ITO 22(1)(4), NAVI MUMBAI V. LAXMAN D. SENGHANI, MUMBAI

ITA 4172/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78815 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-02-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 20-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Proportionate interest; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 4172/MUM/2011 ( / ASSESSMENT YEAR: 2001-02) INCOME TAX OFFICER 22(1)(4), 4 TH FLOOR, TOWER 6, VASHI RLY. STN. BLDG., VASHI, NAVI MUMBAI-400 703 / VS. LAXMAN D. SENGHANI 8, NILKANTH SHOPPING CENTRE, NAVFROJ LANE, GHATKOPAR (W), MUMBAI-400 086 ./ ./PAN/GIR NO. AADPS 0506 J ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI M. L. PERUMAL !' # $ / RESPONDENT BY : NONE % &'( # )* / DATE OF HEARING : 26.02.2014 +,- # )* / DATE OF PRONOUNCEMENT : 25.04.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-33, MUMBAI (CIT(A) FOR SH ORT) DATED 14.03.2011, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) R.W.S 254 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR TH E ASSESSMENT YEAR (A.Y.) 2001-02 VIDE ORDER DATED 29.12.2009. 2. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE WHEN THE APPEAL WAS CALLED OUT FOR HEARING, NOR ANY ADJOURNMENT APPLICATION STANDS RECEIVED. THE HEARING HAVING BEEN 2 ITA NO. 4172/MUM/2011 (A.Y. 2001-02) ITO VS. LAXMAN D. SENGHANI ALREADY ADJOURNED ON TWO OCCASIONS PREVIOUSLY AT TH E REQUEST OF THE ASSESSEES COUNSEL, POSTING THE HEARING FOR DATES AGREEABLE TO HIM, WE ONLY CONSIDER IT FIT AND PROPER TO PROCEED TO DECIDE THIS APPEAL AFTER HEARING THE PAR TY BEFORE US. 3. BRIEFLY STATED, THE FACTS OF THE CASE AS FOLLOWS . THE ASSESSMENT IN THE FIRST INSTANCE WAS FRAMED U/S.144 OF THE ACT ON 30.01.2004 AT A TO TAL INCOME OF RS.65,82,270/- , I.E., AS AGAINST THE RETURNED INCOME OF RS.4,22,544/- . THE ASSESSMENT WAS FINALLY SET ASIDE BY THE TRIBUNAL FOR BEING MADE AFRESH. THE ASSESSEE NOT EX TENDING CO-OPERATION IN THE SET ASIDE PROCEEDING AS WELL, THE ASSESSMENT WAS FINALLY FRAM ED AT AN INCOME OF RS.49,15,268/- BY TAKING INTO ACCOUNT THE MATERIAL BROUGHT ON RECORD BY THE ASSESSEE. THE ASSESSEE PRODUCING SOME ADDITIONAL EVIDENCE/S IN APPEAL, A R EMAND REPORT FROM THE ASSESSING OFFICER (A.O.) WAS CALLED FOR AND RELIEF ALLOWED ON THAT BASIS. AGGRIEVED, THE REVENUE IS IN APPEAL. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 WE SHALL PROCEED GROUND-WISE. GROUND NOS. 1 & 2 RAISE A COMMON ISSUE, BEING IN RESPECT OF ADDITIONS U/S.68 QUA CASH CREDITS FOR RS.5,05,000/- AND RS.8,08,000/- AS SUMED BY THE ASSESSEE-INDIVIDUAL, A BUILDER AND DEVELOPER , IN HIS TWO PROPRIETARY CONCERNS, NAMELY, M/S. ANNAPPI CONSTRUCTION AND SHREE SIDDHIV INAYAK CONSTRUCTION (MULUND) RESPECTIVELY, IN THE ABSENCE OF EVEN THE CONFIRMATI ONS BEING FURNISHED BY THE ASSESSEE. THE ASSESSEE PRODUCED LOAN CONFIRMATIONS FOR RS.4.6 3 LACS IN THE APPELLATE PROCEEDINGS. HOWEVER, AS NO OTHER MATERIAL WAS ADDUCED BY THE AS SESSEE TO PROVE THE CREDITWORTHINESS OF THE CREDITORS OR THE GENUINENESS OF THE LOANS TO THAT EXTENT AND, FURTHER, NO CONFIRMATION FURNISHED FOR THE BALANCE CREDITS FOR RS.3.45 LACS, THE ENTIRE CREDIT WAS CONSIDERED AS UNPROVED BY THE A.O. PER HIS REMAND REPORT DATED 15 .02.2011, REPRODUCED AT PGS. 2, 3 OF THE IMPUGNED ORDER. THE LD. CIT(A) DECIDED THE MATT ER THUS, ON NOT RECEIVING ANY REPLY FROM THE ASSESSEE UPON BEING FURNISHED A COPY OF TH E SAID REMAND REPORT: 4.3 THE ASSESSING OFFICER HAS COMMENTED THAT AGAIN ST THE AMOUNT RS.5,05,000/- AND RS.8,08,000/- ADDED U/S.68 THE AP PELLANT DID NOT PRODUCE CONFIRMATIONS OF RS.3,00,000/- AND RS.3,45,000/- RE SPECTIVELY. SINCE 3 ITA NO. 4172/MUM/2011 (A.Y. 2001-02) ITO VS. LAXMAN D. SENGHANI APPELLANT HAS NOTHING FURTHER TO ADD TO ASSESSING O FFICERS COMMENT I AM CONVINCED THAT HAVING FAILED TO PRODUCE CONFIRMATIO NS EVEN DURING ORIGINAL ASSESSMENT PROCEEDINGS, APPELLATE PROCEEDINGS EARLI ER BEFORE CIT(A) AND AGAIN DURING THE SET ASIDE ASSESSMENT PROCEEDING AN D FINALLY IN REMAND PROCEEDING, THE ADDITION FOR THE AMOUNT OF RS.3,00, 000/- AND RS.3,45,000/- ARE TOTALLY JUSTIFIED AND HENCE ARE CONFIRMED. GROU ND NOS. 2 AND 3 ARE DISMISSED. THE REVENUE PER ITS GROUND NOS. 1 & 2 STATES THAT T HE PART RELIEF OF RS.2,05,000/- (OUT OF RS.5,05,000/-) AND RS.4,63,000/- (OUT OF RS .8,08,000/-) WAS NOT WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.2 WE OBSERVE THAT THOUGH THE LD. CIT(A), HAS THOU GH SEEMINGLY ALLOWED PART RELIEF ON THE BASIS THAT THE LOAN CONFIRMATIONS (FOR RS.2. 05 LACS AND RS.4.63 LACS FOR THE TWO FIRMS RESPECTIVELY) AS HAVING BEEN FURNISHED, HE HA S NOT GIVEN ANY FINDING TO THAT EFFECT, AS APPARENT FROM THE READING OF PARA 4.3 (SUPRA), W HICH IS THE OPERATIVE PART OF HIS ORDER. ALL HE HAS SAID THEREBY IS THAT THE ADDITION FOR TH E BALANCE AMOUNT OF RS.3 LACS AND RS.3.45 LACS, I.E., FOR WHICH NO CONFIRMATIONS STOO D RECEIVED, IS TOTALLY JUSTIFIED AND CONFIRMED, WHICH MUST BE READ IN CONJUNCTION WITH T HE DISCUSSION BEING MADE, WHICH IS IN THE CONTEXT OF THE CONFIRMATIONS FURNISHED. IN F ACT, THE ASSESSEE HAD PRODUCED LOAN CONFIRMATIONS FOR A TOTAL OF RS.4.63 LACS ACROSS BO TH THE FIRMS, AS APPARENT FROM THE NAMES FOR WHICH THESE STOOD FURNISHED (AT PARA 2 OF THE R EMAND REPORT), WHEN COMPARED WITH THE NAMES/DETAILS FOR THE TOTAL LOAN CREDITORS, I.E., T HE FIRM-WISE, APPEARING AT PARA 7 (PG. 4) OF THE ASSESSMENT ORDER, AND NOT FOR A TOTAL OF RS.6.6 8 LACS (RS.2.05 LACS + RS.4.63 LACS). FURTHER, ADMITTEDLY NO MATERIAL TO PROVE THE CREDIT S TO THAT EXTENT, I.E., RS.4.63 LACS, ON THE PARAMETERS OF CAPACITY AND GENUINENESS, STOOD FURNI SHED EVEN IN THE REMAND PROCEEDINGS OR BEFORE THE LD. CIT(A). AN ABSENCE THEREFORE OF A CATEGORICAL FINDING QUA THE AMOUNT FOR WHICH NO LOAN CONFIRMATIONS STAND FILED (I.E., RS.8.50 LACS) BY THE LD. CIT(A), CANNOT BE INTERPRETED TO MEAN AN ACCEPTANCE BY HIM OF THE SAME AS EXPLAINED AND, THUS, ALLOWED. IN FACT, THE ASSESSEES GROUND NOS. 2 & 3 BEFORE HI M, CHALLENGING THE ADDITION FOR RS.5.05 LACS AND RS.8.08 LACS RESPECTIVELY, STAND DISMISSED . WE, ACCORDINGLY, WHILE ENDORSING HIS ORDER, SO THAT THE ENTIRE ADDITION OF RS.13.13 LACS STOOD CONFIRMED BY THE LD. CIT(A), 4 ITA NO. 4172/MUM/2011 (A.Y. 2001-02) ITO VS. LAXMAN D. SENGHANI CLARIFY THAT NO CASE FOR GRIEVANCE AS PROJECTED BY THE REVENUES GROUND NOS. 1 & 2 IS UNDER THE CIRCUMSTANCES CALLED FOR. WE DECIDE ACCOR DINGLY. 5. COMING TO THE FACTS OF THE REVENUES SURVIVING G ROUND NO. 3, THE ASSESSEE WAS FOUND TO HAVE OBTAINED UNSECURED LOANS AT RS.213.47 LACS, INCLUDING FOR RS.193.10 LACS THROUGH HIS PROPRIETARY CONCERN SHREE SIDDHIVINAYAK CONSTRUCTION (MULUND). INTEREST WAS PAID AND CLAIMED AS EXPENDITURE AT RS.38,66,020/- . THE ASSESSEE HAD, HOWEVER, ADVANCED SUMS (FOR RS.17.65 LACS) TO VARIOUS OUTSIDE PARTIES , INCLUDING TO SHREE SIDDHIVINAYAK CONSTRUCTION (THAKURLI), IN WHICH THE ASSESSEE IS A PARTNER. NO BUSINESS PURPOSE FOR THE SAID INTEREST-FREE ADVANCES BEING ESTABLISHED, PROP ORTIONATE INTEREST, WORKED OUT AT RS.31,79,724/- , WAS DISALLOWED U/S.36(1)(III). IN THE REMAND PRO CEEDINGS, THE ASSESSEE WAS ABLE TO SATISFY THE A.O. WITH REGARD TO AN ADVA NCE OF RS.26,14,598/- TO ONE, BAPPANARD NARSHIMA, AS TO ITS BUSINESS PURPOSE, SO THAT HE DESERVED PART RELIEF. THE LD. CIT(A), ACCEPTING THE A.O.S CASE; THE ASSESSEE HAV ING NOT REBUTTED THE A.O.S FINDINGS IN ANY OTHER MANNER, ALLOWED PART RELIEF TO THE ASSESS EE, WORKING THE SAME THOUGH TO RS.18,72,124/-, AS UNDER (REFER PARA 4.4 OF THE IMP UGNED ORDER): 4.4 REGARDING GROUND NO. 4 THE ASSESSING OFFICER H AS ACCEPTED THE APPELLANTS CONTENTION THAT AGAINST TOTAL UNSECURED LOAN ON WHICH APPELLANT PAID RS.38,68,020/- AS INTEREST AND THEN AN AMOUNT OF RS.26,14,598/- GIVEN TO BAPPANARD NARSHIMA IS IN FORM OF BUSINESS ADVANC E AND ONLY THE BALANCE RS.72,16,338/- IS UNSECURED LOAN GIVEN INTEREST FRE E. IN VIEW OF THIS PROPORTIONATE INTEREST [RS.38,68,020 X RS.72,16,338 / RS.21,34,668] = RS.13,07,600/- IS SUSTAINED OUT OF ADDITION MADE OF RS.31,79,724/-. GROUND NO.4 IS PARTLY ALLOWED. 6. WE HAVE HEARD THE PARTY BEFORE US, AND PERUSED T HE MATERIAL ON RECORD. THE LD. CIT(A) HAS, AGAIN, THOUGH DECIDED THE ISSUE CORRECT LY, ERRED IN COMPUTING THE PART RELIEF EXIGIBLE TO THE ASSESSEE. IN FACT, THE WORKING WAS NOT REQUIRED TO BE DONE, SO THAT HE COULD HAVE GIVEN APPROPRIATE DIRECTION/S TO THE A.O. THE ONLY RELIEF RECOMMENDED BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) IS IN RESPECT OF AD VANCE OF RS.26.15 LACS TO BAPPANARD NARSHIMA, SINCE CONSIDERED AS A BUSINESS ADVANCE. T HE DISALLOWANCE OF INTEREST HAVING BEEN WORKED OUT BY APPLYING INTEREST RATE AT 18% P. A., THE ASSESSEE IS WITHOUT DOUBT 5 ITA NO. 4172/MUM/2011 (A.Y. 2001-02) ITO VS. LAXMAN D. SENGHANI ENTITLED TO RELIEF AT THE SAME RATE. AS SUCH, EVEN ASSUMING THE AMOUNT AS BEING CONSTANTLY HELD THROUGHOUT THE YEAR, THE SAME WOULD WORK TO A MAXIMUM OF RS.4,70,627/- ONLY, I.E., RS.26,14,598/- @ 18%, EVEN IS BEING CONTENDED BY TH E REVENUE PER ITS GROUND # 3. THE LD. CIT(A) HAS ONCE AGAIN WHILE DECIDING THE ISSUE CORRECTLY, SO THAT HIS ORDER WARRANTS BEING UPHELD IN PRINCIPLE, ERRED ON SPECIFICS. HIS ORDER IS, THEREFORE, DIRECTED TO BE MODIFIED ACCORDINGLY AND, THEREFORE, HIS FINDINGS T O THE EXTENT INCONSISTENT ARE LIABLE TO BE AND ARE DIRECTED TO BE VACATED, AND WHICH WOULD BE VALID FOR HIS ADJUDICATION OF THE ASSESSEES GROUND NOS. 1 & 2 BEFORE HIS AS WELL. TH E REVENUE ACCORDINGLY GETS RELIEF TO THE EXTENT OF RS.14,01,497/- (RS.18,72,124 RS.4,7 0,627). WE DECIDE ACCORDINGLY. 7. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED O N THE AFORE-SAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 25, 201 4 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; /& DATED : 25.04.2014 '.&../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 0) ( ) / THE CIT(A) 4. % 0) / CIT - CONCERNED 5. 3'45 !)&67 , * 67- , % ( / DR, ITAT, MUMBAI 6. 589 :( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI