Shri Rakesh O.Agarwal, Surat V. The Dy.CIT.,Circle-2, Surat

ITA 574/AHD/2011

• Counselvise Citation: 57420514 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Source of fund; Onus to prove; Bogus loan
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 574/AHD/2011 A.Y: 2007-08 SHRI RAKESH OMPRAKASH AGRAWAL, PROP. OF M/S. ADITI PRINTS, SHOP NO.2001, SILK PLAZA MARKET, RING ROAD, SURAT, 395002 PAN: AAXPD1047P VS THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2 SURAT (APPELLANT) (RESPONDENT) ITA NO. 2801/AHD/2011 A.Y: 2008-09 SHRI RAKESH OMPRAKASH AGRAWAL, PROP. OF M/S. ADITI PRINTS, SHOP NO.2001, SILK PLAZA MARKET, RING ROAD, SURAT, 395002 PAN: AAXPD1047P VS THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2 SURAT (APPELLANT) (RESPONDENT) ITA NO.2619/AHD/2011 A.Y: 2008-09 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2 SURAT VS SHRI RAKESH OMPRAKASH AGRAWAL, PROP. OF M/S. ADITI PRINTS, SHOP NO.2001, SILK PLAZA MARKET, RING ROAD, SURAT, 395002 PAN: AAXPD1047P (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J. P. JHANGID, SR. D. R. ASSESSEE(S) BY : SHRI RASESH SHAH, A.R. DATE OF HEARING : 12/09/2 013 DATE OF PRONOUNCEMENT: /09/2013 ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 2 - O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : ALL THESE THREE APPEALS ARE CONNECTED HENCE HEREBY CONSOLIDATED AND DECIDED BY THIS COMMON ORDER. 2. FOR A.Y. 2007-08, (ITA NO.574/AHD/2011) , THE ASSESSEE HAS FILED THE APPEAL ARISING FROM THE ORDER OF LEARNED CIT(A) , SURAT, DATED 05.01.2011. THE GROUNDS RAISED ARE HEREBY DECIDED A S FOLLOWS: GROUND NO.1: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CON FIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.14,79,35 5/- AS UNEXPLAINED CREDIT U/S.68 OF THE ACT. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3), DATED 24.12.2009 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS IN THE BUSINESS OF MANUFACTURING AND TR ADING OF ART SILK CLOTH. ON VERIFICATION OF BALANCE SHEET AS ON 31 ST OF MARCH, 2007, IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD SHOWN UNSECURED LOA N AS ON 31.03.2007 AT RS.92,71,383/-. THE AO HAS NOTED IN PARAGRAPH 5. 1 THAT WHILE FINALIZING THE ASSESSMENT FOR A.Y. 2006-07, IT WAS NOTED THAT CERTAIN UNSECURED LOANS WERE REFLECTED IN THE NAMES OF VARI OUS PERSONS HAVING ADDRESS OF DISTRICT KUSHINAGAR, U.P. IN THAT YEAR, THOSE DEPOSITS WERE TREATED AS UNSECURED CASH CREDIT U/S.68 OF IT ACT. THE DETAILS OF THOSE DEPOSITS WERE REPRODUCED BY THE AO. HE HAS REPRODUC ED THE NAMES OF THE PERSONS WHO WERE TREATED AS UNSECURED CASH CREDITOR S IN A.Y. 2006-07. THE LIST OF THOSE PERSONS APPEARED AT PAGES 3 AND 4 IN THE ASSESSMENT ORDER TOTALING RS.14,39,355/-. THEREAFTER THE AO HA S ALSO NOTED THE PARTY- WISE CONTENTION OF THE ASSESSEE, STATING THEREIN TH AT THE PAYMENT WAS ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 3 - MADE THROUGH DEMAND DRAFT AND THAT THOSE PERSONS WE RE HAVING REASONABLE RESOURCES OF INCOME. HOWEVER FOLLOWING T HE EARLIER DECISION FOR A.Y. 2006-07 HE HAS TAXED THE DEPOSITS U/S.68 O F THE IT ACT. 4. WHEN THE MATTER WAS CARRIED BEFORE THE LEARNED C IT(A), HE HAS TAKEN THE COGNIZANCE OF THE PAST HISTORY AND AFFIRM ED THE ADDITION IN THE FOLLOWING MANNER: 1 HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELL ANT AND FIND THAT IT IS NOT DISPUTED BY THE APPELLANT THAT LOANS OF R S.14,39,355/-, WHICH ARE APPEARING IN THE APPELLANT'S BOOKS IN THE ACCOU NTING YEAR 2005-06 ARE IN THE SAME NAMES, IN WHOSE NAMES UNSECURED LOA NS APPEARING IN THE ACCOUNTING YEAR 2006-07 HAVE BEEN TREATED AS UN EXPLAINED IN THE ASSESSMENT ORDER IN A.Y.2006-07, ON THE GROUND THAT THE SAID PARTIES DO NOT HAVE CREDITWORTHINESS, THEREFORE, THE LOANS ARE UNGENUINE. THE FINDING GIVEN IN RESPECT OF THESE DEPOSITORS IN THE ASSTT. YEAR 2006-07 HAS ALSO BEEN UPHELD BY THE CIT(A)-II VIDE HIS ORDE R DTD.30.11.2009 IN APPEAL NO.CAS/II/434/08-09. THE ASSESSING OFFICER D URING THE YEAR UNDER CONSIDERATION HAD ALSO ISSUED NOTICES TO ALL THE 21 DEPOSITORS U/S 133(6) OF THE ACT, AND AFTER DULY CONSIDERING THEIR REPLY, GIVEN HIS DETAILED FINDINGS, VIDE PARA 5.5 OF THE ORDER AS TO HOW THESE DEPOSITORS' CREDITWORTHINESS HAS NOT BEEN ESTABLISHED IN THIS Y EAR ALSO, HAS HELD THAT LOAN AMOUNTS FROM THEM ARE NOT GENUINE. IN RES PECT OF SHRI TRIBHUVANNATH AGARWAL, THE ASSESSING OFFICER HAS GI VEN HIS FINDING THAT PAYMENT HAS BEEN MADE BY SHRI AGARWAL THROUGH DEMAND DRAFT IMMEDIATELY AFTER DEPOSITING CASH AND THE MAJOR SOU RCE, OF INCOME OF THE DEPOSITOR IS INTEREST INCOME FROM THE APPELLANT WHICH HAS NOT BEEN PAID, BUT ONLY CREDITED TO HIS ACCOUNT, HENCE SOURC E OF THE LOAN AMOUNT FROM SHRI AGARWAL HAS NOT BEEN EXPLAINED PROPERLY. I, THEREFORE,' FIND THAT AMOUNT OF RS. 40,000/- HAS BEEN ADDED U/S 68 O F THE ACT, BECAUSE THE APPELLANT HAS FAILED TO PROPERLY EXPLAIN THE SO URCE OF THE SAFTF AMOUNT ADVANCED BY SHRI AGARWAL. THUS, FOR THE AFOR ESTATED C REASONS, I CONFIRM THE ADDITION OF RS.40,000/-, BEING UNSECU RED LOAN AMOUNT APPEARING IN THE NAME OF SHRI TRIBHUVANNATH AGARWAL , AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE APPELLANT. IN REGA RD TO ADDITION OF RS.14,39,355/-, I FIND THAT FINDING OF FACT RECORDE D IN THE ASSESSMENT ORDER IN A.Y.2006-07, IN RESPECT OF ALL THE CREDITO RS FROM WHOM THE ABOVE UNSECURED LOAN AMOUNT HAS BEEN RECEIVED DURIN G THE YEAR, HAS REMAINED UNCHANGED. THEREFORE, THE FINDING GIVEN BY THE LEARNED CIT(A) IN THE A.Y. 2006-07 IN ALL THE ABOVE 20 CRED ITORS ARE ALSO APPLICABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATI ON. I, ACCORDINGLY, UPHOLD THE ADDITION OF THE ABOVE AMOUNT, AS UNEXPLA INED CASH CREDITS IN THE HANDS OF THE APPELLANT. IN VIEW THAT I HAVE UPHELD THE ADDITION OF ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 4 - UNSECURED LOAN AMOUNT OF RS.14,79,355/- IN THE HAND S OF THE APPELLANT, I ALSO CONFIRM THE DISALLOWANCE OF INTER EST EXPENSES CREDITED IN THE A/CS. OF THE ABOVE DEPOSITORS. THE APPELLANT HAS DURING THE COURSE OF APPELLATE PROCEEDINGS POINTED OUT THAT TH E ASSESSING OFFICER HAS WRONGLY TAKEN THE INTEREST AMOUNT AT RS.16,76,7 30/- INSTEAD OF RS.17,82,338/-. I, ACCORDINGLY, DIRECT THE ASSESSIN G OFFICER TO TAKE THE FIGURE OF INTEREST FOR DISALLOWANCE PURPOSES AT RS. 17,82,338/-. THE GROUNDS OF APPEAL NO.1 & 2 ARE, THEREFORE, DISMISSE D. 5. WITH THIS FACTUAL BACKGROUND, NOW BEFORE US AN O RDER OF ITAT C BENCH, AHMEDABAD FOR A.Y. 2006-07 DATED 15.3.2013 H AS BEEN PLACED BEARING ITA NO.4 AND 453/AHD/2010, CROSS APPEALS OF RAKESH OMPRAKASH AGRAWAL VS. ACIT, WHEREIN THE ADDITION U/ S. 68 WAS DECIDED IN ASSESSEES FAVOUR, RELEVANT PORTION EXTRACTED BE LOW: HOWEVER, DURING THE RELEVANT ASSESSMENT YEAR THE L EARNED AO'S OBSERVATION WAS THAT IN RESPECT OF FIVE LENDERS BANK ACCOUNTS W ERE OPENED IN THE SAME BANK WITHIN A WEEK AND THE OTHER LENDERS HAD NOT FU RNISHED THEIR BANK STATEMENTS. FURTHER, THERE ARE TRANSACTIONS ONLY WI TH RESPECT TO THE ASSESSEE IN THESE BANK ACCOUNTS AND THE AFFIDAVITS FURNISHED BY THE LENDERS DO NOT APPEAR TO BE GENUINE. ON OUR PERUSAL OF THE RECORDS AND PA PER BOOK FURNISHED BY THE ASSESSEE, THE FACTS SEEM TO BE CONTRADICTORY TO THE FINDINGS OF THE LEARNED AO. AS STATED ABOVE, PREDOMINANTLY ALL THE LENDERS HAD FURNISHED BANK STATEMENTS AND THERE ARE NO SUBSTANTIAL CASH DEPOSITS THOUGH A LL THE LOAN TRANSACTIONS WERE WITH THE ASSESSEE. THOUGH, THIS FACT MAY RAISE AN AIR OF SUSPICION, SOMETHING MORE SHOULD BE BROUGHT ON RECORD TO CONFI RM THE APPREHENSIONS OF THE LEARNED AO. THE AFFIDAVITS APPARENTLY ARE ALL IN ORDER AND DULY SIGNED BY THE EXECUTANTS AND NOTARIZED. THOUGH, THE AFFIDAVIT S BY ITSELF WILL NOT SUBSTANTIALLY PROVE THE GENUINENESS OF THE TRANSACT IONS THE REVENUE HAS TO BRING OUT SOME ADDITIONAL MATERIALS ON RECORD TO DI SPROVE THE STAND OF THE ASSESSEE. NO ACTION HAS BEEN TAKEN BY THE REVENUE T O EXAMINE THE LENDERS U/S 133(6) OF THE ACT IN ORDER TO PROVE THAT THE LENDER S ARE BOGUS. WE ALSO AGREE THAT PROVING THE EXISTENCE OF THE LENDERS AND DOCUM ENTATION OF THE LOAN TRANSACTIONS ALONE WILL NOT, CONFIRM THE TRANSACTIO NS THAT THE LOAN TRANSACTIONS ARE GENUINE. AT THE SAME TIME THE REVE NUE HAS ALSO TO ESTABLISH WITH SOME COGENT EVIDENCE TO DISPROVE THE CONTENTIO NS OF THE ASSESSEE. MERE APPREHENSIONS OF THE REVENUE BASED ON SOME INFORMAT ION ALONE CANNOT DISPROVE THE STAND OF THE ASSESSEE. MOREOVER, FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE DECISIONS OF THE CASES RELIED BY THE LEARNED AO, SUPRA DO NOT APPLY TO THE PRESENT CASE. FURTHER, THE OBSERVA TIONS OF THE LEARNED CIT(A) ARE LISTED AND DISCUSSED HEREUNDER: (A) ALL THE LENDERS ARE FROM VILLAGE FROM WHICH THE ASSESSEE ALSO HAILS. THIS OBSERVATION OF THE LEARNED CIT(A) RATHER SUPPO RTS THE ARGUMENTS OF THE ASSESSEE THAT THE LENDERS ARE GENUINE. ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 5 - (B) THE LENDERS ARE FROM REMOTE VILLAGE HAVING MEAG ER SOURCE OF INCOME IS ALSO NOT A GROUND TO BE GIVEN WEIGHTAGE U NLESS THE SOURCES OF INCOME OF THE VILLAGERS ARE PERUSED. (C)BY THE GENERALIZED REMARK OF THE REVENUE THAT TH ERE ARE NUMBERS OF CASES OF FILING BOGUS RETURNS IN THE PRESENT SCENAR IO, IT CANNOT BE PRESUMED THAT THE ASSESSEE HAD INDULGED IN BOGUS TR ANSACTIONS UNLESS AND UNTIL SPECIFICALLY PROVED. (D)FROM THE BANK STATEMENTS SUBMITTED BY THE LENDER S THOUGH THERE IS AN AIR OF SUSPICION COMING OUT SINCE IN MOST OF THE CASES THE TRANSACTIONS ARE ONLY RELATED TO THE LOAN TRANSACTI ONS WITH THE ASSESSEE, THAT ALONE CANNOT DISPROVE THE STAND OF T HE ASSESSEE. (E)THE AFFIDAVITS SIGNED AND NOTARIZED BY THE ASSES SEE CANNOT BE OUT RIGHTLY REJECTED BECAUSE ON THE FACE OF IT, IT APPE ARS TO BE GENUINE. 8.1 CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE AND FROM THE DISCUSSION IN THE FOREGOING PARAGRAPHS, WE ARE OF THE CONSIDERED VIEW THAT THE REVENUE IS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.8,11,696/- AS BOGUS LOANS OBTAINED FROM THE LENDERS ESPECIALLY WHEN THE REVENUE HAD ACCEPTED THE AMOUNT OF RS.1,31,76,731/- (RS.1,39,88,427/- - RS.8,11,696/-) AS GENUINE WHICH ARE LOANS OBTAINED FROM SAME PARTIES IN THE P REVIOUS ASSESSMENT YEARS. THEREFORE, WE ALLOW THIS GROUND RAISED BY THE ASSES SEE. 6. SINCE, A VIEW HAS ALREADY BEEN TAKEN IN THE PAST ON IDENTICAL FACTS IN FAVOUR OF THE ASSESSEE BY THE RESPECTED CO-ORDIN ATE BENCH IN RESPECT OF THE ADDITION MADE U/S.68 OF THOSE VERY PARTIES, THE REFORE, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE FIND NO REASON TO DIFFER WITH THOSE FACTUAL AS WELL AS LEGAL FINDINGS OF THE TRIBUNAL. IN THE RESULT, THE GROUND RAISED BY THE ASSESSEE IS HEREBY ALLOWED. 7. GROUND NO.2 IS REPRODUCED BELOW: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWANCE INTEREST PAID ON UNSECURED LOAN RS.17,82,338/- 7.1 THIS GROUND IS CONSEQUENTIAL IN NATURE BECAUSE THE AO HAS DISALLOWED THE AMOUNT OF INTEREST ON THOSE DEPOSITS WHICH WERE TAXED U/S.68 OF THE IT ACT. SINCE THE ADDITION U/S. 68 IS HEREBY DELETED, ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 6 - THEREFORE, IN CONSEQUENCE THEREOF THE ASSESSEE IS E NTITLED FOR THE RELIEF CLAIMED. THIS GROUND IS ALLOWED. 8. GROUND NO.3 IS REPRODUCED BELOW: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF ASSESSING OFFICER IN MAKING ADDITION OF RS.3,72,532/- FOR ALLEGED SUPPRE SSION OF CLOSING STOCK. IN CASE THIS ADDITION IS CONFIRMED, THE DEDUCTION OF E QUIVALENT AMOUNT OF RS.3,72,532/- SHOULD BE GIVEN IN A.Y. 2008-09 BY WA Y OF INCREASE IN OPENING STOCK. 9 . THE ASSESSEE HAS REPORTED AS PER THE AUDIT REPORT T HE VALUATION OF THE CLOSING STOCK OF FINISHED GOODS AT RS.70,02,828 /- AND THE VALUATION OF GREY CLOTH AT RS.95,44,172/-. AS PER THE AO, ON VER IFICATION OF SALES BILLS THE AVERAGE RATE WAS 31.58 PER METER AND AFTER CONS IDERING THE ELEMENT OF GROSS PROFIT OF 6.39% THE SALE RATE WAS WORKED OUT BY THE AO AT RS.29.57 PER METER. AS AGAINST THAT THE ASSESSEE HAD WORKED OUT THE VALUATION OF THE FINISHED STOCK AT RS.28.25 ONLY. AFTER DISCUSSI NG CERTAIN FACTS, THE AO HAS TAXED THE DIFFERENCE OF THE VALUATION AS FOLLOW S: IN VIEW OF THE ABOVE ANALYSIS, THE CONTENTIONS OF T HE ASSESSEE CANNOT BE ACCEPTED. ACCORDINGLY, THE VALUATION OF CLOSING STO CK OF FINISHED GOODS AS 31.03.2007 IS TAKEN AT 29.57 PER METER WHICH IS THE NET AVERAGE SALE PRICE FOUND ON VERIFYING THE SALES FOR THE PERIOD FROM 01 .04.2007 TO 14.07.2007. THE VALUATION SO ARRIVE AT COMES TO RS.73,30,360/-. THE DIFFERENTIAL AMOUNT OF UNDER VALUATION WHICH WORKS OUT TO RS.3,27,532/-(RS .73,30,360- RS.70,02,828/-) IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS UNDER SEC.271(1)(C) OF THE ACT HAVE ALS O BEEN INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CON CEALMENT OF INCOME. 10. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, THE ACTION OF THE AO WAS CONFIRMED FOLLOWING THE VI EW TAKEN IN A.Y. 2006-07 AS FOLLOWS: I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPEL LANT AND FIND THAT SIMILAR ISSUE WAS INVOLVED IN THE APPEAL FILED IN A.Y. 2006 -07, AND THE MATTER WAS ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 7 - REMANDED TO THE ASSESSING OFFICER, AND AFTER CONSID ERING THE REPORT OF THE ASSESSING OFFICER, THE ADDITION MADE ON THE ABOVE A CCOUNT WAS UPHELD BY THE THEN CIT(A) VIDE THE APPELLATE ORDER IN THE ABOVE A SSESSMENT YEAR. I ALSO FIND THAT THE APPELLANT HAS NOT MADE ANY SUBMISSION AS T O HOW THE COMPUTATION FOR VALUATION OF FINISHED STOCK MADE BY THE ASSESSING O FFICER IS INCORRECT AND NOT ACCEPTABLE. I, THEREFORE, FOR THE SAID REASON AS WE LL AS THE FINDING GIVEN IN THE APPELLATE ORDER IN THE A.Y. 2006-07 ON THE SAME ISS UE, UPHOLD THE ADDITION OF RS.3,72,532/-. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED. 11. WE HAVE HEARD BOTH THE SIDES. FOR A.Y. 2006-07, ITAT C BENCH AHMEDABAD, VIDE ORDER DATED 15.3.2013 (CITED SUPRA) HAS DECIDED THIS VERY ISSUE IN FAVOUR OF THE ASSESSEE IN THE FOLLOWI NG MANNER: 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIALS ON RECORDS. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS APPARENT THAT THE LEARNED AO WITHOUT EXAMINING THE STOCK RECORDS MAINTAINED BY THE ASSESSEE PROCEEDED TO ESTIMATE THE VALUE OF THE CLO SING STOCK BASED ON TRANSACTIONS FOR A LIMITED PERIOD BETWEEN 01.04.200 6 TO 15.04.2006. THE CALCULATION ADOPTED BY THE LEARNED AO IS CRUDE AND WITHOUT ANY REASONABLE BASIS. FURTHER, THE LEARNED AO HAD NOT COMMENTED ON THE LIABILITY OF THE BOOKS OF ACCOUNTS, STOCK RECORDS ETC. MAINTAINED BY THE ASSESSEE. FURTHER, IT IS PERTINENT TO NOTE THAT THE VALUE OF THE CLOSING STO CK HAS TO BE DETERMINED BY ITS COST OR MARKET PRICE WHICHEVER IS LESS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOR THE REASONS DISCU SSED ABOVE, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE LEARNED AO FOR R S.21,65,298/- ON ACCOUNT OF UNDERSTATEMENT OF VALUE OF STOCK IS NOT WARRANTE D. THEREFORE, WE HEREBY DELETE THE SAME. ACCORDINGLY, GROUND NO.3 OF THE AP PEAL OF THE ASSESSEE IS ALLOWED IN ITS FAVOUR. 12. SINCE, THE RESPECTED CO-ORDINATE BENCH HAS TAKE N A VIEW THAT THE VALUE OF THE CLOSING STOCK OUGHT TO HAVE BEEN DETER MINED EITHER AT THE COST PRICE OR THE MARKET PRICE, WHICHEVER IS LOWER, AND THAT RULE WAS NOT FOLLOWED BY THE AO; HENCE, THE ALLEGATION OF UNDER ESTIMATE OF VALUE STOCK IS HEREBY NOT SUSTAINABLE IN THE EYES OF LAW. RESPECTFULLY FOLLOWING THE CITED DECISION, WE HEREBY DIRECT TO DELETE THE ADDITION AND ALLOW THIS GROUND OF THE ASSESSEE. 13. GROUND NO.4 IS REPRODUCED BELOW: ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 8 - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWI NG THE DEDUCTION OF RS.21,65,298/- BY WAY OF INCREASE IN OPENING STOCK IN THE YEAR UNDER CONSIDERATION WHEN ADDITION OF RS.21,65,289/- FOR A LLEGED SUPPRESSION OF CLOSING STOCK WAS CONFIRMED IN THE ORDER PASSED BY CIT(A) FOR A.Y. 2006-07 ON 30.11.2009. 14. AT THE OUTSET, LEARNED AR, MR. RASESH SHAH HAS MADE A STATEMENT AT BAR THAT THIS GROUND HAS BECOME INFRUCTUOUS BECA USE THE CONSEQUENTIAL RELIEF IN RESPECT OF THE VALUATION OF THE OPENING S TOCK HAS ALREADY BEEN ALLOWED BY THE AO. THE ONLY DIRECTION THUS IS REQUI RED THAT THE OUTCOME OF THE RELIEF GRANTED FOR A.Y. 2006-07 IS TO BE IMP LEMENTED WHILE COMPUTING THE OPENING STOCK FOR A.Y. 2007-08, THE Y EAR UNDER CONSIDERATION. OTHERWISE, IN THE LIGHT OF THE SUBMI SSION OF LEARNED AR THIS GROUND IS HEREBY DISMISSED BEING RENDERED REDU NDANT. 15. IN THE RESULT, APPEAL FOR A.Y. 2007-08 IS PARTL Y ALLOWED. 16. FOR A.Y. 2008-09, (ITA NO.2801/AHD/2011) , THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF LEARNED CIT(A), SURAT, DATED 10.8.2011 AND THE GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS: GROUND NO.1: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED CIT(A0 HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.29,9 4,793/- AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. 17. AT THE OUTSET, LEARNED AR. MR. RASESH SHAH HAS INFORMED THAT FOR A.Y. 2008-09, THE ADDITION WAS MADE IN THE IDENTICA L MANNER AS IT WAS MADE IN THE PAST YEAR. IN ALL, THERE WERE 22 PARTIE S AS LISTED BY THE AO. BY INVOKING THE PROVISIONS OF SECTION 68, THE AO HAD M ADE AN ADDITION OF RS.42,68,793/-. THE MATTER WAS CARRIED BEFORE LEARN ED CIT(A). ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 9 - 18. IN RESPECT OF THE PARTIES WHOSE NAMES WERE APPE ARING IN A.Y. 2006-07 AND 2007-08, LEARNED CIT(A) HAS AFFIRMED TH E ADDITION IN THE FOLLOWING MANNER:- 4.1. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELL ANT, AND FIND THAT IT IS NOT DISPUTED BY THE APPELLANT THAT LOANS OF RS.2 9,94,793/-, APPEARING IN THE APPELLANTS BOOKS IN THE ACCOUNTING YEAR 2007-08 IN THE NAMES, 20 PERSONS VIDE SR. NO. 2 AND 4 TO 23 (WRONGLY MENTIONED AS 22 ) OF THE LIST OF NAMES OF 22 LENDER (CORRECT NUMBER OF LENDERS IS 23), APPEARING IN PARA 2 (PAGE2) OF THE ASSESSMENT ORDER ARE PERSONS IN WHOSE NAMES UNSECUR ED LOANS APPEARING IN THE ACCOUNTING YEARS 2005-06 AND 2006-07 HAVE BEEN TREATED AS UNEXPLAINED IN THE ASSESSMENT ORDER IN A.Y. 2006-07 AND 2007-08 ON THE GROUND THAT THE SAID PARTIES DID NOT HAVE CREDITWORTHINESS, ACCORDI NGLY, THE LOANS WERE UNGENUINE. THE FINDING GIVEN IN RESPECT OF THESE DE POSITORS IN THE ASSTT. YEAR 2006-07 AND 2007-08 HA ALSO BEEN UPHELD BY THE CIT( A)-II. THUS, THE ORDER OF THE CIT(A) IN THE A.Y. 2006-07 AND 2007-08 IN ALL T HE ABOVE 20 CREDITORS ARE ALSO APPLICABLE IN THE ASSESSMENT YEAR UNDER CONSID ERATION. I, ACCORDINGLY, UPHOLD THE ADDITION OF THE ABOVE AMOUNT OF RS.29,94 ,793/- AS UNEXPLAINED CASH CREDITS IN THE HANDS OF THE APPELLANT. IN VIEW THAT I HAVE UPHELD THE ADDITION OF UNSECURED LAON AMOUNT OF RS.29,94,793/- IN THE HANDS OF THE APPELLANT, I ALSO CONFIRM THE DISALLOWANCE OF INTER EST EXPENSES CREDITED IN THE A/CS. OF THE ABOVE 20 DEPOSITORS. 18.1 APART FROM THE ABOVE TWENTY DEPOSITORS, THERE WERE THREE MORE DEPOSITORS, NAMELY, LAXMI DEVI AGARWAL RS,8,45,000/ -, SHILPA VIKAS SINGHANIA RS. 1,00,000/- AND ROHIT KESHAN RS.3,29,0 00/-, TOTALING RS.12,74,000/-. IN RESPECT OF THESE THREE PARTIES L EARNED CIT(A) HAS HELD AS UNDER:- I, THEREFORE, FIND THAT FACTS RELATING TO THE THRE E NEW CREDITORS ARE NOT SAME, AS IN THE REMAINING 20 CREDITORS, IN THE AYS 2006-0 7 AND 2007-08 DUE ENQUIRIES FOR VERIFICATION OF THEIR IDENTITY AND CR EDITWORTHINESS, AS WELL A THE GENUINENESS OF THE LOAN AMOUNTS HAD BEEN CARRIED OU T, AND BASED ON THE RESULTS OF THESE ENQUIRIES, ABOVE FINDING HAD BEEN GIVEN. IN THE CASE OF THE ABOVE 3 NEW LENDERS, NO SUCH ENQUIRY HAS BEEN CARRI ED OUT, AND IN THESE CASES, THE ASSESSING OFFICER HAS SIMPLY APPLIED THE FINDING GIVEN IN THE AYS 2006-07 AND 2007-08, IN THE CASE OF THE REMAINING 2 0 LENDERS. AS ALL THESE THREE NEW LENDERS ARE FILING INCOME TAX RETURNS, AN D THEIR COPY OF BANK STATEMENTS, I.T. RETURNS, PAN AND ADDRESS WAS FURNI SHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I HOLD THAT THE APPELLANT H AS DISCHARGED HIS INITIAL BURDEN OF PROOF AND NOTHING ADVERSE HAS BEEN BROUGH T ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE LOAN AMOUNTS FRO M THE THREE NEW LENDERS DURING THE YEAR ARE ACTUALLY BELONGING TO THE APPEL LANT, WHICH HAVE BEEN ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 10 - INTRODUCED AS CASH CREDITS IN THE NAME OF THE ABOVE THREE LENDERS. I, THEREFORE, DELETE THE ADDITION OF LOAN AMOUNTS OF RS.8,45,000, 3,29,000 AND 1,00,000 APPEARING IN THE NAME OF SMT. LAXMI DEVI AGARWAL, R OHIT KASHAN AND SHILPA VIKAS SINGHANIA RESPECTIVELY AS CASH CREDITS U/S. 6 8 OF THE ACT. 19. AS FAR AS THE ASSESSEES APPEAL IS CONCERNED TH E ADDITION IN RESPECT OF THOSE PARTIES HAVE ALREADY BEEN CONSIDERED FOR A .Y. 2006-07 AND 2007-08 THUS STOOD COVERED IN FAVOUR OF THE ASSESSE E. RESULTANTLY, THE ADDITION OF RS.29,94,793/- IS IN THE LIKE MANNER IS DELETED. THE ASSESSEES GROUND IS ALLOWED. 20. GROUND NO.2 IS REPRODUCED BELOW: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS W ELL AS ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER IN DISALLOWING INTEREST PAID ON UNSECURED LOAN OF RS.2 4,10,586/-. 21. THE DISALLOWANCE OF INTEREST IS CONSEQUENTIAL I N NATURE; HENCE, THE ADDITION IS REVERSED AND THE GROUND IS ALLOWED. 22. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR A.Y. 2008-09. 23. FOR A.Y. 2008-09, (ITA NO.2619/AHD/2011) , THE REVENUE IS IN CROSS APPEAL ARISING OUT OF THE ORDER OF LEARNED CI T(A), DATED 10.8.2011 AND THE GROUNDS OF REVENUE ARE DECIDED HEREUNDER: GROUND NO.1: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.42,68,793/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S. 68 OF THE IT ACT WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO FURNISH BANK STATE MENTS, RETURN AND COPY OF BALANCE SHEET, A PREREQUISITE TO PROVE THE GENUINEN ESS OF THE LOANS. 24. AS NOTED IN THE ABOVE PARAGRAPHS, THE AO HAD MA DE A TOTAL ADDITION OF RS.42,68,793/-. A LIST OF THOSE PERSONS HAS APPEARED IN THE ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 11 - ASSESSMENT YEAR. THE UNDISPUTED FACT IS THAT THE NA MES OF UNSECURED LOANS HAS APPEARED IN THE PAST YEARS AS WE HAVE FOU ND WHILE DECIDING THE APPEAL FOR A.Y. 2007-08. THEREFORE, LEARNED CIT(A) HAS REITERATED THOSE FACTS WHILE DECIDING THE APPEAL FOR A.Y. 2008-09, R ELEVANT OBSERVATIONS OF LEARNED CIT(A) HAD ALREADY BEEN REPRODUCED IN PA RAGRAPH 18 OF HIS JUDGMENT. VIDE PARAGRAPH 4.1, LEARNED CIT(A) HAS UP HELD THE ADDITION OF RS.29,94,793/-. THEREAFTER VIDE PARAGRAPH 4.2, LEAR NED CIT(A) HAS DELETED THE LOAN AMOUNT OF RS.8,45,000/-, RS.3,29,0 00/- AND RS.1,00,000/-, RESPECTIVELY, APPEARING IN THE NAMES OF SMT. LAXMI DEVI AGARWAL, ROHIT P. KASHAN AND SHILAP VIKAS SINGHANIA . THAT PARAGRAPH OF LEARNED CIT(A), ONLY RELEVANT PORTION, HAS ALSO BEE N REPRODUCED BY US IN PARAGRAPH 18.1 (SUPRA). WE HAVE NOTED THAT THE DEPO SITS AS APPEARING IN THE ACCOUNTS OF THESE THREE PERSONS WAS DELETED BY LEARNED CIT(A). HENCE, BECAUSE OF THE PART RELIEF FOR A.Y. 2008-09 BOTH THE PARTIES, I.E., REVENUE AS WELL AS ASSESSEE ARE BEFORE US. 24.1 BECAUSE OF THE ABOVE FACTS, IT IS CLEAR THAT G ROUND NO.1 OF THE REVENUE DEPARTMENT IS WRONG AND INSTEAD OF RS.42,68 ,793/- REVENUE DEPARTMENT COULD ONLY AGITATE THE DELETION PORTION AS APPEARING IN THE NAMES OF THE THREE PARTIES. THERE IS NO APPARENT RE ASON FOR THE REVENUE TO CONTEST THE ADDITION OF RS.29,94,793/- WHICH WAS AF FIRMED BY LEARNED CIT(A). 24.2 AS FAR AS THE DELETION IN RESPECT OF THE THREE PARTIES IS CONCERNED LEARNED CIT(A) HAS NOTED THAT IN RESPECT OF LAXMI D EVI AGARWAL THAT SHE IS GRANDMOTHER AND FILING A RETURN OF INCOME FOR MO RE THAN 20 YEARS. LIKEWISE IN THE CASE OF ROHIT PAWAN KASHAN AND SHIL PA VIKAS SINGHANIA, ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 12 - THE ASSESSEE HAS FURNISHED THEIR PAN, ADDRESSES, AC KNOWLEDGEMENT OF THE INCOME TAX RETURNS, FILED THEIR BANK STATEMENTS, DE TAILS OF THE LOAN TRANSACTIONS, ETC. RATHER, LEARNED CIT(A) HAS ALSO NOTICED THAT THE ASSESSEE HAD MADE A REQUEST TO AO TO ACCEPT THE GEN UINENESS OF THOSE PERSONS AND IN CASE OF ANY DOUBT A SHOW CAUSE NOTIC E COULD HAVE BEEN ISSUED TO THOSE DEPOSITORS DIRECTLY. BECAUSE OF THE PRESENCE OF THE BANK STATEMENTS, INCOME TAX RETURNS AND PAN DETAILS, WHI CH WERE DULY FURNISHED BEFORE THE AO DURING THE COURSE OF ASSESS MENT PROCEEDINGS, LEARNED CIT(A) HAS HELD THAT IN THE ABSENCE OF ANY ADVERSE EVIDENCE FROM THE SIDE OF THE REVENUE DEPARTMENT THOSE DEPOSITS W ERE EXPLAINED BY THE ASSESSEE. IN THE RESULT, THE ADDITION WAS DELETED. 24.3 FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R. MR. J.P. JHANGID APPEARED AND PLACED ON RECORD WRITTEN SUBMISSION. P RIMARILY, REVOLVING AROUND THE FACTS OF THE CASE AS WELL AS CITED FEW C ASE LAWS, LEARNED DR HAS ALSO CONTESTED THAT THE TRIBUNAL HAS NOT CONSID ERED THE WEAK FINANCIAL STATUS OF THOSE 20 PERSONS AND WRONGLY DELETED THE ADDITION IN THE PAST YEARS. HE HAS ALSO PLEADED THAT THOSE ORDERS OF THE TRIBUNAL SHOULD NOT BE APPLIED FOR A.Y. 2008-09. IN RESPECT OF THESE ARGUM ENTS, HE HAS REITERATED THE LAW AS APPLICABLE IN SECTION 68 OF IT ACT. ACCO RDING TO HIM, THE IDENTITY OF THE CREDITOR, GENUINENESS OF THE DEPOSI TS AND THE CREDITWORTHINESS OF THE DEPOSITORS SHOULD HAVE BEEN ESTABLISHED UPTO THE HILT AS HELD IN THE CASE OF P. MOHAN KALA, 291 ITR 278 (SC), BIJU PATHNAYAK, 106 ITR 674, ETC. 25. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES. WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO LEGAL FORCE IN THE GROUND OF THE ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 13 - REVENUE AS ALSO THE ARGUMENTS RAISED BY LEARNED DR. IN A SITUATION, WHEN THE ADMITTED FACTS ARE THAT THE SAID THREE DEPOSITO RS HAVE FILED DOCUMENTARY EVIDENCES IN SUPPORT OF THE IDENTITY OF THOSE PERSONS, PROOF OF CREDITWORTHINESS AND THE DETAILS OF THE TRANSACT IONS THEN IN THE ABSENCE OF ANY CONTRARY MATERIAL THOSE DEPOSITS SHOULD HAVE BEEN DOUBTED. LEARNED CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT THE INCOME TAX RETURN, ACKNOWLEDGMENT SLIPS, THEIR PAN NUMBERS, BA NK STATEMENTS, ETC., WERE DULY PLACED BEFORE THE AO AND THE AO HAS NOT D ISPUTED THOSE EVIDENCES. ACCORDING TO US, SINCE THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS OF EXPLAINING THE CASH CREDITOR DETAIL S THEN IT WAS NOT REASONABLE TO INVOKE THE PROVISIONS OF SECTION 68 O F IT ACT. HENCE, WE HEREBY CONFIRM THE LEGAL AS WELL AS FACTUAL FINDING S OF LEARNED CIT(A). RESULTANTLY, THIS GROUND OF THE REVENUE IS HEREBY D ISMISSED. 26. GROUND NO.2 IS REPRODUCED BELOW: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE INTEREST CLAIMED OF RS.1,45,045/- OUT OF TOTAL INTEREST DISALLOWED ON RS.25,25,631/- WITHOUT APPRE CIATING THE FACT THAT ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM FOR PAYME NT ITS INTEREST. 27. THIS GROUND IS CONSEQUENTIAL IN NATURE BECAUSE THE INTEREST CLAIMED ON THOSE DEPOSITS WAS DISALLOWED BY THE AO WHICH WA S CORRESPONDINGLY DELETED BY THE LEARNED CIT(A). AN ANOTHER FACT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT IN THE SUBSEQUENT YEARS, THE ASSESS EE HAS ALSO REPAID THE AFOREMENTIONED LOANS. THUS, UNDER THE TOTALITY AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THIS GROUND OF THE REVEN UE IS ALSO DISMISSED. 28. APPEAL OF THE REVENUE FOR A.Y. 2008-09 IS DISMI SSED. ITA NO. 574, 2619, 2801/AHD/2011 SHRI RAKESH OMPRAKASH AGARWAL A.YS. 2007-08 AND 2008-09 - 14 - 29. TO SUM UP, THE ASSESSEES APPEAL FOR A.Y. 2007- 08 IS PARTLY ALLOWED AND FOR A.Y. 2008-09, ASSESSEES APPEAL IS ALLOWED AND REVENUES APPEAL IS DISMISSED. SD/- SD/- (A.K. GARODIA) (MUKUL KR. SHRAW AT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/09/2013 PRABHAT KR. KESARWANI, SR.P.S. TRUE COPY PROUNOUNCED IN THE COURT SD/- SD/- A.C. M.K.S. (AM) (JM) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A)-III, AHMEDABAD 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, (DY./ASSTT.REGISTRAR) ITAT, AHMEDABAD