Jose Kuruvinakunnel, Kottayam V. ITO, Kottayam

ITA 429/COCH/2005

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68972 (ITAT-COCHIN)
• Duration Of Justice: 8 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 02-07-2013
• Assessment Year: 1996-1997
• Appeal Filed On: 04-04-2005
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA; M ANIL KUMAR
• Assessee Lawyers: IYPE JOHN; K I JOHN C AS
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Validity of assessment; Assessment record; Onus to prove; Reassessment proceedings
• Section: 143(3); 234B; 147; 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 429-433/COCH/2005 ASSESSMENT YEARS : 1996-97-2000-01 JOSE KURUVINAKUNNEL, PARTNER, HOTEL MAYURA, POOVARANI, PALA, KOTTAYAM. VS. THE INCOME TAX OFFICER, WARD-2, KOTTAYAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) I.T.A. NOS. 590-592/COCH/2007 ASSESSMENT YEARS : 1998-99-2000-01 THE INCOME TAX OFFICER, WARD- 2, KOTTAYAM. VS. JOSE KURUVINAKUNNEL, PARTNER, HOTEL MAYURA, POOVARANI, PALA, KOTTAYAM. (REVENUE-APPELLANT) (ASSESSEE-R ESPONDENT) ASSESSEE BY SHRI IYPE JOHN & SHRI K.I. JOHN, C.AS. REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR & SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 02/07/2013 DATE OF PRONOUNCEMENT 20/09/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE ASSESSEE/REVENU E ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A), TIRUPATI AND THEY RELATE TO TH E ASSESSMENT YEARS 1996-97 TO 2000- 01. 2. ALL THE APPEALS FILED BY THE ASSESSEE WERE DI SPOSED OF BY THE TRIBUNAL EARLIER BY CONSIDERING ONLY THE LEGAL ISSUE VIZ., REGARDING VA LIDITY OF RE-OPENING OF ASSESSMENTS. ALL THESE ASSESSMENTS HAD BEEN RE-OPENED BY THE AO BY ISSUING NOTICE U/S 148 OF THE I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 2 ACT. THE ASSESSEE, INTER ALIA, CHALLENGED THE VALI DITY OF REOPENING OF IMPUGNED ASSESSMENTS BEFORE LD CIT(A). THE FIRST APPELLATE AUTHORITY DISMISSED THE GROUNDS URGED ON VALIDITY OF REOPENING OF APPEALS AND ALSO DISPOSED OF THE GROUNDS URGED ON MERITS OF ADDITIONS. BEFORE TRIBUNAL ALSO, THE ASS ESSEE, INTER ALIA, CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENTS. THE TRIBUNAL , VIDE ITS ORDER DATED 08-12-2006, DECIDED THE ISSUE OF VALIDITY OF REOPENING OF ASSES SMENTS IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEARS 1996-97 AND 1997-98. HENCE, THE R EVENUE FILED APPEALS BEFORE HONBLE HIGH COURT OF KERALA CHALLENGING THE ORDERS PASSED BY THE TRIBUNAL ON THE LEGAL ISSUE REFERRED ABOVE. 3. FOR OTHER THREE YEARS, I.E., ASSESSMENT YEAR S 1998-99 TO 2000-01, THE TRIBUNAL REMANDED THE LEGAL ISSUE CITED ABOVE TO THE FILE OF LD CIT(A) FOR FRESH CONSIDERATION. IN THE SET ASIDE PROCEEDINGS, THE LD CIT(A) HELD THAT THE RE-OPENING OF ASSESSMENTS OF ALL THE THREE YEARS WAS BAD IN LAW. THE REVENUE CHALLE NGED THE SAID DECISION OF THE LD CIT(A) BY FILING APPEALS BEFORE THE TRIBUNAL AND TH E TRIBUNAL, VIDE ITS ORDER DATED 18- 05-2009, REVERSED THE DECISION OF THE FIRST APPELLA TE AUTHORITY, I.E., THE RE-OPENING OF ASSESSMENTS FOR THESE THREE YEARS WERE HELD TO BE V ALID. HENCE THE ASSESSEE FILED APPEALS BEFORE THE HONBLE HIGH COURT OF KERALA CHA LLENGING THE SAID DECISION OF THE TRIBUNAL ON THE LEGAL ISSUE. IT IS PERTINENT TO NO TE THAT THE TRIBUNAL DID NOT ADJUDICATE THE GROUNDS URGED BY THE ASSESSEE ON MERITS ON BOTH THE OCCASIONS. 4. THE HONBLE HIGH COURT OF KERALA, VIDE ITS C ONSOLIDATED ORDER DATED 05-01-2012, UPHELD THE VALIDITY OF REOPENING OF ASSESSMENTS AND ACCORDINGLY RESTORED THE APPEALS TO THE FILE OF THE TRIBUNAL WITH THE DIRECTION TO DISP OSE THE ISSUES RAISED ON ADDITIONS OTHER THAN THOSE PERTAINING TO VALIDITY OF ASSESSMENTS CO MPLETED U/S 147 OF THE ACT. THE HONBLE HIGH COURT ALSO DIRECTED THE TRIBUNAL TO CO NSIDER THE APPEALS FILED BY REVENUE ON MERITS. ACCORDINGLY, ALL THE APPEALS FILED BOTH BY THE ASSESSEE AND THE REVENUE WERE TAKEN ON RECORD. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 3 5. THE REVENUE HAS FILED APPEALS FOR ASSESSMENT YEARS 1998-99 TO 2000-01. ALL THE GROUNDS RAISED BY THE REVENUE RELATE TO A SINGLE IS SUE, VIZ., THE VALIDITY OF RE-OPENING OF ASSESSMENT, WHICH HAS SINCE BEEN DECIDED BY THE HON BLE JURISDICTIONAL HIGH COURT IN FAVOUR OF REVENUE. WE NOTICE THAT THE REVENUE DID NOT RAISE ANY GROUND ON MERITS. ACCORDINGLY, ALL THE THREE APPEALS OF REVENUE DO NO T REQUIRE ANY ADJUDICATION IN VIEW OF THE DECISION RENDERED BY THE HONBLE HIGH COURT. 6. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 1996- 97. THE ASSESSEE HAS RAISED MANY GROUNDS. ON PER USAL OF THE SAME, WE NOTICE THAT THE ASSESSEE IS CONTESTING FOLLOWING ADDITIONS CONF IRMED BY LD CIT(A). THE LD A.R ALSO RESTRICTED HIS ARGUMENTS IN RESPECT OF THE FOLLOWIN G ISSUES ONLY. A. DEPOSITS IN THE BANK ACCOUNT OF FRANCIS JOSEP H RS.3,00,000/- B. UNEXPLAINED CREDIT IN THE CAPITAL ACCOUNT OF T HE FIRM RS.5,60,000/- C. LOAN TAKEN FROM MR. GEORGE JOSEPH ADDED U/S 68 RS.4,00,000/- D. INTEREST INCOME ADDED RS.15,917/- E. CHARGING OF INTEREST U/S 234B OF THE ACT. 7. THE ADDITION RELATING TO THE DEPOSITS FOUND IN THE BANK ACCOUNT OF SHRI FRANCIS JOSEPH IS AVAILABLE IN ASSESSMENT YEARS 1996-97 TO 1999-2000. THE FACTS RELATING TO THE SAME ARE STATED IN BRIEF. THE AO RECEIVED ANON YMOUS INFORMATION ABOUT THE UNACCOUNTED INCOME OF THE ASSESSEE AND ALSO THE INV ESTMENTS MADE BY HIM IN CONSTRUCTION OF A HOUSE HAVING AN EXTENT OF 6000 SQ . FT. AND PURCHASE OF 165 ACRES OF LAND IN TAMILNADU. BASED ON THIS INFORMATION, THE DDIT (INV) RECORDED A STATEMENT FROM THE BROTHER IN LAW OF THE ASSESSEE NAMED SHRI FRANCIS JOSEPH ON 05-09-2002, WHEREIN HE STATED THAT THE SB ACCOUNT NO. 3075 STAN DING IN HIS NAME WITH FEDERAL BANK, POOVARANI BRANCH WAS ACTUALLY OPERATED BY THE ASSESSEE HEREIN. SHRI FRANCIS JOSEPH FURTHER SUBMITTED THAT HE MADE INITIAL DEPOS ITS AGGREGATING TO RS. 2 LAKHS IN HIS ACCOUNT. THEREAFTER, ALL OTHER TRANSACTIONS WERE O PERATED BY THE ASSESSEE HEREIN BY USING BLANK CHEQUE LEAVES SIGNED AND GIVEN TO HIM. WHEN THIS INFORMATION WAS PUT TO THE ASSESSEE, HE DID NOT AGREE WITH THE CLAIM MADE BY SHRI FRANCIS JOSEPH AND ASKED FOR AN OPPORTUNITY TO CROSS-EXAMINE HIM. ACCORDING LY, THE ASSESSING OFFICER ISSUED A SUMMON U/S. 131 OF THE ACT UPON SHRI FRANCIS JOSEPH . ON THE DATE FIXED BY THE I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 4 ASSESSING OFFICER, THE ASSESSEE AND HIS AUTHORISED REPRESENTATIVE APPEARED BUT SHRI FRANCIS JOSEPH FAILED TO TURN UP. THE SUMMON ISSUED BY THE ASSESSING OFFICER WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE ENDORSE MENT NOT CLAIMED. HENCE, THE ASSESSING OFFICER ISSUED ANOTHER SUMMON DATED 18-03 -2004 DIRECTING HIM TO APPEAR BEFORE HIM IN PERSON ON 22-03-2004. ON THE DATE AL SO, SHRI FRANCIS JOSEPH DID NOT APPEAR, BUT FILED A LETTER THROUGH HIS AUTHORISED R EPRESENTATIVE, WHEREIN IT WAS STATED THAT MR. JOSE KURUVINAKUNNEL HAD ALREADY FABRICATED A CRIMINAL CASE AGAINST HIM AND THREATENED TO ARREST HIM OUTSIDE THE INCOME TAX OFF ICE PREMISES IN CONNECTION WITH THE CRIMINAL CASE USING POLICE FORCE IF HE APPEARED BEF ORE THE INCOME TAX OFFICER ON 22-03- 2004 AND GIVE STATEMENT AGAINST HIM. HE FURTHER RE QUESTED TO GIVE HIM ANOTHER OPPORTUNITY TO APPEAR BEFORE THE AO. ACCORDINGLY, THE ASSESSING OFFICER ISSUED ANOTHER SUMMON DIRECTING HIM TO APPEAR BEFORE HIM ON 25-03- 2004. ON THAT DATE ALSO, SHRI FRANCIS JOSEPH DID NOT TURN UP BUT FILED A LETTER W HEREIN IT WAS STATED THAT MR. JOSE KURUVINAKUNNEL HAS SECURED ARREST WARRANT AGAINST H IM AND HAS THREATENED THAT HE WILL BE ARRESTED USING POLICE IF HE DID NOT DENY HIS REC ORDED STATEMENT ON 05-09-2002 GIVEN BEFORE DDIT(INV.). IT WAS FURTHER STATED THEREIN T HAT FROM HIS PAST EXPERIENCE, HE EVEN FEARED THREAT TO HIS LIFE IF HE IS IN THE CUSTODY O F MR. JOSE KURVINAKUNNEL. HE FURTHER REITERATED THAT HE STOOD FIRMLY ON THE RECORDED STA TEMENT GIVEN BY HIM BEFORE DDIT(INV.) ON 05-09-2002. HE ALSO STATED THAT THE ACCOUNT NO. 3075 WITH FEDERAL BANK WAS OPENED BY HIM AT THE INSTANCE OF THE ASSESSEE H EREIN AND EXCEPT FOR INITIAL TWO TRANSACTIONS, THE ENTIRE OPERATION OF THE ACCOUNTS WERE TRANSACTED BY THE ASSESSEE USING BLANK CHEQUE LEAVES SIGNED BY HIM. 7.1 THE ASSESSING OFFICER, THEREAFTER, OBTAINED COPIES OF CHEQUES USED FOR WITHDRAWAL OF MONEY AND PAY-IN-SLIPS USED FOR DEPOS ITING CASH IN THE ABOVE SAID ACCOUNT MAINTAINED WITH THE FEDERAL BANK. ON PERUS AL OF THE SAME, THE ASSESSING OFFICER NOTICED THAT THE MAJORITY OF DEPOSITS AND W ITHDRAWALS WERE EFFECTED BY THE ASSESSEE HEREIN AS THE SIGNATURE OF THE ASSESSEE WA S NOTICED IN THE ABOVE INSTRUMENTS. THE ASSESSING OFFICER THEREAFTER BROUGHT THESE FACT S TO THE NOTICE OF THE ASSESSEE. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY EXPLANA TION IN THIS REGARD. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE COULD NOT H AVE ACTED LIKE A MESSENGER FOR I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 5 DEPOSITING AND WITHDRAWING MONEY IN A BANK ACCOUNT NOT OWNED BY HIM, SINCE HE WAS ENJOYING HIGH STATUS IN SOCIETY. SINCE SHRI FRANC IS JOSEPH DID NOT DISOWN THE STATEMENT GIVEN BY HIM BEFORE THE DDIT, THE ASSESSING OFFICER CONCLUDED THAT THE DEPOSITS IN THE ABOVE SAID BANK ACCOUNT, EXCEPT THE FIRST TWO DEPOS ITS, BELONGED TO THE ASSESSEE HEREIN. ACCORDINGLY, FOR THE ASSESSMENT YEAR 1996- 97, THE ASSESSING OFFICER ADDED A SUM OF RS. 3.00 LAKHS AS UNEXPLAINED DEPOSIT. IN T HE APPELLATE PROCEEDINGS, THE LD. CIT(A) CONFIRMED THIS ADDITION. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE SHRI FRANCIS JOSEPH AND HENCE, THE IMPUGNED ADDITION, MADE IN VIOLATION OF NATURAL JUSTICE. IS NOT VALID IN THE EYES OF LAW. HE FURTHER SUBMITTED THAT SHRI FRANCIS JOSEPH HAS ONLY STATED THAT THE DEPOSITS HAVE BEEN MADE THROUGH BAR BUSINESS OF M/S. MAYURA BAR, A PARTNERS HIP FIRM. ACCORDINGLY, HE SUBMITTED THAT IT IS NOT PROPER TO ASSESS THE SAID DEPOSITS I N THE HANDS OF THE ASSESSEE, WHO IS ONLY ONE OF THE PARTNERS IN THE ABOVE SAID PARTNERS HIP FIRM. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE DEPARTMENT HAS RE-OPENED THE ASSESSMENT OF SHRI FRANCIS JOSEPH ALSO AND ASSESSED THE DEPOSITS OF TH E VERY SAME AMOUNT IN HIS HANDS ALSO. HENCE THE VERY SAME ADDITION MADE IN THE HAN DS OF THE ASSESSEE RESULTS IN DOUBLE TAXATION, WHICH IS NOT PERMISSIBLE IN LAW. THE LD. A.R FURTHER SUBMITTED THAT THE ASSESSEE HAS ONLY INTRODUCED SHRI FRANCIS JOSEPH TO THE BANK TO OPEN THE IMPUGNED ACCOUNT AND HE DOES NOT HAVE ANY CONNECTION WITH TH E OPERATION OF THE SAID BANK ACCOUNT. THOUGH THE ASSESSING OFFICER ISSUED SUMMO NS TO SHRI FRANCIS JOSEPH IN ORDER TO ALLOW CROSS-EXAMINATION, HE FAILED TO APPEAR BEF ORE THE ASSESSING OFFICER AND INSTEAD FILED LETTERS MAKING FALSE ALLEGATIONS, WITHOUT BRI NGING ANY MATERIAL ON RECORD IN SUPPORT OF THE SAID ALLEGATIONS. ACCORDINGLY, THE LD. AR S UBMITTED THAT THE ASSESSING OFFICER SHOULD NOT HAVE PLACED RELIANCE ON THE STATEMENT GI VEN AS WELL AS LETTERS FILED BY SHRI FRANCIS JOSEPH, SINCE THE STATEMENT FROM HIM WAS RE CORDED BEHIND THE BACK OF THE ASSESSEE. THE LD A.R SUBMITTED THAT THE ASSESSEE HE REIN HAS ACTED AS A MESSENGER ONLY ON THE INSTRUCTIONS GIVEN BY SHRI FRANCIS JOSE PH. THE LD. AR PLACED RELIANCE ON THE CASE LAW IN SUPPORT OF HIS ARGUMENTS: I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 6 (A) KISHINCHAND CHELLARAM, 125 ITR 713 (SC) (B) CIT VS. RAJESH KUMAR 218 CTR 691 (DELHI. (C) P.S. ABDUL MAJEED VS. AGRI. IT AND SALES TAX OFFICER 209 ITR 821 (KERALA). THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ONUS OF PROVING SOURCES OF DEPOSITS RESTED ON THE PERSON IN WHOSE NAME THE DEP OSITS APPEARED IN THE BANK ACCOUNT AND HENCE THE ASSESSEE DOES NOT HAVE ANY OB LIGATION TO EXPLAIN THE DEPOSITS MADE IN THE NAME OF SHRI FRANCIS JOSEPH. IN THIS R EGARD, HE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. K. CHINNATHAMBAN, 292 ITR 682. HE ALSO SUBMITTED THAT THE AO SHOULD HAVE ENFORCED THE ATTENDANCE OF WITNESS IN EXERCISE OF HIS POWERS U/S 137 READ WITH ORDER XVI, RULE 10 OF THE CODE OF CIVIL PROCEDURE AND SINCE THE AO HAS FAILED TO DO S O, HE SHOULD NOT HAVE DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF NATHU R AM PREMCHAND VS. CIT (49 ITR 561) AND ALSO THE DECISION RENDERED BY HONBLE MADH YA PRADESH HIGH COURT IN THE CASE OF PRAKASH CHANDRA NAHTA VS. CIT (2008)(301 ITR 134 ). 9. ON THE CONTRARY, THE LD. DR SUBMITTED THAT SHRI FRANCIS JOSEPH WAS FOUND TO BE A MAN OF NO MEANS. IN THE SWORN STATEMENT GIVEN BY HIM BEFORE DDIT, IT WAS CLEARLY STATED THAT ALL THE TRANSACTIONS IN THE BANK ACCOUN T, EXCEPT THE FIRST TWO TRANSACTIONS, WERE CARRIED OUT BY THE ASSESSEE HEREIN ON THE BASI S OF SIGNED BLANK CHEQUE LEAVES GIVEN BY HIM TO THE ASSESSEE. THOUGH THE ASSESSING OFFICER ISSUED SUMMONS TO SHRI FRANCIS JOSEPH, IN ORDER TO ALLOW AN OPPORTUNITY OF CROSS-EXAMINATION TO THE ASSESSEE, YET SHRI FRANCIS JOSEPH DID NOT APPEAR BEFORE THE A SSESSING OFFICER ON THE REASONING THAT HE WAS SCARED OF THE ASSESSEE HEREIN AND FACIN G THREAT OF ARREST IN A CRIMINAL CASE FABRICATED BY THE ASSESSEE HEREIN. HOWEVER, THE SA ID FRANCIS JOSEPH AGAIN RE-AFFIRMED THE STATEMENT GIVEN BY HIM BEFORE THE DDIT TO THE E FFECT THAT THE IMPUGNED BANK ACCOUNT WAS OPERATED BY THE ASSESSEE HEREIN. THE A SSESSING OFFICER HAS ALSO COLLECTED INFORMATION FROM THE BANK AND NOTICED THAT THE MAJO RITY OF CHEQUES AND PAY-IN-SLIPS CONTAINED THE SIGNATURE OF THE ASSESSEE HEREIN WHIC H CLEARLY PROVED THAT THE BANK ACCOUNT WAS CONTROLLED AND OPERATED BY THE ASSESSEE HEREIN. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 7 10. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE ADMITTED FACTS ARE THAT THE BANK ACCOUNT MAINTAINED WITH FEDERAL BANK STAND S IN THE NAME OF SHRI FRANCIS JOSEPH, THE BROTHER IN LAW OF THE ASSESSEE HEREIN. THE ASSESSEE HEREIN HAS INTRODUCED SHRI FRANCIS JOSEPH TO THE BANK. ACCORDING TO SHRI FRANCIS JOSEPH, THE SAID BANK ACCOUNT WAS OPERATED BY THE ASSESSEE HEREIN AND THE SAID FACT WAS NOT DENIED BY THE ASSESSEE. ACCORDING TO THE ASSESSEE, HE HAS OPERAT ED THE BANK ACCOUNT ONLY ON BEHALF OF SHRI FRANCIS JOSEPH, MEANING THEREBY ALL THE TRA NSACTIONS BELONG TO SHRI FRANCIS JOSEPH ONLY. HOWEVER, THE CLAIM OF SHRI FRANCIS JO SEPH IS THAT THE ASSESSEE HEREIN ONLY HAS OPERATED THE BANK ACCOUNT AND ALL THE TRANSACTI ONS, EXCEPT THE FIRST TWO TRANSACTIONS, BELONG TO THE PRESENT ASSESSEE ONLY. 10.1 THE DEPARTMENT HAS CONCLUDED THAT THE TRANSA CTIONS MADE IN THE ABOVE SAID BANK ACCOUNT BELONG TO THE ASSESSEE ONLY ON THE BAS IS OF (A) SWORN STATEMENT TAKEN BY DDIT (INV) FROM SHRI FRANCIS JOSEPH. (B) LETTER FURNISHED BY SHRI FRANCIS JOSEPH DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CONFIRMING THE STATEMENT ALREADY GIVEN . (C) COPIES OF CHEQUE LEAVES AND PAY-IN-SLIPS COLL ECTED FROM FEDERAL BANK, WHERE FROM IT WAS NOTICED THAT THE ASSESSEE HEREIN HAS OP ERATED THE BANK ACCOUNT. 10.2 HOWEVER, ACCORDING TO THE ASSESSEE, THE AO DID NOT PROVIDE OPPORTUNITY OF CROSS EXAMINING SHRI FRANCIS JOSEPH AND HENCE THERE IS VI OLATION OF PRINCIPLES OF NATURAL JUSTICE, WHICH WOULD VITIATE THE ADDITION MADE BY T HE AO. THIS APPEARS TO BE MAIN CONTENTION OF THE ASSESSEE. 10.3 IT CANNOT BE DISPUTED THAT UNDER THE INCOME TAX PROCEEDINGS, STRICT RULE OF EVIDENCE NEED NOT APPLIED, I.E., THE ASSESSING OFFI CER CAN PROCEED TO DECIDE AN ISSUE ON THE BASIS OF HUMAN PROBABILITIES AND SURROUNDING CI RCUMSTANCES. IN THE INSTANT CASE, THE ASSESSEE HEREIN IS CARRYING ON BUSINESS AS ONE OF THE PARTNERS OF M/ MAYOORA BAR. ACCORDING TO THE INFORMATION AVAILABLE WITH THE DEP ARTMENT, HE HAS CONSTRUCTED A PALATIAL BUILDING HAVING EN EXTENT OF ABOUT 6000 SQ . FT. AND HAS ALSO PURCHASED ABOUT 165 ACRES OF LAND IN TAMILNADU. HE IS ALSO ASSESSE D TO INCOME TAX. THESE FACTS REVEAL THE CREDIT WORTHINESS OF THE ASSESSEE. ON THE OTHE R HAND, SHRI FRANCIS JOSEPH IS NOT I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 8 ASSESSED TO INCOME TAX. IN THE SWORN STATEMENT, HE HAS STATED THAT HE WAS OPERATING A TATA 407 MINI TRUCK ALONG WITH HIS BROTHER FOR TRAN SPORTING FRUITS FROM TAMILNADU TO KERALA. FROM THESE FACTS, IT CANNOT BE SAID THAT S HRI FRANCIS JOSEPH WAS A MAN OF MEANS. 10.4 SHRI FRANCIS JOSEPH HAS STATED IN HIS SWORN STATEMENT THAT HE HANDED OVER 60 BLANK SIGNED CHEQUE LEAVES TO THE ASSESSEE HEREIN A ND THIS FACT WAS NOT DENIED BY THE ASSESSEE, MEANING THEREBY, THE ASSESSEE HEREIN WAS OPERATING THE BANK ACCOUNT OPENED IN THE NAME OF SHRI FRANCIS JOSEPH. THE SAI D FACT WAS ALSO CORROBORATED BY THE AO BY OBTAINING COPIES OF CHEQUES LEAVES AND PAY IN SLIPS FROM BANK, WHEREIN THE SIGNATURE OF THE PRESENT ASSESSEE WAS FOUND. HOWEV ER, ACCORDING TO THE ASSESSEE, HE HAS OPERATED THE BANK ACCOUNT ON THE INSTRUCTIONS O F SHRI FRANCIS JOSEPH ONLY. 10.5 THE QUESTION THAT ARISES NOW IS WHICH OF THE STATEMENTS CAN BE CONSIDERED TO BE TRUE. WE HAVE ALREADY NOTICED THAT THE ASSESSEE HEREIN IS A MAN OF MEANS, WHEREAS SHRI FRANCIS JOSEPH DID NOT HAVE ENOUGH MEANS. THE ASSESSEE HAS INTRODUCED SHRI FRANCIS JOSEPH TO THE BANK FOR OPENING THE IMPUGNED BANK ACCOUNT. THEREAFTER, HE HAS COLLECTED 60 LEAVES OF BLANK CHEQUES SIGNED BY SHRI FRANCIS JOSEPH. IT IS ALSO AN ADMITTED FACT THAT SHRI FRANCIS JOSEPH WAS STAYING IN A FAR-AWAY PLACE AND ACCORDINGLY IT WAS SUBMITTED BY THE ASSESSEE THAT HE OBTAINED THE SIGNED CHEQUE LEAVES IN ORDER TO FACILITATE THE OPERATION OF ACCOUNTS ON BEHALF OF S HRI FRANCIS JOSEPH. HOWEVER, THE SAID SUBMISSION DEFIES THE LOGIC FOR MORE THAN ONE REASO N, I.E., (A) THE NECESSITY OF OPENING A BANK ACCOUNT IN A PLACE WHERE SHRI FRANCIS JOSEPH WAS NOT RESIDING/CARRYING ON BUSINESS WAS NOT EXPLAINED AND (B) THE NATURE OF BU SINESS TRANSACTIONS ALLEGED TO HAVE BEEN CARRIED OUT BY SHRI FRANCIS JOSEPH, WHICH ENAB LED HIM TO MAKE HUGE DEPOSITS AND WITHDRAWALS IN THE SAID BANK ACCOUNT WAS ALSO NOT S TATED. THE ASSESSING OFFICER HAS POINTED OUT THAT THE ASSESSEE, BEING A MAN ENJOYING HIGH STATUS, COULD NOT HAVE ACTED AS A MESSENGER, AS CLAIMED. THE INFERENCE SO DRAWN BY THE AO IS SUPPORTED BY THE FINANCIAL STATUS OF THE ASSESSEE VIS--VIS THE INVE STMENTS MADE BY HIM. ALL THESE FACTORS SUGGESTS THAT THE ASSESSEE HEREIN ONLY COULD HAVE O PERATED THE BANK ACCOUNT STANDING IN THE NAME OF SHRI FRANCIS JOSEPH BY USING HIS OWN FUNDS. THUS, THE SURROUNDING I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 9 CIRCUMSTANCES, CONDUCT OF THE ASSESSEE AND HUMAN PR OBABILITIES, IN OUR VIEW, PROVE THAT THE IMPUGNED BANK ACCOUNT BELONGS TO THE ASSESSEE H EREIN. HENCE, WE DO NOT HAVE ANY HESITATION TO CONFIRM THE DECISION OF LD CIT(A) ON THIS MATTER. 10.6 THE LD COUNSEL FOR THE ASSESSEE MAINLY BAN KED UPON THE CONTENTION THAT THERE WAS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, SIN CE THE ASSESSEE WAS NOT ALLOWED TO CROSS EXAMINE SHRI FRANCIS JOSEPH. IT APPEARS THAT THE ASSESSEE IS MAKING THIS CONTENTION ON THE BELIEF THAT THE DEPOSITS MADE INT O THE ABOVE SAID BANK ACCOUNT HAVE BEEN ASSESSED IN THE HANDS OF THE ASSESSEE ONLY ON THE STRENGTH OF THE STATEMENT GIVEN BY SHRI FRANCIS JOSEPH. THE CONTENTION OF THE ASSE SSEE WOULD FIND MERIT, IF THE TAX AUTHORITIES ASSESSED THE BANK DEPOSITS ONLY ON THE STRENGTH OF THE STATEMENT GIVEN BY HIM. A CAREFUL PERUSAL OF THE RECORD SHOWS THAT TH E TAX AUTHORITIES HAVE NOT PLACED RELIANCE SOLELY ON THE SWORN STATEMENT GIVEN BY SHR I FRANCIS JOSEPH. WE NOTICE THAT THE TAX AUTHORITIES HAVE TAKEN INTO CONSIDERATION THE C ONDUCT OF THE ASSESSEE, CAPACITY OF THE ASSESSEE, CAPACITY OF SHRI FRANCIS JOSEPH AND T HE SURROUNDING CIRCUMSTANCES ALSO IN DECIDING THIS ISSUE. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE QUESTION OF VIOLATION OF NATURAL JUSTICE DOES NOT ARISE BY NOT PROVIDING OPP ORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. WE NOTICE THAT THE AO ISSUED SUMMONS TO SHRI FRANCIS JOSEPH MORE THAN ONE TIME, BUT THE SAID PERSON DECLINED TO APPEAR BE FORE THE AO, AS HE WAS SCARED OF THE ASSESSEE. THUS, IN OUR VIEW, IT CANNOT BE SAID THAT THE AO DID NOT OFFER OPPORTUNITY OF CROSS EXAMINATION, BUT THE EXTERNAL CIRCUMSTANCE S BLOCKED THE AO TO PROVIDE SUCH AN OPPORTUNITY TO THE ASSESSEE. IT IS ALSO PERTINENT T O NOTE THAT THE ASSESSEE, BEING BROTHER IN LAW OF SHRI FRANCIS JOSEPH, COULD NOT PRODUCE HI M BEFORE THE AO TO RETRACT THE STATEMENTS ALREADY GIVEN BY HIM BEFORE DDIT. ON TH E CONTRARY, SHRI FRANCIS JOSEPH, DESPITE THE ALLEGED THREAT FROM THE ASSESSEE, HAS F IRMLY STOOD BY HIS STATEMENT THAT THE IMPUGNED BANK ACCOUNT BELONGS TO THE ASSESSEE ONLY. ACCORDINGLY, WE ARE OF THE VIEW THAT DECISION OF THE AO MIGHT NOT HAVE CHANGED, HAD HE DISREGARDED THE SWORN STATEMENT GIVEN BY SHRI FRANCIS JOSEPH. HENCE, THE CROSS EXAMINATION COULD NOT HAVE CHANGED THE POSITION. ACCORDINGLY, IN OUR VIEW, A LL THE CASE LAW RELIED UPON BY THE ASSESSEE SHALL NOT BE APPLICABLE TO THE FACTS OF TH E INSTANT CASE. ACCORDINGLY, WE HOLD THAT THE TAX AUTHORITIES HAVE CORROBORATED THE STAT EMENT GIVEN BY SHRI FRANCIS JOSEPH I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 10 WITH SUFFICIENT MATERIAL AND SURROUNDING CIRCUMSTAN CES. ACCORDINGLY WE HOLD THAT THE TRANSACTIONS FOUND IN THE BANK ACCOUNT, EXCEPT THE FIRST TWO TRANSACTIONS, BELONG TO THE ASSESSEE ONLY. 10.7 THE LD COUNSEL ALSO CONTENDED THAT SHRI FRA NCIS JOSEPH HAS ONLY IMPLICATED THE PARTNERSHIP FIRM, I.E., THE DEPOSITS WERE MADE BY T HE ASSESSEE FROM OUT OF THE INCOME RELATING TO THE PARTNERSHIP FIRM. WE HAVE GONE THR OUGH THE TRANSLATED COPY OF STATEMENT GIVEN BY SHRI FRANCIS JOSEPH, WHICH IS PL ACED IN THE PAPER BOOK FILED BY THE ASSESSEE. WE DO NOT FIND ANY SUCH STATEMENT AS CON TENDED BY LD A.R. ACCORDINGLY WE REJECT SAID CONTENTIONS. THE LD A.R ALSO CONTENDED THAT THE DEPARTMENT HAS ASSESSED VERY SAME AMOUNT IN THE HANDS OF SHRI FRANCIS JOSEP H ALSO AND HENCE IT COULD NOT HAVE BEEN ASSESSED IN THE HANDS OF THE ASSESSEE HEREIN. WE DO NOT FIND MERIT IN SAID CONTENTIONS. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE INCOME IS REQUIRED TO BE ASSESSED IN THE HANDS OF RIGHT PERSON. WE HAVE ALR EADY HELD THAT THE RIGHT PERSON IS THE ASSESSEE HEREIN. 10.8 IN VIEW OF THE FOREGOING DISCUSSIONS, WE D O NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) IN CONFIRMING THE ASSESSMENT OF DEPOSI TS FOUND IN THE BANK ACCOUNT STANDING IN THE NAME OF SHRI FRANCIS JOSEPH, IN THE HANDS OF THE ASSESSEE. 11. THE NEXT ISSUE RELATES TO THE ASSESSMENT O F RS.5,60,000/- RELATING TO THE AMOUNT FOUND CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESS EE IN THE BOOKS OF PARTNERSHIP FIRM. THE ASSESSEE FILED A CASH FLOW STATEMENT BEFORE THE AO. IT WAS NOTICED THAT THE SAID CASH FLOW STATEMENT DID NOT REFLECT THE INVESTMENT OF RS.5,60,000/- MADE BY THE ASSESSEE IN THE CAPITAL ACCOUNT OF THE PARTNERSHIP FIRM. IN HIS LETTER DATED 23.3.2004, THE ASSESSEE EXPLAINED THE SOURCES FOR MAKING THIS INVESTMENT AS UNDER:- SALARY AND INTEREST CREDITED 87,284 AMOUNT RECEIVED FROM SLAUGHTER TAPPING 4,75 ,000 AGRICULTURAL INCOME CREDITED 85,100 ------------- 6,47,384 ======= I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 11 THE AO NOTICED THAT THE ASSESSEE HAD EXPLAINED THE SOURCES OF INVESTMENT OF RS.6.50 LAKHS IN CONSTRUCTION OF RESIDENTIAL BUILDING AS UN DER DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS COMPLETED U/S 143(3) ON 10.3 .1999. AMOUNT RECEIVED FROM SLAUGHTER TAPPING AND SALE OF RUBBER TREES AS PER COPY OF AGREEMENT FILED - RS.4,75,000 REMUNERATION FROM HOTEL MAYOORA - RS. 60,000 AGRICULTURAL INCOME AFTER HOUSEHOLD EXPENSES - RS. 85,100 ------------------ RS.6,97,384 (SIC) ========= SINCE THE SOURCES NOW EXPLAINED FOR THE INVESTMENT MADE IN THE PARTNERSHIP CONCERN WERE ALREADY EXPLAINED TO BE THE SOURCES FOR THE IN VESTMENT MADE IN THE CONSTRUCTION OF HOUSE, THE AO CONCLUDED THAT THE ASSESSEE DID NO T HAVE EXPLAINABLE SOURCES FOR THE INVESTMENT MADE IN THE PARTNERSHIP CONCERN. HENCE, THE AO ASSESSED THE AMOUNT OF RS.5,60,000/- AS UNEXPLAINED INVESTMENT IN THE HAND S OF THE ASSESSEE. 11.1 BEFORE LD CIT(A), THE ASSESSEE SUBMITTED T HAT HE RECEIVED A SUM OF RS.10,15,000/- BY WAY OF SLAUGHTER TAPPING AND SALE OF TREES AS EVIDENCED BY AGREEMENTS DATED 5.7.1994, 15.7.1994 AND 13.2.1995. IT WAS SUBMITTED THAT THE AO CONSIDERED ONLY RS.4,75,000/- ONLY DURING THE COURS E OF ORIGINAL ASSESSMENT PROCEEDING AND THE BALANCE AMOUNT OF RS.5,40,000/- WAS AVAILAB LE. HOWEVER, THE ASSESSEE COULD NOT FURNISH ANY DOCUMENT IN SUPPORT OF THE SAID CLA IM. THE LD CIT(A) ALSO NOTICED THAT THE ASSESSEE WAS RAISING THIS CONTENTION FOR THE FI RST TIME BEFORE HIM, THAT TOO WITHOUT FURNISHING ANY DETAIL OR EVIDENCE IN SUPPORT OF THE SAID CLAIM. HENCE, THE LD CIT(A) CONFIRMED THE SAID ADDITION. 11.2 BEFORE US, THE LD A.R SIMPLY REITERATED TH E CONTENTIONS MADE BEFORE LD CIT(A). HE FAIRLY ADMITTED THAT THE ASSESSEE DID NOT HAVE A NY EVIDENCE TO SUPPORT HIS CONTENTION. HE ALSO SUBMITTED THAT THE ASSESSEE MI GHT HAVE FURNISHED COPIES OF ALL THE THREE AGREEMENTS TO THE AO AND HENCE IT MIGHT BE AV AILABLE IN ASSESSMENT RECORDS. HOWEVER, THE LD D.R STRONGLY REFUTED THE SUBMISSION S MADE BY LD A.R. THE LD D.R FURTHER SUBMITTED THAT THESE SUBMISSIONS WERE NOT M ADE BEFORE THE AO. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 12 11.3 WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. ADMITTEDLY, THE ASSESSEE DID NOT CLAIM THAT HE RECEIVED A SUM OF RS.10,15,000/- ON SLAUGHTER TAPPING AND SALE OF TREES BEFORE THE AO EITHER DURING ORIGINAL ASSESSME NT PROCEEDING OR DURING REASSESSMENT PROCEEDING. HE HAS MADE THIS SUBMISSI ON FOR THE FIRST TIME BEFORE LD CIT(A). IN ANY CASE, THE ASSESSEE COULD NOT SUBSTA NTIATE HIS SUBMISSIONS WITH ANY CREDIBLE EVIDENCE. ON THE CONTRARY, THE LD A.R HAS ONLY PRESUMED THAT THE COPIES OF AGREEMENTS MIGHT BE AVAILABLE IN THE ASSESSMENT REC ORD. WE ALSO NOTICE THAT THE ASSESSEE DID NOT MAKE ANY ATTEMPT TO INSPECT THE AS SESSMENT RECORD IN ORDER TO FIND OUT THE AVAILABLITY OF THE THREE AGREEMENTS. UNDER THESE CIRCUMSTANCES, WE HAVE NO OTHER OPTION, BUT TO REJECT THE SUBMISSIONS MADE BY THE ASSESSEE. ACCORDINGLY, WE CONFIRM THE ORDER OF LD CIT(A) ON THIS ISSUE. 12. THE NEXT ISSUE RELATES TO THE ADDITION OF LOA N OF RS.4.00 LAKHS TAKEN FROM SHRI GEORGE JOSEPH. DURING THE COURSE OF ASSESSMENT PRO CEEDING, THE ASSESSEE FILED A CASH FLOW STATEMENT FOR THE FINANCIAL YEAR 1995-96 RELEV ANT TO THE ASSESSMENT YEAR 1996-97. IN THE SAID CASH FLOW STATEMENT, THE ASSESSEE HAD S HOWN A LOAN OF RS.4.00 LAKHS RECEIVED FROM SHRI GEORGE JOSEPH. THE AO EXAMINED THE SAID LENDER AND NOTICED THAT HE DOES NOT HAVE ENOUGH MEANS TO LEND THE ABOVE SAI D AMOUNT OF RS.4.00 LAKHS. SHRI GEORGE JOSEPH STATED BEFORE THE AO THAT HE HAS PURC HASED AN AGRICULTURAL LAND FOR RS.2.00 LAKHS AND ALSO GIVEN A LOAN OF RS.3.50 LAKH S TO ANOTHER PERSON NAMED SHRI FRANCO JOHN DURING THE PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR 1996-97. HE FURTHER STATED THAT HE AVAILED A BANK LOAN OF RS.3. 00 LAKHS AND USED THE PERSONAL SAVINGS OF RS.1.00 LAKH FOR ADVANCING THE LOAN OF R S.4.00 LAKHS TO THE ASSESSEE HEREIN. IT APPEARS THAT THE LENDER DID NOT PRODUCE ANY DOCU MENT IN SUPPORT OF THE ABOVE SUBMISSIONS. THE AO ALSO NOTICED THAT SHRI GEORGE JOSEPH WAS NOT ASSESSED TO INCOME TAX. HE ALSO FELT THAT IT IS HIGHLY IMPROBABLE THA T A PERSON SHALL GIVE INTEREST FREE LOAN BY AVAILING INTEREST BEARING LOAN FROM BANK. HENCE, THE AO HELD THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN OF PROOF PLACED UPON HIM U/S 68 OF THE ACT IN RESPECT OF THIS LOAN AND ACCORDINGLY ADDED THE SAME TO THE TOT AL INCOME OF THE ASSESSEE. THE LD CIT(A) ALSO AGREED WITH THE VIEW TAKEN BY THE AO ON THIS ISSUE AND ACCORDINGLY CONFIRMED THE SAID ADDITION. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 13 13. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE LENDER SHRI GEORGE JOSEPH HAS CONFIRMED THE LOAN OF RS.4.00 LAKHS GIVEN TO TH E ASSESSEE BY APPEARING BEFORE THE AO. FURTHER THE LENDER HAS ALSO EXPLAINED THE SOUR CES FOR GIVING THE IMPUGNED LOAN. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS DISC HARGED THE OBLIGATION PLACED UPON HIM U/S 68 OF THE ACT. HE ALSO SUBMITTED THAT THE A SSESSEE HAS SHOWN THE LOAN ONLY IN THE CASH FLOW STATEMENT AND THE SAID LOAN WAS NOT R ECORDED IN ANY OF THE BOOKS OF ACCOUNT. ACCORDINGLY HE CONTENDED THAT THE AO WAS NOT RIGHT IN INVOKING THE PROVISIONS OF SEC.68 OF THE ACT IN THE INSTANT ISSUE. THE LD A.R HAS PLACED RELIANCE ON THE CASE LAWS REPORTED IN 234 ITR 571, 187 ITR 299, 237 ITR 570 IN THIS REGARD. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE LENDER DID NOT PROVE HIS CREDIT WORTHINESS TO THE SATISFACTION OF THE AO. FURTHER SHE SAID THAT IT W AS NOT COMPREHENSIBLE AS TO HOW A PERSON COULD GIVE INTEREST FREE LOAN TO THE ASSESSE E BY AVAILING INTEREST BEARING LOANS FROM BANK. 13.1 WE HAVE HEARD THE RIVAL CONTENTIONS ON THI S ISSUE. IT IS WELL SETTLED PROPOSITION THAT THE INITIAL BURDEN OF PROOF IS PLACED UPON THE ASSESSEE U/S 68 OF THE ACT, I.E., THE ASSESSEE HAS TO DISCHARGE THREE MAIN INGREDIENTS VI Z., THE IDENTITY OF THE CREDITOR, GENUINENESS OF TRANSACTIONS AND CREDIT WORTHINESS O F THE CREDITOR. IN THE INSTANT CASE, THE IDENTITY OF THE CREDITOR IS PROVED, SINCE HE HA S APPEARED BEFORE THE AO. HOWEVER, WITH REGARD TO THE CREDIT WORTHINESS, HE HAS GIVEN ORAL STATEMENT THAT HE HAS AVAILED A LOAN OF RS.3.00 LAKHS FROM A BANK FOR GIVING LOAN T O THE ASSESSEE. BUT THE SAID SUBMISSION WAS NOT SUBSTANTIATED WITH ANY MATERIAL. THE AO HAS ALSO POINTED OUT THAT THE SAID GEROGE JOSEPH HAS PURCHASED AGRICULTURAL L AND FOR RS.2.00 LAKHS AND ALSO GIVEN LOAN OF RS.3.50 LAKHS TO ANOTHER PERSON DURING THE YEAR UNDER CONSIDERATION. THE AO HAS ALSO POINTED OUT THAT THE LENDER IS NOT ASSESSE D TO INCOME TAX. THUS, IT WAS SHOWN BY THE AO THAT THE LENDER DOES NOT HAVE ANY OSTENSI BLE SOURCE FOR GIVING THIS LOAN. HENCE, IN OUR VIEW, THE ASSESSEE HAS FAILED TO PROV E THE CREDIT WORTHINESS OF THE CREDITOR. THE LOAN TRANSACTION WAS NOT TRANSACTED THROUGH BANKING CHANNELS AND THE LENDER DOES NOT HAVE ANY OTHER EVIDENCE TO SHOW THA T HE HAD ACTUALLY GIVEN THE LOAN TO THE ASSESSEE. HENCE, THE GENUINENESS OF THE TRANSA CTION IS ALSO NOT PROVED. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 14 ACCORDINGLY, IN OUR VIEW, THE ASSESSEE HAS FAILED T O PROVE THE CREDIT WORTHINESS OF THE CREDITOR AND ALSO THE GENUINENESS OF THE TRANSACTIO N. ACCORDINGLY, IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS.4.00 LAKHS MADE U/S 68 OF THE ACT. THE LD A.R CONTENDED THAT THE PROVISIONS OF SEC. 68 CANNOT BE INVOKED IN THE ABSENCE OF CREDIT IN THE BOOKS OF ACCOUNT. HOWEVER, IT IS A FACT THAT THE ASSESSEE WAS CONSTRAINED TO FILE A CASH FLOW STATEMENT, SINCE HE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNT. THE ASSESSEE, IN OUR VIEW, CANNOT USE THE FACT OF HIS FAILURE TO MAINTAIN THE BOOKS TO HIS ADVANTAGE TO RAISE CONTENTIONS TO SUIT HIS PURPOSE. ACCORDINGLY, IN OUR VIEW, THE CASH FLOW STATEMENT CAN BE TREATED AS BOO KS OF ACCOUNT OF THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 14. THE NEXT ISSUE IN THE APPEAL FILED FOR THE AS SESSMENT YEAR 1996-97 RELATES TO THE ASSESSMENT OF INTEREST INCOME OF RS.15,911/-. THE AO NOTICED THAT THE ASSESSEE HAS DECLARED THE ABOVE SAID INTEREST INCOME IN CASH FLO W STATEMENT, BUT IT WAS NOT INCLUDED IN THE RETURN OF INCOME. HENCE, THE AO ASSESSED TH E SAME. BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER DID N OT INCLUDE THE ABOVE SAID INCOME IN THE REASONS RECORDED FOR RE-OPENING OF ASSESSMENT A ND HENCE HE COULD NOT HAVE ASSESSED THE SAME. THE LD CIT(A) DID NOT AGREE WIT H THE CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY CONFIRMED THE ORDER OF THE AO ON TH IS ISSUE. BEFORE US ALSO, THE LD A.R REITERATED THE SAME CONTENTIONS. HOWEVER, IN VIEW OF THE SPECIFIC PROVISIONS CONTAINED IN SEC. 147, WE ARE OF THE VIEW THAT THE AO IS VERY MUCH ENTITLED TO ASSESS THE ESCAPED INCOME DURING THE REASSESSMENT PROCEEDINGS, WHICH C OMES TO HIS NOTICE DURING THE COURSE OF ASSESSMENT. HOWEVER, THE COURTS HAVE HEL D THAT THE AO IS ENTITLED TO DO SO, PROVIDED HE ASSESSES THOSE INCOMES FOR WHICH THE AS SESSMENT WAS RE-OPENED. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS ASSESSED TH E INCOMES FOR WHICH THE ASSESSMENT WAS RE-OPENED. HENCE, WE DO NOT FIND ANY INFIRMITY IN ASSESSING THE INTEREST INCOME WHICH HAS COME TO HIS NOTICE DURING THE COURSE OF A SSESSMENT PROCEEDINGS FROM OUT OF THE CASH FLOW STATEMENT FILED BY THE ASSESSEE. ACC ORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 15 15. THE LAST ISSUE RELATES TO CHARGING OF INTERE ST U/S 234B OF THE ACT. IN OUR VIEW, CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE AND HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) ON THIS ISSUE. 16. NOW WE SHALL TAKE UP THE APPEAL FILED BY THE AS SESSEE FOR THE ASSESSMENT YEAR 1997-98. IN THIS YEAR ALSO, THE ASSESSEE HAS RAISE D MANY GROUNDS. HOWEVER, ON PERUSAL OF THE SAME, WE NOTICE THAT THE ASSESSEE IS CONTESTING THE FOLLOWING ADDITIONS CONFIRMED BY THE LD. CIT(A). THE LD A.R ALSO RESTRI CTED HIS ARGUMENTS IN RESPECT OF THE FOLLOWING ISSUES ONLY. (A) DEPOSIT IN THE BANK ACCOUNT OF FRANCIS JOSEPH : RS. 24,68,720/-. (B) UNEXPLAINED CREDIT IN THE CAPITAL ACCO UNT OF THE FIRM : RS. 20,000/- (C) PERSONAL EXPENSES : RS. 1,60,224/- (D) CHARGING OF INTEREST U/S 234B 17 THE FIRST ISSUE RELATES TO THE ADDITION OF D EPOSITS FOUND IN THE BANK ACCOUNT MAINTAINED WITH FEDERAL BANK IN THE NAME OF SHRI FR ANCIS JOSEPH. IN THE ASSESSMENT YEAR 1996-97 ALSO, THE DEPOSITS FOUND IN THE ABOVE SAID BANK ACCOUNT WAS ASSESSED BY THE AO. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THAT ASSESSMENT YEAR AND WE HAVE CONFIRMED THE ORDER OF THE LD. CIT(A) IN HOLDING TH AT THE DEPOSITS FOUND IN THE ABOVE SAID BANK ACCOUNT IS ASSESSABLE IN THE HANDS OF THE ASSESSEE. BY FOLLOWING THE SAID DECISION, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE FOR THIS YEAR ALSO. 18 THE NEXT ISSUE RELATES TO THE ADDITION OF RS. 20 ,000/- RELATING TO THE UNEXPLAINED INVESTMENT IN THE FIRM. THE ASSESSING OFFICER NOTI CED THAT THE ASSESSEE HAS INVESTED A SUM OF RS. 20,000/- IN HIS CAPITAL ACCOUNT MAINTAIN ED WITH THE FIRM M/S. HOTEL MAYURA. HOWEVER, IT WAS NOT REFLECTED IN THE CASH FLOW STAT EMENT FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING. HENCE, THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AND IT WAS ALSO CONFIRMED BY THE LD. CIT(A). 18.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE ASSESSEE HAD DECLARED AGRICULTURAL INCOME OF RS. 2.00 LAKHS FOR THIS YEAR AND THE SAME WAS ALSO ACCEPTED BY I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 16 THE ASSESSING OFFICER. INVITING OUR ATTENTION TO T HE CASH FLOW STATEMENT FILED FOR THE FINANCIAL YEAR 1996-97 RELATING TO THE ASSESSMENT Y EAR 1997-98, WHICH IS PLACED AT PAGE 152 OF PAPER BOOK FILED BY THE ASSESSEE, THE LD. CO UNSEL SUBMITTED THAT THE ASSESSEE HAD INCLUDED A SUM OF RS. 1,80,000/- ONLY AS CASH I NFLOW UNDER THE HEAD AGRICULTURAL INCOME, LEAVING A BALANCE OF RS.20,000/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE SAID SUM OF RS 20,000/- WAS USED BY THE ASSESSEE FOR MAKING INVESTMENT IN THE FIRM. WE ALSO HEARD THE LD. DR O N THIS ISSUE AND ALSO PERUSED THE CASH FLOW STATEMENT FILED BY THE ASSESSEE. WE ALSO NOTICE THAT THE ASSESSING OFFICER HAS ASSESSED AGRICULTURAL INCOME AT RS.2.00 LAKHS F OR THIS YEAR. HOWEVER, IN THE CASH FLOW STATEMENT, THE ASSESSEE HAS INCLUDED A SUM OF RS. 1,80,000/- ONLY AS CASH INFLOW, WHICH LEAVES A BALANCE OF RS.20,000/-. AS SUBMITTE D BY THE LD. COUNSEL FOR THE ASSESSEE, THIS AMOUNT COULD HAVE BEEN USED BY THE A SSESSEE FOR MAKING INVESTMENT IN THE FIRM M/S. HOTEL MAYURA. THE DEPARTMENT COULD N OT PRODUCE ANY MATERIAL TO CONTRADICT THE SAID SUBMISSIONS MADE BY THE LD. AR. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT TH E ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 20,000/-. 19. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.1, 60,224/- TOWARDS PERSONAL EXPENSES. BEFORE THE ASSESSING OFFICER, THE ASSESS EE STATED THAT HE HAS DRAWN A SUM OF RS.2,60,224/- FROM THE CAPITAL ACCOUNT OF THE FI RM M/S. HOTEL MAYURA, OUT OF WHICH HE USED A SUM OF RS.1,60,224/- TOWARDS PERSONAL EXP ENSES. IN THE CASH FLOW STATEMENT, THE ASSESSING OFFICER NOTICED THAT THE A SSESSEE HAS DECLARED THE ENTIRE DRAWINGS OF RS.2,60,224/- AS CASH INFLOW. ACCORDIN GLY, THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE COULD NOT EXPLAIN THE DRAWIN GS OF RS. 1,60,224/- AND ADDED THE SAME AS UNEXPLAINED EXPENDITURE. THE LD CIT(A) ALS O CONFIRMED THIS ADDITION. 19.1 THE LD. COUNSEL INVITED OUR ATTENTION TO T HE CASH FLOW STATEMENT WHICH IS PLACED AT PG.152 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAS INCLUDED A SUM OF RS.1.00 LAKH ONLY AS CASH INFLOW IN THE CASH FLOW S TATEMENT, I.E., OUT OF THE DRAWINGS OF RS.2,60,224/- MADE FROM M/S. HOTEL MAYURA, A SUM O F RS. 1,60,224/- WAS DEDUCTED TOWARDS PERSONAL EXPENSES AND THE BALANCE AMOUNT OF RS.1.00 LAKH ONLY WAS INCLUDED I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 17 AS CASH INFLOW. WE ALSO HEARD LD D.R ON THIS ISSUE . ON PERUSAL OF THE CASH FLOW STATEMENT, WE FIND MERIT IN THE SUBMISSIONS MADE BY THE LD. AR. WE NOTICE THAT THE ASSESSEE HAS INCLUDED A SUM OF RS.1.00 LAKH ONLY AS CASH INFLOW, WHICH MEANS THE PERSONAL EXPENSES OF RS.1,60,224/- WAS DEDUCTED FRO M THE TOTAL DRAWINGS OF RS.2,60,224/-. HENCE, WE FIND THAT THE ASSESSEES EXPLANATION THAT THE PERSONAL EXPENSES OF RS.1,60,224/- WAS MET OUT OF DRAWINGS M ADE FROM M/S HOTEL MAYURA IS CORRECT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THIS ADDITION. 20. THE NEXT ISSUE RELATES TO CHARGING OF INTERE ST U/S 234B AND THE SAME IS CONSEQUENTIAL IN NATURE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) ON THIS ISSUE. 21. NOW WE SHALL TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1998-99. IN THIS YEAR ALSO, THE ASSESSEE HAS RAISE D MANY GROUNDS. HOWEVER, ON PERUSAL OF THE SAME, WE NOTICE THAT THE ASSESSEE IS CONTESTING THE FOLLOWING ADDITIONS CONFIRMED BY THE LD. CIT(A). THE LD A.R ALSO RESTRI CTED HIS ARGUMENTS IN RESPECT OF THE FOLLOWING ISSUES ONLY. (A) DEPOSIT IN THE BANK ACCOUNT OF FRANCIS JOSEPH : RS. 4,70,000/-. (B) UNEXPLAINED CREDIT IN THE CAPITAL ACCO UNT OF THE FIRM : RS. 1,90,000/- (C) CHARGING OF INTEREST U/S 234B. 22 THE FIRST ISSUE RELATES TO THE ADDITION OF DE POSITS FOUND IN THE BANK ACCOUNT MAINTAINED WITH FEDERAL BANK IN THE NAME OF SHRI FR ANCIS JOSEPH. IN THE ASSESSMENT YEAR 1996-97 ALSO, THE DEPOSITS FOUND IN THE ABOVE SAID BANK ACCOUNT WAS ASSESSED BY THE AO. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THAT ASSESSMENT YEAR AND WE HAVE CONFIRMED THE ORDER OF THE LD. CIT(A) IN HOLDING TH AT THE DEPOSITS FOUND IN THE ABOVE SAID BANK ACCOUNT IS ASSESSABLE IN THE HANDS OF THE ASSESSEE. BY FOLLOWING THE SAID DECISION, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE FOR THIS YEAR ALSO. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 18 23. THE NEXT ISSUE RELATES TO THE ADDITION OF U NEXPLAINED INVESTMENT IN THE CAPITAL ACCOUNT OF THE FIRM M/S HOTEL MAYOORA. THE AO NOTI CED THAT THE ASSESSEE HAS INVESTED A SUM OF RS.1,90,000/- IN HIS CAPITAL ACCOUNT IN HO TEL MAYOORA, BUT IT WAS NOT REFLECTED IN THE CASH FLOW STATEMENT. THE ASSESSEE ALSO DID NOT OFFER ANY EXPLANATION BEFORE THE AO. HENCE, THE AO ADDED THE ABOVE SAID AMOUNT AS U NEXPLAINED INVESTMENT. BEFORE LD CIT(A), IT WAS SUBMITTED THAT A SUM OF RS.1,50,0 00/- WAS REALISED ON SALE OF OLD BUILDING AND A SUM OF RS.40,000/- WAS REALISED OUT OF AGRICULTURAL INCOME. HOWEVER, NO DETAIL WAS FURNISHED TO SUBSTANTIATE THE SAID EXPLA NATION. HENCE, THE LD CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 23.1 BEFORE US, THE LD COUNSEL REITERATED THE VE RY SAME CONTENTIONS. BEFORE US ALSO, THE ASSESSEE COULD NOT SUBMIT ANY MATERIAL TO SUBST ANTIATE CONTENTION OF SALE OF OLD BUILDING. THE ASSESSEE HAS CLAIMED THAT HE HAS INV ESTED A SUM OF RS.40,000/- OUT OF HIS AGRICULTURAL INCOME. WE NOTICE THAT THE AMOUNT OF RS.40,000/- WAS FOUND INVESTED IN TWO INSTALMENTS, VIZ., RS.25,000/- AND RS.15,000 /-. THE ASSESSEE HAS DECLARED A SUM OF RS.2,50,000/- AS AGRICULTURAL INCOME FOR THIS YE AR. IN THE CASH FLOW STATEMENT, A SUM OF RS.2,40,000/- WAS SHOWN AS CASH INFLOW UNDER THE HEAD AGRICULTURAL INCOME, THUS LEAVING A BALANCE OF RS.10,000/- ONLY, WHICH DID NO T MATCH WITH THE INVESTMENT MADE BY WAY OF TWO INSTALMENTS. HENCE, IN OUR VIEW, THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE AMOUNT OF RS.40,000/- ALSO. ACCORDINGLY, WE UP HOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 24. THE NEXT ISSUE RELATES TO CHARGING OF INTERES T U/S 234B AND THE SAME IS CONSEQUENTIAL IN NATURE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) ON THIS ISSUE. 25. NOW WE SHALL TAKE UP THE APPEAL FILED BY TH E ASSESSEE FOR THE ASSESSMENT YEAR 1999-00. IN THIS YEAR ALSO, THE ASSESSEE HAS RAISE D MANY GROUNDS. HOWEVER, ON PERUSAL OF THE SAME, WE NOTICE THAT THE ASSESSEE IS CONTESTING THE FOLLOWING ADDITIONS CONFIRMED BY THE LD. CIT(A). THE LD A.R ALSO RESTRI CTED HIS ARGUMENTS IN RESPECT OF THE FOLLOWING ISSUES ONLY. I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 19 (A) DEPOSIT IN THE BANK ACCOUNT OF FRANCIS JOSEPH : RS. 5,70,000/-. (B) UNEXPLAINED CREDIT IN THE CAPITAL ACCO UNT OF THE FIRM : RS. 1,70,907/- (C) CHARGING OF INTEREST U/S 234B. 26 THE FIRST ISSUE RELATES TO THE ADDITION OF DE POSITS FOUND IN THE BANK ACCOUNT MAINTAINED WITH FEDERAL BANK IN THE NAME OF SHRI FR ANCIS JOSEPH. IN THE ASSESSMENT YEAR 1996-97 ALSO, THE DEPOSITS FOUND IN THE ABOVE SAID BANK ACCOUNT WAS ASSESSED BY THE AO. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THAT ASSESSMENT YEAR AND WE HAVE CONFIRMED THE ORDER OF THE LD. CIT(A) IN HOLDING TH AT THE DEPOSITS FOUND IN THE ABOVE SAID BANK ACCOUNT IS ASSESSABLE IN THE HANDS OF THE ASSESSEE. BY FOLLOWING THE SAID DECISION, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE FOR THIS YEAR ALSO. 27. THE NEXT ISSUE RELATES TO THE ADDITION OF U NEXPLAINED INVESTMENT IN THE CAPITAL ACCOUNT OF THE FIRM M/S HOTEL MAYOORA. THE AO NOTI CED THAT THE ASSESSEE HAS INVESTED A SUM OF RS.1,70,907/- IN HIS CAPITAL ACCOUNT IN HO TEL MAYOORA, BUT IT WAS NOT REFLECTED IN THE CASH FLOW STATEMENT. THE ASSESSEE ALSO DID NOT OFFER ANY EXPLANATION BEFORE THE AO. HENCE, THE AO ADDED THE ABOVE SAID AMOUNT AS U NEXPLAINED INVESTMENT. BEFORE LD CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE RETUR NED AGRICULTURAL INCOME TO THE TUNE OF RS.3.00 LAKHS. HOWEVER, IN THE CASH FLOW STATEM ENT ONLY A SUM OF RS.1.00 LAKH WAS TAKEN AS CASH INFLOW. ACCORDINGLY, IT WAS SUBMITTE D THAT THE BALANCE AMOUNT OF RS.2.00 LAKHS WAS USED FOR MAKING INVESTMENT IN THE FIRM. THE LD CIT(A) DID NOT ACCEPT THE SAID EXPLANATION AND ACCORDINGLY CONFIRMED THE ADDI TION MADE BY THE AO. 27.1 BEFORE US, THE LD A.R REITERATED THE VERY SAME CONTENTION. WE HAVE GONE THROUGH THE CASH FLOW STATEMENT AND NOTICE THAT THE ASSESSEE HAS INCLUDED A SUM OF RS.1.00 LAKH ONLY AS CASH INFLOW. FROM THE ASSESSM ENT ORDER, WE NOTICE THAT THE AO HAS ASSESSED A SUM OF RS.3.00 LAKHS AS AGRICULTURAL INCOME. HENCE, THE CLAIM OF THE ASSESSEE THAT HE HAS INVESTED IN THE FIRM OUT OF TH E BALANCE AMOUNT OF RS.2.00 LAKHS APPEARS TO BE REASONABLE. IT WAS NOT SHOWN TO US B Y THE DEPARTMENT THAT THE ABOVE SAID SUM OF RS.2.00 LAKHS COULD NOT HAVE BEEN AVAIL ABLE WITH THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE AGREE WITH THE CONTENTION O F THE ASSESSEE. ACCORDINGLY, WE I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 20 SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS.1,70,907/- REFERRED ABOVE. 28. THE NEXT ISSUE RELATES TO CHARGING OF INTERES T U/S 234B AND THE SAME IS CONSEQUENTIAL IN NATURE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) ON THIS ISSUE. 29. NOW WE SHALL TAKE UP THE APPEAL FILED BY TH E ASSESSEE FOR THE ASSESSMENT YEAR 2000-01. IN THIS YEAR ALSO, THE ASSESSEE HAS RAISE D MANY GROUNDS. HOWEVER, ON PERUSAL OF THE SAME, WE NOTICE THAT THE ASSESSEE IS CONTESTING THE FOLLOWING ADDITIONS CONFIRMED BY THE LD. CIT(A). THE LD A.R ALSO RESTRI CTED HIS ARGUMENTS IN RESPECT OF THE FOLLOWING ISSUES ONLY. (A) UNEXPLAINED INVESTMENT IN CONSTRUCTION OF RESIDENTIAL BUILDING RS.2,25,767/- (B) CHARGING OF INTEREST U/S 234B. 30. THE FIRST ISSUE RELATES TO THE UNEXPLAINED I NVESTMENT IN CONSTRUCTION OF RESIDENTIAL BUILDING. BEFORE THE AO, THE ASSESSEE DID NOT FURN ISH THE DETAILS OF CONSTRUCTION, I.E., BUILDING ACCOUNT, THOUGH IT WAS CALLED FOR BY THE AO. INSTEAD, THE ASSESSEE FILED A REPORT FROM A REGISTERED VALUER, WHO HAD ESTIMATED THE COST OF CONSTRUCTION AT RS.42,47,716/-. THE AO ALSO REFERRED THE MATTER OF VALUATION TO THE DEPARTMENT VALUER AND THE DVO ESTIMATED THE COST OF CONSTRUCTION AT R S.32,66,000/-, I.E., AT A RATE LESSER THAN THE REGISTERED VALUERS REPORT. THE AO COMPUT ED THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE FROM THE CASH FLOW STATEMENT RELATI NG TO THE FINANCIAL YEARS 1995-96 TO 2000-01 AT RS.34,91,767/-. THOUGH THE COST OF CONS TRUCTION COMPUTED BY THE AO WAS MORE THAN THE VALUE DETERMINED BY THE DVO, YET THE AO PREFERRED TO MAKE AN ADDITION OF RS.2,25,767/-, I.E., THE DIFFERENCE BETWEEN RS.3 4,91,767 AND RS.32,66,000/-. IN THE APPELLATE PROCEEDING, THE LD CIT(A) DID NOT ADJUDIC ATE THIS ISSUE. 30.1. BEFORE US, THE LD A.R SUBMITTED THAT THE AS SESSEE HAS DISCLOSED THE COST OF CONSTRUCTION AT RS.34,91,767/-, WHICH IS MORE THAN THE VALUE OF RS.32,66,000/- DETERMINED BY THE DVO AND HENCE THE AO WAS NOT CORR ECT IN MAKING THE IMPUGNED I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 21 ADDITION. WE HAVE GONE THROUGH THE CASH FLOW STATE MENTS FILED BY THE ASSESSEE FOR FINANCIAL YEARS 1995-96 TO 2000-01 AND NOTICE THAT THE ASSESSEE HAS SHOWN CASH WITHDRAWALS FOR CONSTRUCTION OF BUILDING AND POOL A S UNDER:- FINANCIAL YEAR ASST. YEAR WITH DRAWALS 1995-96 1996-97 1,50,645 1996-97 1997-98 6,27,090 1997-98 1998-99 2,99,262 1998-99 1999-00 13, 36,250 1999-00 2000-01 4,92,040 -------------- 29,05,287 2000-01 2001-02 3 ,35,930 --------------- 32,41,227 ======= WE NOTICE THAT THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE IS ONLY RS.32,41,227/- AS WORKED OUT ABOVE AND NOT RS.34,91,767/-, AS TAKE N BY THE ASSESSING OFFICER. IT IS UNFORTUNATE THAT THE LD A.R, BEING THE OFFICER OF T HE COURT AND WHO IS REQUIRED TO ASSIST THE BENCH, DID NOT POINT OUT THIS ERROR. INSTEAD, WE NOTICE THAT THE LD A.R HAS ONLY TRIED TO CAPITALISE THE MISTAKE COMMITTED BY THE AS SESSING OFFICER. IN ANY CASE, THE COST DECLARED BY THE ASSESSEE UP TO 31.3.2000 OR UP TO 3 1.3.2001 WAS LESS THAN THE VALUE DETERMINED BY THE DVO. WE ALSO NOTICE THAT THE DVO HAS VALUED THE BUILDING ON 27.3.2002 AND THE DVO HAS STATED THAT THE BUILDING WAS NOT COMPLETED BY THAT DATE. HENCE, THE DVO HAS VALUED AN INCOMPLETE BUILDING. HENCE, IT IS NECESSARY TO COMPARE THE COST DECLARED BY THE ASSESSEE UP TO THAT STAGE OF COMPLETION WITH THE COST DETERMINED BY THE DVO. BEFORE DVO, IT HAS BEEN STA TED THAT THE COST OF OWN TIMBER USED IN THE BUILDING AT RS.10,40,200/-. WE NOTICE THAT THE DVO HAS ACCEPTED THE SAID COST WITHOUT MAKING ANY EXAMINATION. IN THE CASH F LOW STATEMENT, THE WITHDRAWALS WERE MADE FOR CONSTRUCTION OF POOL ALSO. IT IS NOT CLEAR AS TO WHETHER THE DVO INCLUDED THE COST OF POOL IN HIS VALUATION. ALL THESE DISCU SSIONS SHOW THAT THE ASSESSING OFFICER HAS NOT PROPERLY EXAMINED THIS MATTER. WE HAVE ALR EADY NOTICED THAT THE LD CIT(A) DID NOT ADJUDICATE THIS ISSUE. SINCE THE MATTER REQUIR ES FRESH EXAMINATION, WE FEEL IT PROPER TO SET ASIDE THIS MATTER TO THE FILE OF THE ASSESSI NG OFFICER. ACCORDINGLY, WE REMAND THIS MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH AND TAKE I.T.A. NOS. 429-433/COCH/2005 & 590-592/COCH/2007 22 APPROPRIATE DECISION IN ACCORDANCE WITH LAW AFTER A FFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 31. THE NEXT ISSUE RELATES TO CHARGING OF INTER EST U/S 234B AND THE SAME IS CONSEQUENTIAL IN NATURE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) ON THIS ISSUE. 32. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E FOR ASSESSMENT YEARS 1996-97 AND 1998-99 ARE DISMISSED. THE APPEALS FILED BY TH E ASSESSEE FOR ASSESSMENT YEARS 1997-98 AND 1999-2000 ARE PARTLY ALLOWED AND THE AP PEAL FILED FOR ASSESSMENT YEAR 2000-01 IS TREATED AS PARTLY ALLOWED. ALL THE APPE ALS FILED THE REVENUE ARE TREATED AS ALLOWED. PRONOUNCED ACCORDINGLY ON 20-09-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 20TH SEPTEMBER 2013 GJ COPY TO: 1. JOSE KURUVINAKUNNEL, PARTNER, HOTEL MAYURA, POOV ARANI, PALA, KOTTAYAM. 2. THE INCOME TAX OFFICER, WARD-2, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TIRUPAT I CAMP KOCHI. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN