITY IS SET ASIDE AND THE PENALTY IS DELETED. THE APPEA L OF THE ASSESSEE IS ALLOWED. ITA NO.278/RJT/2006 ASSESSEES APPEAL 15. THE FIRST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL PERTAINS TO RETENTION OF ADDITION OF RS.1 LAKH OUT OF TOTAL ADDITION OF R S.2 LAKHS MADE BY THE ASSESSING OFFICER ON ESTIMATION OF BUSINESS INCOME. ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 8 16. SHRI JC RANPURA, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEES BUSINESS INCOME WAS ESTIMATED BY THE ASS ESSING OFFICER WITHOUT ADDUCING ANY REASONS WHICH WAS REDUCED BY THE CIT(A ) TO RS.1 LAKHS. HE SUBMITTED THAT WHEN THE CIT(A) FOUND THAT THERE WAS NO BASIS OR MATERIAL TO ESTIMATE THE INCOME AT RS.2 LAKHS, HE OUGHT TO HAVE DELETED THE ENTIRE ADDITION OF RS.2 LAKHS INSTEAD OF RESTRICTING THE SAME TO RS.1 LAKH. 17. ON THE CONTRARY, SHRI AVINASH KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE HAS DISCLOSED LOSS FROM THE BUSINESS. THE ASSESSING OFFICER, AFTER TAKING INTO CONSIDERATION THAT THE ASSESSEE WAS THE PROPRIETOR OF M/S SHREE NUTAN SAURASHTRA (DAILY) AND M/S SHREE NUTAN SAURAS HTRA ADVERTISERS, RAJKOT BESIDES PARTNER IN IN THE PRINTING PRESS NAMED M/S BHARAT PRINTERS (BOMBAY) FOUND THAT THE INCOME HAS TO BE ESTIMATED AT RS.2 L AKHS. HOWEVER, THE CIT(A) HAS RESTRICTED THE SAME TO RS.1 LAKH, THEREFORE, TH E ASSESSEE MAY NOT BE ABLE TO GET ANY RELIEF. 18. WE HAVE CONSIDERED THE SUBMISSIONS ON EITHER SI DE AND HAVE ALSO GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE IS AN INDIVIDUAL. HE FILED HIS P&L ACCOUNT DISCLOSING LOSS. WHEN THE ASSESSEE DISCLOSED LOSS IN THE P&L ACCOUNT IT IS FOR THE ASSESSING OFFICER TO VERIFY T HE SAME AND FIND OUT WHETHER THE ASSESSEE HAS ANY POSITIVE INCOME OR NOT. WITHOUT A NY MATERIAL ON RECORD THE ASSESSING OFFICER ESTIMATED THE INCOME AT RS.2 LAKH S. THE CIT(A) HAVING FOUND THAT THE ASSESSING OFFICER HAS NO BASIS OR MATERIAL FOR ESTIMATING THE INCOME AT RS.2 LAKHS, RESTRICTED THE SAME TO RS.1 LAKH. IN O UR OPINION, WHEN THERE IS NO MATERIAL OR BASIS FOR MAKING THE ADDITION OF RS.2 L AKHS, THE ENTIRE ADDITION OF RS.2 LAKHS OUGHT TO HAVE BEEN DELETED. INCOME-TAX ACT P ROVIDES FOR TAXATION OF INCOME. WHEN NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS EARNED OR HAS RECEIVED ANY INCOME, THERE IS NO QUESTION OF ANY ASSESSMENT. THEREFORE, THE ADDITION OF RS.2 LAKHS NEEDS TO BE D ELETED. ACCORDINGLY WE SET ASIDE THE ORDER OF LOWER AUTHORITIES AND DELETE THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER. ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 9 19. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF COMMISSION EXPENSES OF RS. 1,36,580. 20. SHRI JC RANPURA, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE INCURRED COMMISSION EXPENDITURE OF RS.1,36 ,580 IN THE PROPRIETORY FIRM M/S SHREE NUTAN SAURASHTRA ADVERTISERS. THE ASSESS ING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE COULD NOT FILE THE DETAILS OF THE COMMISSION SAID TO BE PAID. ACCORDING TO TH E LD.REPRESENTATIVE, UNLESS AND UNTIL THE COMMISSION IS PAID, THE ASSESSEE COULD NO T HAVE RUN THE BUSINESS. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IS NOT JUSTIFIED. 21. ON THE CONTRARY, SHRI AVINASH KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY DETAILS WITH REGARD TO P AYMENT OF COMMISSION. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALL OWED THE CLAIM OF THE ASSESSEE. 22. WE HAVE CONSIDERED THE SUBMISSIONS ON EITHER SI DE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WHILE CL AIMING THE COMMISSION PAYMENT OF RS.1,36,580 THE ASSESSEE FAILED TO FURNI SH THE DETAILS OF THE COMMISSION PAYMENT IN SPITE OF THE FACT THAT THE AS SESSING OFFICER HAD CALLED FOR SUCH INFORMATION. IN THE ABSENCE OF ANY MATERIAL T O SHOW THAT THE ASSESSEE HAS PAID ANY COMMISSION, IN OUR OPINION, THE LOWER AUTH ORITIES HAVE RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.1,36, 580. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITY. THE ORDER OF CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUND NO.2 OF THE ASSESSEE REJECTED . 23. THE THIRD AND LAST EFFECTIVE GROUND OF THE ASSE SSEES APPEAL PERTAINS TO CONFIRMATION OF ADDITION OF RS.1,07,322 AS UNEXPLAI NED SUNDRY CREDITORS U/S 68 OF THE ACT. 24. SHRI JC RANPURA, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE ADDITION OF RS.1,07,322 ON THE GROUND THAT THE ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 10 CONFIRMATION LETTER WAS NOT FILED BEFORE HIM. ACCO RDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS FILED ALL THE DETAILS OF THE SUNDR Y CREDITORS; THEREFORE, THERE IS NO QUESTION OF ANY ADDITION. 25. ON THE CONTRARY, SHRI AVINASH KUMAR, THE LD.DR SUBMITTED THAT UNLESS AND UNTIL THE ASSESSEE PROVES THE IDENTITY, CREDITWORTH INESS AND GENUINENESS OF THE TRANSACTION, THE CREDIT FOUND IN THE BOOKS OF ACCOU NT CANNOT BE ALLOWED. THEREFORE, THE LOWER AUTHORITIES HAVE RIGHTLY REJEC TED THE CLAIM OF THE ASSESSEE. 26. WE HAVE CONSIDERED THE SUBMISSIONS ON EITHER SI DE AND HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US. NOW IT IS W ELL SETTLED THAT FOR THE PURPOSE OF ESTABLISHING CASH CREDITS / SUNDRY CREDITORS THE ASSESSEE HAS TO NATURALLY ESTABLISH THE IDENTITY OF THE CREDITORS, GENUINENES S OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITORS. IN THIS CASE, N O MATERIAL WAS FILED BEFORE THE LOWER AUTHORITIES EITHER TO PROVE THE IDENTITY, CRE DITWORTHINESS OR GENUINENESS OF THE TRANSACTION. THEREFORE, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE LOWER AUTHORITY. THE SAME IS CONFIRMED. 27. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ITA NO.279/RJT/2006 ASSESSEES APPEAL 28. THIS APPEAL OF THE ASSESSEE CHALLENGES THE CONF IRMATION OF LEVY OF PENALTY U/S 221(1) OF THE ACT. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE PENALTY IS LEVIED IS EXACTLY IDENTICAL TO THAT IN THE ASSESSME NT YEAR 1995-96 IN ITA NO.277/RJT/2006. WHILE DISPOSING OFF THE APPEAL IN ITA NO.277/RJT/2006 ELSEWHERE IN THIS ORDER, WE HAVE ALREADY HELD THAT THERE IS NO CASE FOR THE LOWER AUTHORITY TO LEVY PENALTY ON THE ASSESSEE AND THE P ENALTY WAS DELETED. THEREFORE, FOR THE SAME SET OF REASONING, WE CANCEL THE PENALTY IN THIS APPEAL. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 11 ITA NO.280/RJT/2006 ASSESSEES APPEAL 29. THE FIRST GROUND IN THIS APPEAL FILED BY THE AS SESSEE PERTAINS TO RETENTION OF ADDITION OF RS.1 LAKH OUT OF ADDITION OF RS.2 LA KHS ON ACCOUNT OF ESTIMATION OF BUSINESS INCOME. THIS ISSUE IS IDENTICAL TO GROUND NO.1 FOR ASSESSMENT YEAR 1999-2000 IN ITA NO.278/RJT/2006. WE HAVE ALREADY HELD THAT WHEN THE CIT(A) FOUND THAT THERE WAS NO MATERIAL OR BASIS FOR MAKIN G THE ADDITION, THERE WAS NO GROUND FOR RETAINING THE ADDITION TO THE EXTENT OF RS.1 LAKH AND THEREFORE, THE ADDITION WAS DELETED. SINCE THE ISSUE BEING IDENTI CAL, FOR THE DETAILED REASONS MENTIONED ELSEWHERE IN THIS ORDER FOR ASSESSMENT YE AR 1999-2000, WE DELETE THE ADDITION AND GROUND NO.1 OF THE ASSESSEE ALLOWED. 30. THE SECOND GROUND PERTAINS TO CONFIRMATION OF D ISALLOWANCE OF COMMISSION EXPENSES OF RS. 5,55,240. THIS ISSUE IS IDENTICAL TO GROUND NO.1 FOR ASSESSMENT YEAR 1999-2000 IN ITA NO.278/RJT/2006 WH ERE WE HAVE CONFIRMED THE DISALLOWANCE. SINCE THE ISSUE BEING IDENTICAL, FOR THE DETAILED REASONS MENTIONED ELSEWHERE IN THIS ORDER FOR ASSESSMENT YE AR 1999-2000, WE CONFIRM THE DISALLOWANCE.. GROUND 2 OF THE ASSESSEE FAILS. 31. THE LAST EFFECTIVE GROUND IN THIS APPEAL PERTAI NS TO ADDITION U/S 68 TOWARDS SUNDRY CREDITORS OF RS.1,81,698 AND CAPITAL INTRODU CED BY THE ASSESSEE OF RS.3,35,000. THE ISSUE OF ADDITION ON ACCOUNT OF U NEXPLAINED SUNDRY CREDITORS HAS ALREADY BEEN DISCUSSED BY US WHILE DEALING WITH THE APPEAL IN ITA NO.278/RJT/2006 WHERE WE HAVE CONFIRMED THE ADDITIO N FOR THE REASON THAT THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY, GENUINEN ESS AND CREDITWORTHINESS OF THE CREDITOR. WITH REGARD TO ADDITION ON ACCOUNT OF UN EXPLAINED CAPITAL INTRODUCED BY THE ASSESSEE WE FIND THAT THE LOWER AUTHORITIES MAD E THE ADDITION BECAUSE THE ASSESSEE INTRODUCED THE CAPITAL IN CASH FOR WHICH N O DETAILS WERE FURNISHED. SAME IS THE SITUATION BEFORE US, TOO. THEREFORE, I N THE ABSENCE OF ANY DETAILS / MATERIALS FORTHCOMING, WE CONFIRM THE ORDER OF LOWE R AUTHORITY. GROUND 3 OF THE ASSESSEE IS REJECTED. ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 12 32. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ITA NO.281/RJT/2006 ASSESSEES APPEAL 33. THIS APPEAL OF THE ASSESSEE CHALLENGES THE CONF IRMATION OF LEVY OF PENALTY U/S 221(1) OF THE ACT. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE PENALTY IS LEVIED IS EXACTLY IDENTICAL TO THAT IN THE ASSESSME NT YEAR 1995-96 IN ITA NO.277/RJT/2006. WHILE DISPOSING OFF THE APPEAL IN ITA NO.277/RJT/2006 ELSEWHERE IN THIS ORDER, WE HAVE ALREADY HELD THAT THERE IS NO CASE FOR THE LOWER AUTHORITY TO LEVY PENALTY ON THE ASSESSEE AND THE P ENALTY WAS DELETED. THEREFORE, FOR THE SAME SET OF REASONING, WE CANCEL THE PENALTY IN THIS APPEAL. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.284/RJT/2006 REVENUES APPEAL 34. THE FIRST GROUND IN THIS APPEAL FILED BY REVENU E PERTAINS TO DELETION OF ADDITION TO THE EXTENT OF RS.1 LAKH OUT OF ADDITION OF RS.2 LAKHS ON ACCOUNT OF ESTIMATION OF BUSINESS INCOME. THIS ISSUE HAS BEEN CONSIDERED BY US WHILE DEALING WITH ASSESSEES APPEAL IN ITA NO.278/RJT/20 06. WE HAVE ALREADY HELD THAT WHEN THE CIT(A) FOUND THAT THERE WAS NO MATERI AL OR BASIS FOR MAKING THE ADDITION, THERE WAS NO GROUND FOR RETAINING THE ADD ITION TO THE EXTENT OF RS.1 LAKH AND THEREFORE, THE ADDITION WAS DELETED. THEREFORE , FOR THE DETAILED REASONS APPENDED THEREIN, WE DO NOT SEE ANY MERIT IN THE GR OUND RAISED BY THE REVENUE. THE SAME IS REJECTED. 35. THE SECOND GROUND IN THIS APPEAL PERTAINS TO DE LETION OF ADDITION OF RS.10 LAKHS BEING NOTIONAL INTEREST WORKED OUT BY THE ASS ESSING OFFICER ON A SUM OF RS.1 CRORE RECEIVED BY THE ASSESSEE ON SURRENDER OF TENENCY RIGHT. THIS ISSUE HAS BEEN CONSIDERED BY US IN DETAIL WHILE DEALING W ITH REVENUES APPEAL IN ITA NO.404/RJT/2005 WHERE WE HAVE CONFIRMED THE ORDER O F CIT(A) DELETING SUCH ADDITION. THEREFORE, FOR THE DETAILED REASONS APPE NDED THEREIN, WE DO NOT SEE ANY MERIT IN THE GROUND RAISED BY THE REVENUE. THE SAME IS REJECTED. ITA NO.277-281/RJT/2006 ITA NOS 284 & 285/RJT/2006 ITA NO.404/RJT/2005 13 36. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE APPEALS FILED BY THE ASSESSEE IN ITA NOS. 277, 279 & 281/RJT/2006 ARE ALLOWED AND ASSESSEES APPEAL IN ITA NOS 278 & 280/RJT/2006 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-07-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 21 ST JULY, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-III, RAJKOT 4. THE CIT-II, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT