Krishna Kumar Goenka, Kanpur V. ACIT Rg.3, Kanpur

ITA 419/LKW/2011

• Counselvise Citation: 41923714 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-07-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 06-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: P K KAPOOR
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Business income; Revision of order; Opportunity of being heard; Principle of natural justice; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 139(5); 147; 131; 68; 148; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.419/LKW/2011 ASSESSMENT YEAR:2001 - 02 & I.T.A. NO.733/LKW/2010 ASSESSMENT YEAR:2001 - 02 SHRI KRISHNA KUMAR GOENKA, 316, ANANDPURI, KANPUR. PAN:AGTPG3832H VS. A.C.I.T., RANGE - 3, KANPUR. (APPELLANT) (RESPONDENT) I.T.A. NO.728/LKW/2010 ASSESSMENT YEAR:2001 - 02 A.C.I.T., RANGE - 3, KANPUR. VS. SHRI KRISHNA KUMAR GOENKA, 316, ANANDPURI, KANPUR. PAN:AGTPG3832H (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI P. K. KAPOOR, C.A. REVENUE BY SHRI ALOK MITRA, D.R. DATE OF HEARING 22/07/2014 DATE OF PRONOUNCEMENT 1 0 /09/2014 O R D E R PER A. K. GARODIA, A.M. ALL THESE APPEALS ARE IN RESPECT OF SAME ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2001 - 02. FIRST APPEAL OF THE ASSESSEE IN I.T.A. NO.419/LKW/2011 IS IN RESPECT OF ASSESSMENT COMPLETED BY THE ASSESSING OFFICER ON 30/03/2005 U/S 147/143(3) OF THE ACT. THE SECOND APPEAL OF THE ASSE SSEE FOR THE SAME ASSESSMENT YEAR IS AGAINST THE ASSESSMENT ORDER 2 FRAMED BY ASSESSING OFFICER ON 20/12/2007 U/S 143(3)/263 OF THE ACT. THE THIRD APPEAL IS FILED BY THE REVEN UE WHICH IS ALSO IN RESPECT OF THE SAME ASSESSMENT ORDER DATED 20/12/2007 PASSED B Y ASSESSING OFFICER U/S 143(3)/263 OF THE ACT. ALL THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE ARISING OUT OF THE ASSESSMENT ORDER PASSE D BY ASSESSING OFFICER ON 30/03/2005 U/S 147/143(3) OF THE ACT I.E. I.T.A. NO.419/LKW/2011. IN THIS APPEAL , THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL FILED BY THE 'APPELLANT' AGAINST ORDER DATED 30.3.2005 PASSED BY THE ASSISTANT CIT - III, KANPUR UNDER SECTION 147 READ WITH SECTION 143(3), ON THE GROUND THAT THE SAID ASSESSMENT ORDER WAS ITSELF SET ASIDE BY THE LD.CIT - 1, KANPUR VIDE HIS ORDER DATED 16.11.2006 AND THAT ORDER WAS CONFIRMED BY THE HON'BLE ITAT VIDE THEIR ORDER DATED 25.5.2007. 2. BECAUSE THE ASSESSMENT ORDER DATED 30.3.2005 (SUPRA) WAS 'NO ORDER' IN THE EYES OF LAW AS THE SAME WAS NOT BASED ON VALID ASSUMPTION OF JURISDICTION UNDER SECTION 147. 3. BECA USE IN THE APPEAL BEING APPEAL NO.CIT(A)I/293/ACIT - III/2008 - 09/26 (AS HAD BEEN PREFERRED BY THE ''APPELLANT' AGAINST THE ORDER DATED 30.3.2005), FOLLOWING GROUNDS: - '01. BECAUSE THE PROCEEDINGS UNDER SECTION 147 HAVE NEITHER BEEN VALIDLY INITIATED NOR CON CLUDED IN ACCORDANCE WITH THE PROVISIONS OF LAW AND THE ASSESSMENT ORDER DATED 30 TH MARCH, 2005 AS HAS BEEN PASSED IN PURSUANCE OF THE SAME, IS WHOLLY WITHOUT JURISDICTION. 02.BECAUSE THE INFORMATION RECEIVED FROM 'ADIT, UNIT - II (AS HAS BEEN REFERRED TO IN THE 'REASONS 3 RECORDED'), WITHOUT ANY APPLICATION OF MIND BY THE LEARNED ASSESSING OFFICER, COULD NOT HAVE CONSTITUTED THE REQUISITE MATERIAL AND THE INITIATION OF PROCEEDIN GS ARE BAD IN LAW. 03.BECAUSE THE ORDER SHEET ENTRY, AS HAS BEEN COMMUNICATED TO THE APPELLANT, THE 'REASONS RECORDED' IS WHOLLY DEFICIENT IN MEETING THE REQUIREMENT OF LAW IN THIS RESPECT AND CONSEQUENTLY THERE IS NO VALID INITIATION OF PROCEEDINGS UNDER SECTION 147. 04.BECAUSE IN ANY CASE AND WITHOUT PREJUDICE TO THE CONTENTIONS RAISED IN THE FOREGOING GROUNDS, THE IMPUGNED ASSESSMENT ORDER STANDS WHOLLY VITIATED AS THE SAME IS BEYOND THE SCOPE OF 'REASSESSMENT PROCEEDINGS' AND ACCORDINGLY THE SAME IS LI ABLE TO BE DECLARED AS NULL AND VOID. WHICH IMPINGED ON THE VERY VALIDITY THEREOF (ASSESSMENT ORDER DATED 30.3.2005) HAD BEEN TAKEN AND ON A DUE AND PROPER ADJUDICATION OF THE SAME, SAID ORDER 30.03.2005 WAS LIABLE TO BE QUASHED AS VOID - AB - INITIO. 4. BE CAUSE APART FROM CHALLENGING THE LEGALITY OF ACTION UNDER SECTION 147 (IN PURSUANCE OF WHICH THE ASSESSMENT ORDER DATED 30.3.2005 HAD BEEN PASSED), THE 'APPELLANT' HAD CHALLENGED THE QUANTUM OF ASSESSMENT ALSO WHICH INCLUDED VARIOUS ADDITIONS/DISALLOWANCES AS ENUMERATED HEREUNDER: - (A) ENHANCEMENT OF BUSINESS INCOME FROM M/S. ASSAM TEA CO. (PROPRIETARY CONCERN OF THE APPELLANT) AS SHOWN AT RS.1,88,890 (RS.) 1,59,180 (B) CREDITS APPEARING IN THE BANK ACCOUNT OF THE APPELLANT ALLEGED TO HAVE REMAINED UNEXPLAINED 10,00,000 (C) EXPENSES ALLEGED TO HAVE BEEN INCURRED BY THE APPELLANT, ON MANAGEMENT OF GIFTS 50,000 (D) INADEQUATE WITHDRAWALS FOR HOUSEHOLD EXPENSES TO THE EXTENT OF 64 , 000 4 WERE LIABLE TO BE ADJUDICATED UPON BY THE 'CIT(A)' IN THE APPEAL NO. CIT(A)I/293/ACIT - III/2008 - 09/26 . 5. BECAUSE IN ANY CASE, VARIOUS ISSUES AS HAD BEEN RAISED IN THE ABOVE MENTIONED APPEAL, WHICH HAS BEEN SUMMARIZED IN THE GROUNDS OF APPEAL HEREINFORE, WERE NOT COVERED BY THE ORDER PASSED BY THE L D. CIT - I, KANPUR, IN THE PROCEEDINGS UNDER SECTION 263 AND THE SAME CALLED FOR DUE ADJUDICATION BY THE 'CIT(A)' AND VIEW TO THE CONTRARY AS HAS BEEN TAKEN BY HIM IS WHOLLY ERRONEOUS AS BEING INCONSIS TENT WITH THE FACTS OF THE CASE AND LAW APPLICABLE THERE TO. 6. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 3. THE ASSESSEE HAS FURNISHED WRITTEN SUBMISSIONS IN RESPECT OF THIS APPEAL AND THE MAIN CONTENTION OF THE ASSESSEE IN THE WRITTEN SUBMISSIONS IS THAT CIT(A) WAS NOT JUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE IN LIMINE ON THE BASIS THAT REASSESSMENT O RDER DATED 30/05/2005 ITSELF HAS BECOME NONEXISTENT OWING TO THE REVISION BY CIT U/S 263 OF THE ACT. THE WRITTEN SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED BELOW: IN THE ABOVE REFERRED APPEAL THE ASSESSEE/APPELLANT HAS CHALLENGED THE ORDER DATED 10.05.2011 AS HAS BEEN PASSED BY THE L D. CIT(A) - I, KANPUR HEREINAFTER REFERRED TO AS 'CIT(A)' ON THE FOLLOWING GROUNDS: - 1 . BECAUSE THE 'CIT(A)' HAS ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL FILED BY THE 'APPELLANT' AGAINST ORDER DATED 30.3.2005 PASSED BY THE ASSISTANT CIT - III, KANPUR UNDER SECTION 147 READ WITH SECTION 143(3) ON THE GROUND THAT THE SAID ASSESSMENT ORDER WAS ITSELF SET ASIDE BY THE LD.CIT - I, KANPUR VI DE HIS ORDER DATED 16.11.2006 AND THAT ORDER WAS CONFIRMED BY THE HON'BLE ITAT VIDE THEIR ORDER DATED 25.5.2007'. 2 . BECAUSE THE ASSESSMENT ORDER DATED 30.3.2005 (SUPRA) ITSELF WAS 'NO ORDER' IN THE EYES OF LAW AS 5 THE SAME WAS NOT BASED ON VALID ASSUMPTION OF JURISDICTION UNDER SECTION 147. 3 . BECAUSE IN THE APPEAL BEING APPEAL NO.C I T(A)I/293/ACIT - III /2008 - 0 9/26 (AS HAD BEEN PREFERRED BY THE APPELLANT AGAINST THE ORDER DATED 30.3.2005), FOLLOWING GROUNDS: - '01. BECAUSE THE PROCEEDINGS UNDER SECTION 147 HAVE NEIT HER BEEN VALIDLY INITIATED NOR CONCLUDED IN ACCORDANCE WITH THE PROVISIONS OF LAW AND THE ASSESSMENT ORDER DATED 3 0 TH MARCH, 2005 AS HAS BEEN PASSED IN PURSUANCE OF THE SAME, IS WHOLLY WITHOUT JURISDICTION . 02. BECAUSE THE INFORMATION RECEIVED FROM 'ADIT, UNIT - II'(AS HAS BEEN REFERRED TO IN THE 'REASONS RECORDED'), WITHOUT ANY APPLICATION OF MIND BY THE LEARNED ASSESSING OFFICER, COULD NOT HAVE CONSTITUTED THE REQUISITE MATERIAL AND THE INITIATION OF PROCEEDINGS ARE BAD IN LAW. 03. BECAUSE THE ORDER SHEET E NTRY, AS HAS BEEN COMMUNICATED TO THE APPELLANT, THE 'REASONS RECORDED' IS WHOLLY DEFICIENT IN MEETING THE REQUIREMENT OF LAW IN THIS RESPECT AND CONSEQUENTLY THERE IS NO VALID INITIATION OF PROCEEDINGS UNDER SECTION 147. 04. BECA USE IN ANY CASE AND WITHOUT PREJUDICE TO THE CONTENTIONS RAISED IN THE FOREGOING GROUNDS, THE IMPUGNED ASSESSMENT ORDER STANDS WHOLLY VITIATED AS THE SAME IS BEYOND THE SCOPE OF 'REASSESSMENT PROCEEDINGS ' AND ACCORDINGLY THE SAME IS LIABLE TO BE DECLARED AS NULL AND VOID.' WHICH IMPINGED ON THE VERY VALIDITY THEREOF (ASSESSMENT DATED 30.3.2005) HAD BEEN CHALLENGED AND THE SAME WAS LIABLE TO BE DECIDED AND ADJUDICATED UPON BY THE CIT(A) WHILE DECIDING THE APPEAL. 4. BECAUSE APART FROM ILLEGALITY OF THE ACTION UNDER SECTION 1 47 (IN PURSUANCE OF WHICH THE ASSESSMENT ORDER DATED 30.3.2005 (SUPRA) HAD BEEN PASSED), THE APPELLANT 6 HAD CHALLENGED THE QUANTUM OF ASSESSMENT ALSO WHICH INCLUDED VARIOUS ADDITIONS/DISALLOWANCES AS ENUMERATED HEREUNDER: - (A) ENHANCEMENT OF BUSINESS INCOM E FROM M/S. ASSAM TEA CO, (PROPRIETARY CONCERN OF THE APPELLANT) AS SHOWN AT RS. 1,88,890 BY (RS.) 1,59,180 (B) CREDITS APPEARING IN THE BANK ACCOUNT OF THE APPELLANT, ALLEGED TO HAVE REMAINED UNEXPLAINED 10,00,000 (C) EXPENSES ALLEGED TO HAVE BEEN INCURRED BY THE APPELLANT, ON MANAGEMENT OF GIFTS 50,000 (D) INADEQUATE WITHDRAWALS FOR HOUSEHOLD EXPENSES TO THE EXTENT OF 64,000 WERE LIABLE TO BE ADJUDICATED UPON BY THE 'CIT(A)' IN THE APPEAL NO.CIT(A)I/293/A CIT - III/2008 - 09/26. 5. BECAUSE IN ANY CASE, VARIOUS ISSUES AS HAD BEEN RAISED IN THE ABOVE MENTIONED APPEAL, WHICH HAS BEEN SUMMARIZED IN THE GROUNDS OF APPEAL HEREINFORE, WERE NOT COVERED BY THE ORDER PASSED BY THE L D. CIT - I IN THE PROCEEDINGS UNDER SECTION 263 AND THE SAME CALLED FOR DUE ADJUDICATION BY THE 'CIT(A)' AND VIEW TO THE CONTRARY AS HAS BEEN TAKEN BY HIM IS WHOLLY ERRONEOUS AS BEING INCONSISTENT WITH THE FACTS OF THE CASE AND LAW APPLICABLE THERE TO. 6. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE.' 2. THE FACTS GIVING RISE TO THE SAID APPEAL (BEFORE THE HON'BLE ITAT) ARE NARRATED IN BRIEF, IN THE FORM OF CHRONOLOGY OF RELEVANT DATES AND EVENTS, AS GIVEN HEREUNDER: - SI. NO. DATES EVENTS (I) 21.08.2001 RETURN OF INCOME FOR A.Y. 2001 - 02 FILED U/S. 139(1) DISCLOSING A TOTAL INCOME OF RS.188987 VIDE ACKNOWLEDGMENT NO.001083 DATED 21.08.2001 ALONG WITH AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. 7 (II) 09.09.2002 THE SAID RETURN WAS DULY PROCESSED VIDE INTIMATION UNDER SECTION 143(1) OF THE INCOME TAX ACT 1961, DULY (III) 12.03.2003 STATEMENT OF SRI K.K. GOENKA, RECORDED BY ADDITIONAL DIRECTOR OF INCOME TAX, KANPUR (IV) 28.03.2003 REVISED RETURN OF INCOME DISCLOSING AN INCOME OF RS.588990 (AFTER INCLUDING A SUM OF RS.4,00,000/ - ON ACCOUNT OF GIFT) FILED VIDE ACKNOWLEDGEMENT NO. 044277 DATED 28.03.2003. IT IS STATED THAT THE 'RETURN' SO FILED BY THE APPELLANT WAS A 'REVISE D RETURN' AS PER SECTION 139(5) WHICH AT THE RELEVANT TIME READ AS UNDER: - '(5) IF ANY PERSON, HAVING FURNISHED A RETURN UNDER SUB SECTION (1) OR IN PURSUANCE OF A NOTICE ISSUED UNDER SUB SECTION (1) OF SECTION 142, DISCOVERS ANY OMISSION OR ANY WRONG STAT EMENT THEREIN, HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT, WHICHEVER IS EARLIER: PROVIDED THAT WHERE THE RETURN RELATES TO THE PREVIOUS Y EAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 S ' DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR, THE REFERENCE TO ONE YEAR AFORESAID SHALL BE CONSTRUED AS A REFERENCE TO TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ' AND TIME LIMIT FOR COMPLETION OF ASSESSMENT ON THE BASIS OF THE SAID REVISED RETURN WAS AVAILABLE TILL 31.03.2004. (V) 19.3.2004 NOTICE OF DATE ISSUED UNDER SECTION 148 OF THE ACT AND 'REASONS RECORDED' WERE AS UNDER: - 'DURING THE COURSE OF INQUIRIES MADE BY THE ADDL DIRECTOR OF INCOME - TAX (INV.), UNIT - 2, KANPUR, IT WAS GATHERED THAT THE PRESENT ASSESSEE RECEIVED AMOUNTS O RS.4,00,000/ - (DURING F.Y. 2000 - 2001), WHICH WAS CLAIMED AS 'GIFT'. HOWEVER, ON INVESTIGATION BY THE ADDL DIT (INV.), UNIT - 2, KANPUR, IT WAS FO UND TO BE PART OF A BOGUS GIFT RACKET. THE ALLEGED DONOR NEVER CAME OUT FOR CONFIRMATION. TO VERIFY THE ALLEGED GIFT, SUMMONS U/S 131 WERE ISSUED AND SERVED UPON AND THE SO CALLED GIFT WAS SURRENDERED. INFORMATION, IN THIS REGARD HAD ALREADY BEEN SENT BY T HE ADDL. DIT(INV.), UNIT - 2, KANPUR. IN VIEW OF ABOVE FACTS, I AM SATISFIED THAT INCOME OF RS.4,00,000/ - CHARGEABLE TO TAX, IN TERMS OF BOGUS GIFT HAS ESCAPED ASSESSMENT - AS PER PROVISIONS OF . 147 OF THE I. T. ACT, 61. THEREFORE ACTION U/S 147 OF THE ACT, 61 IS BEING INITIATED AND NOTICE U/S 148 IS BEING ISSUED. ' IT IS STATED THAT THE NOTICE ISSUED UNDER SECTION 148 8 WAS WHOLLY ILLEGAL AS THE ASSESSMENT PROCEEDINGS IN PURSUANCE OF 'REVISED RETURN' FILED ON 28.03.2003 WERE TILL PENDING FOR ASSESSMENT. DURIN G THE PENDENCY OF 'RETURN', IT CANNOT BE SAID THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. OTHERWISE ALSO THE 'REASONS RECORDED' WERE DEFICIENT ON MEETING THE REQUIREMENT OF LAW. (VI) 28.10.2004 NOTICE ISSUED UNDER SECTION 142(1)/143(2) OF THE INCOME TAX ACT, 1961. (VII) 29.11.2004 REPLY TO NOTICE DATED 28.10.2004 SUBMITTED BY THE APPELLANT/ OBJECTING TO THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. COPY ENCLOSED AT PAGES 13 TO 15 MARKED AS ANNEXURE - I HE RETO. (VIII) 14.02.2005 FRESH NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT. (IX) 24.02.2005 REPLY TO NOTICE DATED 14.02.2005 SUBMITTED. (X) 30.03.2005 ASSESSMENT ORDER PASSED UNDER SECTION 147/143(3) OF THE INCOME TAX ACT 1961 DETERMINING TOTAL INCOME AT RS.1457167/ - (VI) 29.04.2005 APPEAL AGAINST THE ASSESSMENT ORDER DATES 30.03.200 FILED BEFORE CIT(A) - 1I / KANPUR. THE GROUNDS OF APPEAL AND STATEMENT OF FACTS ARE ENCLOSED AT PAGESL6 TO 19 & 20 TO 23, MARKED A ANNEXURES - II & III HERETO. 3. IT IS AMPLY BORNE OUT FROM THE CHRONOLOGY OF DATES AND EVENTS AS AFORESAID AND THE GROUNDS OF APPEAL AS REFERRED TO AT SERIAL NO.(XI) ABOVE, THAT THE GROUNDS ON WHICH VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147 HAD BEEN CHALLENGED IN THE APPEAL FILE D UNDER SECTION 246A, WERE VERY SUBSTANTIAL, WHICH WENT TO THE VERY ROOT OF THE ASSESSMENT ORDER DATED 30.03.2005 PASSED THEREUNDER. 4. IT IS A LAW WELL SETTLED THAT PROVISIONS RELATED TO INITIATION OF REASSESSMENT PROCEEDINGS ARE 'SELF - CONTAINED' AND IN CASE THERE IS ANY INFIRMITY IN THE INITIATION OF PROCEEDINGS UNDER SECTION 147, ALL THE PROCEEDINGS TAKEN IN PURSUANCE THEREOF (WHICH INCLUDE THE ASSESSMENT ORDER ALSO) ARE LIABLE TO BE QUASHED, AS DISCUSSED INFRA. 5. BEFORE THE APPEAL FILED ON 29.04.2005 [AGAINST ORDER DATED 30.03.2005 PASSED UNDER SECTION 147 OF THE ACT READ WITH SECTION 143(3), LISTED AT SERIAL NO.(XI) PARA HEREINFORE] COULD BE TAKEN UP FOR HEARING BY THE ID. CIT(A) - I , KANPUR, PROCEEDINGS UNDER SECTION 263 GOT INITIATED. 6. THE ASSESSE E/APPELLANT HAD DULY OBJECTED TO THE SAID NOTICE UNDER SECTION 263(1). HOWEVER, AFTER OVER RULING OF SUCH 9 OBJECTIONS, THE CIT - I PASSED AN ORDER UNDER SECTION 263 DATED 16.11.2006, OPERATIVE PART OF WHICH READS AS UNDER: - '10. IN VIEW OF THE DISCUSSION MADE IN THE FOREGOING PARAGRAPHS, I AM OF THE OPINION THAT THE ASSESSMENT ORDER DATED 30.3.2005 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. THEREFORE, IN VIEW OF THE POWERS CONFERRED ON ME U/S 263(1) OF THE INCOME TAX ACT, 1961 , THE SAID ASSESSMENT ORDER DATED 30.3.2005 IS SET - ASIDE TO BE FRAMED AFRESH AS PER LAW AFTER ALLOWING DUE OPPORTUNITY BY THE A. O. TO THE ASSESSEE OF BEING HEARD IN THE MATTER.' A COPY OF THE SAID ORDER 16.11.2006 UNDER SECTION 263 IS ENCLOSED AT PAGES 2 4 TO 28 MARKED AS ANNEXURE - IV HERETO. 7. AFTER THE SAID ORDER DATED 16.11.2006 (PASSED UNDER SECTION 263 BY CIT - I, KANPUR), BECAME AVAILABLE, THE L D. CIT(A) BEFORE WHOM THE APPEAL HAD BEEN FILED ON 29.04.2005 AGAINST THE ORDER DATED 30.03.2005, TOOK UP THE HEARING OF THE SAME. 8. WITHOUT ADJUDICATING UPON THE GROUNDS OF APPEAL READ WITH STATEMENT OF FACTS (ANNEXURE - II & III), THE L D. CIT(A) DISMISSED THE SAME IN LIMINIE ON THE GROUND THAT THE REASSESSMENT ORDER DATED 30.03.2005 PASSED UNDER SECTION 14 7 READ WITH SECTION 143(3) ITSELF HAD BECOME NON - EXISTENT OWING TO REVISION OF THE SAME BY THE CIT - I, KANPUR UNDER SECTION 263 OF THE ACT. THE VIEW IS CONTRARY TO LAW AND EVEN INCONSISTENT WITH OVERALL SCHEME OF TAXATION. THE PURPORT OF THE ORDER UNDER S ECTION 263 DATED 16.11.2006 WAS THAT SOME MORE INCOME THAN WHAT HAD ALREADY BEEN ASSESSED IN TERMS OF THE ORDER DATED 30.03.2005, WAS LIABLE TO BE INCLUDED IN THE ASSESSMENT, AND THAT TOO AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, AND IN ACCO RDANCE WITH THE PROVISIONS OF LAW, AS MAY VERY KINDLY BE SEEN FROM PARA 10 OF THE SAID ORDER AS HAS BEEN REPRODUCED IN PARA 6 HEREINFORE. PLEADING BY THE APPELLANT 9. AS MAY VERY KINDLY BE SEEN FROM CHRONOLOGY OF DATES AND EVENTS AS HAS BEEN GIVEN IN PAR A 2 HEREINFORE, THE ASSESSEE/APPELLANT HAD FILED 'REVISED RETURN' FOR THE ASSESSMENT YEAR 2001 - 02 ON 28.03.2003 WHICH WAS WELL WITHIN THE TIME LIMIT 10 PRESCRIBED UNDER SECTION 139(5) OF THE ACT. DURING THE PENDENCY OF SUCH A 'RETURN' THE ASSESSING OFFICER CO ULD NOT HAVE ENTERTAINED THE REQUISITE 'REASON TO BELIEVE' IN 'GOOD FAITH'. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SATYA NARAIN FRASAD VS. ITO, C - WARD, VARANASI REPORTED IN (1968) 67 ITR 269. A COP Y OF THE SAID JUDGMENT IS ENCLOSED AT PAGES 29 TO 31 MARKED AS ANNEXURE - V HERETO. 10. OTHERWISE ALSO, AS STATED HEREINFORE, THE 'REASONS RECORDED' ARE WHOLLY DEFICIENT. IT IS THE MINIMUM REQUIREMENT OF LAW THAT, WITH REFERENCE TO THE RELEVANT MATERIAL, THE ASSESSING OFFICER SHOULD RECORD THAT HE HAS 'REASONS TO BELIEVE'. IN THE INSTANT CASE , ON A PERUSAL OF THE 'REASONS RECORDED' AS HAVE BEEN REPRODUCED IN PARA 2(V) HEREINFORE, IT WILL BE SEEN THAT THE ASSESSING OFFICER HAD MERELY STATED 'IN VIEW OF THE ABOVE FACTS I AM SATISFIED THAT INCOME OF RS . 4,00,000/ - CHARGEABLE TO TAX IN TERMS OF BOG US GIFT HAS ESCAPED ASSESSMENT AS PER THE PROVISIONS OF S.147 OF THE ACT. THEREFORE, ACTION U/S 147 OF THE I.T. ACT 1961 IS BEING INITIATED AND NOTICE U/S 148 IS BEING ISSUED'. NOWHERE THE ASSESSING OFFICER HAS RECORDED THAT HE HAD 'REASON TO BELIEVE'. IN THE ABSENCE OF SUCH A SPECIFIC MENTION, THE 'REASONS RECORDED' ARE NOT VALID. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BATRA BHATTA COMPANY REPORTED IN (2008) 13 DTR 115 WHEREIN AFTER REFERRING TO THE PRINCIPLES LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF CHHUGAMAL RAJPAL VS. S.P, CHALIAH & ORS REPORTED IN (1971) 79 ITR 603 (SC) THEIR LORDSHIPS OF HON'BLE DELHI OBSERVED AND HELD AS UNDER: - '7. WE FEEL THAT THE OBSERVATIONS OF THE SUPREME CO URT IN THE AFORESAID DECISION DEARLY APPLY TO THE CASE AT HAND. MERELY BECAUSE THE AO FELT THAT THE ISSUE REQUIRED 'MUCH DEEPER SCRUTINY', IS NOT GROUND ENOUGH FOR INVOKING S. 147. IT IS NOT BELIEF PER SE THAT IS A PRE - CONDITION FOR INVOKING S. 147 OF THE SAID ACT BUT A BELIEF FOUNDED ON REASONS. THE EXPRESSION USED IN S, 147 IS 'IF THE AO HAS REASON TO BELIEVE' AND NOT 'IF THE AO BELIEVES'. THERE MUST BE SOME BASIS UPON WHICH THE BELIEF CAN BE BUILT. IT DOES NOT MATTER WHETHER THE BELIEF IS ULTIMATELY PROV ED RIGHT OR WRONG, BUT THERE MUST BE SOME MATERIAL UPON WHICH SUCH A BELIEF CAN BE FOUNDED. IN THE PRESENT CASE, THE CIT(A) 11 AS WELL AS THE TRIBUNAL HAVE FOUND AS A FACT THAT THERE WAS NO MATERIAL UPON WHICH THE AO COULD HAVE BASED HIS BELIEF THAT INCOME HA D ESCAPED ASSESSMENT . A COPY OF THE SAID JUDGMENT AS WHOLE IS ENCLOSED AT PAGES 32 TO 37, MARKED AS ANNEXURE - VI HERETO. 11. THE HON'BLE ALLAHABAD HIGH COURT ALSO IN THE CASE OF INDRA PRASTHA CHEMICALS PVT. LTD. VS. CIT REPORTED IN (2004) 271 ITR 113, AFTER REFERRING TO THE DECISION OF HON'BLE APEX COURT IN THE UNDERNOTED CASES: - ( I ) SHEO NATH SINGH VS. APPELLATE ASSTT. COMMISSIONER OF INCOME - TAX REPORTED IN (1971) 82 ITR 147 ( II ) ITO VS. LAKHMANI MEWAL DAS REPORTED IN (1976) 103 ITR 437 ( III ) GANGA SARAN & SONS P. LTD. VS. ITO REPORTED IN (1981) 130 ITR 1 HAS HELD THAT THE ASSESSING OFFICER SHOULD RECORD IN UNMISTAKABLE TERM THE 'REASON TO BELIEVE' AND SUCH 'REASON TO BELIEVE' SHOULD BE HELD IN GOOD FAITH. RELEVANT PASSAGE FROM THE JUDGMENT IN THE CASE OF INDRA PRA STHA IS REPRODUCED HEREUNDER: - 'UNDER SECTION 147 OF THE ACT THE PROCEEDINGS FOR THE REASSESSMENT CAN BE INITIATED ONLY IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE QU ESTION WHETHER THE ASSESSING OFFICER HAD REASONS TO BELIEVE IS NOT A QUESTION OF LIMITATION ONLY BUT IS A QUESTION OF JURISDICTION, A VITAL THING, WHICH CAN ALWAYS BE INVESTIGATED BY THE COURT IN AN APPLICATION UNDER ARTICLE 226 OF THE CONSTITUTION AS HELD IN DAULATRAM RAWATMAL V. ITO [1960] 38 ITR 301 (CAL); JAMNALAL KABRA V. ITO [1968] 69 ITR 461 (ALL); CALCUTTA DISCOUNT CO. LTD. V. ITO [1961] 41 ITR 191 (SC); CM RAJGHARIA V. ITO [1975] 98 ITR 486 (PATNA) AND MADHYA PRADESH INDUSTRIES LTD. V. ITO [1965]57 ITR 637 (SC). THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR, IN OTHER WORDS, IT MUST BE BASED ON REASONS WHICH ARE 12 RELEVANT AND MATERIAL AS HELD BY THE APEX COURT IN GANGA SARAN AND SONS P. LTD, V. ITO [1981] 130 ITR 1. THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 147 DOES NOT MEAN PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE ASSESSING OFFICER. THE BELIEF MUST BE HELD IN GOOD FAITH; IT CANNOT BE MERELY A PRETENCE. IT IS OPEN TO THE COU RT TO EXAMINE WHETHER THE REASONS FOR THE BELIEF HAVE A RATIONAL CONNECTION OR A RELEVANT BEARING TO THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT TO THE PURPOSE OF THE SECTION. TO THIS LIMITED EXTENT, THE ACTION OF THE ASSESSING OFFICER IN STARTING PROCEEDINGS UNDER SECTION 147 IS OPEN TO CHALLENGE IN A COURT OF LAW AS HELD IN S. NARAYANAPPA V. CIT [1967] 63 ITR 219 (SC); KANTAMANI VENKATA NARAYANA AND SONS V. FIRST ADDITIONAL ITO [1967] 63 ITR 638 (SC); MADHYA PRADESH INDUSTRIES LTD. V. ITO [1970] 77 ITR 268 (SC); SOWDAGAR AHMED KHAN V. ITO [1968] 70 ITR 79 (SC); ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC); ITO V. NAWAB MIR BARKAT ALL KHAN BAHADUR [1974] 97 ITR 239 (SC); CST V. BHAG \ VAN INDUSTRIES (P) LTD. [1973] 31 STC 293 (SC) AN D STATE OF PUNJAB V. BALBIR SINGH [1994] 3 SCC 299. THE FORMATION OF THE REQUIRED OPINION AND BELIEF BY THE ASSESSING OFFICER IS A CONDITION PRECEDENT. WITHOUT SUCH FORMATION, HE MIL NOT HAVE JURISDICTION TO INITIATE PROCEEDINGS UNDER SECTION 147. THE FUL FILLMENT OF THIS CONDITION IS NOT A MERE FORMALITY BUT IT IS MANDATORY. THE FAILURE TO FULFILL THAT CONDITION WOULD VITIATE THE ENTIRE PROCEEDINGS AS HELD BY THE APEX COURT IN THE CASE OF JOHRI LAL (HUF) V. CIT [1973] 88 ITR 439 (SC) AND SHEO NATH SINGH V. AAC OF I. T. [1971] 82 ITR 147 (SC). THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE M ATERIAL COMING TO THE NOTICE OF THE ASSESSING OFFICER AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR. IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTA NT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF INCOME OF THE ASSESSEE FROM ASSESSMENT, AS HELD BY 13 THE HON'BLE SUPREME COURT IN THE CASE OF ITO V, LAKHMANI MEWAL DAS [1976] 103 ITR 437. IF THERE IS NO RA TIONAL AND INTELLIGIBLE NEXUS BET W EEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTED ON FACTS AND LAW COULD REASONABLY ENTERTAIN THE BELIEF, THE CONCLUSION WOULD BE INESCAPABLE THAT THE ASSESSING OFFICER COULD, NOT HAVE RE ASON TO BELIEVE. IN SUCH A CASE, THE NOTICE ISSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID AS HELD IN THE CASE OF GANGA SARAN AND SONS P. LTD. V. ITO [1981] 130 ITR 1 (SC). THUS, IT IS WELL SETTLED THAT THE 'REASON TO BELIEVE' UNDER SECTION 147 MUST BE HELD IN GOOD FAITH AND SHOULD HAVE A RATIONAL CONNECTION AND RELEVANT BEARING ON THE FORMATION OF THE BELIEF AND SHOULD NOT BE EXTRANEOUS OR IRRELEVANT. FURTHER, THIS COURT IN PROCEEDINGS UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA CAN SCRUT INIZE THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATING THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. THE SUFFICIENCY OF THE MATERIAL CANNOT BE GONE INTO BUT RELEVANCY CERTAINLY BE GONE INTO.' (PAGES 118/119) A COPY OF THE SAID JUDGMENT AS A WHOLE IS ENCLOSED AT PAGES 38 TO 47 MARKED AS ANNEXURE - VII HERETO. 12. IN THIS RESPECT, EVEN THE LEGISLATIVE INTENTION IS UNEQUIVOCAL AS MAY BE SEEN FROM THE FOLLOWING PASSAGE AS APPEARING IN THE FULL BENCH DECISION OF HON'BLE DELHI HIGH COURT IN THE C ASE OF CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN (2002) 256 ITR 1 WHEREIN AT PAGE 10 THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER: - ' ...THE AMENDING ACT, 1987, HAS, THEREFORE, RATIONALIZED THE PROVISIONS OF SECTION 147 AND OTHER CONNECTED SECTIONS TO SIMPLIFY THE PROCEDURE FOR BRINGING TO TAX THE INCOME WHICH ESCAPES ASSESSMENT, ESPECIALLY IN NON - SCRUTINY CASES. THUS, THE AMENDING ACT, 1987, HAS SUBSTITUTED A NEW SECTION 147 WHICH CONTAINS SIMPLIFIED PROVISIONS AS FOLLOWS: - (I) SEPARATE PROVISIONS CONTAINED IN CLAUSES (A) AND (B) OF THE OLD SECTION HAVE BEEN MERGED INTO A SINGLE NEW SECTION, WHICH PROVIDES THAT IF THE 14 ASSESSING OFFICER IS OF THE OPINION THAT INCOME CHARGEABLE TO TAX FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT, HE CAN ASSESS OR R EASSESS THE SAME AFTER RECORDING IN WRITING THE REASONS FOR DOING SO. (II)T HE REQUIREMENTS IN THE OLD PROVISIONS THAT THE INCOME - TAX OFFICER SHOULD HAVE 'REASON TO BELIEVE' OR 'INFORMATION' IN POSSESSION BEFORE TAKING ACTION TO ASSESS OR REASSESS THE INCOM E ESCAPING ASSESSMENT, HAVE BEEN DISPENSED WITH . (III)T HE EXISTING LEGAL INTERPRETATION THAT ONCE AN ASSESSMENT HAS BEEN REOPENED ANY OTHER INCOME THAT HAS ESCAPED ASSESSMENT AND COMES TO THE NOTICE OF THE ASSESSING OFFICER SUBSEQUENTLY DURING THE COURSE OF PROCEEDINGS UNDER THIS SECTION CAN ALSO BE INCLUDED IN THE ASSESSMENT, HAS BEEN INCORPORATED IN THE NEW SECTION ITSELF . (IV) A PROVISO TO THE NEW SECTION PROVIDES THAT AN ASSESSMENT, WHICH HAS BEEN COMPLETED UNDER SECTION 143(3) OR 147, I.E. A SCRUTINY A SSESSMENT, CAN BE REOPENED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF INCOME HAS ESCAPED ASSESSMENT DUE TO THE FAILURE ON THE PART OF THE ASSESSED TO FILE A RETURN OF INCOME OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. 7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 147 A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS 'REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE 'OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, 'REASON TO BELIEVE 'FR OM HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMEND ING ACT, 1989, HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION 'HAS REASON TO BELIEVE' IN THE PLACE OF THE WORDS FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION. OTHER 15 PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME. ' 13. FROM THE SAID PASSAGE, IT WOULD BE SEEN THAT PROPOSED SUBSTITUTION OF THE PHRASEOLOGY 'REASON TO BELIEVE' BY 'OPINION' OF THE ASSESSING OFFICER TO BE RECORDED IN WRITING, WAS RECALLED AND THE OLD PHRASEOLOGY I.E. 'REASON TO BELIEVE' WAS SUBSTITUTED. THUS, EVEN THE SLIGHTEST OF TINKERING WITH THE PHRASEOLOGY 'REASON TO BELIEVE'/ WAS HELD TO BE IMPERMISSIBLE AND FATAL TO THE VERY SURVIVAL OF THE PROCEEDINGS. AS THE 'REASONS RECORDED' IN THE INSTANT CASE ARE WHOLLY DEFICIENT TO MEET THE REQUIREMENT OF L AW AS CAME TO BE INTERPRETED IN THE JUDICIAL PRONOUNCEMENTS IN UMPTEEN NUMBER OF CASE LAWS, SUCH DEFICIENCY GOES TO THE VERY ROOT OF THE INITIATION OF PROCEEDINGS UNDER SECTION 147 AND CONSEQUENTLY THE ASSESSMENT ORDER DATED 30.03.2005 ITSELF HAS NOT SURVI VED. 14. IT IS ALSO VERY RELEVANT TO MENTION HERE THAT THE ASSESSEE HAD FILED OBJECTION TO THE VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147 VIDE LETTER DATED 29.11.2004 [REFERRED TO AT SERIAL NO.(VII)] OF THE CHRONOLOGY OF DATES AND EVENTS AS G IVEN IN PARA 2 ABOVE. THE SAID OBJECTIONS WERE LIABLE TO BE DECIDED THROUGH A SPEAKING ORDER, WHICH HAD NOT BEEN DONE. THEREFORE/ THE PROCEEDINGS WERE LIABLE TO BE QUASHED AS PER THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALLANA COLD STORAGE LTD VS. ITO (2006) REPORTED IN 287 ITR 1 WHEREIN THEIR LORDSHIPS OBSERVED AND HELD AS UNDER: - 'WE HAVE NOTED THE SUBMISSIONS OF BOTH COUNSEL THE LAW AS LAID DOWN BY THE APEX COURT IS BINDING ON THIS COURT AS WELL AS ON THE AUTHORITIES FUNCTIONING UNDER TH E STATUTE. THIS BEING THE POSITION, WE FAIL TO UNDERSTAND AS TO WHY THE FIRST RESPONDENT DID NOT DECIDE THE OBJECTIONS SEPARATELY WHICH HE IS DUTY BOUND TO DECIDE. THE WHOLE IDEA IN LAYING DOWN THE LAW IN THE ABOVE REFERRED JUDGMENT OF THE APEX COURT IS TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO KNOW AS TO WHAT IS THE DECISION ON HIS OBJECTIONS, WHICH DECISION HAS ALSO TO BE ARRIVED AT AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAS BEEN DENIED THIS OPPORTUNITY. NOR ONLY TH AT BUT IN THE FIRST THREE WRIT PETITIONS WHAT WE FIND IS THAT A COMMON ORDER HAS BEEN PASSED ON THE OBJECTIONS AS WELL AS FOR THE REASSESSMENT. IN THE FOURTH MATTER, THE 16 ASSESSMENT ORDER DOES NOT DISCLOSE ANY DECISION ON THE OBJECTIONS AT ALL THE UNDOUBTED LY NO SUCH DECISION HAS BEEN GIVEN SEPARATELY ON THE OBJECTIONS. HAVING NOTED THIS SCENARIO, IN OUR VIEW THE PROPER COURSE WILL BE TO INTERFERE WITH THE ASSESSMENT ORDERS PASSED IN ALL FOUR MATTERS BY THE CONCERNED OFFICER. WE ARE AWARE THAT WHEN AN ALTER NATIVE REMEDY IS RESORTED TO, THE WRIT JURISDICTION IS NOT TO BE EXERCISED, BUT THAT IS A RULE OF SELF - LIMITATION. THE ORDERS CHALLENGED IN THE PRESENT MATTER ARE CLEARLY AGAINST THE LAW LAID DOWN BY THE APEX COURT AND, THEREFORE, THE EXERCISE OF WRIT JURI SDICTION IS CALLED FOR. THAT BEING SO, WE ALLOW ALL THESE PETITIONS AND QUASH AND SET ASIDE THE ORDERS OF ASSESSMENT PASSED IN ALL THESE FOUR PETITIONS. INASMUCH AS THE ASSESSMENT ORDERS ARE SET ASIDE, THE APPEALS FILED BY THE PETITIONERS NO LONGER REQUIRE TO BE PROSECUTED. THE SAME WILL STAND DISPOSED OF.' 15. THE APPELLANT'S CONTENTION IS THAT CAUSE OF ACTION WHICH AROSE IN THIS CASE AND CULMINATED INTO AN ASSESSMENT ORDER DATED 30.03.2005, HAD NOT BECOME NON - EXISTENT. IN CASE THE APPELLANT SUCCEEDS IN H IS PLEADINGS AGAINST VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147, ALL THE PROCEEDINGS MADE IN PURSUANCE THEREOF, WHICH INCLUDE THE ASSESSMENT ORDER DATED 30.03.2005 ALSO, WOULD BE SET - AT - NAUGHT. THE CONSEQUENCE THEREOF WOULD BE THAT THE CIT'S O RDER DATED 16.11.2006 (UNDER SECTION 263) AND ALL THE SUBSEQUENT PROCEEDINGS IN PURSUANCE THEREOF SHALL ALSO FAIL. RELIANCE IN THIS REGARD IS PLACED ON AN UNREPORTED JUDGMENT AND ORDER DATED 06.07.2007 AS HAS BEEN DELIVERED BY HON'BLE ALLAHABAD HIGH COURT IN CIVIL MISC. WRIT PETITION NO.555 OF 2000 (TAX) IN THE CASE OF VIJAY KUMAR AGARWAL VS. ITO WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER: - 'IN VIEW OF THE AFORESAID DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT THE NOTICE ISSUED UNDER SECTI ON 148 OF THE ACT WAS WITHOUT JURISDICTION AND CANNOT BE SUSTAINED AND FURTHER THE PROCEEDINGS PURSUANCE TO SUCH NOTICE WAS ALSO NOT MAINTAINABLE. I N VIEW OF THE DISCUSSIONS MADE ABOVE THE WRIT PETITION SUCCEEDS AND IS ALLOWED. THE IMPUGNED NOTICE DATED 08.03.1999 (ANNEXURE - 6 TO THE WRIT PETITION) AND THE 17 PROCEEDINGS CONSEQUENT THERETO ARE HEREBY QUASHED. HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE THERE SHALL BE NO ORDER AS TO COSTS.' A COPY OF THE SAID JUDGMENT IS ENCLOSED AT PAGES 48 TO 54 MARKED AS ANNEXURE - VIII HERETO. 16. TO SUM UP, THE APPELLANT'S CONTENTION IS THAT HE WAS LEGITIMATELY ENTITLED TO HAVE ADJUDICATION OF THE GROUNDS TAKE N BY HIM AGAINST THE VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147 (WHICH HAD CULMINATED INTO AN ASSESSMENT ORDER DATED 30.03.2005 CAPTIONED AS ORDER 'U/S 147 READ WITH SECTION 143(3)' AS NON - ADJUDICATION THEREOF HAS ADVERSELY AFFECTED HIS RIGHTS TO SEEK JUSTICE. 17. IT IS VERY CANDIDLY ADMITTED THAT, AS STATED ABOVE, THE APPEAL HAS BEEN DISMISSED IN LIMINIE WITHOUT CONSIDERING THE REQUISITE MATERIAL AND INFORMATION. THEREFORE, IN CASE THE HON'BLE TRIBUNAL IS OF THE VIEW THAT THE ISSUE OF INITIATION OF PROCEEDINGS UNDER SECTION 147 SHOULD FIRST BE DECIDED BY THE ID. FIRST APPELLATE AUTHORITY ITSELF, THE APPELLANT PRAYS THAT YOUR HONOURS BE PLEASED TO RESTORE THE APPEAL FOR BEING DECIDED AFRESH BY THE ID. CIT(A) / BY ADJUDICATING THE LEGAL GR OUNDS AS WELL AS THE GROUNDS TAKEN ON MERITS OF VARIOUS ADDITIONS AS HAVE BEEN MADE IN THE ASSESSMENT. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 4. 1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT CIT(A) HAS REJECTED THE APPEAL OF THE ASSESSEE ON THE BASIS THAT SINCE THE IMPUGNED ASSESSMENT ORDER, WHICH HAS BEEN APPEALED AGAINST, WAS ITSELF SET ASIDE BY CIT - I, KANPUR VIDE HIS ORDER DATED 16/11/ 2006 AND THAT ORDER WAS CONFIRMED BY I.T.A.T. VIDE ORDER DATED 25/05/2007, THIS ASSESSMENT ORDER CEASES TO EXIST AND THEREFORE, THE APPEAL OF THE ASSESSEE HAS BECOME INFRUCTUOUS. WE FIND FORCE IN THIS STAND OF LEARNED CIT (A) PARTICULARLY WHEN THE ORDER P ASSED BY CIT U/S 263 ON 16/11/2006 IS APPROVED BY THE TRIBUNAL AS PER WHICH IT WAS HELD BY CIT THAT THE ASSESSMENT ORDER DATED 30/03/2003 IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE 18 AND HE HAS SET ASIDE THE SAME ASSESSMENT ORDER AND DIRE CTED THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AFRESH AS PER LAW. THIS ORDER OF CIT U/S 263 HAS BEEN APPROVED BY THE TRIBUNAL VIDE ITS ORDER DATED 25 TH MAY 2007 IN I.T.A. NO.1330/LKW/2006. SINCE THE ORDER OF CIT U/S 263 HAS ATTAINED FINALITY AT LEAST TILL THE TRIBUNAL STAGE AND OPERATION OF THIS TRIBUNAL ORDER IS NOT STAYED BY HONBLE HIGH COURT , THE DISCUSSION ABOUT VALIDITY OF THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER U/S 147 ON 30/03/2005 IS ACADEMIC AND HENCE, WE DECLINE TO INTERFERE IN THE O RDER OF CIT(A). 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. 6. NOW WE TAKE UP THE SECOND APPEAL OF THE ASSESSEE I.E. I.T.A. NO.733/LKW/2010. IN THIS APPEAL , THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE INITIATION OF PROCEEDINGS UNDER SECTION 147 BY ISSUE OF NOTICE DATED 19 TH MARCH, 2004 ITSELF WAS INVALID AND CONSEQUENTLY ALL - THE SUBSEQUENT PROCEEDINGS, WHICH INCLUDED THE ASSESSMENT ORDER DATED 20 TH DECEMBER, 2007 THAT HAS BEEN IMPUGNED IN THIS APPEAL, ARE WHOLLY INVA LID IN THE EYES OF LAW. 2. BECAUSE IN RELATION TO THE FIRST ORDER, THE LEARNED CIT COULD NOT HAVE EXERCISED HIS REVISIONARY JURISDICTION UNDER SECTION 263 SO AS TO EXPAND THE SCOPE OF THE SAME (FIRST ORDER) BEYOND THE 'SATISFACTION' OF THE ASSESSING OFFIC ER CONCERNED AS HAD BEEN RECORDED AT THE STAGE OF INITIATION OF PROCEEDINGS UNDER SECTION 147 VIDE NOTICE DATED 19.3.2004 (IN PURSUANCE OF WHICH FIRST ORDER HAD BEEN PASSED) AND CONSEQUENTLY THE SECOND ORDER DATED 20.12.2007 IS WHOLLY ILLEGAL. 4 . BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON FACTS IN HOLDING THAT CREDITS OF (A) RS.4,00,000 / - AND (B) RS. 6,00,000 / - AS APPEARING IN THE CAPITAL ACCOUNT OF THE 'APPELLANT', REMAINED UNEXPLAINED AND, ON THAT BASIS, IN MAKING THE FOLLOWING ADDITIONS: - 19 (RS.) A) CREDIT IN CAPITAL ACCOUNT 4,00,000/ - B) EXPENSES ALLEGED TO HAVE BEEN INCURRED IN RELATION TO THE SAID CREDIT 20,000/ - C) CREDIT APPEARING IN CAPITAL ACCOUNT 6,00,000/ - D) EXPENSES ALLEGED TO HAVE BEEN INCURRED IN RELATION TO THE SAID CREDIT - 30,000/ - 4. BECAUSE THE CREDITS IN QUESTION WERE WHOLLY GENUINE AND ORIGINATED FROM WELL DEFINED SOURCES AND NO ADDITION FOR THE SAME AND FURTHER ADDITION ON ACCOUNT OF EXPENSES ALLEGED TO HAVE BEEN INCURRED BY THE 'APPELLANT' FOR MANAGING SUCH CREDITS COULD NOT HAVE BEEN MADE. 5. BECAUSE SOURCE OF CREDITS IN QUESTION BEING ATTRIBUTABLE TO THE CORRESPONDING DEBITS APPEARING IN THE BANK ACCOUNTS OF THE DONORS AND EVEN IF THERE REMAINED ANY DISPU TE ABOUT THE NATURE OF CREDITS IN THE BOOKS OF THE 'APPELLANT', ALTHOUGH NOT ADMITTED BY THE 'APPELLANT', NO ADDITION COULD HAVE BEEN MADE BY INVOKING THE PROVISIONS OF SECTION 68. 6. BECAUSE SECTION 68 ITSELF CREATES A 'FICTION' AND ADDITION FOR SUMS AGGREGATING RS.10 LAKHS COULD NOT HAVE BEEN MADE / SUSTAINED BY CREATING 'FURTHER FICTION OF THE FICTION'. 7. BECAUSE THE 'APPELLANT' HAD DISCHARGED THE ONUS THAT LIED ON HIM UNDER SECTION 68 OF THE ACT, BY PLACING ON RECORD WELL DOCUMENTED EVIDENCES IN S UPPORT OF THE GENUINENESS OF THE SAME AND ADDITION OF SUMS AGGREGATING RS.10,50,000/ - AS MADE AND SUSTAINED BY THE AUTHORITIES BELOW IS WHOLLY ERRONEOUS BOTH ON FACTS AS WELL AS IN LAW. 8. BECAUSE THE 'CIT (A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING T HE ADHOC DISALLOWANCES OF RS.10,000/ - OUT OF TELEPHONE EXPENSES. 9. BECAUSE THE 'CIT (A)' HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS . 64,000/ - ON ACCOUNT OF ALLEGED LOW WITHDRAWALS. 10. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 20 7. LEARNED A.R. OF THE ASSESSEE HAS SUBMITTED WRITTEN SUBMISSIONS IN RESPECT OF THIS APPEAL AND ALSO THE CROSS APPEAL FILED BY THE REVENUE IN I.T.A. NO.728/LKW/2010. PARA 5 TO 13 OF THIS WRITTEN SUBMISSIONS ARE IN RELATION TO THE ASSESSEES APPEAL AND HENCE, THESE PARAGRAPHS ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 5. ISSUE NO. 1 (GROUNDS NO. 1 & 2) ORIGINATES FROM THE ACTION TAKEN BY THE ASSESSING OFFICER UNDER SECTION 147, BY ISSU E OF NOTICE UNDER SECTION 148 DATED 19.03.2014), IN PURSUANCE OF WHICH THE ASSESSMENT ORDER DATED 30.03.2005 HAD BEEN PASSED. IT WAS THE SAID ASSESSMENT ORDER, WHICH WAS SUBJECTED TO REVISION BY THE CIT UNDER SECTION 263 OF THE ACT VIDE ORDER DATED 16.11.2 006. IN PURSUANCE OF THE SAID ORDER DATED 16.11.2006 THE ASSESSING OFFICER PASSED AN ORDER CAPTIONED AS ORDER 'U/S 143(3)/263 DATED 20.12.2007' AND MADE VARIOUS ADDITIONS, PARTICULARS WHEREOF HAVE BEEN GIVEN IN THE COMPARATIVE CHART APPEARING IN PARA 2 HER EFORE. THUS, THE EXISTENCE OF THE ASSESSMENT ORDER DATED 20.12.2007 (2 ND ROUND) AND VARIOUS ADDITIONS AS HAS BEEN INCORPORATED THEREIN, ARE, DEPENDENT ON THE VALIDITY OF FIST ASSESSMENT ORDER DATED 30.0.2005. THE SAID ASSESSMENT ORDER HAS TRAVELLED UPTO TH E HON'BLE ITAT (BEING ITA NO.419/LKW/LL) AS THE CIT(A) HAD REFUSED TO ADJUDICATE THE VALIDITY OF THE PROCEEDINGS UNDER SECTION 147 AND ASSESSMENT ORDER DATED 30.03.2005 MADE IN PURSUANCE THEREOF. IN THE SAID APPEAL (ITA NO.419/LKW/2011) COMPREHENSIVE SUBMI SSIONS HAVE SEPARATELY BEEN MADE, EMPHASIZING THE NECESSITY OF ADJUDICATION OF THE VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147 AND THE ASSESSMENT ORDER DATED 30.03.2005 MADE IN PURSUANCE THEREOF, EITHER BY THE HON'BLE TRIBUNAL ITSELF, OR BY REM ITTED THE MATTER BACK TO THE CIT(A) FOR DECIDING THE ISSUE IN ACCORDANCE WITH THE LAW. 6. IT IS SUBMITTED THAT IN CASE YOUR HONOURS ARE PLEASED TO ACCEPT THE PRAYER MADE BY THE APPELLANT IN ITA NO.419/LKW/LL 7 IT WILL HAVE A BEARING ON THE DECISION OF THE ABOVE MENTIONED CROSS APPEALS ALSO. 7. NOTWITHSTANDING THE AFORESAID, SCOPE OF REASSESSMENT PROCEEDINGS, WAS STRICTLY CIRCUMSCRIBED BY THE 'REASON TO BELIEVE' AS RECORDED BY THE ASSESSING OFFICER READING AS U NDER: - 21 'DURING THE COURSE OF INQUIRIES MADE BY THE ADDL. DIRECTOR OF INCOME - TAX (INV.), UNIT - 2, KANPUR, IT WAS GATHERED THAT THE PRESENT ASSESSEE RECEIVED AMOUNTS O F RS.4, 00,000/ - (DURING F.Y. 2000 - 2001), WHICH WAS CLAIMED AS 'GIFT'. HOWEVER, ON INVESTIGA TION BY THE ADDL. DIT (INV.), UNIT - 2, KANPUR, IT WAS FOUND TO BE PART OF A BOGUS GIFT RACKET. THE ALLEGED DONOR NEVER CAME OUT FOR CONFIRMATION. TO VERIFY THE ALLEGED GIFT, SUMMONS U/S 131 WERE ISSUED AND SERVED UPON AND THE SO CALLED GIFT WAS SURRENDERED. INFORMATION IN THIS REGARD HAD ALREADY BEEN SENT BY THE ADDL. DIT(INV.), UNIT - 2, KANPUR. IN VIEW OF ABOVE FACTS, I AM SATISFIED THAT INCOME OF RS.4,00,000 / - CHARGEABLE TO TAX, IN TERMS OF BOGUS GIFT HAS ESCAPED ASSESSMENT AS PER PROVISIONS OF S.147 OF THE I.T. ACT, 61. THEREFORE ACTION U/S 147 OF THE ACT, 61 IS BEING INITIATED AND NOTICE U/S 148 IS BEING ISSUED.' AS EXTRACTED FROM SI. NO.(V) OF PARA 2 OF THE SUBMISSIONS MADE IN ITA NO.419/LKW/LL] AND ANY ADDITION MADE BEYOND THE ISSUE COVERED BY THE S AID 'REASONS RECORDED' OR ANY OTHER ISSUE INCIDENTAL TO THE SAME IS WHOLLY ILLEGAL. IN SHORT, THE ASSESSEE'S CONTENTION THAT SCOPE OF REVISION UNDER SECTION 263 IN RELATION TO AN ASSESSMENT MADE UNDER SECTION 147 IS CIRCUMSCRIBED BY ISSUES DIRECTLY ARISING OUT OF 'REASONS RECORDED' AND ASSESSMENT MADE IN PURSUANCE THEREOF. NEW ISSUES CANNOT BE ROPED - IN IN THE PROCEEDINGS UNDER SECTION 263. 8. ISSUE NO.2 (ADDITION ON ACCOUNT OF GIFTS AND EXPENSES THEREON): AS MAY VERY KINDLY BE SEEN FROM THE ASSESSMENT ORDE R DATED 30.03.2005 (PASSED IN THE FIRST ROUND IN PURSUANCE OF NOTICE UNDER SECTION 148 DATED 19.03.2004) THE APPELLANT HAD SUBMITTED DETAILED INFORMATION WITH REGARD TO THE GIFTS AGGREGATING RS.6,00,000/ - AS HAD BEEN RECEIVED FROM SMT. INDU AGARWAL (RS.4,0 0,000 / - AND RS.2,00,000 / - ), EXCLUDING THE GIFT AGGREGATING RS.4,00,000/ - (WHICH HAD BEEN INCLUDED IN THE REVISED RETURN FILED ON 28.03.2003) VIDE LETTER DATED 22 10.03.2005. KIND ATTENTION IS INVITED TO PARA 4 OF THE SAID LETTER READING AS UNDER: - '04. AS REQUIRED VIDE NOTICE DATED 28.2.2005 NATURE OF CREDIT ENTRIES APPEARS IN MY SAVING BANK ACCOUNT IS AS UNDER: - SL.NO.L RS. 50,000/ - CHEQUE RECEIVED FROM M/S SHIVA TEA COMPANY SL.NO.2 RS. 50,000/ - CHEQUE RECEIVED FROM M/S SHIVA TEA COMPANY SL.NO.3 RS.200,000/ - UNEXPLAINED CREDIT INCLUDED IN THE TOTAL INCOME (REVISED RETURN) SL.NO.4 RS.400,0007 - GIFT RECEIVED FROM INDU AGARWAL SL.NO.5 RS.200,0007 - UNEXPLAINED CREDIT INCLUDED IN THE TOTAL INCOME (REVISED RETURN) SL.NO.6 RS. 200,0007 - GIFT RECEIVED FROM INDU AGARWAL SL.NO.7 RS. 30,0007 - CHEQUE RECEIVED FROM M / S SHIVA TEA COMPANY THE ABOVE FACTS ARE FULLY VERIFIABLE. IT IS ALSO SUBMITTED THAT OUT OF TOTAL CREDITS RS.4,00,000 / - IN THE BANK ACCOUNT DURING THE YEAR UNDER CONSIDERATION OFFERED FOR TAXATION IN REVISED RETURN. THE SAME ARE NOT IN ADDITION TO CAPITAL ACCOUNT. I HOPE FROM THE ABOVE THE MATTER STANDS CLARIFY. FURTHER DURING THE YEAR UNDER CONSIDERATION I RECEIVED GIFTS OF RS.6,00,000 / - . THE COMPLETE NAMES & ADD RESSES OF THE DONOR DULY BEEN SUBMITTED IN REPLY DATED 29.11.2004. THE TRANSACTIONS OF GIFT THROUGH BANKING CHANNEL AND OUT OF THE BANK .ACCOUNT STANDING IN THE NAME OF THE DONOR HIMSELF. THE GIFTS WERE MADE VOLUNTARILY, VALID GIFTS AND WITHOUT CONSIDERATI ON. THE GIFTS WERE DULY ACCEPTED BY THE DONE. AS PER THE INFORMATION AVAILABLE WITH ME THE DONOR IS REGULAR INCOME TAX / WEALTH TAX ASSESSEE. A COPY OF RELEVANT ASSESSMENT ORDER DATED 6.12.1999 PASSED U / S 143(3) FOR THE ASSESSMENT YEAR 1998 - 99 AND ACKNOWLE DGEMENT OF WEALTH TAX RETURN RELATING TO ASSESSMENT YEAR 1998 - 99 IN CASE OF SMT. INDU AGARWAL ARE BEING ENCLOSED. 23 FURTHER THE DRAFTS ISSUING BRANCHES ARE VIJAYA BANK, CHANDANI CHOWK, DELHI AND VIJAYA BANK, VIGYAN VIHAR, DELHI. THE NECESSARY INFORMATION ABOUT THE GIFT TRANSACTIONS MAY BE CALLED FOR FROM THE BANK U7S 131 OF THE INCOME - TAX ACT AT MY COST TO VERIFY THE CORRECTNESS7GENUINENESS.' A COPY OF THE SAID LETTER (WHICH WAS DULY SUPPORTED WITH COPIES OF THE GIFT DEEDS AND AFFIDAVIT ETC. OF SMT. INDU AGARWAL) IS ENCLOSED AT PAGES 11 TO 18, MARKED AS ANNEXURE - 1 HERETO. 9. IN VIEW OF THE FACTUAL MATRIX AS AFORESAID, NO SUCH ADDITION AS HAS BEEN MADE IN THE ASSESSMENT COULD HAVE BEEN VALIDLY MADE. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE BEGS TO REFE R AND RELY UPON THE FOLLOWING CASE LAWS: - ( I ) ANAND PRAKASH AGARWAL VS. ASSTT. CIT REPORTED IN (2008) 6 DTR (ALL)(TRIB.) 191 ( II ) SMT. AMITA DEVI SANGANERIA VS. ASSTT. CIT REPORTED IN (2011) 53 DTR (GAU)(TM)(TRIB)214 ( III ) CIT - II VS. MRS. KUSUM GUPTA IN ITA NO.831/2010OF HON'BLE DELHI HIGH COURT DATED 16.07.2010 UNREPORTED COPIES OF THE ABOVE REFERRED JUDGMENTS ARE ENCLOSED AT PAGES 19 TO 39, 40 TO 58 & 59 TO 61, MARKED AS ANNEXURES - II, III & IV HERETO. 10. IN RELATION TO THE SAID GIFTS AGGREGATING RS.6,00,000 / - AND ALSO EARLIER GIFTS OF RS.4,00,000 / - (WHICH HAD ALREADY BEEN INCLUDED IN THE REVISED RETURN FILED ON 28.03.2003) THE ASSESSING OFFICER HAD ADDED FURTHER SUMS AGGREGATING RS.50,000/ - . IT IS STATED THAT FIRST OF ALL THE GIFTS WERE GENUINE AN D NOT MANAGED AND IN ANY CASE, NO MATERIAL HAS BEEN BROUGHT ON RECORD TO JUSTIFY THE SAID ADDITION. THE SAME DESERVES TO BE STRAIGHT AWAY DELETED. RELIANCE IN THIS REGARD IS PLACED ON THE JUDGMENT AND ORDER DATED 26 TH SEPTEMBER 2004 PASSED BY THE HON'BLE I TAT (ALLAHABAD BENCH) IN THE CASE OF S.M. SHARMA VS. THE ACIT (ITA NO.208/ALLD/2000), COPY OF WHICH IS ENCLOSED AT PAGES 62 TO 67, MARKED AS ANNEXURE - V HERETO. 11. ISSUE NO.3 (DISALLOWANCE OUT OF TELEPHONE EXPENSES): THE SAID DISALLOWANCE HAD BEEN MADE IN A VERY CASUAL MANNER, 24 AS MAY VERY KINDLY SEEN FROM PARA 13 OF THE ASSESSMENT ORDER READING AS UNDER: - 13. ASSESSEE HAS DEBITED RS.58,360/ - ON ACCOUNT OF TELEPHONE EXPENSES. IT WAS SEEN THAT THE EXPENSES IN THIS RESPECT WERE NOT OPEN TO FULL VERIFICATION AND LOG BOOK WAS BEING MAINTAINED IN RESPECT OF THESE EXPENSES. ACCORDINGLY A DISALLOWANCE OF RS.10,000/ - IS BEING MADE TO COVER UP FOR ANY PERSONAL USE OF TELEPHONE.' THUS, THE DISALLOWANCE HAS BEEN MADE WITHOUT THERE BEING ANY COGENT REASON . SUCH DISALLOWANCE, THEREFORE DESERVES TO BE DELETED. 12. ISSUE NO.4 (AD HOC ADDITION ON ACCOUNT OF ALLEGEDLY LOW WITHDRAWALS FOR HOUSE HOLD EXPENSES): SUCH AN ADDITION HAS BEEN MADE, ON A WHOLLY WRONG PREMISE, AS MAY VERY KINDLY BE SEEN FROM PARA 9 OF THE ASSESSMENT ORDER, WHICH IS REPRODUCED HEREUNDER: - '9. FROM THIS IT IS SEEN THAT WITHDRAWAL FOR THE HOUSEHOLD EXPENSES ARE HIGHLY INADEQUATE. LOOKING TO THE SOCIAL STATUS OF THE FAMILY, CLUB MEMBERSHIP AND THE FACT THAT ASSESSEE HAS RECEIVED HUGE UNEXPLAINED CREDITS WHICH ARE BEING SURRENDERED SUBSEQUENTLY IN THE RETURNS, THE WITHDRAWALS ARE EXTREMELY LOW. THE WITHDRAWALS ARE ESTIMATED AT RS.1,20,000/ - . DEDUCTING THEREFROM THE WITHDRAWAL OF RS.56,000/ - DEBITED IN THE CAPITAL ACCOUNT THE WITHDRAWAL S OF RS.64,000 / - (1,20,000 - 56,000) REMAIN UNEXPLAINED AND ARE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE'. 13. IT IS A SETTLED LAW THAT WITHOUT BRINGING ON RECORD ANY MATERIAL OR INFORMATION IN SUPPORT OF THE ESTIMATE OF HOUSEHOLD EXPENSES MADE BY T HE ASSESSING OFFICER, NO SUCH ADDITION CAN BE MADE AS IT AMOUNTS TO RAISING A 'FICTION' TO THE 'FICTION' WHICH IS NOT PERMISSIBLE. THE POINT AT ISSUE IS SQUARELY COVERED BY THE THIRD MEMBER DECISION IN THE CASE OF RAJ KUMAR JAIN VS. ASSTT. CIT REPORTED IN (1994) 208 ITR 22 (AT). A COPY OF THE SAID JUDGMENT AS A WHOLE IS ENCLOSED AT PAGES 68 TO 91, MARKED AS ANNEXURE - VI HERETO. 25 8. REGARDING GROUND NO. 1 & 2 OF THE ASSESSEE, WE FIND THAT THIS IS THE ONLY OBJECTION OF THE ASSESSEE THAT THE ASSESSING OFFICER CANNOT MAKE ANY ADDITION WHICH IS BEYOND THE ISSUES COVERED BY THE ASSESSING OFFICER IN THE REASONS RECORDED BY HIM FOR REOPENING. WE DO NOT FIND ANY FORCE IN TH IS CONTENTION OF LEARNED A.R. OF THE ASSESSEE. IN THIS REGARD, WE FIND THAT WHILE DEC IDING THE APPEAL OF THE ASSESSEE AGAINST THE ORDER PASSED BY CIT U/S 263 IN I.T.A. NO.1310/LKW/06 DATED 25/05/2007, A CLEAR FINDING IS GIVEN BY THE TRIBUNAL IN PARA 17 THAT THE JURISDICTION OF THE ASSESSING OFFICER U/S 147 OF THE ACT COVERS ENTIRE ASSESSME NT. THIS FINDING IS ALSO GIVEN THAT HE CAN NOT ONLY ADD THE ITEMS FOR WHICH ASSESSMENT HAS BEEN REOPENED BUT ALSO CAN ADD ANY OTHER ITEM WHICH COMES TO HIS KNOWLEDGE DURING THE COURSE OF REASSESSMENT PROCEEDINGS. THE TRIBUNAL HAS REFERRED TO VARIOUS JUDG MENTS IN THE SAID PARA OF ITS ORDER AND THEREAFTER , IN PARA 18 OF THE ORDER, THIS FINDING IS GIVEN BY THE TRIBUNAL THAT ONCE THE ENTIRE ASSESSMENT IS OPEN BEFORE THE ASSESSING OFFICER AFTER VALIDLY REOPENING THE ASSESSMENT, THEN THE JURISDICTION OF THE CIT U/S 263 OF THE ACT WOULD EXTEND TO ENTIRE ASSESSMENT ORDER AND CANNOT BE CONFINED TO THE ITEMS WHICH FORMED PART OF REASONS RECORDED FOR REOPENING OF ASSESSMENT. HENCE, WE FIND THAT THIS ASPECT OF THE MATTER RAISED BY THE ASSESSEE IN THIS APPEAL AS PER G ROUND NOS. 1 & 2 HAS ALREADY BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE WHILE CONFIRMING THE ORDER PASSED BY CIT U/S 263 AND HENCE, THESE GROUNDS OF THE ASSESSEE ARE LIABLE TO BE REJECTED. ACCORDINGLY, THESE GROUND NOS. 1 & 2 ARE REJECTED. 9. REGARDING GROUND NO. 3 TO 7 IN RESPECT OF THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.10.50 LAC AS PER DETAILS AVAILABLE IN GROUND NO. 3 OF THE ASSESSEE, WE FIND THAT IT IS SUBMITTED BY THE ASSESSEE IN THE WRITTEN SUBMISSIONS ALSO THAT THE ASSESSEE HA S OFFERED AN AMOUNT OF RS.4 LAC S FOR TAXATION IN THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE. HENCE, THE 26 ASSESSEE HIMSELF H AD ADMITTED THIS INCOME IN THE REVISED RETURN OF INCOME. AS PER THE IMPUGNED ASSESSMENT ORDER, THE ASSESSING OFFICER STARTED THE ASSESSMENT WITH THE NET PROFIT SHOWN BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT AT RS.18,00,987/ - AND THEREAFTER , HE MADE ADDITION OF RS.4 LAC AS PER HIS DISCUSSION IN PARA 4 OF THE ASSESSMENT ORDER. IN PARA 4, IT IS STATED BY ASSESSING OFFICER THA T FROM THE PERUSAL OF THE STATEMENT ON OATH OF THE ASSESSEE , IT IS CLEAR THAT AMOUNT OF RS.4 LAC WAS RECEIVED BY THE ASSESSEE WHICH WAS SURRENDERED AS IT WAS NOT A PROVABLE GIFT. HE HAS ALSO GIVEN A FINDING THAT DURING THE COURSE OF ASSESSMENT ALSO , THE A SSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE GIFT. BEFORE US ALSO , THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THIS GIFT AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE REGARDING THIS ADDITION OF RS.4 LAC MADE BY ASSESSING OFFICER AND CONF IRMED BY CIT(A). 10. THE SECOND ADDITION WAS MADE OF RS.6 LAC AS PER DISCUSSION IN PARA 6 OF THE ASSESSMENT ORDER. IN PARA 6, IT IS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE COULD NOT GIVE ANY COGENT EXPLANATION EXCEPT FOR MAKING A REFERENCE TO HIS EARLIER REPLY DATED 29/11/2004. A CLEAR FINDING IS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS AS HE COULD NEITHER PRODUCE THE ALLEGED DONORS NOR ESTABLISH THEIR IDENTITY BY MEANS OF DOCUM ENTARY EVIDENCE. BEFORE CIT(A) ALSO , THE ASSESSEE COULD NOT ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE DONOR AND GENUINENESS OF THE TRANSACTION. BEFORE US ALSO, THESE INGREDIENTS OF SECTION 68 COULD NOT BE ESTABLISHED AND HENCE, WE DO NOT FIND AN Y REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE . 11. THE ASSESSING OFFICER HAS ALSO MADE ADDITION OF RS.20,000/ - AS PER HIS OBSERVATIONS IN PARA 5 OF THE ASSESSMENT ORDER. THIS ADDITION IS MADE ON THE BASIS THAT THE ASSESSEE HAS CLAIMED BOGUS GIFT OF RS.4 LAC AND IT IS COMMON PRACTICE THAT THE ASSESSEE MUST HAVE PAID COMMISSION TO ARRANGE 27 BOGUS GIFT. HE HAS ESTIMATED SUCH EXPENSES A T 5% OF THE GIFT AMOUNT OF RS.4 LAC AND THE ADDITION WAS MADE FOR RS.20,000/ - . SINCE WE HAVE CONFIRMED THE ADDI TION OF RS.4 LAC, THIS ADDITION OF RS.20,0000/ - IS ALSO CONFIRMED. 12. ONE MORE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER OF RS.30,000/ - AND THE SAME IS IN RESPECT OF EXPENSES FOR THE SECOND BOGUS GIFT OF RS.6 LAC AND SINCE WE HAVE CONFIRMED THIS AD DITION OF RS.6 LAC OF ALLEGED BOGUS GIFT, THIS ADDITION OF RS.30,000/ - IS ALSO CONFIRMED. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 3 TO 7 ARE REJECTED. 13. REGARDING GROUND NO. 8 & 9 OF THE APPEAL, WE FIND THAT OUT OF TOTAL EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF TELEPHONE EXPENSES OF RS.58,360/ - , THE DISALLOWANCE MADE BY ASSESSING OFFICER IS ONLY OF RS.10,000/ - FOR ALLEGED PERSONAL USE OF TELEPHONE. IT IS NOT THE CASE OF THE ASSE SSEE THAT A SEPARATE TELEPHONE IS MAINTAINED BY THE ASSESSEE FOR HIS PERSONAL USE FOR WHICH NO EXPENSES IS DEBITED IN PROFIT & LOSS ACCOUNT. HENCE, THIS DISALLOWANCE ON ACCOUNT OF ALLEGED PERSONAL USE OF TELEPHONE IS REASONABLE AND WE CONFIRM THE SAME. 14. ONE MORE ADDITION WAS MADE BY ASSESSING OFFICER OF RS.64,000/ - ON THE BASIS THAT THE WITHDRAWAL SHOWN BY THE ASSESSEE FOR HOUSE HOLD EXPENSES IS LOW. IT IS OBSERVED BY THE ASSESSING OFFICER THAT LOOKING TO SOCIAL STATUS OF THE ASSESSEE FAMILY AND CLUB MEMBERSHIP, THE WITHDRAWAL SHOWN BY THE ASSESSEE OF RS.56,000/ - IN WHOLE YEAR IS VERY LOW. THE ASSESSING OFFICER ESTIMATED THE HOUSE HOLD EXPENSES OF THE ASSESSEE AT RS.10,000/ - PER MONTH TOTALING TO RS. 1 . 2 0 LAC FOR WHOLE YEAR AND MADE ADDITION OF RS.64, 000/ - BEING SHORT WITHDRAWAL SHOWN BY THE ASSESSE . IN THIS REGARD, WE FIND THAT THIS ISSUE WAS NOT AGITATED BEFORE CIT(A) BECAUSE 28 NO GROUND WAS RAISED IN THIS REGARD BEFORE THE CIT(A). HENCE, THIS GROUND IS NOT ARISING OUT OF THE IMPUGNED ORDER OF CIT(A) . THEREFORE, THIS GROUND OF THE ASSESSEE BEING GROUND NO. 9 IS ALSO REJECTED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. 16. NOW WE TAKE UP THE APPEAL OF THE REVENUE I.E. I.T.A. NO. 728/LKW/2010. IN THIS APPEAL, THE REVENUE HAS RAIS ED THE FOLLOWING GROUNDS: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEA L S) - I, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS . 58.93.881/ - ON ACCOUNT OF SUPPRESSED SALES WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE AND M ATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER . 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.49,180/ - ON ACCOUNT INTEREST PAID ON UNSECURED LOAN WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS UNDER SECTION 40A(2) OF THE INCOME TAX ACT, 1961 ARE CLEARLY ATTRACTED IN THE CASE OF THE ASSESSEE. 3. T HAT THE ORDER OF THE LD. C I T (A ) - I I. KANPUR DATED 30.09.2010 NEEDS TO B E QUASHED AND THE ORDER PASSED B Y THE ASSESSING OFFICER DA T E D 20.12.2007 BE RESTORED. 17. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED AR OF THE ASSESSEE SUBMITTED THAT PARA NOS. 14 TO 18 OF THE WRITTEN SUBMISSIONS ARE IN RESPECT OF THE REVENUES APPEAL AND THESE PARAS ARE REPRODUCED BELOW: 14. AS FAR AS ISSUE OF DISALLOWANCE OF INTEREST AMOUNTING TO RS.49,180/ - IS CONCERNED, THE SAME HAD BEEN MADE BY HOLDING THAT THE ASSE SSEE HAD ADVANCED INTEREST FREE LOAN TO THE TUNE OF RS.59,83,185 / - TO M/S SHIVA TEA CO., KANPUR (PROPRIETARY CONCERN OF ASSESSEE'S WIFE SMT. UMA GOENKA), BY REFERRING TO AND RELYING UPON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT 29 IN THE CASE OF CIT VS. H .R. SUGAR FACTORY PVT. LTD. REPORTED IN (1991) 187 ITR 363. 15. THE ID. CIT(A) HAS DISCUSSED THE ISSUE IN PARAS 25, 26, 27 AND 28. GIST OF THE FINDINGS GIVEN BY THE ID. FIRST APPELLATE AUTHORITY IS THAT 'NO SUCH BORROWED F UN DS ARE ADVANCED TO M/S SHIVA TE A CO. ENTIRE DEBIT BALANCE APPEARING IN THE ACCOUNT OF THE SAID FIRM, REPRESENTED SALES MADE. IN VIEW OF SUCH FINDING OF FACT THE APPLICABILITY OF THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF L.H. SUGAR FACTORY (BY RELYING ON WHICH THE ADDIT ION HAS BEEN MADE, STANDS COMPLETELY OUSTED). 16. FURTHER IN PARA 28 OF THE APPELLATE ORDER THE CIT(A) HAS RECORDED A FINDING THAT THERE WAS NO 'LENDING' AT ALL AND THE ENTIRE DEBITS WERE ON ACCOUNT OF SALES MADE TO M/S SHIVA TEA CO. (PROPRIETARY CONCERN OF SMT. UMA GOENKA), MOREOVER THE DISALLOWANCE MADE ON THE GROUND THAT 'INTEREST HAVING NOT BEEN CHARGED WHILE INTEREST IS BEING PAID TO THE CREDITORS' IS NOT TENABLE, AS THERE WAS NO STIPULATION FOR CHARGING INTEREST ON SALES MADE TO ANY PARTY. AS THE DEBITS ARE ON ACCOUNT OF SALES MADE AND THERE WAS NO STIPULATION FOR CHARGING ANY INTEREST, ADDITION ON ACCOUNT OF NOTIONAL BASIS COULD NOT HAVE BEEN MADE. THUS, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT, ON THIS SCORE. 17. ADDITION ON ACCOUNT OF ALLEGEDLY SUPPRESSED SALE, RS.58,53,881/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS (IN PURSUANCE OF THE CIT'S ORDER DATED 16.11.2006 UNDER SECTION 263) THE ASSESSEE HAD REFERRED THE MATTER FOR ADJUDICATION UNDER SECTION 144A BEFO RE THE JT. CIT, AS MENTIONED BY THE CIT(A) IN PARA 19 OF THE APPELLATE ORDER. THE DIRECTIONS GIVEN BY THE JT. CIT UNDER SECTION 144A ARE AS UNDER: - 'YOU MAY CAREFULLY CONSIDER THE SUBMISSION OF THE ASSESSEE REGARDING 'SALES ON CONSIGNMENT BASIS' AND THE D ISCREPANCY BETWEEN THE PURCHASES CLAIMED TO HAVE BEEN MADE AS WELL AS THE SALES AS SHOWN. ACCORDINGLY ON THE BASIS OF THE SAME, YOU MAY FINALIZE ASSESSMENT PROCEEDINGS'. (EXTRACTED FROM PAGE 13 OF THE APPELLATE ORDER) 30 18. THE ID. CIT(A) AFTER REFERRING TO LARGE NUMBER OF MATERIAL AND INFORMATION AS WERE AVAILABLE ON RECORD, AS LISTED AT PAGE 16 (LAST LINE) AND 17 OF THE APPELLATE ORDER, HELD THAT THE TRANSACTIONS REFERRED TO THE CONSIGNMENT BUSINESS OF THE ASSESSEE AND COMMISSION EARNED THEREON STOOD FU LLY 'RECORDED IN THE BOOKS OF THE APPELLANT WHICH HAS NOT BEEN QUESTIONED, THE SAME HAS BEEN CONTINUING YEAR AFTER YEAR'. THE RECONCILIATION SUBMITTED BY THE ASSESSEE WAS FOUND TO BE VALID AND ACCORDINGLY THE ADDITION OF RS.58,53,881/ - HAD BEEN DELETED. IT IS SUBMITTED THAT, AFTER HAVING FOUND FROM A PERUSAL OF THE RECORDS THAT THE SALE REFERRED TO BY THE ASSESSING OFFICER WERE THE SALES MADE BY THE APPELLANT ON CONSIGNED BASIS (CONSIGNOR BEING SHIVA TEA CO.) AND COMMISSION EARNED ON SUCH SALES (MADE ON COM MISSION BASIS) STOOD DULY RECORDED IN THE BOOKS OF ACCOUNT WHICH REMAINED UNQUESTIONED, THE LD. CIT(A) HAS HELD THAT, ANY FURTHER ADDITION ON ACCOUNT OF PROFIT ON SUCH SALES WAS WHOLLY UNCALLED FOR, ILLEGAL AND UNJUSTIFIED. THUS, THE RELIEF HAS BEEN GRANTE D BY THE LD. CIT(A) AFTER RECORDING FINDING OF FACT, AND THERE IS NO SUCH INFIRMITY IN SUCH FINDING OF FACT AND NOTHING HAS BEEN POINTED OUT BY THE CIT DR. THEREFORE, RELIEF GRANTED BY THE CIT(A) DESERVES TO BE UPHELD. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. R EGARDING THE FIRST ISSUE RAISED BY THE REVENUE AS PER GROUND N O . 1, WE FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARA 21 OF HIS ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 21. I HAV E CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ARGUMENTS OF THE APPELLANT AND THE SUBMISSIONS ON THIS ISSUE. THE DOCUMENTS AND EVIDENCES CONTAINED IN THE ARGUMENTS AND SUBMITTED, WHICH HAVE BEEN SUMMARIZED ABOVE FROM (I) TO (XI) SHOW THAT THE AP PELLANT HAS BEEN CARRYING ON THE BUSINESS ON CONSIGNMENT BASIS ALSO. THE COMMISSION INCOME OF SUCH CONSIGNMENT BUSINESS IS RECORDED IN THE BOOKS OF THE APPELLANT WHICH HAS NOT BEEN QUESTIONED, SAME HAS BEEN CONTINUING FROM YEAR TO YEAR. IN THIS CONTEXT, TH E RECONCILIATION FURNISHED BY THE APPELLANT SEEMS TO BE VALID AND THERE IS NO ADVERSE FINDING IN RESPECT OF THE EXPLANATIONS OF THE APPELLANT ON THIS ISSUE GIVEN BY AO. THEREFORE, THE EXPLANATION OFFERED BY THE APPELLANT CANNOT BE REJECTED AND SAME CANNOT BE IGNORED 31 WITHOUT ANY BASIS, WHICH HAVE BEEN SUMMARILY NOTED IN PARA - 20 OF THIS ORDER. 18.1 FROM THE ABOVE PARA FROM THE ORDER OF CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT THIS SALE IS CONSIGNMENT SALE AND THE COMMISSION INCOME OF SUCH CONSIGNMENT BUSINESS IS RECORDED IN THE BOOKS OF THE ASSESSEE WHICH HAS NOT BEEN QUESTIONED AND THIS IS CONTINUI NG FROM YEAR TO YEAR. HE HAS ALSO NOTED THAT THE RECONCILIATION FURNISHED BY THE ASSESSEE SEEMS TO BE VALID AND THERE IS NO ADVERSE FINDING IN RESPECT OF THE EXPLANATION OF THE ASSESSEE ON THIS ISSUE GIVEN BY THE ASSESSING OFFICER. THESE FINDINGS OF CI T(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND HENCE , ON THIS ASPECT , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 1 IS REJECTED. 19. REGARDING GROUND NO. 2 OF THE REVENUES APPEAL, WE FIND THA T THIS ISSUE WAS DECIDED BY THE CIT(A) AS PER PARA 28 OF HIS ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 28. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND IT IS CLEAR FROM THE STATEMENT OF SALES FILED THAT DURING THE Y EAR, THAT APPELLANT MADE TOTAL SALES OF TEA AMOUNTING TO RS.2,39,81,002/ - TO M/S SHIVA TEA COMPANY, THE ENTIRE OUTSTANDING DEBIT BALANCES IN THE ACCOUNT OF SAID FIRM IS AGAINST SALES MADE DURING THE YEAR UNDER CONSIDERATION. FURTHER, NO SUCH FINDING IS SPE CIFICALLY MENTIONED BY THE ASSESSING OFFICER THAT AMOUNT OUT OF BORROWED FUNDS WERE DIVERTED AS INTEREST FREE FUNDS TO M/S SHIVA TEA COMPANY. HENCE, THE DISALLOWANCE IS MADE ON ASSUMPTION/ESTIMATION BASIS AND SAME IS FACTUALLY BASED ON WRONG PREMISES. THER EFORE, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.49,160/ - AND GROUNDS NO. 14,15 AND 16 OF APPEAL ARE ALLOWED. 19.1 FROM THE ABOVE PARA FROM THE ORDER OF CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT THE ASSESSEE HAS MADE TOTAL SALES OF RS.239.81 LAC TO M/S SHIVA TEA COMPANY AND THE ENTIRE OUTSTANDING DEBIT BALANCE IN THE ACCOUNT OF THE SAID FIRM IS AGAINST SALES MADE DURIN G THE YEAR 32 UNDER CONSIDERATION. HE HAS ALSO GIVEN A FINDING THAT N O SUCH FINDING IS SPECIFICALLY MENTIONED BY THE ASSESSING OFFICER THAT BORROWED FUNDS WERE DIVERTED AS INTEREST FREE FUNDS TO M/S SHIVA TEA COMPANY. THIS FINDING OF CIT(A) COULD NOT BE CON TROVERTED BY LEARNED D.R. OF THE REVENUE THAT ENTIRE DEBIT BALANCE IN SHIVA TEA COMPANY IS ON ACCOUNT OF SALES TO THIS PARTY. HENCE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). GROUND NO. 2 IS ALSO REJECTED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 21. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE AS WELL AS ONE APPEAL OF THE REVENUE ARE DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 0 /09/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR