M/s. Soft Touch Fabrics Pvt. Ltd., Surat V. The Dy.CIT, Circle-2(1)(2), Surat

ITA 491/AHD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8951 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Earning of tax free income; Proportionate interest; Question of law; Corroborative evidences; Accommodation entries; Assessment record; Onus to prove
• Section: 143(3); 14A; 133(6); 131; 68; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. SOFT TOUCH FABRICS PVT. LTD, 102, 1 ST FLOOR, AIRLON HOUSE, 2/4569 MAIN ROAD, SAGRAMPURA, SURAT - 395002 PAN: AAIHM4574M (APPELLANT) VS THE DCIT, CIRCLE - 2(1)(2), SURAT (RESPONDENT) REVENUE BY : S H RI SITARAM MEEN A , SR. D . R. ASSESSEE BY: S H RI RASESH SHAH , A.R. DATE OF HEARING : 14 - 02 - 2 017 DATE OF PRONOUNCEMENT : 30 - 03 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , AR ISES FROM ORDER OF THE CIT(A) - II, SURAT DATED 20 - 01 - 2016 IN APPEAL NO. CAS/II /202/2014 - 15 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 491 / A HD/20 16 A SSESSMENT YEAR 2012 - 13 I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 2 2. THE ASSESSEE HAS RAIS ED FOLLOWING SUBSTANTIVE GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING DISALLOWANCE OF R S. 22,12,957/ - U/S. 14A OF THE IT. ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION ON ACCOUNT O F UNSECURED LOAN OF RS. 60,00,000/ - FOR ALLEGED UNEXPLAINED CASH CREDIT U/S. 68 OF THE IT. ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTI ON OF ASSESSING OFFICER IN MAKING CONSEQUENTIAL DISALLOWANCE OF RS. 5,39,057/ - ON ACCOUNT OF INTEREST EXPENSES U/S. 68 OF THE IT. ACT. 3. IN THIS CASE, ASSESSEE FILED RETURN OF INCOME ON 29 TH SEPTEMBER, 2012 SHOWING INCOME OF RS. 57 , 94 , 830/ - . SUBSEQU ENTLY, THE CASE WAS SELECTED UNDER SCRUTINY AND NOTICE U/S. 14 3(2) OF THE ACT WAS ISSUED ON 7 TH AUGUST, 2013. THE ASSESSEE COMPA NY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF N ARROW W IDTH F ABRICS. THE BRIEF FACTS OF THE CASE ARE MENTIONED GROUNDS OF APPEAL WISE AS BELOW. FIRST GROUND OF APPEAL: DISALLOWANCE U/S. 14A OF THE ACT 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS SHOWN INVESTMENT IN EQUITY SHARE OF RS. 2,95, 00, 000/ - AS ON 31 ST MARCH, 20 12 UNDER THE HEAD SHORT TERM INVESTMENT . HE ALSO NOTICED THAT THE ASSESSEE HAS DEBITED INTEREST EXPENDITURE UNDER THE FINANC E COST S BORROWING S FOR ASSESSMENT YEAR 2011 - 12 OF RS. 71 , 47 , 575/ - AND FOR ASSESSMENT YEAR 2012 - 13 RESPECTIVELY. THE ASSESSING OF FICER OBSERVED THAT ASSSESSEE HAD MADE DIRECT BORROWING ON WHICH INTEREST PAYMENT WAS MADE DURING THE PREVIOUS YEAR . T HEREFORE, THE ASSESSEE WAS I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 3 ASKED TO F URNISH THE DETAIL OF INVESTMENT MADE IN THESE TWO COMPANIES AND ALSO ASKED TO EXPLAIN WHY NOT PROPORTIONATE INTEREST EXPENSES UNDER SECTION 14A SHOULD NOT BE DISALLOWED IN THIS CASE. THE ASSESSEE EXPLAINED THAT THE ASSESSEE COMPANY HAS NOT EARNED ANY INCOME BY WAY OF DIVIDEND ON THE INVESTMENT MADE BY IT. IT WAS ALSO EXPLAINED THAT ASSESSEE COMPANY HA D NOT EARNED ANY INCOME WHICH WAS NOT FORMED PART OF THE TOTAL INCOME OF THE COMPANY AND FURTHER IT HA D NOT EARNED ANY EXEMPT INCOME. THEREFORE, IT WAS SUBMITTED BE RORE THE ASSESSING OFFICER THAT THE PROVISION OF SECTION 14A WAS NOT APPLICABL E. ASSESSEE HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH E NER G Y PV T. LTD. IN STATING THAT AS PER THE RATIO OF JUDGMENTS THE LAW IS WELL SETTLED THAT IN THE YEAR IF THE ASSESSEE HA S NOT EARNED ANY EXEMP T INCOME OR HAS NOT CLAIMED ANY INCOME TO BE EXEMPT ED THEN THE PREVISION OF SECTION 14A WAS NOT APPLICABLE ON THE ASSESSEE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE . SHE HAS APPLIED SECTION 14A(3) ALONG WITH RULE 8D OF THE IT RULES, 1961 AND DETERMINE D THE TOTAL DISALLOWANCE U/S. 14A OF THE ACT TO THE AMOUNT OF RS. 22 , 12 , 957/ - AS WORKED OUT AT PARA 4.5 TO 4.7 OF THE ASSESSMENT ORDER AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED AGAINST THE IMPUGNED DISALLOW ANCE MADE BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE GROUND OF APPEAL OF THE ASSSESSEE ON THIS ISSUE BY OBSERVING AS UNDER: - I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 4 6.1.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL - GROUND NO, 1 PERTA INS TO MAKING AN ADDITION OF RS. 22,12,957/ - IN THE TOTAL INCOME BY WAY OF DISALLOWANCE OF EXPENSES, INVOKING PROVISIONS OF SECTION 14A OF THE ACT. THE AO FOUND THAT THE APPELLANT HAS M ADE INVESTMENT S IN EQUITY SHARE OF RS. 2,95,00 ,000/ - ON 31.03.2012 UNDER THE HEAD SHORT TERM INVESTMENTS. THESE INVESTMENTS WERE MADE IN TWO RELATIVE CONCERNS DURING THE L AST THREE YEARS I.E. AS 31.03.2010 AND 31.03.2012. THE APPELLANT HAD SHOWN INTEREST E XPENSES UNDER FINANCE COST BORROWINGS FOR AY 2012 - 13 OF RS. 79,69,711/ - . THE AO FOUND THAT THE APPELLANT DID NOT PROVIDE DETAILS REGARDING ANY EXPENSES BEING INCURRED ON THE EXEMPT INCOME. THE AO DISALLOWED AN AMOUNT OF RS. 22.12.957/ - UNDER RULE 14A R.W. RULE 8D OF THE IT RULES. THE APPELLANT SUBMITTED THAT THE ENTIRE INVESTMENT MADE BY THE APPELLANT WAS OUT OF NON INTEREST BEARING FUNDS. THE APPELLANT HAD SHARE CAPITAL AND RESERVES OF RS. 452.14 LACS AS AGAINST THE INVESTMENT OF RS. 295 LACS. IT WAS CONTE NDED THAT THE INVESTMENT IN THE SHARES HAD BEEN MADE IN .PRIVATE LIMITED COMPANY SHARES AND THE DIVIDEND INCOME IS NOT TAX FREE IN CASE OF PRIVATE COMPANY. 6.1.2 THE APPELLANT CONTENDED THAT THE INVESTMENT IN SHARE IS OUT OF NON - INTEREST BEARING FUNDS IN T HE FORM OF CAPITAL AND RESERVES WHICH ARE IN EXCESS OF THE INTEREST FREE INVESTMENT MADE. I FIND THAT THIS CONTENTION IS BASED ON THE OVERALL MACRO ANALYSIS OF THE FIGURES IN BALANCE SHEET, WHERE IT IS PRESUMED THAT ALL THE INTEREST FREE FUNDS AVAILABLE IN THE BALANCE SHEET WERE USED ONLY FOR MAKING THESE INVESTMENTS IN SHARES, IRRESPECTIVE OF THE DATES OF THEIR UTILIZATION. THIS PRESUMPTION CANNOT HOLD GOOD WHERE BORROWED FUND S AND OWN FUNDS ARE MIXED. IN .THIS SITUATION IT CANNOT BE CLAIMED THAT THE INTER EST FREE INVESTMENTS WERE OUT OF NON - INTEREST BEARING FUNDS. THE APPELLANT HAS NOT PROVIDED DETAILS OF THE SOURCE OF THE INVESTMENT IN SHARES ON A DAY TO D AY BASIS BEFORE THE AO IN SUPPOR T OF ITS CLAIM THAT THE INTEREST FREE INVESTMENTS WERE OUT OF NON - INT EREST BEARING FUNDS. IN THIS REGARD REFERENCE IS MADE TO THE CASE OF THE DHANUKA & SONS VS. CIT 339 ITR 319 (CAL) WHERE IN IT WAS HELD THAT SINCE THE ASSESSEE WAS UNABLE TO P RODUCE MATERIAL TO SHOW THE SOUR CE OF ACQUISITION OF SHARES AND TO SHOW THAT NO IN TEREST WAS PAID BY IT THEN PROPORTIONATE DISALLOWANCE OUT OF INTEREST EXPENSES WAS JUSTIFIED, IN THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT EXPRESSED HIS INABILITY TO PROVIDE DETAILS OF THE BREAK - UP OF THE MIXED FUNDS TOWARDS INVESTMENTS IN SHARES FROM THE FUNDS AVAILABLE IN FORM OF CAPITAL AND RESERVES AS PER ORDER SHEET ENTRY DATED 04/12/2015. THEREFORE, IN THE INSTANT CASE WHERE THE FUNDS ARE MI XED AND NO SEPARATE LINKAGE HAS BEEN ESTABLISHED BY THE APPELLANT, IT IS DIFFICULT TO CONSIDER AND ACCE PT THE PROPOSITION OF THE APPELLANT. 6.1.3 IN THE CASE OF MAXOPP INVESTMENT LTD. & OTHERS VS. CIT 247 CTR (DEL) 162, HON'BLE HIGH COURT OF DELHI HAS OBSERVED THAT PRIOR TO INTRODUCTION OF SECTION 14A, THE LAW WAS THAT IF THE ASSESSEE WAS HAVING A COMPO SITE AND INDIVIDUAL BUSINESS WHICH HAD ELEMENTS OF BOTH TAXABLE AND NON - TAXABLE INCOME, THE ENTIRE EXPENDITURE WAS DEDUCTIBLE. IF BUSINESS WAS DIVISIBLE, THE PRINCIPAL OF APPORTIONMENT OF EXPENSES WAS APPLICABLE AND THE EXPENDITURE APPORTIONED TO THE EXEMP T INCOME OR INCOME NOT EXIGIBLE TO TAX WAS NOT ALLOWED AS DEDUCTION. WHILE INTRODUCING SECTION 14A INTENTION OF THE LEGISLATURE WAS THAT NO DEDUCTION SHALL BE MADE IN RESPECT OF ANY EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE BASIC I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 5 OBJECT OF SECTION 14A IS TO DISALLOW THE DIRECT AND INDIRECT EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. 6.1.4 IN THE CASE OF GODREJ & BOYCE MANUFACTURIN G'CO. LTD. VS. CIT 328 - ITR 81 (BORN) THE HON'BLE HIGH COURT OF BOMBAY HAS OBSERVED THAT THE FOLLOWING PRINCIPLES WOULD EMERGE FROM SECTION 14A AND THE DECISION IN CIT V. WALFORT SHARE AND STOCK BROKERS P. LTD. [2010] 326 ITR 1 (SC): (A) THE MANDATE OF SECT ION 14A IS TO PREVENT CLAIMS FOR DEDUCTION OF EXPENDITURE IN RELATION TO IN COME WHICH DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE; (B) S ECTION 14A(1) IS ENACTED TO ENS URE THAT ONLY EXPENSES INCURRED IN RESPECT OF EARNING TAXABLE INCOME ARE ALLO WED; (C) THE PRINCIPLE OF APPORTIONMENT OF EXPENSES IS WIDENED BY SECTION 14A TO INCLUDE EVEN THE APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON - TAXABLE INCOME OF AN INDIVISIBLE BUSINESS; (D) THE BASIC PRINCIPLE OF TAXATION IS TO TAX NET INCOME. THI S PRINCIPLE APPLIES EVEN FOR THE PURPOSES OF SECTION 14/4 AND EXPENSES TOWARDS NON - TAXABLE INCOME MUST BE EXCLUDED; (E) ONCE A PROXIMATE CAUSE FOR DISALLOWANCE IS ESTABLISHED - WHICH IS THE RELATIONSHIP OF THE EXPENDITURE WITH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME - A DISALLOWANCE HAS TO BE EFFECTED. 6.1.5 THE APPELLANT HAS SUBMITTED THAT EFFORTS HAVE BEEN MADE TO SHOW THAT THERE IS NO NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN SHARES. THEREFORE, THERE WAS NO' APPLICATION OF SECTION 14A, T HIS CONTENTION IS NOT ACCEPTABLE IN VIEW OF THE DECISION OF THE ITAT, DELHI SPL. BENCH IN THE CASE OF CHEMINVEST LTD. VS. ITO 124 TTJ (DEL) SB 577 IN WHICH IT HAS BEEN HELD >' THAT DISALLOWANCE U/S. 14 CAN BE MADE IRRESPECTIVE OF THE FACT WHETHER ANY INCOM E IS EARNED BY ASSESSEE OR NOT. EXPENDITURE IN RELATION TO INCOME IS WIDER IN SCOPE AND PROVIDE FOR DISALLOWANCE IF RELATED TO INCOME NOT FORMING PART OF TOTAL INCOME. 6.1.6 THE APPELLANT HAS SUBMITTED THAT THE INVESTMENT WAS MADE IN SHARES OUT OF COMMERC IAL EXPEDIENCY. IN THE CASE OF MAXOPP INVESTMENT LTD. 247 CTR (DEL), IT HAS BEEN HELD BY THE HON'BLE HIGH COURT THAT THE INVESTMENT IN SHARES FOR GAINING CONTROLLING INTEREST IS HIT BY THE PROVISIONS OF SECTION 14A. 6. 1.7 RECENTLY, HON'BLE DELHI HIGH COUR T HAS IN THE CASE OF CIT V/S TAIKISHA ENGINEERING INDIA LTD. AFTER CONSIDERING THE ABOVE MENTIONED DECISIONS VIDE ORDER DATED 09 - 03 - 2015, H AS HELD THAT DISALLOWANCE OF EXPENSES MADE U/S 14A OF THE IT ACT ON EXEMPT INCOME, IS VALID IF AO IS NOT SATISFIED WITH THE CLAIM MADE BY THE ASSESSEE. THE METHOD FOR COMPUTING SUCH DISALLOWANCE HAS BEEN PRESCRIBED UNDER RULE 8D OF THE IT RULE. IT WAS ALSO HELD THAT IF RULE 8D APPLIES, ASSESSEE'S CLAIM THAT INTEREST IS NOT DISALLOWABLE ON GROUND OF 'OWN FUNDS' IS NOT ACCEPTABLE. 6.1.8 FURTHER, RELIANCE IS BEING PLACED ON THE DECISION OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF THE SOUTH INDIAN BANK LTD. V/S COMMISSIONER OF INCOME TAX IN IT APPEAL NO. 189 OF 2011 VIDE ORDER DATED 22ND JANUARY, 2014, 105 DTR (KER) 29 9(2014), IT WAS HELD THAT PROVISIONS OF SECTION 14A OF THE IT ACT ENABLES THE AO TO DISALLOW EXPENDITURE INCURRED BY THE ASSESSEE RELATING TO INCOME/WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE IT ACT. THE SUB SECTION (2) TO SECTION 14A OF THE IT ACT WAS INTRODUCED W.E.F. 1ST APRIL, 2007 AND IT PROVIDES HOW THE DISALLOWANCE HAS TO BE WORKED OUT. THIS PROCEDURE - HAS BEEN PRESCRIBED UNDER I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 6 RULE 8D AS WELL, WHEREIN SUB - SECTIONS (2) AND (3) OF SECTION 14A OF THE IT ACT ARE ONLY OF A CLARIFICATORY NATURE AND DO NOT AMOUNT TO THE CHARGING PROVISION. 6.1.9 IF THE APPELLANT HAS MADE INVESTMENT IN SHARES AND THE APPELLANT IS NOT TRADER IN SHARES THEN APPELLANT WHICH EARNS THE INCOME FROM SHARES IS ONLY 'DIVIDEND' AND SINCE THE 'DIVIDEND' IS EXEMPT THEREFORE, SECTION 14A IS APPLICABLE. THE AO HAS OBSERVED IN THE COURSE OF ASSESSMENT PROCEEDINGS THAT THERE WERE NO INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT AND THE INVESTMENT IN SHARES HAVE BEEN MADE OUT OF THE INTEREST BEARING FUNDS. T HE APPELLANT HAS MADE/INVESTMENTS ON WHICH NO INCOME HAS BEEN BROUGHT IN THE BOOKS OF ACCOUNT OF THE COMPANY AND DISALLOWANCE OUT OF INTEREST EXPENSES HAS BEEN MADE IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT. ON THE PERUSAL OF THE DETAILS, IT IS O BSERVED THAT THE APPELLANT HAD MADE INVESTMENT IN SHARES OF TWO COMPANIES OF RS. 295 LACS WHILE THE COMPANY HAD SHARE CAPITAL AND RESERVES OF RS. 452.14 LACS AVAILABLE. 6.1.10 SECTION 14A WAS FIRST INSERTED BY THE FINANCE ACT, 2001. HOWEVER, SAME WAS INSER TED WITH RET ROSPECTIVE EFFECT FROM 1 - 4 - 1962. THE INSERTED SECTION READS AS '14A. EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME. FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSES IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.' THE PURPOSE FOR WHICH THE SECTION WAS INTRODUCED, AND GIVEN IN THE EXPLANATORY MEMORANDUM ISSUED WITH THE FINANCE BILL, 200 1, THE MOST RELEVANT PART READS AS UNDER: '.....IT IS PROPOSED TO INSERT A NEW SECTION 14A SO AS TO CLARIFY THE INTENTION OF THE LEGISLATURE, SINCE THE INCEPTION OF THE INCOME - TAX ACT, 1961, THAT NO DEDUCTION SHALL BE MADE IN RESPECT OF ANY EXPENDITURE IN CURRED BY THE ASSESSEE IN RELATION TO 'INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE INCOME - TAX ACT. THE PROPOSED AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FROM 1ST APRIL, 1962 AND WILL, AC CORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEA R 1962 - 1963 AND SUBSEQUENT ASSESSMENT YEARS.' 6.1.11 IT WAS FOUND THAT T HE ASSESSING OFFICERS WERE FINDING IT DIFFICULT TO ARRIVE AT A FIGURE O F DISALLOWANCE REQUIRED ON THE FACTS OF THE CASES AND UNSUBSTANTIATED AD - HOC ADDITIONS WERE BEING MADE. SUBSEQUEN TLY' ANOTHER AMENDMENT BY THE FINANCE ACT, 2006 TO SECTION 14A ENLARGED THE SCOPE OF APPLICABILITY OF SECTION'14A. THE NEW SUB - SECTIONS W.E.F. 1 - 4 - 2007 READ AS UNDER: '(2) THE ASSESSING OFFICER SH ALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATIO N TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. (3) THE PROVISIONS OF SUB - SECTION (2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO.EXPENDITURE HAS B EEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT' THE REASONS FOR THE ABOVE AMENDMENT WERE EXPLAINED IN EXPLANATORY STATEMENT FOR THE FINAN CE ACT, 2006 UNDER CIRCULAR NO. 14/2006, DATED 28 - 12 - 2006 IN PARA 11. IT.IS REPRODUCED HEREUNDER: - '11. METHO D FOR ALLOCATING EXPENDITURE IN RELATION TO EXEMPT INCOME. I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 7 11. 1 SECTION 14A OF THE INCOME - TAX ACT, 1961, PROVIDES THAT FOR THE PURPOSES OF COMPUTI NG THE TOTAL INCOME UNDER CHAPTER - IV OF THE SAID ACT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE INCOME - TAX AC T IN THE EXISTING PROVISIONS OF SECTION 14A, HOWEVER, NO METHOD OF COMPUTING THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME HAS BEEN PROVIDED FOR. CONSEQUENTLY, THERE IS CONSIDERABLE DISPUTE BETWEEN THE TAXPAYERS AND THE DEPARTMENT ON THE MET HOD OF - DETERMINING SUCH EXPENDITURE. 11.2 IN VIEW OF THE ABOVE, A NEW SUB - SECTION (2) HAS BEEN INSERTED IN SECTION 14A SO AS TO PROVIDE THAT IT WOULD BE MANDATORY FOR THE ASSESSING OFFICER TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUC H INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. HOWEVER, THE ASSESSING OFFICER SHALL FOLLOW THE PRESCRIBED METHOD IF, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, HE IS NOT SATISFIED WITH THE COR RECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. PROVISIONS OF SUB SECTION (2), WILL ALSO BE APPLICABLE IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HA S BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. 11.3 APPLICABI LITY FROM ASSESSMENT YEAR 200 7 - 08 ONWARDS.' 6.1.12 SUBSEQUENTLY, RULES FOR DETERMINATION OF DISALLOWANCE WERE PRESCRIBED 'VIDE IT, (5TH AMEND,) RULES, 2008, W.E.F. 24 - 3 - 2008. FURTHER, UNDER FORM 3CD, A COLUMN WAS ALSO INSERTED W.E.F. 23 - 8 - 2006 VIDE THE INCOME - TAX (NINTH AMENDMENT) RULES, 2006 REGARDING AMOUNT OF DISALLOWANCE UNDER SECTION 14A. HENCE, IT IS THE LIABILITY OF TAX AUDITOR TO GIVE APPROPRIAT E FINDING IN THIS REGARD. AFTER PRESCRIBING FORMULA FOR DETERMINATION OF DISALLOWANCE UNDER SECTION 14A THE SCOPE OF LIABILITY TO DISCLOSE RELEVANT FACTS HAS ALSO BEEN ENLARGED. THE SCOPE AND APPLICABILITY OF SECTION W.E.F. 1 - 4 - 2007 OF SECTION 14A IS AS UN DER : - > THE ASSESSEE MUST HAVE AN EXEMPTED INCOME WHICH IS NOT INCLUDIBLE IN HIS TOTAL INCOME. > THE ASSESSEE MUST HAVE INCURRED EXPENDITURE IN RELATION TO INCOME WHICH IS EXEMPTED UNDER THE INCOME - TAX ACT, 1961. > JUST BECAUSE THE INCOME EARNED IS S UBJECT TO TAXATION IN SOME OTHER FORM/OTHER STAGE IN HANDS OF OTHER ASSESSEES; IT DOES NOT PRECLUDE THE APPLICATION OF SECTION 14A; E.G. DIVIDEND INCOME TAXED OTHERWISE UNDER 1150 OR SHARE FROM PARTNERSHIP FIRM. > RULE 8D IS PROSPECTIVE IN APPLICATION W.E .F. 24 - 3 - 2008 I.E. F ROM AY 2008 - 09, ONLY. HOWEVER, THE AO CAN DISALLOW THE EXPENSES IN EARLIER ASSESSMENT YEARS ALSO AFTER RECORDING CLEAR I FINDING THAT THE EXPENSES ON EARNING EXEMPT INCOME SHOWN BY THE APPELLANT ARE NOT CORRECT AND APPLYING THEM REASON ABLE AND ACCEPTABLE METHOD OF APPORTIONMENT TO DETERMINE SUCH A AMOUNT PRESCRIBED FORMULA UNDER RULE 8D CAN BE APPLIED ONLY WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH ACCOUNT OF THE ASSESSEE WITH REGARD TO CORRECTNESS OF THE CLAIM OF EXPENS ES OR ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 8 6.1 .13 SINCE, THE APPELLANT HAS MADE INVESTMENT IN SHARES, THE INCOME FROM WHICH WOULD NOT FORM PART OF TOTAL INCOME, THE EXPENDITURE INCURRED, BEING INTEREST ON BORROWED FUNDS, IN RELATION TO SU CH INCOME HAS TO BE DISALLOWED. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSIDERED - OPINION THAT THE AO HAD RIGHTLY DISALLOWED THE PROPORTIONATE INTEREST EXPENDITURE RELATING TO INVESTMENT IN SHARES U/S. 14A OF THE ACT. ACCORDINGLY, THE DISALLOWANCE OF INTEREST OF RS. 22,12,957/ - MADE BY THE AO U/S 14A OF THE IT ACT IS CONFIRMED AND THE GROUNDS OF APPEAL IS DISMISSED. 6. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE SUBMISSION OF THE ASSESSEE THAT THE SAID INVESTMENT WAS MADE BY THE ASSESSEE COMPANY OUT OF NON - INTEREST BEARING FUNDS COMPRISING SHARE CAPITAL & RESERVES OF RS. 452.14 LACS AS AGAINST INVESTMENT OF RS. 295 LACS. THE ASSESSEE ALSO SUBMITTED THAT COMPANY HAD MADE INVESTMENT IN THE SHAR ES OF PRIVATE LIMITED COMPANY AND THE DIVIDEND INCOME TO BE EARNED IN FUTURE WOULD NOT BE TAX FREE IN CASE OF PRIVATE COMPANY. WE HAVE ALSO PERUSED THE JUDICIAL PRONOUNCEMENT IN THE CASE OF CIT V CORRTECH ENERGY (P) LTD (2014) 45 TAXMANN.COM. 116 OF HON 'BLE HIGH COURT OF GUJARAT HELD THAT AS PER SECTION 14A OF INCOME TAX ACT 1961 READ WITH RULE 8D OF THE INCOME TAX RULES 1962 EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDABLE IN INCOME IN A CASE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF AN Y INCOME FROM PAYMENT OF TAXES, IN THAT CASE DISALLOWANCE U/S 14A OF THE ACT COULD NOT BE MADE. IT IS CRYSTAL CLEAR THAT THE JURISDICTIONAL HIGH COURT HAS DECIDED TO ATTRACT THE PROVISION OF SECTION 14A IT IS REQUIRED THAT ASSESSEE SHOULD HAVE EARNED AN E XEMPT INCOME, IF THE ASSESSEE HAS NOT EARNED AN EXEMPT INCOME AND NOT CLAIMED SO IN THE RETURN OF INCOME THEN THE PROVISION OF SECTION 14A ARE NOT APPLICABLE. WE FIND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAS NOT I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 9 EARNED ANY EXEMPT I NCOME AND HAS NOT CLAIMED ANY SUCH EXEMPT INCOME IN THE RETURN OF INCOME THEREFORE AS PER OUR CONSIDERED OPINION THE PROVISION OF SECTION 14A ARE NOT APPLICABLE. IN VIEW OF THE ABOVE MENTIONED FACTS AND LEGAL FINDINGS WE FIND THE DECISION OF THE LD. CIT(A) IS NOT JUSTIFIED, THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE ON THIS ISSUE. DISALLOWANCE OF UNSECURED LOAN U/S. 68 OF THE ACT 7. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS RECEIVED UNSEC URED LOAN O F RS.60 LACS FROM THE FIVE PARTIES AS MENTIONED AT PARA 5.1 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER ASSESSING OFFICER HAD ISSUED NOTICE U/S. 133(6) OF THE ACT TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE UNSECURED LOAN P ROVIDERS AS PER PROVISIONS U/S. 68 OF THE ACT. THE ASSESSING OFFICER FURTHER MENTIONED ANALYSIS OF THE LENDERS BRIEFLY AS UNDER : - RAJ GRAPHICS PVT. LTD . THE ASSESSING OFFICER STATED THAT THE RETURN OF INCOME, AUDITED AND THE BANK STATEMENT HAD BEEN EXAMINED. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE COMPANY WAS SHOWING MEAGER INCOME AND THE COMPANY DOES NOT HAVE ANY FIXED ASSETS. CHANDERI GRAPHIC PVT. LTD. I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 10 THE ASSESSING OFFICER STATED THAT THE RETURN OF INCOME, AUDITED AND THE BANK STATEMEN T HAD BEEN EXAMINED. IN THIS CASE ALSO, THE ASSESSING OFFICER HAS MENTIONED THAT COMPANY WAS SHOWING MEAGER EXPENSES AND THE COMPANY HAS NOT CLAIMED ELECTRICITY EXPENSES AND DOES NOT HAVE FIXED ASSETS. ANKIT IMAGES PVT. LTD . THE ASSESSING OFFICER HAS EXAMI NED RETURN OF INCOME, AUDIT REPORT AND THE BANK A/S STATEMENT OF THE COMPANY. THE ASSESSING OFFICER STATED THAT THIS COMPANY WAS SHOWING MEAGER INCOME, NO ELECTRICITY EXPENSES WERE CLAIMED A ND COMPANY DOES NOT HAVE ANY FIXED ASSETS. THE ASSESSING OFFICE R STATED THAT T HESE DATA PROVE THAT THE COMPANIES WERE NOT HAVING CREDITWORTHINESS TO PROVIDE THE UNSECURED LOAN TO THE ASSESSEE. T HE ASSESSING OFFICER CONCLUDED THAT ASSESSEE FAILED TO JUSTIFY IDENTITY, CREDITWORTHINESS A ND GENUINENESS OF RS. 60 LACS UN SEC URED LOAN , THEREFORE, SHE ADDED THE UNSECURED LOAN AL ONG WITH INTEREST EXPENSES OF R S. 5 , 3 9,057/ - TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED AGAINST THIS IMPUGNED ADDITION, THE ASSESSE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAI NED THE ADDITION MADE BY THE ASSESSING OFFICER. THE RELEVANT PART OF THE OBSERVATION OF THE LD.CIT(A) IS REPRODUCED AS UNDER: - 6. 2.15. THE IDENTITY, CAPACITY AND GENUINENESS ASPECTS ARE NOT WATER TIGHT COMPARTMENTS. AN ASSESSEE'S EXPLANATION OF THE NATUR E AND SOURCE OF THE CREDITS CANNOT BE ENTERTAINED AND HELD BY THE ASSESSING OFFICER AS SATISFACTORY UNLESS AND UNTIL THE GROUND REALITY I.E. THE DE - FACTO EXISTENCE OF THE CREDITOR IS FIRST ESTABLISHED PRIMA FACIE PAVING THE WAY FOR THE ASSESSING OFFICER TO EXAMINE FURTHER THE CAPACITY AND GENUINENESS ASPECTS. MERELY BASED ON ARRANGED AFFAIRS AND SUPPORTING DOCUMENTS, THE IDENTITY CANNOT BE SAID .TO BE ESTABLISHED, AND IN I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 11 MANY CASE NOT THE CAPACITY AND GENUINENESS OF THE TRANSACTION, IN THIS ASPECT IT WOULD BE NECESSARY TO ADVERT TO TWO DECISIONS OF THE SUPREME COURT, THE FIRST BEING IN COMMISSIONER OF INCOME TAX VS. P. MOHANAKAIA AIR 2007 SC 21 1 6. WHILE CONSIDERING THE SCOPE OF SECTION 68, THE SUPREME COURT OBSERVED AS FOLLOWS: '. ...WHEN AND IN WHAT CIRCU MSTANCES SECTION 68 OF THE ACT WOULD COME INTO PLAY? THAT A BARE READING OF SECTION 68 SUGGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY AN ASSESSEE; SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSEES OFFER NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS; OR THE EXPLANATION OFFERED BY THE ASSESSEES IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY, IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE I NCOME, OF THE ASSESSEES OF THAT PREVIOUS YEAR. THE EXPRESSION 'THE ASSESSEES OFFERS NO EXPLANATION' MEANS WHERE THE ASSESSEES OFFER NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEES . IT IS TRUE THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEES AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION O F THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION.' IN THE INSTANT CASE, THE AO HAS ARRIVED AT THE CONCLUSION BASED ON THE MATERI AL AVAILABLE ON RECORD WHICH SHOWED THE LENDERS TO BE PAPER COMPANIES. 6.12.16. THE SUPREME COURT N OTED, FOLLOWING THE EARLIER DECISION IN COMMISS4ONER - OF INCOME VS. ORISSA CORPORATION PVT . LTD. [1986] 159 ITR 78 THAT WHERE THE CONCLUSION OF THE TRIBUNAL WAS NOT UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE, NO QUESTION OF LAW AS SUCH WOULD ARISE FOR CONSIDERATION. THE COURT FURTHER OBSERVED THUS:. '...THE DOUBTFUL NATURE OF THE TRANSACTION AND THE MANNER IN WHICH THE SUMS WERE FOUND CREDITED IN THE BOO KS OF ACCOUNTS MAINTAINED BY THE ASSESSEE HAVE BEEN DUTY TAKEN INTO CONSIDERATION BY THE AUTHORITIES BELOW. THE TRANSACTI ONS THOUGH APPARENT WERE HELD TO BE NOT REAL ONE. MAY BE THE MONEY CAME BY WAY OF B ANK CHEQUES AND PAID THROUGH THE PROCESS OF BANKING TRANSACTION BUT THAT ITSELF IS OF NO CONSEQUENCE.' THE OVERALL CIRCUMSTANCES IS TO BE TAKEN INTO CONSIDERATION AND IN THE PRESENT CASE, MERE TRANSACTIONS BEING MADE THROUGH BANKING CHANNELS DO NOT MAKE THE TRANSACTIONS GENUINE AS IN THE INSTANT CASE WHERE THE BANK ACCOUNTS OF THE LENDERS DO NOT SHOW ANY GENUINE ACTIVITIES AS DISCUSSED IN THE AFORESAID PARAS. 6.2.17 IN ANOTHER JUDGMENT OF THE SUPREME COURT IN VIJAY KUMAR TALWAR VS. CLT O F 2011) 1 SCC 673 THE SAME PRINCIPLE WAS APPLIED IN THE FOLLOWING OBSER VATIONS: '. ...AL L THE AUTHORITIES BELOW, IN PARTICULAR THE TRIBUNAL, HAVE OBSERVED - IN UNISON THAT THE ASSESSES DID NOT PRODUCE ANY EVIDENCE TO REBUT THE 'PRESUMPTION DRAWN AGAINST HIM UNDER SECTION 68 OF THE ACT, BY PRODUCING THE PARTIES IN WHOSE NAME THE AMOUNTS IN QUESTION HAD BEEN CREDITED BY THE ASSESSES IN HIS BOOKS OF ACCOUNT. IN THE ABSENCE OF ANY COGENT EVIDENCE, A BALD EXPLANATION FURNISHED BY THE ASSESSES ABOUT THE SOURCE OF THE CREDITS IN QUESTION VIZ. REALISATION FROM THE DEBTORS OF THE ERSTWHI LE FIRM, IN THE OPINION OF THE ASSESSING OFFICER, WAS NOT SATISFACTORY. IT IS WELL SETTLED THAT IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSES FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME TAX AS T HE INCOME OF THE ASSESSEE OF THAT PREVIOUS I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 12 YEAR, IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY.' ' 6.2.18. THE ONLY REQUIREMENT FOR ESTABLISHING THE CASH CREDIT TO BE UNDISCLOSED INCOME OF THE TAXPAYER IS THAT PROPER ENQUIRY MUST BE MADE BY A.O BEFORE MAKING ANY ADDITION U/S 68. IN KHANDELWAL CONSTRUCTIONS - V. CIT 227 ITR 900 (GAU.) IT HAS BEEN HELD THAT SECTION 68 OF INCOME TAX ACT, 1961, EMPOWERS THE ASSESSI NG O FFICER TO MAKE ENQUIRY REGARDING CASH CREDIT, IF HE IS SATISFIED THAT THESE ENTRIES ARE NOT GENUINE HE HAS EVERY RIGHT TO ADD THESE AS INCOME FROM OTHER SOURCES. BUT BEFORE 'REJECTING THE ASSESSEE'S EXPLANATION A.O. MUST MAKE PROPER ENQUIRIES AND IN THE AB SENCE OF PROPER ENQUIRIES, ADDITION CANNOT BE SUSTAINED. IN THE INSTANT CASE, THE AO HAD MADE PROPER INQUIRIES TO ESTABLISH THAT THE LENDERS WERE PAPER COMPANIES FOR ACCOMMODATION ENTRIES AS EVIDENT FROM THE FOLLOWING FACTS: NON TRACEABLE - IDENTITY NOT PROVED NATURE OF BUSINESS NOT KNOWN; NO KNOWN SOURCE OF INCOME; - MEAGER INCOME TO JUSTIFY SUCH INVESTMENTS; NO FIXED ASSETS; NO RENTAL PAYMENTS; MINISCULE EXPENSES'; VERY LOW BALANCES IN THE BANK ACCOUNTS; THE BANK ACCOUNTS HAVE BEEN USED TO TRANSFER FUNDS FROM ONE ACCOUNT TO OTHER ACCOUNTS; NO PROOF REGARDING HOW THE LENDERS OF KOLKATTA CAME IN CONTACT WITH THE APPELLANT; 6. 2.19. IF THE ABOVE PRINCIPLES OF STATUTOR Y ONUS ON AN ASSESSEE U/S 68 AND OF THE SHIFTING OF SUCH ONUS FROM THE ASSESSEE ON TO THE ASSESSING OFFICER ARE APPLIED TO ANY CASE INCLUDING THE PRESENT APPELLANT'S CASE, THE FOLLOWING POSITION SHALL EMERGE. PRIMA FACIE PROOF OF THE THREE INGREDIENTS AND THAT TOO CUMULATIVELY SHALL HAVE TO BE EXAMINED AT THREE DIFFERENT STAGES ONE AFTER THE OTHER BUT IF AN ASSESSEE FAILS TO ESTABLISH AT THE FIRST STAGE, THE IDENTITY OF THE CREDITOR ITSELF, THERE IS NO QUESTION OF AN ASSESSING OFFICER EXAMINING THE MATTER A T THE SECOND STAGE OF ENSURING AND SATISFYING HIMSELF OF THE CAPACITY OF THE CREDITOR TO ADVANCE THE MONEYS AND NOR THEREFORE, THE ASSESSING OFFICER EXAMINING THE MATTER AT THE SECOND STAGE OF ENSURING AND SATISFYING HIMSELF OF THE CAPACITY OF THE CREDITOR TO ADVANCE THE MONEYS, EVEN THEN THE ONUS LAY ON THE, ASSESSEE TO FURTHER ESTABLISH CERTAIN THINGS BECAUSE NON - PRODUCTION OF DOCUMENTARY EVIDENCE OF CORROBORATIVE VALUE INVITES ADVERSE INFERENCE AGAINST THE PERSON WHO OUGHT TO HAVE PRODUCED. 6.2. 20 IT WAS NOTICED, AS MENTIONED ABOVE THAT, ON THE VERIFICATION OF THE RETURN OF INCOME FILED BY THESE PERSONS/LENDERS, THAT THEY ALL HAVE MEAGER MEANS OF INCOME WITH NO CAPACITY TO BE ABLE TO INVEST THE AMOUNTS AS LOANS. IT IS NOT THE CASE WHERE THE AO HAS NOT PURSUED - THE MATTER ANY FURTHER AND DID NOT EXAMINE THE SOURCE OF INCOME OF THESE LENDERS TO FIND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COULD GIVE THE LOANS, PRIMA FACIE ONUS IS ALWAYS ON THE ASSESSEE TO PROVE THE CASH CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN LAND MARK CASES LIKE KALE KHAN MOHAMMAD HANIF V CIT[1963] 50 ITR 1 (SC),AND ROSHAN DI HATTI V CIT [1977] 107 ITR (SC), IT HAS BEEN HELD TH AT THE LAW IS WELL SETTLED THAT THE ONUS OF PROVING I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 13 THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE, IS ON HIM. WHERE, THE NATURE AND SOURCE THEREOF CANNOT BE EXPLAINED SATISFACTORILY, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS TH E INCOME OF THE ASSESSEE AND NO FURTHER BURDEN IS ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE. IT MAY ALSO BE POINTED OUT THAT THE BURDEN OF PROO'F IS FLUID FOR THE PURPOSES OF SEC. 68 OF THE AQT. ONCE ASSESSEE HAS SUBMITTED BASIC DOCUMENTS RELATING TO IDENTITY, GENUINEN ESS OF TRANSACTION AND CREDITWO RTHINESS THEN AO MUST DO SOME INQUIRY TO CALL FOR MORE DETAILS TO INVOKE SECTION 68. AN ASSESSEE CAN DISCHARGE HIS ONUS OF PROOF BY PROVING THREE THINGS: IDENT ITY OF THE CREDITOR, CAPAC ITY TO THE CREDITOR AND THE GENUINENESS OF THE TRANSACTION. ONCE THE ASSESSEE PROVES AIL THREE THINGS HIS ONUS IS DISCHARGED. SECTION 68 OF THE INCOME TAX ACT PROVIDES THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREV IOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASS ESSEE OF THAT PREVIOUS YEAR. THE SUPREME COURT HELD IN SUMATI DAYAL VS. CIT 214 ITR 801 (SC) IN APPLYING THE TEST OF HUMAN PROBABILITIES AS FOLLOWS: 'IT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO - PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE, [SEE : PARIMISETTI SE ETHARAMAMMA [1965] 57 ITR 532 AT PAGE 536). BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE - EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINJON OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH A CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINSI THE ASSESSEE, VIZ., THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT IT, THE SAID EVIDENCE BEING UNFEBUTTED, CAN FEE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE ASSESSEE THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY,' 6.2.21. THE ONUS OF ESTABLISHING THE NATURE OF A CASH CREDIT IS ON THE ASSESSEE AND IF HE FAILS TO OFFER A REASONABLE EXPLANATION, THE AO MAY PRESUME THAT IT REPRESENTS AN 'INCOME RECEIPT'. SO TOO, THE ONUS OF PROVING THAT SUCH INCOME RECEIPT DID NOT FALL UNDER THE HEAD 'INCOME FROM OTHER SOURCES' WAS ON THE ASSESSEE. IF THE ASSESSEE DID NOT PLACE ANY SATISFACTORY MATERIAL BEFORE THE AO TO ENABLE HIM TO ARRIVE AT A CONTRARY CONCLUSION, THE AO MIGHT PRESUME THAT THE CASH CREDIT FE LL UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THE PRESUMPTION THAT AN UNEXPLAINED CASH CREDIT IS AN 'INCOME FROM OTHER SOURCES' ARE PRESUMPTIONS WHICH FLOW NATURALLY FROM THE CIRCUMSTANCES THAT ALL FACTS WHICH CAN ESTABLISH THE NATURE AND SOURCE OF THE CA SH CREDIT ARE PECULIARLY WITHIN THE KNOWLEDGE OF THE ASSESSEE. IT MAY BE THAT THE ONUS OF DISPLACING THE PRESUMPTIONS MAY BE HEAVY IN SOME CASES AND LIGHT IN OTHERS, DEPENDING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. BUT, THE PRESUMPTIONS ARE THERE AND THE BURDEN OF REBUTTING THE PRESUMPTIONS IS ON THE ASSESSEE. COMMISSIONER OF INCOME - TAX V. DEVI PRASAD VISHWANATH PTASAD J1969] 72 ITR 194,196,197 (SC).}' 6.2.22. IN SREELEKHA BANERJEE V. COMMISSIONER OF INCOME - TAX [1969] 49 ITR (SC) 114, 120; [1964] 2 SCR 552 (SC), THE SUPREME COURT OBSERVED: I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 14 'THE VERY WORDS ' AN UNDISCLOSED SOURCE' SHOW THAT THE DISCLOSURE MUST COME FROM THE ASSESSES AND NOT FROM THE DEPARTMENT.' 6.2.23. SECTION 68 OF THE ACT CLEARLY SHOWS THAT ANY SUM FOUND CREDITED IN THE BOOKS OF AN AS SESSEE MAINTAINED FOR A PREVIOUS YEAR MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR, IF (A ) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM, OR (B ) THE EXPLANATION OFFERED BY HIM IS, IN THE OP INION OF ASSESSING OFFICER, NOT SATISFACTORY. AS A MATTER OF FACT, SECTION 68 IS A STATUTORY RECOGNITION, OF WHAT WAS PREVIOUSLY ESTABLISHED BY JUDICIAL DECISIONS TO THE EFFECT THAT WHERE CERTAIN SUMS OF MONEY WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN BORR OWED FROM CERTAIN PERSONS, IT WAS FOR THE ASSESSEE TO PROVE BY COGENT AND PROPER EVIDENCE THAT THERE WERE GENUINE BORROWINGS AS THE FACTS ARE EXCLUSIVELY WITHIN THE ASSESSEE'S KNOWLEDGE. IN DECIDING AN ISSUE OF THIS NATURE, THERE CANNOT BE ONE GENERAL O R U NIVERSAL PROPOSITION OF LAW WHICH COULD BE THE GUIDING YARDSTIC K IN THE MATTER. EACH CASE HAS G O T O BE DECIDED ON THE FACTS ARID C IRCUMSTANCES OF THAT CASE. THE SURROUNDING - CIRCUMSTANCES TO BE CONSIDERED MUST, HOWEVER, BE OBJECTIVE FACTS, EVIDENCE ADDUCED BEFORE THE AUTHORITIES, PRESUMPTION OF FACTS BASED ON COMMON HUMAN EXPERIENCE IN LIFE AND REASONABLE CONCLUSIONS. LR>.' HOLDING A PARTICULAR RECEIPT TO BE INCOME FROM UNDISCLOSED SOURCE, THE FATE OF THE ASSESSEE CANNOT BE DECIDED BY THE AUTHORITIES ON THE BASIS OF SURMISES, SUSPICIONS OR PROBABILITIES. HON'BLE SUPREME COURT'S DECISION IN THE CASE OF CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 WHICH IS AS FOLLOWS AT PAGE 546 OF THE DECISION: 'SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE, THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A PI ECE OF EVIDENCE. BUT IN THAT SP H ERE THE DECISION OF THE FINAL FACT FINDING AUTHORITY IS MADE CONCLUSIVE LAW. 6.2.24. THE HON. SUPREME COURT IN CASE OF D. BHOORMALI (AIR 1974 SC 859) THE DEPARTMENT IS NOT REQUIRED TO PROVE ITS CASE WITH MATHEMATICAL, A DEMONSTRABLE DEGREE FOR IN ALL HUMAN AFFAIRS, ABSOLUTE CERTAINLY IS A MYTH AND AS PROOF ALL EXACTNESS IS A FAKE. THE ABSOLUTE PROOF BEING UNATTAINABLE, THE LAW ACCEPTS FOR IT PROBABILITY AS A WORKING SUBSTITUTES IN THIS WORK - A - DAY WORLD. THE LAW DOES NOT REQUIRE ESTABLISHME NT TO PROVE THE IMPOSSIBLE. ALL T HAT IT REQUIRES IS THE ESTABLISHMENT OF SUCH A DEGREE OF PROBABILI TY THAT A PRUDENT MAN MAY FORM O N THE BASIS OF EXISTENCE OF FACTS. 6.2.25. THE ONUS TO PROVE THE GENUINENESS OF THE TRANSACTION LIES UPON THE ASSESSEE WHICH HAS UPHELD IN TH E FOLLOWING CASES ALSO: * CIT V. W.J.WALKER AND CO. [1979] 117 ITR 690, 694 (CAL); * SAJAN DASS AND SONS V. CIT [2003] 264 ITR 435 (DELHI); * SUMATI DAYAL V. CIT [1995] 214 ITR 801 (SC); AND * JASPALSINGHV. CIT [2006] 290 ITR 306 (P&H). * DHANALAXMI STEEL RE - ROLLING MILLS 57 ITD 361 (HYD.) 6.2.26. THE HON. ITAT, KOLAKTTA BENCH IN THE CASE OF [2014 ] 52 TAXMANN.COM 305 (KOLKATA - TRIB.) BISAKHA SALES (P.) LTD, WHILE DECIDING THE RACKET/SCAM OF THE ISSUE' OF ACCOMMODATION ENTRIES HELD THAT THE METHODOLO GY AND ACTS DONE IN SUCH CASES OF CAPITAL FORMATION IS NOT TAX AVOIDANCE. IT IS MORE IN THE NATURE OF TAX EVASION BY MONEY LAUNDER ING. THESE TRANSACTIONS HAVE IN EFFECT THREE LIMBS. THE FIRST LIMB IS THE CREATION OF THE SHELL COMPANIES WITH SUBSTANTIAL SHA RE CAPITAL WHICH IS BALANCED WITH INVENTORIES IN THE FORM OF SHARES IN OTHER SHELL COMPANIES. I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 15 THE SECOND LIMB IS THE TRANSFER OF SUCH SHELL COMPANIES TO PERSONS WHO DESIRE TO USE SUCH SUBSTANTIAL SHARE CAPITAL COMPANIES FOR CONVERTING THEIR UNACCOUNTED MON EY INTO ACCOUNTED FUNDS AND USE SUCH SHELL COMPANIES TO DO LEGITIMATE BUSINESS. THE THIRD LIMB IS WHEN THE SHELL COMPANIES AFTER BEING TAKEN OVER, THE ASSETS IN THE FORM OF INVENTORIES ARE ENCASHED WHEREBY THE UNACCOUNTED MONIES ARE LAUNDERED AND BROUGHT I NTO THE COMPANY FOR CONDUCT ING THE LEGITIMATE BUSINESS. ALL THESE THREE LIMBS ARE NOT DONE IN ONE ASSESSMENT YEAR BUT IN DIFFERENT ASSESSMENT YEARS 6.2.27. THE ASSESSING OFFICER HAS BROUGHT CERTAIN FACTS ON RECORD TO HIGHLIGHT THAT THE LOAN RECEIVED ACTUAL LY REPRESENTS AN ACCOMMODATION ENTRY. IT COULD BE PROVED THAT THE COMPANY PROVIDING LOAN EXISTS ONLY ON PAPER, IT HAS NO EMPLOYEES, THE ADDRESS GIVEN IS ONLY A POSTAL ADDRESS AND THE COMPANY DOES NOT HAVE ANY PHYSICAL SET UP AT THE GIVEN ADDRESS, THE SAME ADDRESS IS POSSIBLY BEING U SED AS POSTAL ADDRESS FOR MULTIPLE COMPANIES INDULGING IN TO THE SAME ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES THE APPELLANT WAS TRYING TO PRESS INTO SERVICE ONLY THE LEGAL OR DE - JURE IDENTITY OF A CREDITOR AND COULD NOT ADDUC E ANY EVIDENCE, OF THE DE - FAETO EXISTENCE OF THE CREDITOR COMPANY. THE DE - JURE EXISTENCE IS A MERE CONVENIENT FACADE OF THE DE - FACTO EXISTENCE OF THE CREDITOR COMPANY. SUCH DE - JURE EXISTENCE IS SELF SERVING ONE, HAVING BEEN OBTAINED THROUGH APPLICATION AND . OTHER F ORMS AND FORMALITIES UNILATERAL FILED BEFORE THE ROC ETC. 6.2.28. THUS, ON OVERALL CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE AND AS DISCUSSED IN DETAIL ABOVE, THE AMOUNTS CLAIMED TO BE RECEIVED BY THE APPELLANT DO NOT IN ANY WAY APPEAR TO BE GENUINE LOANS. THEY ARE NOTHING BUT ARRANGED AFFAIRS BEING PRE - ORDAINED SERIES OF TRANSACTIONS AND TAX EVASION DEVICE WHERE MONEY LAUNDERING TRANSACTIONS HAVE BEEN CAMOUFLAGED AS LOANS. HENCE NO CREDENCE CAN BE PLACED ON THE COPIES OF V ARIOUS DOCUMEN TS FILED TO SUPPORT ; SUCH CLAIM OF LOANS AND ADDITION OF RS. 60,00,000/ - IS HEREBY CONFIRMED AND GROUNDS OF APPEAL IS DISMISSED. 8 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. COUNSEL HAS STATED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF UNSECURED LOAN OF RS. 60 LACS U/S. 68 OF THE ACT WITHOUT CONSIDERING THE SUPPORTING DETAIL AND INFORMATION FURNISHED BY THE ASSESSEE DURING THE COURSE OF A SSESSMENT PROCEEDINGS BEFORE ASSESSING OFFICER AND DURING THE COURSE OF APPEL LATE PROCEEDINGS BEFORE LD. CIT(A) . LD. COUNSEL HAS ALSO REFERRED THE DIFFERENT PAGES OF PAPER BOOK SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDINGS SHOWING INFORMATION REGARDING WRITTEN SUBMISSION FILED BEFORE LD. CIT(A) AND BEFORE ASSESSING I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 16 OFFICE R, CONFIRMATION OF ALL LEN D ING COMPANIES, RELEVANT BANK STATEMENT OF ALL THE LENDING COMPANIES, LEDGER A/C OF LENDERS, LETTER FILED BY THE LENDERS IN RESPECT OF NOTICE U/S. 133(6) OF THE ACT, ACKNOWLEDGEMENT OF RETURN OF INCOME OF LENDING COMPANIES, AUDIT REPORT ALONG WITH AUDITED FINANCIAL STATEMENT OF ALL LENDING COMPANIES, SANCTION LETTER OBTAINED FROM SBI FOR SLC CREDIT FACILITIES, MINUTES OF BOARD RESOLUTION FOR UNSECURED LOAN, RELEVANT BANK STATEMENT OF THE ASSESSE COMPANY, DETAIL OF INTEREST PAYMEN T MADE DURING THE YEAR ETC. LD. COUNSEL HAS ALSO FILED COP IES O F JUDICIAL PRONOUNCEMENTS OF HON BLE HIGH COURT OF GUJARAT IN THE CASE S OF CIT, RAJKOT VS. AYACHI CHANDRASHEKHAR NARSANGJI AND IN THE CASE OF CIT VS. APEX THERM PACKAGING P. LTD. ON THE OTH ER HAND THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LD. CIT(A). 9. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD . WE HAVE NOTICED THAT SUBSEQUENTLY AT THE APPELLATE PROCEEDINGS THE LD.CIT(A) HAS RAISED CERTAIN QUERI ES BRIEFLY REGARDING THE DECISION OF THE BOARD OF DIRECTORS OF RAISING LOANS, HOW THE A SSESSEE CAME IN CONTACT WITH THESE FOUR COMPANIES , ANY OTHER FINANCIAL TRANSACTIONS THESE 4 COMPANIES HAVING IN LAST 3 PRECEDING/ SUBSEQUENT ASSESSMENT YEARS AND W HAT WAS THE PURPOSE OF THE LOANS . WE HAVE ALSO NOTICED THE EXPLANATION AND SUBMISSION MADE BY THE ASSESSEET IN RESPONSE TO THE QUERIES RAISED BY THE LD.CIT(A) REPRODUCED AS UNDER: - 'THE ASSESSEET IS A PRIVATE LIMITED COMPANY AND IT IS DULLY AUTHORIZED VIDE ITS ARTICLES OF ASSOCIATION TO RAISE THE LOANS AS AND WHEN THE NEED ARISES. THE CLAUSE NO. 54 OF THE ARTICLES OF ASSOCIATION OF THE COMPANY HAS DULLY AUTHORIZED I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 17 THE BOARD TO BORROW MONEY FROM TIME TO TIME. THE ASSESSEE HAS ALSO ENCLOSED THE COPY OF THE MEM ORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY. IT WAS ALSO STATED THAT ' THE COMPANY IN ITS BOARD MEETING HELD ON 2 ND SEPTEMBER 2011 APART FROM CONDUCTING VARIOUS BUSINESSES HAS ALSO PASSED A RESOLUTION TO BORROW FUNDS FROM TIME TO TIME FROM DIRECTO RS SHAREHOLDERS, THEIR RELATIVES AND OTHER BODY CORPORATE. THE RESOLUTION AUTHORIZED ANY ONE DIRECTOR TO DO ALL SUCH ACTS THAT MAY BE REQUIRED IN THIS REGARD. COPY OF THE SAME WAS ALSO SUBMITTED FOR THE REFERENCE . IT WAS ALSO SUBMITTED THAT THE COMPANY HAD AVAILED CREDIT LIMITS FROM THE STATE BANK OF INDIA SP. COMMERCIAL BRANCH RING ROAD, SURAT. THE COMPANY IN ORDER TO MEET URGENT FINANCIAL NEEDS HAD ALSO APPROACHED THE BANKERS FOR TEMPORARY FINANCE IN ADDITION TO THE NORMAL CASH CREDIT LIMITS GRANTED TO THE COMPANY. THE SAID BANKERS THE SB! THEN GRANTED SLC (STANDBY LINE OF CREDIT) TO THE COMPANY IN ADDITION TO THE NORMAL ADVANCES GRANTED. THE SLC LIMITS WERE GRANTED BY THE SBI TO ITS CUSTOMERS PURELY ON TEMPORARY BASIS AND IT HAD TO BE REPAID WITHIN A P ERIOD OF TWO TO THREE MONTHS. THE DUE DATE OF REPAYMENT WAS NEARING AND THE COMPANY WAS NOT HAVING SUFFICIENT BALANCE WITH IT TO REPAY THE SAID SLC LIMITS AVAILED FROM THE SAID BANKERS THE SBI. THE COMPANY WAS IN NEED OF URGENT FUNDS TO REPAY THE SLC AND T RYING TO EXPLORE THE POSSIBILITIES TO GET THE FINANCIAL ASSISTANCE FROM OUTSIDE PARTIES. ONE OF THE RELATIVES OF THE DIRECTORS, SHRI SURENDRA KUMAR BENGANI STAYING IN KOLKOTTA SINCE LAST MANY YEARS. THEY APPROACHED THEM FOR FINANCIAL ASSISTANCE SO AS TO ME ET THE URGENT NEED OF THE BUSINESS, SHRI SURENDRA KUMAR BENGANI THE SON OF FATHER'S SISTER OF THE DIRECTORS (COUSIN BROTHER AS SON OF BHUVA) WAS REQUESTED TO ARRANGE LOANS 'FROM PRIVATE PERSONS ON BEHALF OF THE COMPANY. THE SAID COUSIN BROTHER SHRI SUREND RA KUMAR BENGANI WAS HAVING PERSONAL RELATIONS WITH SHRI VIKAS KUMAR BADJATYA ONE OF THE DIRECTORS OF THE LENDING .COMPANIES AND ON PERSONAL PERSUASION AND CONTACTS OF THE SAID COUSIN BROTHER OF THE DIRECTORS THEY AGREED 'TO LEND THE FUNDS TO THE APPELLANT COMPANY.' WE HAVE NOTICED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE LD. CIT(A) HAS ISSUED DIRECTIONS U/S 250(4) OF THE ACT ON 04.12.2015 TO THE ASSESSING OFFICER TO GET ENQUIRIES CONDUCTED FROM THE INVESTIGATION WING KOLKATA REGARDING THE E XISTENCE OF THE 5 COMPANIES ON THEIR GIVEN ADDRESSES. WE HAVE NOTICED THAT LD.CIT(A) STATED THAT THE ASSESSING OFFICERS REPORTED THAT THE COMMISSION U/S 131(1)(D) OF THE ACT WAS ISSUED TO THE INVESTIGATION WING KOLKATA ON 14.12.20 - 15.AND IT WAS INFORMED T HAT THE COMPANIES WERE FOUND TO BE NON EXISTENT ON THE GIVEN ADDRESSES IN THIS CONNECTION WE HAVE ALSO NOTICED THE ASSESSEE'S EXPLAINED SUBMITTED TO LD.CIT(A) REPRODUCED AS UNDER: - I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 18 'THE FINDINGS OF THE DEPARTMENT ARE NOT CORRECT BASED ON THE FOLLOWING FACTS - 1. ALL THE DEPOSITORS ARE CORPORATE ENTITIES AND ARE DULY REGISTERED WITH THE REGISTRAR OF COMPANIES. DETAILS WITH RESPECT TO THEIR INCORPORATIONS WERE DUTY SUBMITTED TO THE LEARNED AO AND ALSO IN OUR EARLIER SUBMISSIONS MADE BEFORE THE LD.CIT(A). 2. THE STATUS OF ALL THE COMPANIES ARE DULLY CONSIDERED AS ACTIVE STATUS IN THE RECORDS OF THE COMPANY MASTER DATA OBTAINED FROM THE MINISTRY OF COMPANY AFFAIRS. COPIES OF THE LATEST COMPANY MASTER DATA WAS SUBMITTED TO THE LD.CIT(A). THE LENDERS WER E MAINTAINING AND HAVING OPERATIVE BANKING ACCOUNTS WITH REGULAR DEALINGS IN THESE ACCOUNTS. COPIES OF THE LATEST BANK ACCOUNTS OF THE LENDERS WERE ALSO FURNISHED TO THE LD.CIT(A). AND THE LATEST BANK STATEMENTS WEREE REFLECTING THE SAME ADDRESS. 4. IT WASS FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED AO HAD ISSUED NOTICES UNDER SECTION 133 (6) OF THE ACT TO CONDUCT DIRECT INQUIRIES. THE SAID NOTICES WERE DULY SERVED AND WERE ALSO COMPLIED WITH. THE COPIES OF SUCH REPLI ES WERE ALSO PROVIDED TO THE LD.CIT(A). 5. IT WAS FURTHER SUBMITTED TO THE LD.CIT(A) THAT THE NOTICES ISSUED BY THE INCOME TAX DEPARTMENT ON THE LENDERS IN THE MATTER OF OTHER ASSESSES, WERE ALSO DULY SERVED UPON THE LENDORS ON THE SAME ADDRESSEES. THE ASSESSEE HAD ALSO FURNISHED COPIES OF THE FEW SUCH LETTERS TO THE LD.CIT(A). 6. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT IN CASE OF ONE DEPOSITOR COMPANY CHANDERI GRAPHICS PRIVATE LIMITED THE ASSESSMENT OF THE SAID COMPANY FOR A.Y 2012 - 13 WAS MADE UND ER SECTION 143(3) OF THE ACT AND THE NOTICE UNDER SECTION 143(2) OF THE ACT ISSUED BY THE DEPARTMENT ON THE SAME ADDRESS WAS DULY SERVED UPON THE SAFD DEPOSITOR COMPANY. COPY OF THE SAID NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT WAS ALSO PROVIDED TO TH E LD.CIT(A). 7. IT WAS FURTHER SUBMITTED BY THE ASSESSEE TO THE LD.CIT(A)THAT CHEQUES/DRAFTS ISSUED AND POSTED BY THE INCOME TAX DEPARTMENTS FOR REFUNDS TO THE DEPOSITOR COMPANIES ON THE SAME ADDRESSES WERE DULY SERVED.THE ASSESSEE HAD ALSO PROVIDED THE SUPPORTING EVIDENCES. 8. THE ASSESSEE HAD ALSO INFORMED THAT THE LENDERS WERE DULY REGISTERED WITH THE DEPARTMENT OF PROFESSION TAX OF WEST BENGAL. THE SAID REGISTRATION HAD BEEN GRANTED BY THE WEST BENGAL GOVERNMENT ON THE SAME ADDRESS. IT WAS ALS O SUBMITTED BY THE ASSESSEE THAT THE RECEIPTS OF THE SAID SHOP AND ESTABLISHMENT RENEWAL FEES ARE ALSO REFLECTING THE SAME ADDRESS AS ROOM NO. 124A, 53A SURYA SEN STREET, 1 ST FLOOR, KOLKOTTA, WEST BENGAL.' WE HAVE ALSO PERUSED THE JUDICIAL PRONOUNCEMEN T IN THE CASE OF CIT - 2 V.D& H ENTERPRISES(2016) 72 TAXMANN.COM.91(GUJARAT HIGH COURT) IN WHICH IT WAS HELD THAT THE SOLITARY REASON OF NOT SERVING OF SUMMONS CANNOT BE RELIED ONLY BY IGNORING THE OTHER RELEVANT MATERIAL PRODUCED BY THE ASSESSEE. THE RELE VANT PART OF THIS JUDICIAL I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 19 PRONOUNCEMENT IN THE CASE OF CIT - 2 V.D& H ENTERPRISES(2016) 72 TAXMANN.COM.91(GUJARAT HIGH COURT) IS REPRODUCED AS UNDER: - 'IT WAS POINTED OUT THAT ALL THE SUMMONS WERE ISSUED TO THE ALLEGED PARTIES AT THE ADDRESS MENTIONED IN THEIR RESPECTIVE LATEST RETURN OF INCOME, HOWEVER, NONE OF THEM WERE FOUND AT THE GIVEN ADDRESS, NOT ONLY BY THE EMPLOYEE OF THE DEPARTMENT, BUT ALSO BY THE POSTAL AUTHORITIES. IT WAS SUBMITTED THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY OF SUCH PERSONS BE FORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT IT IS BY NOW WELL SETTLED THAT MERELY BECAUSE PAYMENTS ARE MADE BY CHEQUES WOULD NOT ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. IN SUPPORT OF HIS SUBMISSIONS, THE LEARNED COUNSEL PLACED RELIANCE UPON TH E DECISION OF THIS COURT IN THE CASE OF MANOJ KUMAR SARAF V. ITO [2014] 45 TAXMANN.COM 63/223 TAXMAN 43 . IT WAS, ACCORDINGLY, URGED THAT THE IMPUGNED ORDER PASSED BY TH E TRIBUNAL DOES GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW, AS PROPOSED OR AS MAY BE FORMULATED BY THIS COURT. 5. THIS COURT HAS CONSIDERED THE SUBMISSIONS ADVANCED BY THE LEARNED COUNSEL FOR THE APPELLANT AND HAS PERUSED THE ORDERS PASSED BY THE AUTHORITI ES BELOW. A PERUSAL OF THE ORDER PASSED BY THE COMMISSIONER (APPEALS) REVEALS THAT HE HAS, UPON APPRECIATION OF THE MATERIAL ON RECORD, FOUND AS A MATTER OF FACT THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FURNISHED ALL THE CUSTOMERS' DETAILS LIKE NAME, ADDRESS, PAN, COPY OF INCOME TAX RETURNS, BANK STATEMENT, ETC. AND HAD, THUS, DISCHARGED ITS PRIMARY ONUS AS HAS BEEN HELD BY THE SUPREME COURT IN THE CASE OF CIT V. ORISSA CORPN. (P) LTD. [1986] 159 ITR 78/25 TAXMAN 80 (SC) . HE WAS FURTHER OF THE OPINION THAT IT WAS THE DUTY OF THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THESE TRANSACTIONS BY STRICTLY ENFORCING THE PROVISIONS OF SECTION 131 OF THE ACT IF AT ALL THOSE CUSTOMERS WERE REQUIRED TO BE PRODUCED BEFORE HIM. ACCORDING TO THE COMMISSIONER (APPEALS), THE PHYSICAL PRESENCE OF THE CUSTOMERS WAS NOT REQUIRED AT ALL AS ALL THE RELEVANT DETAILS RELATED TO THEM WERE AVAILABLE WITH THE ASSESSING OFFICER AND MERELY BECAUSE THE PARTIES DID NOT APPEAR BEFORE HIM, THE TRANSACTIONS CANNOT BE HELD TO BE NON - GENUINE. HE WAS FURTHER OF THE OPINION THAT THE ADVANCES REMAINED UNPROVED BUT NOT DISPROVED AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIO NAL TEXTILES V. CIT [2001] 249 ITR 125/114 TAXMAN 203 (GUJ.) , WHEREIN THE COURT HELD THAT IF AN ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, THAT IS, IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME O F THE ASSESSEE. THE COMMISSIONER (APPEALS) WAS OF THE VIEW THAT ALL THE TRANSACTIONS, THAT IS, ADVANCES RECEIVED WERE THROUGH BANK ONLY AND THAT THE ASSESSING OFFICER SHOULD HAVE VERIFIED THESE TRANSACTIONS WITH THE RELEVANT BANKS AND SHOULD HAVE MADE FURT HER INQUIRIES IN THIS REGARD, WHICH HE HAS FAILED TO DO SO. HE FURTHER TOOK NOTE OF THE FACT THAT IN MOST OF THE CASES, THE CUSTOMERS WERE FILING THEIR RETURNS ON REGULAR BASIS AND THAT DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAD PRODUCED COPIES OF THE RETURNS OF INCOME FOR ASSESSMENT YEAR 2009 - 10 FOR VERIFICATION IN SUPPORT OF HIS CASE. HE FURTHER OBSERVED THAT IT WAS NOT THE CASE OF THE REVENUE THAT ANY EVIDENCE HAD BEEN BROUGHT ON THE RECORD WHICH EVEN REMOTELY INDICATED THAT THE MONEY ORIGINALLY BELONGED TO THE ASSESSEE AND IT HAD RETURNED BACK TO THE ASSESSEE AGAIN. IN THE I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 20 LIGHT OF THE ABOVE FINDINGS OF FACT RECORDED BY HIM, THE COMMISSIONER (APPEALS) ALLOWED THE APPEAL AND SET ASIDE THE ADDITIONS MADE BY THE ASSESSING OFFICER. 6. THE TRIBUNAL, I N THE IMPUGNED ORDER, HAS CONCURRED WITH THE ABOVE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) AND HAS NOTED THAT THE SOLITARY GRIEVANCE OF THE ASSESSING OFFICER WAS THAT HE HAD TRIED TO SERVE THE NOTICE UPON THE INVESTORS BUT FAILED TO SERVE THEM. THE TRIBUNAL, AFTER CONSIDERING THE MATERIAL ON RECORD, WAS OF THE VIEW THAT AS TO HOW THE ASSESSING OFFICER COULD NOT SERVE THE NOTICES UPON THESE PERSONS WAS NOT SPECIFICALLY DISCERNIBLE. IT TOOK NOTE OF THE FACT THAT THERE WERE TWO SETS OF EVIDENCES. THE A LLEGED ASSERTIONS OF THE ASSESSING OFFICER ON THE BASIS OF THE ALLEGED REPORT OF THE PROCESS SERVER WHICH HAS NOT BEEN PLACED ON RECORD BY THE REVENUE, NOR REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT. THE ASSESSING OFFICER HAS NOT EVEN MADE REFER ENCE TO ANY PARTICULAR WITNESS IN WHOSE PRESENCE THE PROCESS SERVER HAD TRIED TO LOCATE THE ALLEGED INVESTORS. WHEREAS ON THE OTHER HAND, THE ASSESSEE HAS FURNISHED COPIES OF THE INCOME TAX RETURNS, BANK STATEMENT, PAN COUPLED WITH THE FACT THAT THE AMOUNT S HAVE BEEN RETURNED THROUGH ACCOUNT PAYEE CHEQUES, WHICH HAD BEEN ACCEPTED BY THE COMMISSIONER (APPEALS). CONSIDERING THE MATERIAL ON RECORD, THE TRIBUNAL FOUND THAT THE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) WERE REQUIRED TO BE ACCEPTED AND ACCO RDINGLY, UPHELD HIS ORDER. 7. THUS, FROM THE FACTS NOTED HEREINABOVE, IT IS EVIDENT THAT THE ASSESSEE HAD PRODUCED ALL RELEVANT DETAILS IN ITS POSSESSION, NAMELY, NAMES, PERMANENT ACCOUNT NUMBERS, INCOME TAX RETURNS, AND BANK STATEMENTS OF ALL THE INVESTOR S. THE AMOUNTS IN QUESTION HAD BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES. HAVING REGARD TO THE FACT THAT THE PERMANENT ACCOUNT NUMBERS AND THE INCOME TAX RETURNS OF ALL THE INVESTORS HAD BEEN FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER COULD HAVE EASILY VERIFIED THE SAME. HE, HOWEVER, PLACED RELIANCE UPON THE FACT THAT THE SUMMONS ISSUED TO THE PARTIES UNDER SECTION 137 OF THE ACT COULD NOT BE SERVED AND HENCE, DID NOT ACCEPT THE GENUINENESS OF THE TRANSACTIONS. IN THE OPINION OF THIS COURT, TAKING INTO ACCOUNT THE CONCURRENT FINDINGS OF FACT RECORDED BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL, IT CANNOT BE SAID THAT THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS, IN ANY MANNER, CONTRARY TO THE RECORD OR THAT THE SAME SUFFERS FROM ANY LEGAL INFIRM ITY SO AS TO GIVE RISE TO ANY QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF LAW WARRANTING INTERFERENCE.' WE HAVE PERUSED THE ABOVE JUDICIAL PRONOUNCEMENT AND A FTER CONSIDE RING THE MATERIAL ON RECORD, WE HAVE NOTICED THAT A SSESSING O FFICER AND LD.C IT(A) HAS NOT ELABORATED AND DESCRIBED IN DETAIL THE I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 21 COMPLETE FACTS PERTAINING TO NOT SERV ING THE NOTICES UPON THESE LENDERS. THE ASSESSING OFFICER HAS NOT EVEN MADE REFERENCE TO ANY PARTICULAR WITNESS IN WHOSE PRESENCE THE PROCESS SERVER HAD TRIED TO LOC ATE THE ALLEGED LENDERS. WE HAVE ALSO CONSIDERED THAT THE ASSESSING OFFICER AN D THE LD.CIT(A) HAD NOT REBUTTED THE SUPPORTING MATERIAL AND EVIDENCES FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS AS ELABORATED IN THIS ORDE R. WE HAVE FURTHER PERUSED THE JUDICIAL PRONOUNCEMENT I N THE CASE OF CIT V APEX THERM PACKAGING P. LTD ITA NO.1070 OF 2013 VIDE WHICH THE HON'BLE HIGH COURT GUJARAT HELD THAT IN CASE FULL PARTICULARS, INCLUSIVE OF THE CONFIRMATION WITH THE NAME, ADDRESS AND PAN NUMBER, COPY OF THE INCOME TAX RETURNS, BALANCE SHEET, PROFIT AND LOSS ACCOUNT AND COMPUTATION OF THE TOTAL INCOME IN RESPECT OF ALL THE CREDITORS, LENDERS WERE FURNISHED AND THE LOANS WERE RECEIVED THROUGH CHEQUES, THE LOAN ACCOUNT ARE DULY R EFL ECTED IN THE BALANCE SHEET THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION. WE HAVE NOTICED THAT IN THE CASE OF THE ASSESSEE, THE CONFIRMATION WITH THE NAME, ADDRESS, COPY OF LEDGER ACCOUNT, COPY OF BALANCE SHEET AND PROFIT AND LOSS ACCOU NT, COPY OF INCOME TAX RETURNS AND COMPUTATION OF TOTAL INCOME IN RESPECT OF ALL THE PARTIES WERE FILED BEFORE THE ASSESSING OFFICER. WE HAVE ALSO PERUSED THE JUDICIAL PRONOUNCEMENT IN THE CASE OF CIT - RAJKOT VAYACHI CHANDRASHEKHAR NARSANGJI IN WHICH THE HON'BLE HIGH COURT OF GUJARAT HELD THAT IN CASE THE LOAN AMOUNT HAS BEEN REPAID BY THE ASSESSEE IN THE IMMEDIATE NEXT FINANCIAL YEARS THAT INDICATE THAT THE DEPARTMENT HAS ACCEPTED THE REPAYMENT OF LOAN WITHOUT PROVING INTO IT. WE HAVE ALSO I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 22 OBSERVED THA T I T WAS UND I SPUTED FACT THAT THE ASSESSEE HAD REPAID CONSIDERABLE AMOUNT OF THE LOANS TO THE LENDERS IN THE NEXT YEAR ALONG WITH THE INTEREST AMOUNT. THE ASSESSMENT RECORDS OF ALL THE LENDERS ARE AVAILABLE WITH THE INCOME TAX DEPARTMENT AND THE ASSESSIN G OFFICER COULD HAVE EASILY VERIFY THE SAME. WE HAVE ALSO NOTICED THAT N OT ANY LENDER HAS MADE DENIAL OF NOT EXTENDING ANY LOAN TO THE ASSESSEE COMPANY. WE HAVE ALSO NOTICE D THAT ALL THE TRANSACTIONS HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. THE SU BMISSION MADE BY THE ASSESSEE THAT THE NET WORTH OF THE LENDING COMPANIES WERE VERY HIGH , THE IDENTITY, CREDITWORTHINESS , GENUINENESS OF THE TRANSACTIONS HA VE NOT BEEN DISPROVED BY THE ASSESSING OFFICER WITH COGENT AND CONCRETE SUPPORTING EVIDENCES . TH E AMOUNTS IN QUESTION HAD BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES. HAVING REGARD TO THE FACT THAT THE PERMANENT ACCOUNT NUMBERS AND THE INCOME TAX RETURNS OF ALL THE INVESTORS HAD BEEN FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER COULD HAVE EASIL Y VERIFIED THE SAME. WE HAVE NOTICED THAT ALL THE TRANSACTIONS OF ADVANCES RECEIVED WERE MADE THROUGH BANK ONLY AND THE ASS ESSING O FFICER SHOULD HAVE VERIFIED THESE TRANSACTIONS WITH THE RELEVANT BANKS AND SHOULD HAVE MADE FURTHER INQUIRIES IN THIS REGA RD, WHICH S HE HAS FAILED TO DO SO. IN ALL THE CASES THE LENDERS WERE FILING THEIR RETURNS ON REGULAR BASIS AND COPIES OF THE RETURNS OF INCOME WERE PRODUCED FOR VERIFICATION IN SUPPORT OF HIS CASE. NOT ANY EVIDENCE HAD BEEN BROUGHT ON THE RECORD WHICH EVE N REMOTELY INDICATED THAT THE MONEY ORIGINALLY BELONGED TO THE ASSESSEE AND IT HAD RETURNED BACK TO THE ASSESSEE AGAIN. WE OBSERVED THAT DURING I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 23 THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED THE DETAILS OF THE PERSONS FROM WHOM LOAN HAD BEEN RECEIV ED STATING, NAME AND THE ADDRESS, PAN, COPY OF ACCOUNT CONFIRMATION, COPY OF ACKNOWLEDGEMENT OF ROI, COPY OF RELEVANT PORTION OF THEIR BANK ACCOUNT AND THE COPIES OF T H E AUDITED ANNUALS ACCOUNTS. FURTHER WE HAVE NOTICED THAT THE ASSESSING OFFICER HAD ISSUE D NOTICES U/S 133(6) OF THE ACT AND ALL THE NOTICES WERE DULY COMPLIED BY THE LENDERS. THUS, FROM THE FACTS NOTED HEREINABOVE, IT IS EVIDENT THAT THE ASSESSEE HAD PRODUCED ALL RELEVANT DETAILS IN ITS POSSESSION, NAMELY, NAMES, PERMANENT ACCOUNT NUMBERS, IN COME TAX RETURNS, AND BANK STATEMENTS OF ALL THE INVESTORS. THE LOWER AUTHORITIES HAVE MADE FINDINGS MOSTLY ON THE BASIS OF ASSUMPTION BASED ON OWN ANALYSIS WITHOUT DISPROVING THE SUPPORTING AND EVIDENCES PRODUCED BY THE ASSESSEE AS ELABORATED SUPRA IN T HIS ORDER. AFTER CONSIDERING THE ABOVE STATED FACTS AND JUDICIAL FINDINGS AS PER OUR CONSIDERED OPINION THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER. 1 0 . IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 30 - 03 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 30 /03 /2017 / COPY OF ORDER FORWARDED TO: - I.T.A NO. 491 /AHD/20 1 6 A.Y. 2012 - 13 PAGE NO M/S. SOFT TOUCH FABRICS PVT. LTD. VS. DCIT 24 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,