PRAKASH JHA, MUMBAI V. ACIT , CIRCLE 16(1), MUMBAI

ITA 5051/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4556 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 25-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: CHETAN KARIA
• Keywords: Unexplained cash credit; Business income; Depreciation; Business expenditure; Bad and doubtful debts; Capital receipt; TDS
• Section: 143(3); 133(6); 201; 208; 68

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , BEFORE SRI MAHAVIR SINGH, JM AND SRI MANOJ KUMAR AGGARWAL , AM AA YAKR APILA SAM . / ITA NO. 323/ MUM/ 201 6 ( INAQA - ARNA BAYA - / ASSESSMENT YEAR 201 1 - 12 ) AAYAKR APILA SAM . / ITA NO. 5051/ MUM/201 7 ( INAQA - ARNA BAYA - / ASSESSMENT YEAR 2012 - 13 ) PRAKASH JHA 201/ABCD, ABHISHEK, NEW LINK ROAD, ANDHERI (WEST), MUMBAI - 400 053 VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE 11(1), MUMBAI, ROOM NO. 432, AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI - 400 020 ( APILAAQAI - / APPELLANT) .. ( P`%YAQAAI - / RESPONDENT) . / PAN NO. AATPJ 3208 L / APPELLANT BY : SHRI CHETAN KARIA, AR / RESPONDENT BY : SHRI ABIRAMA KARTHIKEYAN, DR / DATE OF HEARING: 1 9 .03. 20 19 / DATE OF PRONOUNCEMEN T : 19.03.2019 AADOSA / O R D E R , / PER MAHAVIR SINGH, JM : THESE APPEAL S FILED BY THE ASSESSEE ARE ARISING OUT OF THE DIFFERENT ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) - 4 , MUMBAI [IN S HORT 2 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 CIT(A) ], APPEAL NO. CIT(A) - 4/ TR - 338/APPEAL(3)/JCIT.11(1)/2014 - 15 & CIT(A) - 4/IT - 52/ACIT.16(1)/2014 - 15 VIDE ORDER DATED 23.10.2015 & 11.04.2017 . THE ASSESSMENT S WERE FRAMED BY THE JOINT COMMISSIONER OF INCOME TAX , CIRCLE - 11(1 ), MUMBAI (IN SHORT J CIT/ IT O / AO) FOR THE A.Y S . 201 1 - 12 & 2012 - 13 VIDE ORDER DATED 30.03.2014 & 27.02.1015 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IN ITA NO. 5051/MUM/2017 FOR AY 2012 - 13 IS AGAINST THE OR DER OF CIT(A) CONFIRMING THE ACTION OF THE AO BY DISALLOWING THE DEPRECIATION AND SOCIETY CHARGES . FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND: - 1. TAXING OF THE RENTAL INCOME FROM THE OFFICES AS INCOME FROM HOUSE PROPERTY INSTEAD OF AS BUSINESS INCOME SHOWN BY THE APPELLANT. ACCORDINGLY, HE HAS ERRED IN DISALLOWING DEPRECIATION OF 11,37,686 AND SOCIETY CHARGES OF 2,44,772/ - . 3. THE LEARNED COUNSEL FOR THE ASSESSEE MOVED AN APPLICATION DATED 19.03 .2019 SEEKING WITHDRAWAL OF THIS APPEAL WHICH READ AS UNDER: - THE ASSESSEE ABOVE NAMED SUBMITS THAT ONLY ISSUE IN THE PRESENT APPEAL RE LATES TO HEAD UNDER WHICH INCOME ON LETTING OUT CERTAIN OFFICE PREMISES IS ASSESSABLE. THE ASSESSEE SUBMITS THAT THOUGH IN INITIAL FEW YEARS, INCOME COMPUTED UNDER THE HEAD BUSINESS INCOME IS LESS DUE TO EXPENSE INCURRED AND DEPRECIATION CLAIMED, HOWEVER, OVER A PERIOD OF TIME, STANDARD DEDUCTION OF 30% OF RENT RECEIVED UNDER THE HEAD 3 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 INCOME FROM HOUSE PROPERTY IS MORE BENEFICIAL TO THE ASSESSEE AS THE ISSUE IS LITIGATED EVER YEAR AND IS TAX NEUTRAL OVER A PERIOD OF TIME, THE ASSESSEE SEEKS RESOLVE THE CONT ENTIONS ISSUE BY WITHDRAWING HIS APPEAL . 4. AS PER THE ABOVE, ASSESSEE SEEKS WITHDRAWAL OF THIS APPEAL AND THE DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION FOR THE SAME. HENCE, THIS APPEAL OF ASSESSEE IS DISMISSED AS WITHDRAWN 5. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IN ITA NO. 323/MUM/2016 FOR AY 2011 - 12 IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTI ON OF THE AO IN NOT ALLOWING CREDIT FOR TDS AMOUNTING TO 89 LACS. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO. 1 : - 1. CONFIRMING THE ACTION OF THE LEARNED JT. CIT IN NOT ALLOWING CREDIT FOR TDS OF 89 LACS/ - FOR THE AY 2011 - 12, I.E . THE YEAR UNDER APPEAL. THE REASONS GIVEN BY HIM IN THIS REGARD ARE INCORRECT, ILLEGAL AND INVALID. ' 6. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THIS TDS CREDIT HAS BEEN ALLOWED BY AO AND HENCE, THE ASSESSEE IS NOT PRESSING THIS GROUND AND THE SA ME CAN BE DISMISSED AS NOT PRESSED. THE DEPARTMENTAL REPRESENTATIVE HAS NOT OBJECT ED TO THE SAME, HENCE, THE SAME IS DISMISSED AS NOT PRESSED . 7. THE SECOND ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE AO IN MAK ING ADDITION OF UNEXPLAINED 4 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 CASH CREDIT AMOUNTING TO 1 . 5 0 CRORES. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO 2: - 2. CONFIRMING THE ADDITION OF AN AMOUNT OF 1,50,000/ - AS UNEXPLAINED CASH CREDIT. THE REASON GIVEN BY HIM IN THIS REGARD ARE PU RELY BASED ON PRESUMPTIONS, CONJECTURES AND SURMISES AND ARE INCORRECT, ILLEGAL AND INVALID. 8. BRIEFLY NOTED FACTS BY THE AO ARE THAT THE ASSESSEE HAS SHOWN A LIABILITY OF 1.5 CRORES IN HIS INDIVIDUAL ACCOUNT AS AN ADVANCED AGAINST THE SALE OF EQUITY SHAR ES OF MAURYA SUGAR LTD . THE AO NOTED THAT THE ADVANCED WAS CLAIMED TO HAVE BEEN RECEIVED BY ASSESSEE FROM ONE KOLKATA BASED COMPANY NOPANY & SONS PVT. LTD. THE AO NOTED THAT THERE ARE INCONSISTENCIES IN RESPECT TO VARIOUS INFORMATION RECEIVED I.E. INFORMAT ION RECEIVED FROM NOPANY & SONS PVT. LTD AND AGREEMENT DATED 01.09.2010 BETWEEN THE ASSESSEE AND ONE MR. VIMAL KUMAR NOPANY REPRESENTING NOPANY & SONS PVT. LTD, THE PARTY WHO PAID THE SAID SUM OF 1.50 CRORES TO THE ASSESSEE. THE AO NOTED AS UNDER: - (A) FIRSTLY THE AGREEMENT WAS WITH THE COMPANY SHREE HANUMAN SUGAR & INDUSTRIES LTD. AND NOT WITH NOPANY & SONS PVT. LTD. HOWEVER THE PAYMENT OF 1.5 CRORES MADE TO THE ASSESSEE IS PARTLY BY NOPAY & SONS PVT LTD. ( 1.25 CRORE) AND PARTLY BY NOPANY INVESTMENT S PVT. LTD ( 25 LAKHS) (B) IN THE BOOKS OF THE ASSESSEE, THERE IS NO MENTION OF SHREE HANUMAN SUGAR & INDUSTRIES 5 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 PVT. LTD WHICH HIS ACTUALLY THE ONLY PARTY TO AGREEMENT. (C) THE SOURCE OF ADVANCE TO THE EXTENT OF 25 LAKHS IN SHOWN INCORRECT IN THE BOOK S AS IT WAS NOT FROM NOPANY & SONS PVT. LTD BUT FROM NOPANY INVESTMENTS PVT. LTD. (D) THE LETTER OF ARRANGEMENT DATED 01.09.2014 SUBMITTED BY THE ASSESSEE MENTIONS THAT M/S NAPONY SONS PVT LTD WOULD INVEST 3.51 CRORE IN SHARES OF COMPANY MAURYA SUGARS LT D. WHILE THE AGREEMENT SUBMITTED BY NSPL SHOWS THAT SHREE HANUMAN SUGAR INDUSTRIES PVT. LTD. WOULD PURCHASE ENTIRE SHARES OF MAURYA SUGARS LTD. FOR AN AMOUNT OF 15 CRORES. (E) THE AGREEMENT ALSO STATES THAT THE ASSESSEE WOULD FORFEIT THE INITIAL PAYMENT MADE IN CASE THE FURTHER PAYMENTS COULD NOT BE MADE ON SCHEDULE TIME. THERE WAS NO MENTION OF SUCH A CLAUSE IN THE LETTER OF ARRANGEMENT. 9. FURTHER, ACCORDING TO AO ON ISSUANCE OF COMMISSION BY ADIT (INVESTIGATION) WING, UNIT IV(3), KOLKATA, NOPANY & SONS P VT. LTD VIDE LETTER DATED 18.03.2014 HAD MENTIONED THAT THERE IS NO AGREEMENT BETWEEN THE COMPANY AND MR. PRAKASH JHA, THE ASSESSEE FOR PURCHASE OF SHARES. IN VIEW OF THE ABOVE, THE AO CONCLUDED THAT NONE OF TH ESE TRANSACTION S ARE EXPLAINED AND REASONABLE DUE TO THE FOLLOWING REASONS: - 6 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 (I) AS SEEN FROM ABOVE DISCUSSION, THE ASSESSEE AND THE OTHER PARTY NOPANY & SONS PVT. LTD ARE CONSTANTLY CHANGING THEIR STANCE WITH REGARD TO THIS TRANSACTION. AT ONE POINT, THE AGREEMENT FOR THIS TRANSACTION WAS NOT THERE AS PER THE ASSESSEE. THEN, ONCE THE OTHER PARTY PRODUCES AN AGREEMENT, SUDDENLY THE SAME AGREEMENT IS PRODUCED SUO MOTO BY THE ASSESSEE ALSO. LATER THE OTHER PARTY AGAIN DENIES ANY AGREEMENT. EVEN THIS SO CALLED AGREEMENT' IS CONTRADICTORY TO THE 'LETTER OF ARRANGEMENT' PRODUCED BY THE ASSESSEE INITIALLY. (II) THE AGREEMENT IS WITH A THIRD PARTY (SHREE HANUMAN SUGAR & INDUSTRIES LTD) AND PAYMENTS ARE FROM SOME OTHER PARTIES. FURTHER, THE AMOUNT FOR ADVANCE FOR SHARES IN A COMPANY WAS NOT PAID TO THE RELEVA NT COMPANY BUT PAID TO THE ASSESSEE. (III) TILL DATE THERE IS NO ACTUAL TRANSFER OF SHARES NOR ANY FURTHER PAYMENTS HAVE BEEN MADE ALTHOUGH ABOUT FOUR YEARS HAVE ELAPSED. ONLY A PAYMENT OF RS 1.5 CRORE WAS MADE FOUR YEARS BACK WITHOUT ANY AGREEMENT OR ANY CONSIDERATION. THIS PAYMENT IS LYING AS SUCH WITH THE ASSESSEE. THE WHOLE TRANSACTION IS HIGHLY UNLIKELY AND BEYOND ANY REASON. 7 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 (IV) THE CREDENTIALS OF THE PAYER COMPANY ITSELF ARE NOT SOUND. THE INFORMATIO N WITH REGARD TO THIS COMPANY M/ S NOPANY & SONS PV T. LTD AS DOWNLOADED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS (MCA) SHOWS PAID UP SHARE CAPITAL OF THIS COMPANY AT RS 4 LAKH; DATE OF LAST AGM WAS 28/09/2007; AND COMPANY STATUS (FOR FILING ) IS 'UNDER THE PROCESS OF STRIKING OFF'. SIGNIFICANTLY, T HE ASSESSEE HAS RECEIVED THIS AMOUNT OF RS 1.5 CRORE IN THE YEAR 2010 - 11. (V) REGARDING SOURCE OF INVESTMENT MADE BY NSPL, AND NOPARTY INVESTMENTS PVT LTD: FROM THE BANK STATEMENT OF NOPANY INVESTMENTS FM LTD, IT IS SEEN CASH DEPOSIT OF 5 LAKHS AND TRANSFE R FROM SISTER CONCERN OF 20 LAKHS WAS DONE IMMEDIATELY BEFORE WITHDRAWAL OF RS 25 LAKHS FROM THEIR BANK ACCOUNT. MOREOVER, THE RETURN OF INCOME FILED BY THE COMPANY M/S NOPANY & SONS PVT. LTD HAS SHOWN A TOTAL INCOME OF RS 74370 ONLY. IT IS HIGHLY UNLIKELY THAT THE COMPANY WITH AN ANNUAL INCOME OF RS 74370 WOULD GIVE AN ADVANCE OF RS 1.5 CRORE TO SH PRAKASH JHA FOR PURCHASE OF SHARES OF ONE OF THE COMPANY WHERE HE IS A DIRECTOR WITHOUT ANY AGREEMENT. (VI) THERE IS A FORFEITURE CLAUSE IN AGREEMENT AND SIGNIF ICANTLY THE SHARES HAVE NOT BEEN 8 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 TRANSFERRED TO TILL DATE IN LIEU OF ADVANCES RECEIVED AND NO FURTHER PAYMENTS HAVE BEEN MADE TO THE ASSESSEE. HENCE THE WHOLE TRANSACTION IS IN INDETERMINATE STATE WHICH NEITHER PARTY IS ABLE TO EXPLAIN. 10. ACCORDINGLY, THE A O TREATED THE ABOVE SAID SUM OF 1.50 CRORES CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE DURING THE FY 2010 - 11 RELEVANT TO AY 2011 - 12 AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). 11. THE CIT(A) CONFIRMED THE ACTION OF THE AO VIDE PARA 4.5 TO 4.10 AS UNDER: - 4.5 I HAVE CIRCUMSPECTED THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVE CAREFULLY CONSIDERED THE FINDING OF THE AD. AS WELL AS RIVAL SUBMISSION OF THE APPELLANT. THE APPELLA NT MAINTAINS TWO SET OF ACCOUNTS ONE IN HIS OWN NAME AND THE OTHER IN THE NAME OF P J. PRODUCTIONS. IN INDIVIDUAL BALANCE - SHEET, ASSESSEE HAS SHOWN LIABILITY OF RS 30.07 17,524/ - UNDER THE HEAD 'CURRENT LIABILITIES'. IN SCHEDULE 3, IT IS SEEN THAT THESE CU RRENT LIABILITIES INCLUDE ADVANCE AGAINST SHARE CAPITAL OF MAURYA SUGAR OF RS.1,50,00,000/ - . SCHEDULE 5 REVEALS THE INVESTMENT OF RS.14,10,43,071/ - AND SCHEDULE 6 REVEALS THE ADVANCES AND DEPOSITS OF RS.31.61,62,311/ - . DURING THE COURSE OF ASSESSMENT PROCE EDINGS, WHEN A.O. 9 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 HAS ASKED THE APPELLANT TO FURNISH DETAILS OF SHAREHOLDERS, MODE OF RECEIPT ALONGWITH COPY OF AGREEMENT VIDE QUESTIONNAIRE DATED 10.12.2013, ASSESSEE HAS SUBMITTED A LETTER DATED 16.12.2013 STATING THAT HE IS NOT A SHAREHOLDER AS WELL AS DIRECTOR OF THIS COMPANY. HENCE, HE IS UNABLE TO PROVIDE THE SHAREHOLDING PATTERN OF THIS COMPANY HOWEVER, COPY OF LETTER OF ARRANGEMENT WITH THIS COMPANY ALONGWITH MODE OF RECEIPT IS ENCLOSED AS PER ANNEXURE 'C'. IT IS IMPORTANT TO MENTION THAT LD. A.O '1 DE QUESTIONNAIRE DATED 28 10.2013 HAS SPECIFICALLY ASKED THE APPELLANT TO FURNISH DOCUMENTARY EVIDENCE OF RS,1.5 CRORE SHOWN AS ADVANCE AGAINST SHARE CAPITAL OF MAURYA TV (ASSESSEE SAYS THAT LATER ON ADVANCE AGAINST SATE OF SHARES OF MAURYA SUGAR LTD) AO H AS ALSO ASKED THE EXACT NATURE OF SUCH ADVANCE. APPELLANT WAS ALSO ASKED TO EXPLAIN AS TO WHO HAD PAID THE AMOUNT OF RS.1,50 , 00,000/ - ACCORDING TCTHE LETTER DATED 16.12.2013, MIS.NOPANY & SONS PVT. LTD. WOULD BUY SHARES OF MAURYA 'SUGAR LTD. HELD AS INVEST MENT BY THE APPELLANT FOR AN AMOUNT OF RS.3.51 LAKHS. OUT OF THIS AS CLAIMED, AMOUNT OF PSI .50,00.000/ - WAS RECEIVED BY THE ASSESSEE. THUS, THERE IS AMBIGUITY IN THE ACCOUNTS ITSELF BECAUSE AS PER THE INDIVIDUAL BALANCE - SHEET. ADVANCE HAS BEEN RECEIVED AG AINST SHARE CAPITAL OF MAURYA SUGAR LTD 10 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 WHEREAS AS PER SCHEDULE 6 THE ADVANCE WITH MAURYA SUGAR LTD. IS ONLY OF RS.17.18,435/ - AND FURTHERMORE, IT IS NOT UNDERSTOOD AS TO WHY SUCH ADVANCE HAS BEEN SHOWN IN THE INDIVIDUAL BALANCE - SHEET FOR ALLOTMENT OF SHAR E CAPITAL OF ANOTHER COMPANY. IF ASSESSEE WAS TO SELL THE SHARES OF MAURYA SUGAR LTD SAME COULD HAVE BEEN COMPLETED IN THIS YEAR ITSELF BUT IT IS FOUND FROM THE EVIDENCES ON RECEIVED THAT NOTHING HAS HAPPENED THOUGH ADVANCE HAS BEEN SHOWN AGAINST THE SHARE OF ANOTHER COMPANY. FURTHER, IT IS PERTINENT TO MENTION THAT LD A 0 HAS RIGHTLY UNEARTHED THE FACT THAT NO DETAILS OF SHARE TRANSFER TO SUCH COMPANY NAMELY. M / S.NOPANY & SONS PVT. LTD HAS BEEN FILED WITH DOCUMENTARY EVIDENCES. WHEN ENQUIRY WAS MADE FROM M /S.NOPANY & SONS PVT. LTD. THIS COMPANY HAD NOT GIVEN REPLY WITHIN EXPECTED TIME AND HAD RESPONDED BELATEDLY VIDE LETTER DATED 27.02.2014 WHICH WAS FULL OF DISCREPANCY HENCE A.O HAS RIGHTLY DOUBTED THE NATURE OF ADVANCES AND GENUINENESS OF THE TRANSACTIONS IT CAN BE SEEN FROM THE REPLY OF M/S. NOPANY & SONS PVT. LTD. THAT IT HAS ENCLOSED AN AGREEMENT DATED 01.09.2010 WHICH IS DIFFERENT FROM THE LETTER OF ARRANGEMENT FURNISHED BY THE APPELLANT VIDE HIS LETTER DATED 16 . 12.2013. ALL THESE FACTS REVEAL THAT THE TRANSACTION IS DUBIOUS IN NATURE. THE LD. A.O. HAS RIGHTLY HELD THAT ONLY 11 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 BECAUSE OF A CONCOCTED STORY A LOOK HAS BEEN REFLECTED AS IF TRANSACTION IS GENUINE WHEREAS THE EMBEDDED FACTS REVEAL THE IN GENUINENESS OF TRANSACTION. VIDE LETTER DATED 16.12.2013 , ASSESSEE HAD SUBMITTED NO SUCH AGREEMENT AND ONLY A COPY OF LETTER OF ARRANGEMENT' WAS SUBMITTED HOWEVE R, WHEN ENQUIRY WAS MADE FROM M/ S NOPANY & SONS PVT LTD. U/S.133(6) AND ONE AGREEMENT DATED 01 092010 WAS RECEIVED LATER ON 07.03.2014. ASSESSEE HAS SU BMITTED THE COPY OF THE SAME AGREEMENT IN DAK/TAPAL. THUS. I FIND MERIT IN THE FINDING OF THE A.O. THAT INITIALLY THERE WAS NO SUCH AGREEMENT AND LATER ON IT WAS SUBMITTED WHEN QUERY WAS RA,SED AND INFORMATION WAS RECEIVED. OBVIOUSLY, THERE IS SOMETHING HI DDEN WHICH GIVES RISE TO THE NEGATIVE PRESUMPTION. ASSESSEE HAS PRODUCED THIS AGREEMENT ONLY AFTER THE SAME WAS RECEIVED THROUGH ENQUIRY. 4.6 FURTHER, IT IS IMPORTANT TO TAKE NOTICE OF THE FACT THAT THERE IS INCONSISTENCY OF THE FACTS INITIALLY REVEALED BY THE APPELLANT AND L ATER ON FOUND BY THE A.O. FIRSTLY, AGREEMENT DATED 01 .09.2010 WAS WITH ANOTHER COMPANY, NAMELY. SHREE HANUMAN SUGAR INDUSTRIES PVT. LTD. AND NOT WITH MIS. NOPANY & SONS PVT. LTD. WHEREAS THE PAYMENT OF RS . 1. 50 LAKHS HAS BEEN SHOWN BY T HE ASSESSEE PARTLY IN THE NAME OF MIS 12 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 NOPANY & SONS FM. LTD. I.E.RS.1,25 , 00,000/ - AND PARTLY IN THE NAME OF MIS NOPANY INVESTMENT PVT. LTD. OF RS 25 , 00,000/ - . THIS FACT REVEALS SOMETHING ELSE THAN PROJECTED BY THE APPELLANT IN HIS BALANCE - SHEET OR ACCOUNTS SUBMITTED TO THE INCOME - TAX DEPARTMENT. IN THE BOOKS OF ACCOUNTS, AS RIGHTLY OBSERVED BY THE A.O., THERE IS NO MENTION OF ROLE OF SHREE HANUMAN SUGAR INDUSTRIES PVT. LTD. WHO IS THE ONLY PARTY TO THE SAID AGREEMENT. THIS FACT CLEARLY REVEALS THAT APPELLAN T HAS CONCEALED THE FULL AND TRUE INFORMATION RELATED TO SUCH TRANSACTION. FURTHER, A.O. HAS RIGHTLY UNEARTHED THE FACT THAT SOURCE OF ADVANCE S TO THE EXTENT OF RS.25,00,000/ - HAS BEEN SHOWN IN THE NAME OF M / S.NOPANY & SONS PVT. LTD. BUT AS PER THE AGREEME NT AND FACTS NOT PROPERLY DISCLOSED BY THE APPELLANT REVEALS THAT THIS AMOUNT WAS RECEIVED FROM ANOTHER COMPANY NAMELY. M S NOPANY LNVESSTMENT PVT LTD SIMILARLY, AN IMPORTANT POINT HAS ALSO BEEN UNEARTHED BY THE A.O THAT THE 'LETTER OF ARRANGEMENT DATED 01 .09.2015 SAYS THAT M/S.NOPANY & SONS PVT. LTD. WOULD INVEST RS.3.51 CRORES IN THE SHARES OF ANOTHER COMPANY, M/S.MAURYA SUGARS LTD. WHEREAS THE AGREEMENT DATED 01. 09 . 2010 SUBMITTED BY M/S.NOPANY & SONS PVT LTD, SHREE HUMAN SUGAR INDUSTRIES LTD. WOULD PURCHA SE THE ENTIRE SHARES OF M/S.MAURYA SUGARS LTD. FOR 13 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 AN AMOUNT OF RS. 15 CRORES. FURTHER, AN IMPORTANT POINT IS TO BE TAKEN INTO ACCOUNT THAT SAID AGREEMENT DATED 01.09.2010 PROVIDES THAT ASSESSEE WOULD FORFEIT THE INITIAL PAYMENT RECEIVED BY HIM IN CASE FUR THER PAYMENT COULD NOT BE MADE AT THE SCHEDULED TIME. THERE WAS NO MENTION OF SUCH CLAUSE IN THE 'LETTER OF ARRANGEMENT'. THESE FACTS CLEARLY PROVE THAT AN AMOUNT OF RS.1,50,00,000/ - HAS BEEN ARRANGED IN SUCH A WAY THAT IT CAN GIVE COLOUR OF ADVANCES FROM A COMPANY WHICH IS DUBIOUS IN NATURE AND IT HAS BEEN PROVIDED IN THE AGREEMENT THAT IN CASE OF FAILURE OF FURTHER PAYMENTS, SUCH AMOUNT WOULD BE FORFEITED. THIS FACT PROVES THAT THIS AMOUNT HAS BEEN ARRANGED BECAUSE IN CASE OF FORFEITURE IN SUBSEQUENT YEAR , IT WOULD BE SHOWN AS CAPITAL RECEIPT AND NOT AS REVENUE RECEIPT, HENCE THIS FACT GIVES CLUE THAT IN REALITY THIS AMOUNT OF RS.1 , 50 , 00,000/ - IS NOT AT ALL THE ACTUAL ADVANCE FROM ANY SUCH COMPANY. SUCH ARRANGEMENT HAS BEEN MADE TO CONVERT UNACCOUNTED MONE Y AS WHITE MONEY AND ATTEMPT HAS BEEN MADE TO INTRODUCE SUCH UNEXPLAINED MONEY IN THE FORM OF ADVANCES FOR SHARE OF ANOTHER COMPANY HENCE INITIALLY FULL FACTS WERE NOT DISCLOSED AND THERE IS ROUND ABOUT NARRATIONS WHEN GENUINENESS OF T RANSACTION WAS DOUBTE D BY THE AO AND NO CONVINCING EVIDENCE WAS FURNISHED EXCEPT THE 14 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 'JUSTIFICATORY EVIDENCES' BOUND TO BE CREATED OR GOT CREDITED OF SUCH ARRANGEMENT, A.C. HAD ISSUED COMMISSION TO ADIT (INVESTIGATION) UNIT IV(3), KOLKATA. WHEN ENQUIRY WAS MADE, IT WAS FOUND T HAT M/S. NOPANY & SONS PVT. LTD COULD NOT EXPLAIN THE SOURCE SHOWN IN ITS BANK ACCOUNTS WHEREFROM CHEQUE HAS BEEN ISSUED NOR COULD GIVE REPLY TO THE SPECIFIC QUERIES RAISED BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. FURTHER, IT CANNOT LOSE SIG HT THAT INCOME OF THIS COMPANY IS NOT SUFFICIENT FOR GIVING SUCH ADVANCES OF RS.1,50,00,000/ - . 4.7 FURTHER, AN IMPORTANT POINT ALSO DESERVES SPECIAL ATTENTION THAT AFTER PARTING WITH SUCH AMOUNT OF RS. 1,50,00,000/ - , M/S. NOPANY & SONS PVT LTD. HAS FORGOTT EN IT AND HENCE NO SHARE WAS TRANSFERRED TO THAT COMPANY, HENCE THE OBSERVATION OF THE A.O. DESERVES APPROVAL THAT INVESTING COMPANY HAS NO MEANS TO ADVANCE SUCH HUGE SUM AND THEN ALLOW IT TO BE FORGOTTEN TILL THAT DATE. AT ONE POINT OF TIME, IT WAS STATED THAT THERE WAS NO AGREEMENT FOR SUCH TRANSACTION BUT ONCE THAT PARTY HAS SUBMITTED A SO - CALLED AGREEMENT, THEN INSTANTLY ASSESSEE HAS ALSO PRODUCED A COPY OF THE SAME AND SUBMITTED IN THE DAK SILENTLY. THIS SO CALLED AGREEMENT IS OBVIOUSLY CONTRADICTING T HE FACTS 15 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 MENTIONED IN THE 'LETTER OF ARRANGEMENT' SUBMITTED BY THE APPELLANT. FURTHER, AT THE COST OF REPETITION, IT HAS TO BE MENTIONED THAT THE AGREEMENT DATED 01.09.2010 IS WITH ANOTHER PARTY NAMELY, SHREE HANUMAN SUGAR INDUSTRIES LTD. WHEREAS SUCH ADVA NCE IS FROM ANOTHER PARTY. THIS HAS NOT BEEN REFLECTED IN SCHEDULE 3 OF NOTES TO ACCOUNTS OR ANYWHERE IN THE ACCOUNTS SUBMITTED TO THE DEPARTMENT. ONLY WHILE CLARIFYING OR SUBMITTING THE REPLY, APPELLANT HAS SHOWN SUCH FACTS. IT IS ALSO VERY IMPORTANT TO R EITERATE THAT TILL THE DATE THE ASSESSMENT ORDER WAS PASSED, THERE WAS NO ACTUAL TRANSFER OF SHARES NOR WAS ANY FURTHER PAYMENT MADE THOUGH 4 YEARS HAD ALREADY ELAPSED. IT IS NOT UNDERSTOOD AS TO HOW ONE COMPANY CAN ADVANCE SUCH A HUGE AMOUNT OF RS 1,50,00 ,000/ - WITHOUT ANY CONSIDERATION HENCE IT IS FOUND BEYOND DOUBT THAT THIS AMOUNT OF RS.1,50,00,000/ - IS NOT PROPERLY EXPLAINED. ONLY ARRANGEMENT HAS BEEN MADE BY UTILIZING THIS FLOATED COMPANY NAMELY. M/S. NOPANY & SONS PVT. LTD. U. A.O. HAS RIGHTLY MENTIO NED AT PAGE NO.10 OF THE ASSESSMENT ORDER THAT CREDENTIALS OF THIS COMPANY ITSELF IS DOUBTFUL. 4.8 THE INFORMATION DOWNLOADED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, AS OBSERVED BY A.O., SHOWS THE PAID - UP SHARE 16 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 CAPITAL IS OF ONLY RS.4 , 00,000 / - A ND LAST DATE OF ACM WAS 28.09.2007 FURTHER A.O. HAS RIGHTLY NOTED THE CURRENT STATUS OF THIS COMPANY FROM THE WEBSITE (FOR E - FILING) AC 'UNDER THE PROCESS OF STRIKING OFF' WHEREAS ASSESSEE HAS SHOWN TO HAVE RECEIVED AN AMOUNT OF RS.1,50,00,000/ - IN F.Y.201 0 - 11. THIS FACT PROVES BEYOND DOUBT THAT THIS COMPANY NAMELY, M/S. NOPANY & SONS PVT. LTD. HAS BEEN UTILIZED AS CONDUIT. A.O HAS RIGHTLY NOTED THAT THERE IS A FORFEITURE CLAUSE IN AGREEMENT AND NO SUCH SHARE HAS BEEN TRANSFERRED EITHER BY M/S.MAURVA SUGAR LTD. OR BY ANY OTHER COMPANIES ON BEHALF OF THE APPELLANT IN LIEU OF SUCH ADVANCES AND FURTHER, THERE IS NO REPAYMENT TO THE INVESTING COMPANY, HENCE IT IS A CASE WHERE ATTEMPT HAS BEEN MADE TO GIVE WHITE COLOUR TO THE UNEXPLAINED' MONEY. IT IS NOT OUT OF PLACE TO STATE IN MANY SUCH CASES IT HAS BEEN FOUND BY THE DEPARTMENT AND ALSO WIDELY KNOWN AND OF COMMON KNOWLEDGE THAT CASH IS GIVEN TO THE VARIOUS AGENTS OR INTERMEDIARIES AND CHE QUES OR DDS ARE RECEIVED FOR UTILI ZING OWN MONEY AFTER GIVING WHITE COLOUR WITH THE HELP OF 'JUSTIFICATORY EVIDENCES.' THEREFORE, THE VARIOUS OBSERVATIONS, NARRATION OF FACTS AND VARIOUS EVIDENCES EMBEDDED TO SUCH JUSTIFICATORY EVIDENCES REVEALS THAT AN AMOUNT OF RS.1.50 CRORES IS NOT AT ALL FROM A GENUINE COMPANY DOING ANY SORT OF 17 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 ACTUAL BUSINESS AND REALLY IN EXISTENCE. IT APPEARS THAT SOME PERSONS ARE THERE WHO USED TO TAKE BENEFIT OF CREATED JUSTIFICATORY EVIDENCES AND INVOLVE IN SUCH BOGUS TRANSACTIONS. IT HAS BEEN FOUND OUT BY THE DEPARTMENT AND OTHER INVESTIGATING AGENCIES THAT THERE ARE A HUGE NUMBER OF BOGUS COMPANIES FLOATED BY HAWALA ENTRY OPERATORS AND UTILIZED THEIR NAME FOR GIVING SUCH ENTRIES OR ADVANCES, LOANS OR SHARE APPLICATION MONEY THE FACTS OF THIS CASE AS HIGHLIGHTED HEREINABOVE IS NOT DIFFERENT TO SUCH COM P ANIES WHO ARE INVOLVED IN HAWALA TRANSACTIONS OR ACCOMMODATION ENTRY PROVIDING BUSINESS. THEREFORE, WHILE CONSIDERING SUCH A CASE AND GOING TO THE DEPTH OF THE MATTER, ONE HAS TO ALSO TAKE INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE CASE ALONGWITH DOCU MENTARY EVIDENCES. IN THE CASE OF CIT VS NIVEND VANIJYA CO. NIYOJAN LTD. (2003) 263 ITR 623 (CAL), IT WAS HELD THAT AN ASSESSEE HAS TO ESTABLISH NOT ONLY THE IDENTITY OF THE CREDITOR AND REAL CREDITWORTHINESS BUT HAS ALSO TO ESTABLISH THE GENUINENESS OF TH E TRANSACTIONS. MERELY BY FILING COPY OF I.T. RETURN IS NOT SUFFICIENT. 4.9. IT IS ALSO IMPORTANT TO POINT OUT THAT VIDE LETTER NO. DCIT. 11(1 )/PRAKASH JHA / 2013 - 14 DATED 19.03.2014. THE LEARNED A.O. VIDE QUESTION NO.2, HAS VERY SPECIFICALLY POINTED OUT 18 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 TH E VARIOUS DISCREPANCIES AMBIGUITY AND ALSO THE FACT EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS REVEALING THAT M/S.NOPANY & SONS PVT. LTD. WAS UNDER THE PROCESS OF STRIKING OFF' FROM THE REGISTRAR OF COMPANIES AND THERE WAS ONLY PAID UP CAP ITAL OF THIS COMPANY OF RS.4,00,000 - AND LAST AGM WAS CONDUCTED ON 2809.2007 THIS FACT REVEALS THAT MIS.NOPANY & SONS PVT. LTD. HAS BEEN FLOATED FOR UTILIZING AND HENCE THE RELATED PERSON OF THE COMPANY USED TO GIVE SOME REPLY APPELLANT HAS NOT PRODUCED AN Y SUCH EVIDENCE, SUBSEQUENTLY IN THE APPELLATE PROCEEDINGS TO DEMONSTRATE THAT MIS NOPANY & SONS PVT. LTD. IS THE REAL AND GENUINE COMPANY AND HAS SUBSEQUENTLY DONE GENUINE TRANSACTIONS. THEREFORE, ONE CANNOT BE ALLOWED TO BE PREYED OF SUCH JUSTIFICATORY E VIDENCES IGNORING THE HIDDEN FACTS WHICH HAS NOT BEEN DISCLOSED BUT SOME OF THE FACTS ARE VISIBLE LACK OF CREDITWORTHINESS OF THE COMPANY UNDER REFERENCE IS ALSO VISIBLE. MERELY ESTABLISHING THE IDENTITY OF THE CREDITOR IS NOT ENOUGH VIDE SHANKAR INDUSTRIE S VS. CIT (1978) 114 ITR 689 (CAL); C. KANT & CO. VS. CIT (1980) 126 ITR 63 (CAL): PRAKASH TEXTILE AGENCY VS CIT. (1080) 121 ITR 890 (CAL); ORIENTAL WIRE INDUSTRIES PVT. LTD. VS. CIT. (1981) 131 FIR 688 (CAL); CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. LTD . VS. CIT (1991) 187 IT R 596. 599 (CAL); M. A. UNNEERI 19 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 KUTTY VS. CIT (1992) 198 ITR 147 150 (KER), SPECIAL LEAVE PETITION DISMISSED BY THE SUPREME COURT (1993) 201 ITR (ST.) 23 (SC); CIT VS. PRECISION FINANCE PVT. LTD. (1994) 208 ITR 465, 470 (CAL). MERE F ILING OF CONFIRMATORY LETTERS DOES NOT DISCHARGE THE ONUS THAT LIES ON THE ASSESSEE VIDE SHARATI PVT. LTD. VS. CIT (1978) 111 ITR 951 (CAL); CIT VS. W. J. WALKER & CO. (1979)117 ITR 690, 694 (CAL); CIT VS. UNITED COMMERCIAL & INDUSTRIES CO. (P) LTD. (1991) 187 ITR 596. 599 (CAL). FURTHER, MERE FURNISHING OF THE PARTICULARS IS NOT ENOUGH. MERE PAYMENT BY ACCOUNT PAYEE CHEQUE IS ALSO NOT SACROSANCT NOR CAN IT MAKE A NON - GENUINE TRANSACTION GENUINE ONE VIDE CIT VS. PRECISION FINANCE PVT. LTD. (1994) 208 ITR 46 5. 470,471 (CAL.) CF. NIZAM WOOK AGENCY VS. CIT (1992) 193 ITR 318, 320 (ALT). 4.10 DURING THE COURSE OF APPELLATE PROCEEDINGS. LD. A.R. HAS VEHEMENTLY ARGUED THAT LD. A.O. HAS UTILIZED THE REPORT OF THE ADIT (INVESTIGATION). UNIT IV(3), KOLKATA DATED 21 0 3.2014 WITHOUT GIVING OPPORTUNITY TO COUNTER THE REPORT AND CROSS - EXAMINE THE REPORTER. THIS STAND OR COUNTER ARGUMENT OR STATEMENT IS FOUND MEANINGLESS OR WITHOUT LEGS BECAUSE OF THE FACTS AND EVIDENCES ON RECORD ON 24.02.2014, A.R. OF THE APPELLANT WHO W AS ATTENDING THE 20 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 ASSESSMENT PROCEEDINGS AND REPRESENTING THE APPELLANT WAS CONFRONTED WITH THE INFORMATION RECEIVED FROM M/S.NOPANY & SONS PVT. LTD. THROUGH ADIT (INVESTIGATION) UNIT IV(3), KOLKATA. THE LD. A.O HAD VERY CATEGORICALLY POINTED OUT TO THE LD. AR. THAT M/S.NOPANY & SONS PVT. LTD. HAS STATED BEFORE THE ADIT THAT THERE WAS NO AGREEMENT FOR PURCHASE OF SHARES OF AN Y COMPANY WITH MR. PRAKASH JHA APPELLANT IN RESPECT OF SIGNING A COPY A COPY OF AGREEMENT VIDE LETTER DATED 24.02.2014 TO THE OFFICE OF THE A.O. FURTHER, IT IS IMPORTANT TO HIGHLIGHT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 24.03.2014, LD. A.O HAS BROUGHT TO THE NOTICE OF THE APPELLANT THAT THE COMPANY, M/S.NOPANY & SONS PVT. LTD HAS NOT EXPLAINED LE SOURCE OF ADVANCES AND THEI R RETURN OF INCOME SHOWS ONLY A MEAGRE AMOUNT OF RS.74370/ - . IT WAS ALSO BROUGHT TO THE NOTICE OF THE APPELLANT THAT CREDITWORTHINESS OF THIS COMPANY IS DOUBTFUL. APPELLANT WAS THEREFORE FURTHER ASKED TO EXPLAIN AND GIVE COMPREHENSIVE REPLY. IN COMPLIANCE, THE THEN LD. AR., SHRI ANIL SEKHRI, MS. ADITI AND MR KISHOR REPRESENTING THE APPELLANT HAD FILED THE REPLY ON 26 . 03 . 2014. AD. HAS CONSIDERED THE REPLY/EXPLANATION AS UNSATISFACTORY BECAUSE THE SOURCE OF ADVANCES AND GENUINENESS OF ENTIRE STORY OR TRANSACTI ONS HAS NOT BEEN FOUND BY HIM TO BE PROVED BEYOND 21 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 DOUBT THEREFORE, IT CANNOT BE ARGUED THAT INFORMATION OR REPORT RECEIVED FROM ADIT (INVESTIGATION) UNIT IV(3), KOLKATA HAS BEEN UTILIZED WITHOUT GIVING OPPORTUNITY TO THE APPELLANT. THUS. I FIND NO MERIT IN SUCH ARGUMENT ADVANCED BY THE LD. A R. RATHER IT IS FACTUALLY INCORRECT TO STATE 'IT IS STRONGLY SUBMITTED THAT THIS REPORT OR THE CONTENTS THEREOF WERE NEVER PUT TO THE APPELLANT PRIOR TO THE PASSING OF THE ASSESSMENT ORDER. EVEN THE ASSESSMENT ORDER SAY S THAT THESE WERE PUT TO THE APPELLANT'. THIS STATEMENT MADE DURING THE COURSE OF APPELLATE PROCEEDINGS VIDE LETTER DATED 23.10.2014 BY LEARNED ADVOCATE, SHRI HIRO RAI IS FACTUALLY INCORRECT, UNTRUE AND RATHER MISREPRESENTING ONE BECAUSE AFTER RECEIPT OF S UCH REPORT/INFORMATION, LD. A.O. HAS DULY CONFRONTED AND DISCLOSED THE BACKGROUND FACT BASED ON REPORT/ COMMUNICATION OF ADIT (INVESTIGATION) UNIT LV(3). KOLKATA. AGGRIEVED, NOW, ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 12. BEFORE US, THE LEARNED COUNS EL FOR THE ASSESSEE FIRST OF ALL TOOK US THROUGH THE FACTS OF THE CASE. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO INDEX OF THE PAPER BOOK FILED BY THE ASSESSEE STATING THAT ALL THE DOCUMENTS FORM PART OF THE RECORD BEFORE THE AO AND BEFORE THE CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUGH THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2011, WHEREIN CURRENT LIABILITIES OUTSTANDING IS 11,77,22,353/ - AND WHICH ARE GIVEN TO SCHEDULE 22 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 3. THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUGH SCHEDULE 3 AND THE RELEVANT DETAILS GIVEN IN SCHEDULE 3 READS AS UNDER: - SCHEDULE 3 CURRENT LIABILITIES CAPITAL IN PRAKASH JHA PRODUCTION 91,453,747 OTHER RECEIPTS 300,000 CAPITAL IN HOLICOW PICTURES 10,968,595 ADV. AG AINST SHARE CAPITAL OF MAURYA T 15,000,000 THEN, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO SCHEDULE 5, WHEREIN THE INVESTMENTS IN SHARES IS AT 10,03,31,205/ - AND ADVANCE GIVEN TO MAURYA SUGAR PVT. LTD IS AT 17,18,435/ - . THE LEARNED COUNSEL FOR THE ASSESSE E PARTICULARLY D REW OUR ATTENTION TO SCHEDULE 3, WHEREIN ADVANCE RECEIPT AGAINST SHARE CAPITAL OF MAURYA SUGAR LTD. IS AT 1.50 CRORES. THESE FACTS ARE FROM THE INDIVIDUAL BALANCE SHEET OF THE ASSESSEE. THE ASSESSEE HAS MAINTAINED THE ASSESSEE'S PRODUCTIO N BALANCE SHEET I.E. PRAKASH JHA PRODUCTION AND THE ASSESSEE DREW OUT ATTENTION TO PAGE 4 OF ASSESSEES PAPER BOOK, WHEREIN THIS BALANCE SHEET IS ENCLOSED AND LOANS AND ADVANCED AND DEPOSITS ARE TO THE TUNE OF 6,18,92,254/ - AND THE RELEVA NT DETAILS OF LO ANS AND ADVANCE ARE GIVEN IN SCHEDULE 7, WHEREIN THE LOANS, ADVANCES AND DEPOSITS WITH MAURYA SUGAR PVT. LTD IS TO THE TUNE OF 1,83,40,000/ - AND MAURYA TV PVT. LTD. TO 1,12,82,354/ - . THE LEARNED COUNSEL FOR THE ASSESSEE THEN TOOK US THROUGH THE MEMORAN DUM OF UNDERSTANDING ENTERED INTO BETWEEN THE MAURYA SUGAR LTD., THE ASSESSEE PRAKASH JHA AND SHRI HANUMAN SUGAR AND INDUSTRIES LTD, WHEREBY MAURYA SUGAR LTD. WAS TO BE TAKEN OVER BY 23 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 SHRI HANUMAN SUGAR AND INDUSTRIES LTD AND THE LEARNED COUNSEL FOR THE ASS ESSEE DREW OUR ATTENTION TO TERMS AND CONDITIONS NO. 1 TO 7 WHICH READS AS UNDER: - TERMS AND CONDITIONS 1. THE SELLER IS IN CONTROL AND MANAGEMENT OF MAURYA SUGAR LIMITED HAVING ITS REGISTERED OFFICE AT 201 - A&B, ABHISHEK, OFF NEW LINK ROAD, ANDHERI (W), M UMBAI - 400 053. 2. AS CONSIDERATION FOR THE SALE AND TRANSFER OF THE SALE SHARES BY THE SELLERS, THE PURCHASER SHALL PAY TO THE SELLERS AN AGGREGATE SUM OF 15,00,00,000/ - (RUPEES FIF T EEN CRORE ONLY) PAYABLE IN THE MANNER AS SET FORTH IN CLAUSE 4 OF THIS M EMORANDUM. 3. THE PURCHASE PRICE SHALL BE PAID IN FULL, WITHOUT ANY ADJUSTMENT, DEDUCTION, SET OFF OR COUNTERCLAIM. 4. THE PURCHASE PRICE TO BE PAID AND TRANSFER OF SHARE SHALL TAKE PLACE IN THE FOLLOWING MANNER. INSTALLMENT ON OR BEFORE AMOUNT (IN (RS) TO BE USED FOR REPAYMENT OF UNSECURED LOAN TO BE USED FOR ACQUISITION OF SHARES % OF SHARE TRANSFER DOWN PAYMENT / EARNEST MONEY DEPOSIT AT THE TIME OF MOU 50,00,000 50,00,000 NIL NIL 24 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 1 ST 15 TH SEPT, 2010 4,00,00,000 1,87,87,155 2,12,12,845 NIL 2 ND 30 TH SEPT,2010 3,5000,000 NIL 3,50,00,000 45% 3 RD 30 TH NOV, 2010 2,00,00,000 NIL 2,00,00,000 NIL 4 TH 30 TH DEC, 2010 2,00,00,000 NIL 2,00,00,000 NIL 5 TH AND LAST 31 ST JAN, 2011 3,00,00,000 NIL 4,00,00,000 55% TOTAL 15,00,00,000 2,37,87,155 12,62,12,845 100% 5. THE SHARE SHALL BE TRANSFERRED IN THE AFORESAID MANNER ONLY I.E. THE TRANSFER OF SHARE SHALL NOT TAKE PLACE PROPORTIONATELY IN ANY CASE. 6. THE PURCHASER SHALL KEEP THEIR LAND & BUILDING SITUATED AT KOLKATA AS MORTGAGEE OF THE EQUAL VALUE FOR LAST TH REE INSTALLMENTS . 7. THE SALE CONSIDERATION OF 15 CRORES SHALL INCLUDE CONSIDERATION FOR REPAYMENT OF SECURED / UNSECURED LOANS AND ANY OTHER LIABILITIES OF THE COMPANY. AND THE FIRST AND SECOND PART SHALL REPAY ALL LIABILITIES INCLUDING SECURED/ UNSECU RED LOAN AND PRODUCE NO DUES/ OBJECTION CERTIFICATE FROM THE RESPECTIVE LENDER AND CREDITORS IF ANY. 13. ACCORDING TO THE LEARNED COUNSEL, THIS MEMORANDUM OF UNDERSTANDING HAS CREATED DOUBT IN THE MINDS OF REVENUE AUTHORITIES I.E. AO AND THE CIT(A) AND THEY C OULD NOT UNDERSTAND THE COMMERCIAL TRANSACTIONS ENTERED INTO BETWEEN THESE TWO PARTIES. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT VIDE CLAUSE 4 ABOVE OF THE MOU IT IS AGREED THAT PURCHASE PRICE TO BE PAID AND TRANSFERRED OF SHARES SHALL TAKE PLACE I N THE MANNER PRESCRIBED THEREIN AND HOW PAYMENTS IS TO BE USED. 25 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO 4 TH COLUMN OF THE TABLE AS PROVIDED IN THE CLAUSE 4 OF THE MOU, WHEREBY THE REPAYMENTS OF UNSECURED LOAN OF 2,37,87,155/ - IS TO BE REPAID. FURTHER ANOTHER SUM OF 12,62,12,845/ - IS TO BE UTILIZED FOR ACQUISITION OF SHARES IN TERM OF THESE AGREEMENT ENTERED INTO BETWEEN AND ACCORDINGLY, SHRI HANUMAN SUGAR AND INDUSTRIES LTD DIRECTED THE NOPANY INVESTMENT PVT. LTD AND NOPANY AND SONS P VT. LTD TO PAY A SUM OF 1.5 CRORES TO ASSESSEE I.E. PRAKASH JHA AS ADVANCED AGAINST PURCHASE OF SHARES. THIS FACT WAS INFORMED TO THE AO UNDER SECTION 133(6) OF THE ACT BY NOPANY AND SONS PVT. LTD VIDE LETTER DATED 24.02.2014 AND THE RELEVANT LETTER READ S AS UNDER: - DATE 24.02.2014 THE JOINT COMMISSIONER OF INCOME TAX RANGE 11(1), AAYAKAR BHAVAN, ROOM NO. 434 MAHARSHI KARVE ROAD MUMBAI - 400 020 DEAR SIR, SUB: CALLING FOR INFORMATION UNDER SECTION 133(6) OF THE I.T. ACT IN THE CASE OF SHRI PRAKASH JHA (P AN AAJPJ3208L) FOR ASST. YEAR 2011 - 12 - REGARDING REF: YOUR LETTER NO. CIT 11(1)/PRAKASHJHA/2013 - 14 DTD. 07.01.2014 PLEASE NOTE THAT M/S SHREE HANUMAN SUGAR & INDUSTRIES LTD, REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR, SHRI B.K NOPANY ENTERED INTO AN A GREEMENT ON 1 ST SEPTEMBER 2010 WITH M/S MAURYA SUGAR LIMITED REPRESENTED BY THEIR DIRECTOR SHRI PRAKASH JHA TO PURCHASE 26 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 SHARES AS PER THE ENCLOSED COPY OF MEMORANDUM OF UNDERSTANDING DATED 1 ST SEPTEMBER 2010. ON THE REQUEST OF SHREE HANUMAN SUGAR & INDUSTR IES LIMITED, NOPANY INVESTMENTS PVT. LTD AND WE PAID A SUM OF 1.5 CRORES TO MR. PRAKASH JHA AS AN ADVANCE AGAINST PURCHASE OF SHARES OF MAURYA SUGAR LTD., AS UNDER: PAYMENTS MADE BY DATE AMOUNT BANK NOPANY & SONS P. LTD 11.11.2010 1,00,00,000 ANDHRA B ANK, KOLKTA MAIN BRANCH NOPANY & SONS P. LTD. 15.10.2010 25,00,000 ANDHRA BANK, KOLKTA MAIN BRANCH NOPANY INVESTMENTS PVT. LTD. 20.09.2010 25,00,000 ANDHRA BANK, KOLK A TA MAIN BRANCH THE RELEVANT BANK STATEMENTS OF BOTH THE COMPANIES ARE ENCLOSED HEREWI TH FOR YOUR PERUSAL. NO DELIVERY OF THE SHARES HAS BEEN RECEIVED TILL DATE. THE AMOUNT IS TO BE TREATED AS AN ADVANCE TO THE SELLER, I.E. SHRI PRAKASH JHA. 14. THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUGH THE BANK STATEMENT OF NOPANY AND SONS PVT. LTD WHICH ARE ENCLOSED IN ASSESSEES PAPER BOOK AT PAGES 13 & 14 WHEREBY IN THE BANK ACCOUNT OF THE PARTY IS HUGE BALANCE RANGING FROM 2.12 CRORES TO 60 LACS. IT RANGES FROM VARIOUS DATES THERE ARE LACS OF RUPEES TRANSACTIONS COMING AND GOING AND AS ON THE DAT E WHEN TH IS 1 CRORE WAS PAID I.E. 11.11.2010, THE BALANCE IN NOPANY AND SONS PVT. LTD WAS AT 1.92 CRORES OUT OF WHICH 1 CRORE WAS PAID AS ADVANCED AGAINST SALE OF SHARES TO THE ASSESSEE. FURTHER, A SUM OF 25 LACS WAS PAID BY NOPANY AND SONS PVT. LTD ON 15.10.2010 AND ON 27 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 THAT DATE ALSO THE BALANCE IN THE ACCOUNT OF THE NOPANY AND SONS PVT. L TD WAS 1.33 CRORES. ANOTHER SUM OF 25 LAKHS WAS PAID BY NOPANY INVESTMENT PVT. LTD ON 20.09.2010. 15. ON THE OTHER HAND, THE LEARNED SR. DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE ASSESSMENT ORDER AND THE ORDER OF CIT(A) AND HE ARGUED THAT THE ENTI RE TRANSACTION IS A SHAM TRANSACTION IN VIEW OF THE FACTUAL FINDING RECORDED BY THE AO VIDE POINT NO. 1 TO 6 AS REPRODUCED BY THE CIT(A ). WHEN ENQUIRED FROM THE BENCH AND REFERRED TO CASE RE CORD S WHEREIN THE EVIDENCES SHOWN TO US BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHICH ARE FILED IN ASSESSEES PAPER BOOK, THE LEARNED DR COULD NOT CONTROVERT THE SAME. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACT S AND CIRCUMSTANCES OF THE CASE. WE HAVE GONE THROUGH THE BANK STATEMENT OF NOPANY INVESTME NT PVT. LTD AND NOTICE THAT THIS AMOUNT IS ALSO PAID ON ACCOUNT OF PURCHASE OF SHARE BY NOPANY INVESTMENT PVT. LTD AND THE BALANCE OUTSTANDING WAS MORE THAN 25 LACS OUT OF WHICH ONLY ONE ENTRY OF 5 LACS DEPOSITED IN CASH WAS MADE. IT WAS CLAIMED BY THE LEA RNED COUNSEL THAT THIS CASH DEPOSIT IS OUT OF RUNNING BALANCE SHEET OF THE ASSESSEE. BUT ADMITTEDLY THIS TRANSACTION IS ON ACCOUNT OF ADVANCED AGAINST SALE OF SHARES OF MAURYA SUGAR LIMITED. THE BANK ACCOUNT OF BOTH THE PARTIES I.E. NOPANY AND SONS PVT. LT D AND NOPANY INVESTMENT PVT. LTD. IS MAINTAINED WITH ANDHRA BANK OF KOLKATA MAIN BRANCH. COPIES OF BANK ACCOUNT ARE ENCLOSED IN ASSESSEES PAPER BOOK AT PAGES 13 TO 15. WE HAVE ALSO GONE THROUGH THROUGH THE BANK STATEMENT OF NOPANY AND SONS PVT. LTD WHICH ARE ENCLOSED IN ASSESSEES PAPER BOOK AT PAGES 13 & 14 WHEREBY IN THE BANK ACCOUNT OF THE PARTY IS HUGE BALANCE RANGING FROM 2.12 CRORES TO 60 LACS. IT RANGES FROM VARIOUS DATES THERE ARE LACS OF RUPEES TRANSACTIONS COMING AND GOING AND AS ON THE DATE 28 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 WHE N THIS 1 CRORE WAS PAID I.E. 11.11.2010, THE BALANCE IN NOPANY AND SONS PVT. LTD WAS AT 1.92 CRORES OUT OF WHICH 1 CRORE WAS PAID AS ADVANCED AGAINST SALE OF SHARES TO THE ASSESSEE. FURTHER, A SUM OF 25 LACS WAS PAID BY NOPANY AND SONS PVT. LTD ON 15.1 0.2010 AND ON THAT DATE ALSO THE BALANCE IN THE ACCOUNT OF THE NOPANY AND SONS PVT. LTD WAS 1.33 CRORES. ANOTHER SUM OF 25 LAKHS WAS PAID BY NOPANY INVESTMENT PVT. LTD ON 20.09.2010. 17. FROM THE ABOVE FACTS, WE HAVE ALSO NOTED THAT MEMORANDUM OF UNDERSTA NDING HAS CREATED DOUBT IN THE MINDS OF REVENUE AUTHORITIES I.E. AO AND THE CIT(A) AND THEY COULD NOT UNDERSTAND THE COMMERCIAL TRANSACTIONS ENTERED INTO BETWEEN THESE TWO PARTIES. WE ALSO NOTED THAT THE ASSESSEE VIDE CLAUSE 4 ABOVE OF THE MOU AGREED THAT PURCHASE PRICE TO BE PAID AND TRANSFERRED OF SHARES SHALL TAKE PLACE IN THE MANNER PRESCRIBED THEREIN AND HOW PAYMENTS IS TO BE USED. WE HAVE GONE THROUGH 4 TH COLUMN OF THE TABLE AS PROVIDED IN THE CLAUSE 4 OF THE MOU, WHEREBY THE REPAYMENTS OF UNSECURED L OAN OF 2,37,87,155/ - IS TO BE REPAID. FURTHER ANOTHER SUM OF 12,62,12,845/ - IS TO BE UTILIZED FOR ACQUISITION OF SHARES IN TERM OF THESE AGREEMENT ENTERED INTO BETWEEN AND ACCORDINGLY, SHRI HANUMAN SUGAR AND INDUSTRIES LTD DIRECTED THE NOPANY INVESTMEN T PVT. LTD AND NOPANY AND SONS PVT. LTD TO PAY A SUM OF 1.5 CRORES TO ASSESSEE I.E. PRAKASH JHA AS ADVANCED AGAINST PURCHASE OF SHARES. HENCE, WE FIND THAT THE ENTIRE TRUNCATION OF ADVANCE OF 1.50 CRORES IS EXPLAINED AND CANNOT BE ADDED UNDER SECTION 6 8 OF THE A CT . ACCORDINGLY, WE DELETE THE ADDITION AND ALLOW THIS ISSUE OF ASSESSEE APPEAL. 18. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) SUSTAINING THE DISALLOWANCE OF DEPRECIATION CLAIMED BY ASSESSEE 29 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 ON CAR, CAR MAINTENANCE AN D INTEREST ON CAR LOANS AMOUNTING TO 2,37,228/ - . FOR THIS ASSESSEE HAS RAISED THE FOLLOWING ROUND NO. 3 : - 3. SUSTAINING A DISALLOWANCE OF 2,37,228/ - BEING 25% OF DEPRECIATION ON CARS, CAR MAINTENANCE AND INTEREST ON CAR LOANS . 19. WE HAVE HEARD RIVAL C ONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAS INCURRED EXPENSES, IN HIS PROPRIETOR CONCERN CAPACITY, AMOUNTING TO 9,48,915/ - . THE AO DISALLOWED THESE EXPENSES BY GIVING THE R EASONING THAT THESE EXPENSES ARE INCURRED FOR THE PURPOSE OF PRAKASH JHA PRODUCTION I.E. PROPRIETOR CONCERN OF THE ASSESSEE AND IS INDIVIDUAL CAPACITY, HE CANNOT CLAIM THIS EXPENDITURE. AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). THE CIT(A) ADM ITTED THE BUSINESS EXIGENCY OF EXPENSES INCURRING THIS EXPENDITURE BUT RESTRICTED THE DISALLOWANCE AT 25% OF THE EXPENDITURE ON ADHOC BASIS FOR USE OF CAR FOR THE PERSONAL PURPOSES. AGGRIEVED, AGAINST THE RESTRICTION OF DISALLOWANCE, ASSESSEE CAME IN APPEA L FOR TRIBUNAL. 20. WE FIND FROM THE FACTS OF THE CASE THAT THE CIT(A) HAS NOT DOUBTED THE BUSINESS EXIGENCIES FOR USE OF CAR FOR PROFESSIONAL PURPOSES BY THE ASSESSEE BUT HE HAS DISALLOWED FOR PERSONAL USE TO THE EXTENT OF 25%. THE LEARNED COUNSEL FOR THE AS SESSEE REQUESTED FOR REASONABLE ESTIMATION FOR THE DISALLOWANCE. WE ARE OF THE VIEW THAT THE DISALLOWANCE AT 25% IS EXCESSIVE AND ACCORDINGLY, WE RESTRICT THE DISALLOWANCE AT 10% . WE DIRECT THE AO ACCORDINGLY. THIS ISSUE OF ASSESSEES APPEAL IS PARTLY ALLO WED. 21. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF LIABILITIES OF 30 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 THE PARTIES CONCERN. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO. 4: - 4. CONFIRMING THE ADDITION OF AN AMOUNT OF RS. 13,33,356/ - . 22. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO NOTED FROM THE ACCOUNTS OF THE ASSESSEE THAT THERE IS LIABILITY OUTSTANDING IN THE BOOKS OF THE ASSESSEE FOR AN AMOUNT OF 10,47,914 / - IN THE NAME OF FILM KRAFT PVT. LTD. AND ANOTHER AMOUNT OF 2, 85,444/ - IN THE NAME OF ENTERTAINMENT ONE. THE AO REQUIRE THE ASSESSEE TO CONFIRM THESE LIABILITIES FROM THESE PARTIES BUT THE ASSESSEE ONLY ENCLOSED THE LEDGER ACCOUNT OF THE OLD BALANCES CARRIED FORWARD FROM PREVIOUS YEAR. ACCORDINGLY, THE AO ISSUED NOTICE TO BOTH THE PARTIES AND IN RESPONSE TO FILMKRAFT PVT. LTD. DENIED ANY SUCH LIABILITY OUTSTANDING IN THEIR BOOKS AND THE OTHER PARTY ENTERTAINMENT ONE, NOTICE RETURNED U NSERVED. THE ASSESSEE EXPLAINED THAT DURING THE FY 2011 - 12 RELEVANT TO AY 2012 - 13, THE BALANCES OF THESE PARTIES HAS BEEN WRITTEN OFF BY THE ASSESSEE AND INCLUDED IN THE INCOME OF THE ASSESSEE. BUT THE AO ADDED THE SAME IN AY 2011 - 12 BY HOLDING THAT THESE LIABILITIES HAVE CEASED TO EXIST. AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 23. AFTER HEARING BOTH THE SIDES AND GOING THROUGH THE FA CTS OF THE CASE IT IS ADMITTED FACT THAT THESE LIABILITIES ARE OUTSTANDING IN THE BALANCE SHEET OF THE ASSESSEE BUT WRITE OFF IS MADE IN AY 2012 - 13 AND DISCLOSED THIS AS INCOME ACCORDINGLY. WHEN THESE FACTS WERE CONFRONTED TO THE LEARNED SR. DEPARTMENTAL R EPRESENTATIVE, HE COULD NOT CONTROVERT THE SAME. AS THE ASSESSEE HAS DISCLOSED THE INCOME IN AY 2012 - 13 AND IT IS 31 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 NOT CLEAR THAT IN WHICH YEAR THESE LIABILITIES HAVE CEASED TO EXIST BECAUSE THE ASSESSEE HAS CONTINUOUSLY ACKNOWLEDGING THIS LIABILITY, THE LI ABILITY CAN BE TREATED AS CEASED IN AY 2012 - 13 ONLY. HENCE, WE ARE OF THE VIEW THAT THIS ADDITION CANNOT BE MADE IN AY 2011 - 12 AND WE DIRECT THE AO TO DELETE THE SAME. 24. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF DEBIT BALANCES WRITTEN OFF AMOUNTING TO 22,02,150/ - . FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO. 5: - 5. CONFIRMING THE DISALLOWANCE OF 22,02,150/ - BEING DEBIT BALANCES WRITTEN OFF. 25. BRIEFLY STATED FACTS ARE THAT THE AO NOTICE D FROM THE ACCOUNTS OF THE ASSESSEE THAT IT HAS WRITTEN OFF DEBIT BALANCES AMOUNTING TO 22,02,150/ - DURING THE YEAR. THE AO REQUIRED THE ASSESSEE THE REASONS FOR WRITING OFF OF DEBIT BALANCES. THE ASSESSEE EXPLAINED THAT DURING THE COURSE OF BUSINESS, THE ASSESSEE MAKES ADVANCES TO VARIOUS INDIVIDUALS CONSISTING OF ARTISTES AND TECHNICIANS, SUPPLIERS AND VENDORS FOR VARIOUS PROJECTS. SOMETIMES, THE ENVISAGED PROJECTS DO NOT FRUCTIFY AND SUCH ADVANCES GIVEN BECOME REDUNDANT AND NEED TO BE WRITTEN OFF. THESE DEBIT BALANCES ARE IN THE NATURE OF BAD DEBTS WHICH NEEDS TO BE WRITTEN OFF FROM TIME TO TIME TO CLEAN UP THE ACCOUNTS OF THE ENTITY. SIMILARLY, THERE ARE VARIOUS CREDITORS ARISING OUT OF VARIOUS PRODUCTIONS WITH WHOM ACCOUNTS ARE SETTLED AND THE OUTSTAND ING BALANCES ARE NO LONGER PAYABLE FOR VARIOUS REASONS. THESE CREDIT BALANCES ALSO NEED T O BE WRITTEN OFF FROM TIME TO TI ME TO CLEAR THE BOOKS OF ACCOUNT JUST AS IN THE CASE OF DEBIT BALANCES. DURING THE YEAR UNDER ASSESSMENT THE ASSESSEE HAS WRITTEN OFF V ARIOUS BALANCES AS UNDER: 32 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 A) SUNDRY CREDIT BALANCES WRITTEN OFF 18,05,204/ - B) SUNDRY DEBIT BALANCES WRITTEN OFF 22,02,150 (COPIES OF THE PARTY - WISE LEDGER ACCOUNTS HAVE ALREADY BEEN FURNISHED VIDE OUT LETTER DT. 28.01.2014) C) NET DIFFERENCE (DEBIT) WRITTEN OFF 3,96,946/ - . 26. THE AO HAS NOT ACCEPTED THE EXPLA NATION OF THE ASSESSEE AND ADDED THE SAME BY STATING THAT THE BUSINESS PURPOSES OF ADVANCES WAS NOT ESTABLISHED BY THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED THE APPEAL BEFORE CIT(A). THE CIT(A) CONFIRMED THE ACTION OF THE AO BUT DISALLOWED ON THE PREMISE S THAT THE PURPOSE OF BUSINESS IS NOT ESTA BLISHED BY THE ASSESSEE WITH ANY VARIABLE EVIDENCES AND HENCE, SUCH ADVANCES CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. ACCORDING TO CIT(A) , THE ADVANCED GIVEN CAN BE TREATED ONLY CAPITAL LOSS AND NOT ONLY BUSINESS LOSS. AGGRIEVED , ASSESSEE CAME IN SECOND APPEAL BEFORE TRIBUNAL. 27. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. NOW, DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ASSESSEES PAPER BOOK AT PAGES 22 TO 24, WHEREIN THE DETAILS OF SUNDRY BALANCES WRITTEN OFF IS ENCLOSED. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE ASSESSEE IS A MAJOR FILM PRODUCER AND DIRECTOR. HE EXPLAINED THAT IN THE COURSE OF HIS BUSINESS, VARIOUS DEBIT AND CREDIT BALANCES REMAIN IN THE ACCOUNTS. THE SAME ARE PERIODICALLY WRITTEN OFF. IN THE ACCOUNTS FOR THE AY 2011 - 12 UNDER APPEAL, DEBIT BALANCES OF 33 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 22,02,150/ - AND CREDIT BALANCES OF 18,05,204/ - WERE WRITTEN OFF RESULTING IN T HE WRITE OFF OF NET DEBIT BALANCES OF 3,96,946/ - . THE DETAILS THEREOF WERE FILLED BEFORE THE AO AND ARE CONTAINED AT PAGES 22 TO 24 OF ASSESSEES PAPER BOOK. ALL THESE GIVEN THE ITEM - WISE DETAILS OF THE DEBIT AND CREDIT BALANCES WRITTEN OFF RESULTING IN THE WRITE OFF OF THE NET DEBIT BALANCES OF 3,96,946/ - . WE FIND FROM THE FACTS OF THE CASE THAT THE AO HAS TAXED THE CREDIT BALANCES WRITTEN OFF BUT UNFORTUNATELY, HE HAS DISALLOWED THE DEBIT BALANCES WRITTEN OFF. THIS, TO SAY THE LEAST, IS GROSSLY UNFAIR AND UNREASONABLE. THE ASSESSEE HAD EXPLAINED THAT THESE BALANCES WERE DUE IN THE NORMAL COURSE OF THE BUSINESS. THE AO NEVER ASKED THE ASSESSEE TO PROVE THAT THESE WERE FOR BUSINESS PURPOSES AND IT IS THEREFORE CLEARLY UNFAIR ON HIS PART TO DISALLOW THE S AME ON THE GROUND THAT BUSINESS PURPOSES WAS NOT PROVED. THE SAME LOGIC WOULD APPLY TO THE CREDIT BALANCES WRITTEN OFF WHICH HE HAS NO HESITATION IN TAXING. HENCE, ACCORDING TO US, THE DISALLOWANCE OF ONLY THE DEBIT BALANCES WRITTEN OFF IS UNJUSTIFIED AND DESERVES TO BE DELETED. 28. IN THE RESULT, THE APPEALS OF ASSESSEE , IN ITA NO. 5051/MUM/2017 IS DISMISSED AS WITHDRAWN AND ITA NO. 323/MUM/2016 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 - 0 3 - 201 9 . SD/ - SD/ - ( / MANOJ KUMAR AGGARWAL ) ( /MAHAVIR SINGH) ( / ACCOUNTANT MEMBER) ( / JUDICIAL MEMBER) , / MUMBAI, DATED: 19 - 0 3 - 20 1 9 . , . / SUDIP SARKAR, SR.PS 34 ITA S NO. 323/MUM/2016 & 5051/MUM/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI