AMIT H JHAVERI, MUMBAI V. ACIT 16(1), MUMBAI

ITA 4051/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8480 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-01-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 14-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Assessment record; Notional interest
• Section: 43B; 143(3); 148; 144

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 4051/ MUM/2016 ( / ASSESSMENT YEAR : 2002-03) AMIT H. JHAVERI, 412 NEO CORPORATE PLAZA, RAMCHANDRA LANE EXTENSION, KAACHPADA MALAD (W), MUMBAI 400 064. / V. ASST. COMMISSIONER OF INCOME TAX 16(1), MUMBAI. ./ PAN : AACPJ3117F ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI SAURABHKUMAR RAI / DATE OF HEARING : 03-01-2017 / DATE OF PRONOUNCEMENT : 31-01-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 4051/MUM/2016, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 21-10-20 15 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 30, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2002-03, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 30-12-2009 PASSED U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). 2. NONE APPEARED ON BEHALF OF THE ASSESSEE, HENCE, WE PROCEED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. D.R. AND MATERI AL AVAILABLE ON RECORD. ITA 4051/MUM/2016 2 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE CIT (A) FAILED TO APPRECIATE ITS ITAT ORDER D ATED 25.01.2012 IN ITS RIGHT PERSPECTIVE AND TRUE MEANING. 2. THE PETITIONER RESPECTFULLY SUBMITS THAT THE CIT (A ) ERRED IN NOT APPRECIATING IT AT ORDER, PASSED IN INDISTINGUISHABL E SET OF FACTS, RELIED UPON BY THE PETITIONER IN SUPPORT OF HIS CASE. THUS, N EGATING ITS OWN VIEW IN HELD IN EARLIER CASE DECIDED BY THE HON'BLE TRIBUNAL. 3. THE PETITIONER CRAVES LEAVE TO AMEND AND/OR ALTER ANY GROUND AND OR ADD NEW GROUND AS AND WHEN NECESSARY WITH THE PERMISSION OF THIS HON'BLE COURT. 4. THE PETITIONER SUBMITS THAT A COPY OF THE IMPUGNED ORDER WAS RECEIVED BY THE PETITIONER ON 23.12.2015 AND A CONDON ATION OF DELAY APPLICATION FOR 109 DAYS IS ATTACHED TO THIS APPLICATION . 5. THE PETITIONER HAS NOT FILED ANY OTHER APPEAL APPLI CATION WRIT PETITION ON THE SAME CAUSE AND/OR AGAINST THE SAID O RDER OF THE CIT (A) 30 IN ANY OTHER COURT IN INDIA INCLUDING THE SUPREME C OURT OF INDIA. 6. THE PETITIONER IN LIGHT AFORESAID CIRCUMSTANCES PRA YS: A. THAT PENDING THE DETERMINATION OF THIS APPEAL THE RE SPONDENT BE DIRECTED TO CEASE AND DESIST FROM RECOVERING ANY OUTST ANDING DEMAND AMOUNTS FROM THE PETITIONER; B. THE ORDER OF THE CIT (A) 30 DATED 21.10.2015 BE SET ASIDE; C. THE DEMAND OF RS. 44,90,190/- BE SET ASIDE 'INTOTO '; D. INTERIM RELIEF IN TERMS OF PRAYER CLAUSE (A) BE GRANTED; E. TO CONDONE THE DELAY AS PER APPLICATION ANNEXED. F. SUCH OTHER AND FURTHER RELIEF AS DEEMED PROPER BY THIS HON. TRIBUNAL. 4. THERE IS A DELAY OF 114 DAYS IN FILING OF THIS A PPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATI ON OF DELAY ALONG WITH ITA 4051/MUM/2016 3 AFFIDAVIT WHEREIN THE ASSESSEE HAS TAKEN THE PLEA T HAT THE FATHER OF THE ASSESSEE WAS AN AGED PERSON OF ADVANCED AGE OF 85 Y EARS WHO WAS NOT KEEPING WELL AND WAS ADMITTED IN THE HOSPITAL FOR T HE LAST SIX MONTHS FROM TIME TO TIME AT THAT RELEVANT PERIOD WHEN THE APPEA L WAS REQUIRED TO BE FILED AS PER THE TIME STIPULATED UNDER LAW. VARIOUS SUPP ORTING EVIDENCES HAVE BEEN ENCLOSED BY THE ASSESSEE W.R.T. ADMISSION AND DISCHARGE FROM HOSPITAL TO SUBSTANTIATE THAT THE ASSESSEES FATHER WAS HOSPITA LIZED FROM TIME TO TIME WITH THE LATEST ADMISSION AND DISCHARGE ENDING ON 1 1-05-2016 WHICH PREVENTED THE ASSESSEE FROM FILING THE APPEAL WITHI N THE TIME PRESCRIBED UNDER THE ACT. AN AFFIDAVIT DATED 08-06-2016 IS ALS O FILED BY THE ASSESSEE WHICH IS PLACED IN FILE. IT IS STATED THAT THE FAT HER OF THE ASSESSEE ULTIMATELY EXPIRED ON 22-07-2016. THE ASSESSEE HAD RECEIVED TH E APPELLATE ORDER OF THE LD. CIT(A) ON 23 RD DECEMBER, 2015 AND APPEAL WAS REQUIRED TO BE FILED ON OR BEFORE 21 ST FEBRUARY, 2016 BUT WAS ULTIMATELY FILED BY THE ASS ESSEE ON 14 TH JUNE, 2016 WITH THE TRIBUNAL WHEREIN THERE IS DELAY IN FILING OF THE APPEAL BEYOND THE PERIOD OF TIME OF 60 DAYS AS STIPULATED UNDER LAW. THUS, IT WAS PRAYED THAT THE DELAY OCCURRED IN FILING THE INSTAN T APPEAL BE CONDONED AS THERE WAS A REASONABLE AND BONAFIDE CAUSE WHICH PRE VENTED THE ASSESSEE FROM FILING THE APPEAL IN TIME BEFORE THE TRIBUNAL AS STIPULATED UNDER THE ACT. THE LD. D.R., HOWEVER, OBJECTED TO THE CONDONATION APPLICATION FILED BY THE ASSESSEE TO EXPLAIN / JUSTIFY THE DELAY BUT HE SUBM ITTED THAT ALL THE RELEVANT DOCUMENTS ALONG WITH AFFIDAVIT HAVE BEEN FILED BY T HE ASSESSEE IN SUPPORT OF HIS CONTENTION THAT THERE WAS SUFFICIENT AND BONAFI DE CAUSE WHICH PREVENTED THE ASSESSEE FROM FILING OF APPEAL WITHIN STIPULATE D TIME BEFORE THE TRIBUNAL. THOUGH NONE APPEARED ON BEHALF OF THE ASSESSEE, WE HAVE CONSIDERED THE ISSUE BASED UPON THE MATERIAL PLACED ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THERE WAS A SUFFICIENT AND BONAFIDE CAUSE BEING ILLNESS OF THE AGED FATHER OF THE ASSESSEE OF ADVANCED AGE OF 85 YEARDS WHO WAS HOSPITALIZED AT THAT MATERIAL AND RELEVANT TIME WHICH PREVENTED THE ASSESSEE FROM FILING OF THE INSTANT APPEAL IN TIME AND IN THE INTEREST OF S UBSTANTIAL JUSTICE VIS--VIS ITA 4051/MUM/2016 4 TECHNICALITIES, WE CONDONE THE DELAY IN FILING OF T HIS APPEAL AND THE APPEAL IS HEREBY DIRECTED TO BE ADMITTED IN THE INTEREST OF J SUTICE TO BE ADJUDICATED ON MERITS. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL. THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME WITH TH E REVENUE FOR THE IMPUGNED ASSESSMENT YEAR. THE REVENUE , BASED ON TH E INFORMATION THAT THE ACCRUED INTEREST ON LOANS GIVEN BY THE ASSESSEE TO SOME PERSONS HAS NOT BEEN OFFERED FOR TAXATION ALTHOUGH THE ASSESSEE WAS FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING , INVOKED PROVISIONS OF SECTION 147/148 OF THE ACT BY ISSUING NOTICES U/S 148 OF THE ACT ON 24-03-2009 TO THE ASS ESSEE , TO ASSESS THE INCOME ESCAPED FROM TAXATION BEING ACCRUED INTEREST INCOME ON LOANS ADVANCED BY THE ASSESSEE. THE ASSESSEE IN RESPONSE FILED RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 23-12-2009 DECLARING A LOS S OF RS. 9,11,248/- . THE ASSESSMENT WAS COMPLETED U/S. 143(3) R.WS. 147 OF T HE ACT ON 30-12-2009 DETERMINING TOTAL INCOME AT RS. 44,90,190/- . IT WA S OBSERVED BY THE AO THAT THE ASSESSEE HAS ADVANCED LOANS ON WHICH INTEREST O F RS. 44,90,192/- HAD ACCRUED AS PER REVENUE AS THE ASSESSEE WAS FOLLOWIN G MERCANTILE SYSTEM OF ACCOUNTING WHICH WAS BROUGHT TO TAX BY THE REVENUE. IT IS THE CONTENTION OF THE REVENUE THAT THE ASSESSEE IS FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTING AND THE ABOVE INTEREST AMOUNTS STOOD ACCRUED TO THE ASSESSEE ON THE AMOUNT OF LOANS ADVANCED, WHICH AS PER REVENUE THE SAME HA D NOT BEEN OFFERED TO TAXATION BY THE ASSESSEE. HOWEVER, IT WAS THE CONT ENTION OF THE ASSESSEE THAT THESE AMOUNTS WHICH ARE DUE TO THE ASSESSEE ARE IN DISPUTE AND THE MATTER IS SUBJUDICED WITH DIFFERENT COURTS AND THE SAME CANNO T BE BROUGHT TO TAX AS THE PRINCIPAL AMOUNT RECOVERABLE ITSELF IS IN DISPU TE AND DOUBTFUL OF RECOVERY. SECONDLY, IT IS CONTENDED BY THE ASSESSEE THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING WHICH THE ASSESSEE HAD CONTEND ED BEFORE THE AUTHORITIES BELOW IS SUPPORTED BY THE RETURN OF INC OME FILED WITH THE REVENUE FOR VARIOUS ASSESSMENT YEARS . THIRDLY, IT IS SUBMI TTED THAT THE INTEREST ITA 4051/MUM/2016 5 PAYABLE TO BANK OF BARODA TO THE TUNE OF RS.1,45,72 ,440/- BE SET-OFF AGAINST THE INTEREST RECEIVABLE FROM THE PARTIES TO WHOM TH E LOANS WERE ADVANCED. THE LIABILITY OF INTEREST PAYMENT WAS DETERMINED BY THE ORDER OF DEBT RECOVERY TRIBUNAL AGAINST WHICH THE ASSESSEE HAD PREFERRED A N APPEAL. THE AO REJECTED THIS CONTENTION AS THE SAME IS AGAINST THE PROVISIO NS OF SECTION 43B OF THE ACT AS BANK OF BARODA BEING SCHEDULED BANK AND NO PAYME NT OF INTEREST HAS ACTUALLY BEEN MADE BY THE ASSESSEE TO THE SAID BANK . THE MATTER TRAVELLED UP TO THE TRIBUNAL IN THE FIRST ROUND OF LITIGATION AN D THE TRIBUNAL IN ITA NO. 3095 AND 3096/MUM/2011 VIDE ORDERS DATED 07-09-2012 SET ASIDE THE MATTER BACK TO THE FILE OF LD. CIT(A) WITH DIRECTION TO RE CONSIDER THE ISSUE AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND DOCU MENTS AS MAY BE FURNISHED BY THE ASSESSEE IN HIS SUPPORT , AND TO P ASS THEREAFTER A REASONED AND SPEAKING ORDERS. THE LD. CIT(A) HAS FRAMED AN APPELLATE ORDER DATED 21- 10-2015 IN COMPLIANCE WITH THE ORDER OF THE TRIBUNA L IN SECOND ROUND OF LITIGATION AND HELD AS UNDER:- 5.1 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DUL Y CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICAB LE LEGAL POSITION. 5.2 THESE PROCEEDINGS ARISE OUT OF THE ORDER OF THE HON'BLE ITAT IN ITA NOS. 3095 & 3096/MUM/2011 DATED 07-09-2012 B Y VIRTUE OF WHICH THE ISSUE WAS SET ASIDE TO THE FILE OF THE LD. CIT(A). THE RELEVANT PART OF THE ORDER IS REPRODUCED HEREWITH A S UNDER:' 'WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUT HORITIES BELOW, THE SUBMISSIONS OF THE LEARNED REPRESENTATIV ES OF BOTH THE PARTIES AS ALSO THE EARLIER ORDER OF THE T RIBUNAL DATED 25-01-2012 (SUPRA). THE ASSESSEE HAS ALSO FIL ED A PAPER BOOK CONTAINING PAGES 1 TO 37. WE HAVE ALSO P ERUSED THE PAPER BOOK. DURING THE COURSE OF HEARING, LD. A R SUBMITTED THAT THE PRINCIPAL AMOUNT ITSELF IS IN DI SPUTE AND ACCORDINGLY THE QUESTION OF ACCRUAL OF INTEREST ON THE LOANS ADVANCED BY THE ASSESSEE DO NOT ARISE. WE AGREE WIT H THE LEGAL PROPOSITION MADE BY THE LD. AR ON THE ABOVE I SSUE I.E. ITA 4051/MUM/2016 6 IF THE LOAN ITSELF IS IN DISPUTE AND THERE IS NO PR OSPECT OF REALIZATION OF THE PRINCIPAL AMOUNT, THE QUESTION O F ACCRUING OF INTEREST THEREON DO NOT ARISE. THE HONBLE CALCU TTA HIGH COURT HAS ALSO CONSIDERED THE SIMILAR ISSUE IN THE CASE OF CALCUTTA INVESTMENT CO. LTD. VS. CIT (142 ITR 120) WHERE IN WAS HELD THAT INTEREST WAS NOT LIABLE TO BE INCLUDE D IN THE ASSESSMENT OF THE ASSESSEE ON DUE BASIS OF LOAN WHE N DEBTOR COMPANY IS IN A BAD FINANCIAL CONDITION AND THERE IS NO PROSPECT OF REALIZATION OF PRINCIPAL INTEREST: H OWEVER; IN THE CASE OF THE ASSESSEE, ON PERUSAL OF THE PAPERS BEFORE US, WE OBSERVED THAT THE ASSESSEE FILED A WINDING UP PE TITION AGAINST M/S SUBHASH ARORA INVESTMENT PVT. LTD. IN 2 005, THE COPY OF THE MEMO PARTIES AND AN AFFIDAVIT IS PLACED AT PAGES 12 TO 14 OF THE PAPER BOOK FROM WHICH IT CAN BE INF ERRED AT- THE MOST THAT THE ASSESSEE WAS INITIATING WINDING U P PROCEEDINGS AGAINST THE ABOVE LOAN CREDITOR IN 2005 . WE ALSO OBSERVED ON PERUSAL OF PAGES 15 TO 20 OF THE PAPER BOOK THAT THERE WAS A COMPLAINT/CRIMINAL CASE FILED BY THE AS SESSEE AGAINST THE TWO LOAN CREDITORS VIZ. ASHISH GORADIA AND HIMMATLAL GORADIA ON ACCOUNT OF DISHONOR OF CHEQUES IN 1994. SAVE AN EXCEPT THE ABOVE PAPERS ON RECORD, WE OBSERVED THAT THERE IS NO OTHER DOCUMENT FILED BY T HE ASSESSEE IN THE PAPER BOOK TO ESTABLISH AND/OR TO S UPPORT THE CONTENTIONS THAT THE PRINCIPAL AMOUNT PAYABLE T O THE ASSESSEE BY THE ABOVE NAMED LOAN DEBTORS IS IN DISP UTE. MOREOVER, THE ABOVE DOCUMENTS 'ALSO DO NOT ESTABLI SH THAT THE PRINCIPAL AMOUNT OF LOAN IS IN DISPUTE AND THE ASSESSEE HAS NOT RECEIVED ANY INTEREST INCOME FROM THE SAID LOAN CREDITORS IN THE YEAR UNDER CONSIDERATION. THE EARL IER ORDER OF THE TRIBUNAL DATED 25-01-2012 (SUPRA) RELIED UPON B Y THE ASSESSEE PERTAIN TO A. YS 2004-05 AND 2005-06 IE. SUBSEQUENT TO THE ASSESSMENT YEAR UNDER CONSIDERATI ON. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTION OF THE LD. AR THAT THE ISSUE INVOLVED IN BOTH THE APPEALS IS COVERED BY THE EARLIER ORDER OF THE TRIB UNAL DATED 25-01-2012, HAS NO MERIT. HOWEVER, CONSIDERING THE FACT IN, BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION VIZ.. ASSESSMENT YEARS 2002-03 AND 2003-04 AND THE FACT T HAT THE ASSESSEE DID NOT APPEAR BEFORE THE ID. CIT(A) W E, IN THE INTEREST OF JUSTICE CONSIDER IT PRUDENT TO SET ASID E THE ORDERS OF THE ID. CIT(A) FOR BOTH THE ASSESSMENT YEARS UND ER CONSIDERATION AND RESTORE THE ISSUE TO HIS FILE WIT H A DIRECTION TO DECIDE THE ISSUE AFRESH AFTER GIVING AN OPPORTUN ITY OF HEARING TO BOTH THE PARTIES AND ALSO RELYING UPON S UCH ITA 4051/MUM/2016 7 DOCUMENTS AS MAY BE FURNISHED BY THE ASSESSEE BY A REASONED ORDER. HENCE, WE SET ASIDE THE ORDERS OF T HE ID. CIT(A) FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDER ATION AND RESTORE THE ISSUE TO THE FILE OF THE ID. CIT(A) FOR HIS FRESH CONSIDERATION AND ADJUDICATE THE SAME AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE PARTIES AND CONSIDERI NG SUCH EVIDENCES AS MAY BE RELIED BEFORE HIM' . 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT DURING THE PRESENT PROCEEDINGS, AND ALSO PERUSED THE ORDER OF THE LD. A.O. ON THE ISSUE UNDER DISPUTE AN D THE EARLIER ORDER OF THE LD. CIT(A) DATED 11-02-2011 WHEREIN TH E ADDITION OF RS. 44,90,190/- MADE BY THE LD. AO ON ACCOUNT OF IN TEREST ACCRUED ON INVESTMENTS WAS CONFIRMED. 5.4 IN THE ASSESSMENT ORDER PASSED BY THE AO ON 30- 12-2009 THE ADDITION WAS CONSIDERED NECESSARY BY THE LD. AO ON THE GROUND THAT THE ASSESSEE IS FOLLOWING MERCANTILE S YSTEM OF ACCOUNTING' AS PER AS PER THE ASSESSMENT RECORDS AN D THE APPELLANT NOT FURNISHED ANY DOCUMENTARY EVIDENCE VI Z. AUDIT REPORT FOR THE YEAR UNDER CONSIDERATION CONFIRMING THE METHOD OF ACCOUNTING FOLLOWED BY HIM IS OTHERWISE. ON THE BAS IS OF THE AVAILABLE FACTS ON RECORDS IT WAS HELD THAT THE ASS ESSEE WAS PRACTICING MERCANTILE SYSTEM OF ACCOUNTING BY THE A O. THE LD. AO ALSO OBSERVED THAT THE FACT OF RECEIPT OF INTEREST IS CHALLENGED IN A COURT OF LAW IS NEITHER DECISIVE NOR CONCLUSIVE AND COURTS HAVE NOWHERE GIVEN ANY INJUNCTION TO THE PARTIES FROM WH OM INTEREST IS RECEIVABLE AND JUST BECAUSE THE INTEREST PAYMENT IS QUESTIONED BY THE DEBTOR IN A COURT OF LAW DOESN'T MEAN THAT THE INTEREST THEREON CEASES TO ACCRUE TO THE ASSESSEE, THEREFORE THE A.O. HELD THAT THE INTEREST AMOUNT OF RS. 44,90,192/- HAS ACC RUED TO THE ASSESSEE AND ACCORDINGLY ADDED TO THE TOTAL INCOME. WHILE DOING SO, THE AO DIDNT ALLOW THE CONTENTIONS OF THE APPE LLANT OF THAT THE INTEREST PAYABLE ON THE LOAN TO BANK OF BARODA DETERMINED ON THE ORDERS OF DRT IS TO BE SET-OFF AGAINST THE INTE REST RECEIVABLE, AS THE SAME IS NOT PAID DURING THE YEAR AND IS NOT ALLOWABLE U/S 438 OF THE ACT. 5.5 THE APPELLANT APPEALED AGAINST THE ORDERS OF TH E LD. AO AND THE CIT(A)-28, MUMBAI AFTER GIVING SEVERAL OPPO RTUNITIES WITHOUT ANY COMPLIANCE FROM THE APPELLANT AND FINAL IZED THE APPEAL ON THE BASIS OF THE GROUNDS OF APPEAL AND ON THE BASIS OF THE REASONING, GIVEN IN THE ASSESSMENT ORDER BY THE AO, ITA 4051/MUM/2016 8 CONFIRMED THE ADDITION WHICH WAS SET-ASIDE BY THE H ONBLE ITAT IN ITA. NOS. 3095 & 3096/MUM/2011 DATED 07/09/2012. 5.6 DURING THE PRESENT PROCEEDINGS, THE APPELLANT W AS SPECIFICALLY ASKED TO CLARIFY THE SYSTEM OF ACCOUNTING FOLLOWED, AND ALSO THE ISSUE POINTED OUT BY THE HON'BLE ITAT WHILE SETTING ASIDE THE ORDERS OF THE LD. CIT (A) TO ESTABLISH THE PRINCIPA L AMOUNT OF LOAN IS IN DISPUTE AND THE APPELLANT HAS NOT RECEIVED AN Y INTEREST INCOME FROM THE SAID LOAN CREDITORS IN THE YEAR UND ER CONSIDERATION. IN RESPONSE TO THE SAME, WITH REGARD TO THE METHOD OF ACCOUNTING, THE APPELLANT FILED COPIES OF THE RETURNS OF INCOME FILED IN RESPONSE TO THE NOTICE ISSUED U/S 1 48 OF THE ACT FOR THE A.Y. 2002-03 AND ALSO REGULAR RETURNS FILED FOR THE A.Y 2008-09 & 2009-10 AND THE ASSESSMENT ORDERS PASSED FOR 1993- 94, 94-95 & 96-97. FROM THESE EVIDENCES THE APPELLA NT TRIES TO ARGUE THAT THE SYSTEM OF ACCOUNTING FOLLOWED BY HIM IS NOT MERCANTILE, AS STATED IN THE ASSESSMENT ORDER BY TH E AO. HOWEVER, IN THE DOCUMENTS /COPIES FILED NOWHERE IT IS MENTIONED THAT THE APPELLANT IS FOLLOWING THE CASH SYSTEM. NO BOOKS OF ACCOUNTS OR STATEMENTS AS CALLED FOR, FOR THE RELEV ANT YEARS TO SUPPORT HIS CONTENTION THAT HE IS FOLLOWING THE CAS H SYSTEM WERE PRODUCED. AO CLEARLY MENTIONED IN THE ASSESSMENT OR DER THAT FROM THE RECORDS THE APPELLANT IS FOLLOWING MERCANT ILE SYSTEM. AS THE APPELLANT COULD NOT SUBSTANTIATE WITH FULL PROO F DOCUMENTARY EVIDENCES EXPLAINING THE SYSTEM OF ACCOUNTING THAT HE IS FOLLOWING CASH SYSTEM, I HOLD THAT THE ACCRUAL METHOD ADOPTED BY THE LD. AO IS CORRECT AND APPELLANT FAILS ON THE ISSUES RAI SED IN GROUND NO. 1. 5.7 THE OTHER ISSUE RAISED THROUGH GROUND NO. 2 TO 5, PERTAINS TO THE ASSESSMENT OF INTEREST ACCRUED ON THE LOAN G IVEN TO M/S SUBHASH ARORA INVESTMENT PVT. LTD, ASHISH GARODIA A ND HIMMATLAL GARODIA. WHEN ASKED TO SUBSTANTIATE HIS C LAIM THAT THE RECOVERY OF PRINCIPAL AMOUNT IN SUPPORT OF THE CLAIM THAT THE PRINCIPAL AMOUNT IS IN DISPUTE, HE HAS ONLY FILED A COPY OF THE JUDGMENT OF THE HON'BLE HIGH COURT OF MUMBAI DISPOS ING THE WRIT PETITION NO. 2676 OF 2008 FILED BY ONE M/S MOLLY TR ADING CO, PVT. LTD AND SHRI SATINDER KSHETRAPAL, DIRECTOR OF THE COMPANY WHO STOOD AS GUARANTORS TO THE LOAN TAKEN BY SHRI SUBHA SH AURORA INVESTMENT COMPANY (P) LTD AGAINST THE ATTACHMENT O F BANK ACCOUNT AND COLLECTING A SMALL PORTION BY THE TRO A FTER TREATING THEM AS ASSESSEE IN DEFAULT. ON PERUSAL OF THE JUDG MENT DELIVERED ON THE WRIT PETITION FILED BY THE ABOVE SAID COMPAN Y, IT IS FOUND THAT THE APPELLANT IS ONE OF THE RESPONDENTS. IN T HE SAID ITA 4051/MUM/2016 9 JUDGMENT HONBLE COURT HAS CONFIRMED THE ACTION OF THE TRO ATTACHING THE ACCOUNTS OF THE PETITIONER AND DISMIS SED THE PETITION. THE COPY OF THE JUDGMENT IS NOTHING TO DO WITH THE ISSUE OF PRINCIPAL AMOUNT OF THE LOANS FROM THE THREE PAR TIES IS IN DISPUTE. EXCEPT THIS COPY, THE APPELLANT COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCES TO SHOW THAT THE PRINCIPAL AM OUNT OF THE LOANS FROM THREE PARTIES IS IN DISPUTE. EXCEPT THIS COPY, THE APPELLANT COULD NOT PRODUCE ANY DOCUMENTARY EVIDENC ES TO SHOW THAT THE PRINCIPAL AMOUNT OF THE LOANS ARE IN DISPU TE IN THE PRESENT PROCEEDINGS. THE APPELLANT NOT EVEN PRODUCE D THE WINDING UP PETITION FILED BY THE APPELLANT WHICH WA S DISCUSSED IN THE HONBLE ITAT ORDER AT THE TIME OF SETTING ASIDE THE ORDER OF CIT(A) FOR THE YEAR. THE APPELLANT IS SILENT ON THE PRESENT POSITION OF THE WINDING UP PETITION FOR THE REASONS BETTER K NOWN TO HIM. NO NEW MATERIAL HAS BEEN FILED BY THE APPELLANT IN DICATING THAT THE MONEY WHICH IS DUE TO HIM HAS BECOME IRRECOVERA BLE, BUT FROM THE PAPERS ON RECORD IT CAN BE AT THE MOST DER IVED THAT ONLY SOME DISPUTES ARE PENDING WITH REGARD TO THE QUANTU M OF LIABILITY. WITH REGARD TO THE LOAN AMOUNTS OF THE O THER TWO PERSONS ALSO, NO NEW EVIDENCES ARE FILED DURING THE SE PROCEEDINGS. 5.8 THE APPELLANT ALSO FILED COPIES OF SOME CASE LA WS IN SUPPORT OF HIS CASE. (CIT VS. CHAMANLAL MANGALDAS & CO AIR 1960 SC 1336 DATED 19-02-1960, CIT VS. SHOORJI VALLABHADAS AND CO 1962 46 ITR 144 SC DATED 27-()3-199,2). THE CASES M OSTLY DISCUSSED THE CONTEXT OF THE PRINCIPAL AMOUNT IS IN DISPUTE AND IS NOT RECOVERABLE. THE CASE LAWS FILED IN SUPPORT OF HIS CASE ARE APPLICABLE ONLY WHEN THE APPELLANT PROVES THAT IN H IS CASE THE RECOVERY OF PRINCIPAL AMOUNT IS IN DOUBT. THEREFORE THE COPIES OF THE SET OF CASE LAWS FILED WILL NOT COME TO THE RES CUE OF THE APPELLANT BECAUSE HE HAS NOT PROVED THE BASIC ISSUE IN THOSE DECISIONS THAT THE RECOVERY OF LOAN AMOUNT IS IN DO UBT. DESPITE GIVING SPECIFIC OPPORTUNITIES TO PROVE HIS CASE THA T THE PRINCIPAL AMOUNT IS IN DOUBT, THE APPELLANT FAILED TO DO SO I N THE PRESENT PROCEEDINGS ALSO. THEREFORE CONSIDERING THE DIFFERE NT ASPECTS OF THE CASE, I DRAW A CONCLUSION THAT THE LIABILITY OF THE DEBTORS TO THE APPELLANT STILL EXIST AND IN VIEW OF THE SAME T HE CONCLUSION ARRIVED AT BY THE AO THAT INTEREST HAS ACCRUED TO T HE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS CORRECT. IN FACT THE APPELLANT HIMSELF ADMITTED AND DECLARED THE AMOUNTS DUE TO HIM BEFORE THE TRO, BASED ON SUCH DECLARATION ONLY THE ASSESSMENT WAS REOPENED AND ASSESSMENTS WERE COMPLETED. IN SUC H A SITUATION, I HOLD THAT THE ISSUE OF ASSESSMENT OF I NTEREST ACCRUED ITA 4051/MUM/2016 10 ON THE LOANS GIVEN TO M/S SUBHASH ARORA INVESTMENT (P) LTD, ASHISH GARODIA AND HIMMMATHLAL GARODIA RAISED IN GR OUND NOS 2,3,4 & 5 OF THE APPEAL FILED BY THE APPELLANT ARE NOT MAINTAINABLE AND ARE DISMISSED. HON'BLE ITAT WHILE DECIDING THE CASE FOR THE A.Y. 2004-05 & 2005-06 ALLOWED THE ASS ESSEE'S APPEAL. HOWEVER HONBLE ITAT WHILE SETTING ASIDE TH E CASE OF THE ASSESSEE FOR THE A.Y. 2002-03 & 04 DISCUSSED THE DE CISION OF THE ITAT ORDER FOR THE A.Y. 2004-05 & 05-06 DISTINGUISH ING THE SAME AND DIRECTED THE CIT(A) TO FINALISE THE APPEAL AFRE SH ON THE BASIS OF THE SUBMISSIONS. ACCORDINGLY THE ORDERS ARE PASS ED FOR THIS A.Y. ALSO TAKING INTO CONSIDERATION THE ISSUES DEAL T IN THE ORDER OF THE ITAT FOR THE A.Y. 2004-05 & 05-06. 5.9 IN THE GROUNDS OF APPEAL, THE APPELLANT MENTION ED ONE MORE ISSUE UNDER THE HEAD 'OTHER GROUNDS' WITHOUT G IVING ANY GROUND NUMBER. THE ISSUE RAISED IN THAT GROUND IS T HAT IF THE AO SEEKS TO TAX, THE NOTIONAL INCOME ARISING OUT OF IN TEREST RECEIVABLE BY THE ASSESSEE FROM VARIOUS PARTIES THEN HE IS DUT Y BOUND TO GIVE RELIEF AGAINST NOTIONAL INTEREST PAYMENT DUE T O THIRD PARTIES BY THE ASSESSE. BY SAYING SO THE APPELLANT IS PLEAD ING TO GIVE SET- OFF OF THE INTEREST ON THE LOAN CHARGED BY BANK OF BARODA. THE AO CLEARLY DISCUSSED THIS ISSUE IN THE ASSESSMENT ORDE R IN PARA 2.3 & 2.4. THE AMOUNT OF INTEREST CHARGED BY THE BANK OF BARODA IS NOT PAID IN THE YEAR UNDER CONSIDERATION AND SUCH INTER EST PAYMENT DEDUCTION IS ALLOWABLE ONLY ON PAID BASIS AS SPECIF IED IN 43B OF THE ACT. IN VIEW OF THE SAME, IT IS HELD THAT THE I NTEREST LIABILITY OF BANK OF BARODA LOAN CANNOT ALLOWABLE BE AS DEDUCTIO N. THE ACTION OF THE A.O. IS CORRECT AND APPELLANT FAILED TO SUCCEED ON THIS GROUND. 5.10 IN THE END, THE APPELLANT SAYS THAT HE CRAVES TO ADD OR AMEND OR ALTER ANY OF THE ABOVE GROUND OF APPEAL WI TH PRIOR PERMISSION OF YOUR HONOUR. NO SUCH OPTION HAS BEEN EXERCISED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS. THE REFORE, IT IS CLEAR THAT THIS GROUND OF APPEAL IS ACADEMIC IN NAT URE AND NO DECISION IS REQUIRED IN RESPECT OF THIS GROUND OF A PPEAL. FOR THE STATISTICAL PURPOSE, THIS GROUND BE TAKEN TO BE DIS MISSED GROUND OF APPEAL. 5.11 IN THE RESULT, THE APPEAL FOR THE A.Y. 2002-03 IS DISMISSED. ITA 4051/MUM/2016 11 ON CAREFUL PERUSAL OF THE ORDER OF THE LD. CIT(A) I N SECOND ROUND OF LITIGATION AND AFTER HEARING THE LD. D.R., WHO SUPPORTED THE A PPELLATE ORDER OF THE LD. CIT(A) , WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS NOT PASSED A SPEAKING AND REASONED ORDER IN SECOND ROUND OF LITI GATION WHEREBY THE CONTENTIONS OF THE ASSESSEE OF FOLLOWING CONSISTENT LY CASH METHOD OF ACCOUNTING WAS REJECTED BY THE LD. CIT(A) WITHOUT G IVING SPECIFIC AND COGENT REASONS WITHOUT CONSIDERING THE SYSTEM OF ACCOUNTIN G FOLLOWED BY THE ASSESSEE IN THE PRECEDING AS WELL SUBSEQUENT ASSESS MENT YEARS, AND SECONDLY LD. CIT(A) HAS NOT PASSED SPEAKING AND REA SONED ORDER WHEREIN NO DETAILED DISCUSSIONS WAS RECORDED BY LEARNED CIT(A) WITH REGARDS TO VARIOUS LEGAL DISPUTES RAISED BY THE ASSESSEE OR THE COUNTE R CLAIMS RAISED BY THE BORROWERS IN COURT LITIGATIONS , WHICH WERE WITH VA RIOUS COURTS OF LAW AND ALSO FATE/STATUS OF THESE COURT CASES WITH VARIOUS FORUM S WERE NOT DISCUSSED BY THE LEARNED CIT(A) ON SPECIFIC BASIS TO ARRIVE AT D ECISION, HENCE, WE ARE INCLINED TO SET ASIDE AND RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION TO PASS A REASONED AND SPEAKING ORDER AFT ER CONSIDERING THE CONTENTIONS OF THE ASSESSEE AND MATERIAL ON RECORD. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED TO FILE NECESSARY AND COGE NT EVIDENCES AND CONTENTIONS INCLUDING COPIES OF VARIOUS PETITIONS A ND THE DECISIONS OF COURT CASES ALONG WITH THE RELEVANT EVIDENCES TO SUPPORT THE AVERMENTS THAT THE ASSESSEE IS FOLLOWING CASH METHOD OF ACCOUNTING AND ALSO WITH RESPECT TO DETAILS OF DISPUTES, CLAIMS AND COUNTERCLAIMS W.R.T . VARIOUS DISPUTES AS TO THE LOANS ADVANCED BY THE ASSESSEE AS WELL OTHER CONTEN TIONS IN IT DEFENSE. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE WITH THE L D. CIT(A) IN THE PROCEEDINGS AND FILE ALL NECESSARY DOCUMENTS IN ITS DEFENSE AND IN THE ABSENCE OF CO- OPERATION OF THE ASSESSEE BEFORE LEARNED CIT(A), TH E LEARNED CIT(A) SHALL BE FREE TO PASS AN ORDER BASED ON MATERIAL ON RECORD. THE LEARNED CIT(A) SHALL GRANT AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LA W. WE ORDER ACCORDINGLY. ITA 4051/MUM/2016 12 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN I TA NO. 4051/MUM/2016 FOR ASSESSMENT YEAR 2002-03 IS ALLOWED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2017. # $% &' 31-01-2017 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 31-01-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI I BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI