IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAYAPAL RAO, JUDICIAL MEMBER ITA NO.4169/MUM/2009 ASSESSMENT YEAR: 1997-1998 SULTAN K DHARANI, 45, METAL HOUSE, 2 ND BHOIWADA LANE, MUMBAI 400002. PAN : AABPD 1727 C VS. INCOME TAX OFFICER, WARD NO. 14 (1) 1 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M. SUBRAMANIAN RESPONDENT BY : SHRI. D. SONGATE, D.R. O R D E R PER P.M. JAGTAP, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XIV, MUMBAI DATED 28 TH APRIL, 2009. 2. THE MAIN ISSUE INVOLVED IN THIS APPEAL RELATING TO THE ADDITION OF RS. 5 LAKHS MADE BY THE AO AND CONFIRMED BY THE LD. CIT ( A) ON ACCOUNT OF LOAN RECEIVED BY THE ASSESSEE FROM M/S. SPECIALITY COATI NG TREATING THE SAME AS ,UNEXPLAINED CASH CREDIT U/S. 68 IS RAISED BY THE A SSESSEE IN GROUND NOS. 1 TO 5. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS CARRYING ON THE BUSINESS ACTIVITIES THROUGH HIS THREE PROPRIETA RY CONCERNS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY HIM ON 31.10.1997 DECLARING TOTAL INCOME OF RS. 1,70,770/-. IN THE S AID YEAR, A LOAN OF RS. 5 LAKHS WAS SHOWN TO BE RECEIVED BY THE ASSESSEE IN T HE NAME OF HIS ITA NO.4169/MUM/2009 A.Y 1997-98: 2 PROPRIETARY CONCERN M/S. GEMINI IMPEX FROM M/S. SPE CIALITY COATING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CONFIR MATION LETTER OF THE SAID CREDITOR WAS FILED BY THE ASSESSEE. THE ASSESSEE H OWEVER COULD NOT PRODUCE SHRI HIMANSHU K TRIVEDI, PROP. OF M/S. SPECIALITY Q UOTING FOR EXAMINATION BEFORE THE AO. A SUMMON U/S 131 WAS ALSO ISSUED BY THE AO TO SHRI HIMANSHU K TRIVEDI REQUIRING THE LATTER TO APPEAR O N 21.03.2000 ALONG WITH HIS BANK STATEMENT, COPY OF ACCOUNT OF THE ASSESSEE IN HIS BOOKS OF ACCOUNT ETC. SHRI HIMANSHU K TRIVEDI HOWEVER DID NOT APPEA R ON 21.03.2000 IN SPITE OF THE FACT THAT SUMMONS ISSUED TO HIM WAS DU LY SERVED ON 15.03.2000. THE ASSESSING OFFICER, THEREFORE, PROC EEDED TO TREAT THE LOAN OF RS. 5 LAKHS RECEIVED BY THE ASSESSEE FROM THE SAID CREDITOR S UNEXPLAINED AND THE AMOUNT OF RS. 5 LAKHS WAS ADDED BY HIM TO T HE TOTAL INCOME OF THE ASSESSEE U/S 68 IN THE ASSESSMENT COMPLETED U/S 143 (3) VIDE AN ORDER DATED 27.03.2000. AGAINST THE SAID ORDER, AN APPEA L WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) WHO DISMISSED THE S AID APPEAL FILED BY THE ASSESSEE BELATEDLY REFUSING TO CONDONE THE DELAY IN FILING THE SAME. ON FURTHER APPEAL, THE TRIBUNAL DIRECTED THE LD. CIT ( A) TO CONDONE THE SAID DELAY AND DISPOSE OF APPEAL OF THE ASSESSEE ON MERI T. 4. AS PER THE DIRECTION OF THE TRIBUNAL, THE LD. CI T (A) TOOK UP THE APPEAL OF THE ASSESSEE FOR FRESH CONSIDERATION ON MERIT. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT (A), IT WA S SUBMITTED ON BEHALF OF THE ASSESSEE THAT A LETTER DATED 31.3.2000 WAS FILE D BY THE CONCERNED CREDITOR SHRI HIMANSHU TRIVEDI, PROPRIETOR OF SPECI ALITY COATING FURNISHING ALL THE DETAILS AND DOCUMENTS REQUIRED BY THE AO. IT WAS SUBMITTED THAT SINCE THE SAID LETTER WAS FILED ONLY AFTER THE COMP LETION OF ASSESSMENT BY AO ITA NO.4169/MUM/2009 A.Y 1997-98: 3 ON 27.03.2000, COGNIZANCE THEREOF COULD NOT BE TAKE N BY THE AO. A REQUEST THEREFORE WAS MADE BY THE ASSESSEE TO THE LD. CIT ( A) TO ADMIT THE SAID LETTER ALONG WITH ITS ENCLOSURES AS ADDITIONAL EVIDENCE. THE SAID DOCUMENTS WERE FORWARDED BY THE LD. CIT (A) TO THE AO WITH A DIREC TION TO EXAMINE THE SAME AND TO SUBMIT HIS COMMENTS / REPORT THEREON ALONG W ITH OBJECTIONS, IF ANY, WITH REGARD TO ITS ADMISSIBILITY. ACCORDINGLY A R EMAND REPORT WAS SUBMITTED BY THE AO TO THE LD. CIT (A) AND AFTER OBTAINING TH E COUNTER COMMENTS OF THE ASSESSEE THEREON, THE LD. CIT (A) PROCEEDED TO ADJU DICATE UPON THIS ISSUE. HE HELD THAT SINCE THE LETTER DATED 30.03.2000 FILE D BY THE CONCERNED CREDITOR WAS ALREADY AVAILABLE ON THE RECORD OF THE AO, THE PRAYER OF THE ASSESSEE FOR ADMITTING THE SAME AS ADDITIONAL EVIDE NCE WAS IRRELEVANT. HE FURTHER REJECTED THE SAME. ON MERIT, THE LD. CIT ( A) HELD THAT THE ONUS THAT LAY ON THE ASSESSEE TO ESTABLISH THE CREDITWORTHINE SS OF THE CONCERNED CREDITOR AS WELL AS GENUINENESS OF THE RELEVANT TRA NSACTION WAS NOT SATISFACTORILY DISCHARGED BY THE ASSESSEE. HE THER EFORE CONFIRMED THE ADDITION OF RS. 5 LAKHS MADE BY THE AO TREATING THE LOAN RECEIVED BY THE ASSESSEE FROM M/S SPECIALITY COATING AS UNEXPLAINED CASH CREDIT. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS DEMONSTRATED BY TH E LEARNED COUNSEL FOR THE ASSESSEE FROM THE COPY OF LETTER DATED 30.03.2000 FILED BY THE CREDITOR IN THE OFFICE OF THE ASSESSING OFFICER ALONG WITH ITS ENCL OSURE PLACED IN HIS PAPER BOOK, ALL THE REQUIRED DOCUMENTS SUCH AS BANK STATE MENT OF THE SAID CREDITOR ALONG WITH HIS BALANCE SHEET SHOWING THE L OAN IN QUESTION GIVEN TO THE ASSESSEE WERE DULY FILED BEFORE THE AO IN RESPO NSE TO THE SUMMONS ISSUED U/S 131. HOWEVER AS THE ASSESSMENT WAS ALRE ADY COMPLETED BY THE ITA NO.4169/MUM/2009 A.Y 1997-98: 4 AO ON 27.03.2000, HE COULD NOT TAKE COGNIZANCE OF T HE SAID DOCUMENTS. WHEN THE SAID DOCUMENTS WERE FILED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS OF LD. CIT (A) AND A REQUEST WAS MADE TO ADMIT THE SAME AS ADDITIONAL EVIDENCE, THE LD. CIT (A) SOUGH T REMAND REPORT FROM THE AO THEREON. AS SUBMITTED BY THE LEARNED COUNSEL FO R THE ASSESSEE IN THIS REGARD, NO OPPORTUNITY WAS GIVEN BY THE AO TO THE A SSESSEE EVEN DURING THE COURSE OF REMAND PROCEEDINGS OF BEING HEARD ESPECIA LLY WHEN HE WAS NOT SATISFIED ABOUT THE DOCUMENTARY EVIDENCE FILED BY T HE CONCERNED CREDITOR AS PER THE REQUIREMENT OF SUMMONS ISSUED U/S 131. AFT ER HAVING GONE THROUGH THE COPIES OF THE SAID DOCUMENTS FILED BY THE CONCE 4RNED CREDITOR WHICH ARE PLACED AT PAGE NO.21-23 OF THE ASSESSEES PAPER BOO K, WE FIND THAT THE SAME CONSTITUTE A RELEVANT EVIDENCE TO EXPLAIN THE CASH CREDIT REPRESENTING LOAN RECEIVED BY THE ASSESSEE FROM M/S. SPECIALITY COATI NG U/S 68 AND THE ASSESSEE, IN OUR OPINION, SHOULD BE GIVEN ONE MORE OPPORTUNITY TO EXPLAIN THE SAID CASH CREDIT IN THE LIGHT OF THE SAID EVIDE NCE. WE THEREFORE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT (A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH IN THE LIGHT OF THE DOCUMENTARY EVIDENCE FILED BY THE CONCERNED CREDITO R VIDE HIS LETTER DATED 30.03.2000 AFTER GIVING THE ASSESSEE A PROPER AND S UFFICIENT OPPORTUNITY OF BEING HEARD. GROUND NOS. 1 TO 5 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED. 6. AS REGARDS THE OTHER ISSUE RELATING TO THE DISA LLOWANCE OF RS. 40,929/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) OUT OF TELEPHONE EXPENSES RAISED IN GR. NO.6, IT IS OBSERVED THAT THE EXPENSE S INCURRED BY THE ASSESSEE ON HIS MOBILE PHONE AMOUNTING TO RS. 1,63,716/- WER E DISALLOWED BY THE AO ITA NO.4169/MUM/2009 A.Y 1997-98: 5 TO THE EXTENT OF RS. 40,929/- BEING 25% OF THE TOTA L EXPENSES ON ACCOUNT OF PERSONAL USE. THE LD. CIT (A) CONFIRMED THE SAID D ISALLOWANCE. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE A SSESSEE HAS NOT RAISED ANY MATERIAL CONTENTION EXCEPT STATING THAT THE DISALLO WANCE TO THE EXTENT OF 25% OUT OF TOTAL EXPENSES MADE FOR PERSONAL USE IS EXCE SSIVE AND UNREASONABLE. IN THIS REGARD, IT IS OBSERVED THAT IN THE ASSESSME NT COMPLETED U/S 143(3) FOR A.Y. 2003-2004 IN THE ASSESSEES OWN CASE, A SI MILAR DISALLOWANCE OUT OF TELEPHONE EXPENSES WAS MADE BY THE AO TO THE EXTENT OF 15% FOR PERSONAL USE AND THE SAME WAS ACCEPTED BY THE ASSESSEE. WE THEREFORE FIND IT FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE OF 25% MADE OUT OF TELEPHONE EXPENSES ON ACCOUNT OF PERSONAL USE TO 15% AND DIRE CT THE AO TO RECOMPUTE THE DISALLOWANCE ACCORDINGLY. GROUND NO.6 OF THE AS SESSEES APPEAL IS THUS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 10 TH DAY OF JUNE, 2011. SD/- SD/- VIJAYAPAL RAO P.M. JAGTAP (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) MUMBAI, DATED 10 TH JUNE, 2011. OKK* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- XIV, MUMB AI 4. COMMISSIONER OF INCOME TAX, CONCERNED 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI