Shri Rasiklal A.Patel, Dist.Anand V. The Income tax Officer, Ward-2, Anand

ITA 575/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9349 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 31-07-2009
• Assessment Year: 1995-1996
• Appeal Filed On: 22-02-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M G PATEL AR SHRI P ORAM
• Keywords: Bogus purchase; Unexplained cash credit; Question of law; Tax effect; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 31/07/09 DRAFTED ON: 10/08/09 SL. NO(S) ITA NO(S) ASSTT. YEAR(S) APPEAL(S) BY APPELLANT(S) RESPONDENT(S 1. 575/AHD/2005 1995-96 SHRI RASIKBHAI A.PATEL PROP.MARUTI AGRO EQUIPMENTS C/O.ADARSH PLANT PROTECTS LTD. 604, GIDC, VITHAL UDYOGNAGAR, DIST.ANAND PAN/GNR : 31-612-PZ- 5453 THE ITO, WARD-2, ANAND 2. 682/AHD/2005 1995-96 THE ITO WARD-2, ANAND SHRI RASIKBHAI A. PATEL 3. 576/AHD/2005 1997-98 SHRI RASIKBHAI A. PATEL THE ITO WARD-2, ANAND 4. 683/AHD/2005 1997-98 THE ITO, WARD-2, ANAND SHR I RASIKBHAI A. PATEL 5. 577/AHD/2005 1998-99 SHRI RASIKBHAI A. PATEL THE ITO,WARD-2, ANAND 6. 684/AHD/2005 1998-99 ITO, WARD-2, ANAND SHRI RASIKBHAI A.PATEL 7. 578/AHD/2005 1999- 2000 SHRI RASIKBHAI A. PATEL THE ITO WARD-2, ANAND 8. 685/AHD/2005 1999- 2000 THE ITO, WARD-2, ANAND SHRI RASIKBHAI A. PATEL 9. 681/AHD/2005 1994-95 -DO- -DO- ASSESSEE BY : SHRI M.G. PATEL, AR REVENUE BY : SHRI P. ORAM, DR ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 2 - O R D E R PER BENCH :- ITA NOS.575/AHD/2005 & 682/AHD/2005:- THESE ARE THE CROSS APPEALS; ONE BY THE ASSESSEE AND THE OTHER BY THE R EVENUE AGAINST THE COMMON ORDER OF THE LD.CIT(APPEALS)-II, BARODA DATED 24 TH DECEMBER-2004 PASSED FOR ASSESSMENT YEAR 1995-96. THE FOLLOWING GROUNDS HAV E BEEN RAISED BY THE RESPECTIVE PARTIES IN THEIR APPEALS:- (A) IN ASSESSEES APPEAL, ITA NO.575/AHD/2005 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING TH AT THE ASSESSING OFFICER HAS RIGHTLY CONSIDERED RS.93,000/- AS UNEX PLAINED INCOME OF THE APPELLANT BEING AMOUNT OF CASH DEPOSITED IN THE BANK. 2.YOUR APPELLANT PRAYS TO DELETE THE ADDITION OF RS .93,000/- MADE ON ACCOUNT OF UNEXPLAINED DEPOSITS IN THE BANK. (B) IN REVENUES APPEAL, ITA NO.682/AHD/2005 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED; I. IN DELETING THE ADDITION OF RS.1,00,000/- MADE U/S.68 OF THE ACT IN RESPECT OF UNEXPLAINED CASH CREDIT IN THE NAME OF M /S.AMBIC BOT CO FAILED TO FURNISH BOOKS OF ACCOUNT AND THEREBY FAIL ED TO EXPLAIN THE SOURCE OF THE AMOUNT ADVANCED TO THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ASSESSEES APPEAL, ITA NO.575/AHD/2005 FOR ASST.YEA R 1995-96 ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 3 - 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER FOUND THAT A SUM OF RS.1,57,000/- IS DEPOSITED IN CASH IN THE BANK ACCOUNT OF THE ASSESSEE. IT WAS CLAIMED THAT MONEY WAS RECEIVED F ROM VARIOUS CLIENTS BUT NO EVIDENCE WAS PRODUCED. HE ACCORDINGLY MADE THE AD DITION OF RS.1,57,000/-. THE LD.CIT(APPEALS) EXAMINED THE ISSUE AFRESH AT HI S LEVEL. THE ASSESSEE EXPLAINED THAT SUM OF RS.93,000/- WAS RECEIVED FROM THE FOLLOWING FIVE PERSONS:- SL.NO(S) NAME OF PERSON(S) AMOUNT (RS.) 1. GOPALBHAI DHIRUBHAI PATEL 19,000/- 2. MOHANBHAI P.DESAI 19,000/- 3. BHARATBHAI SUTHAR 19,000/- 4. SHASHIKANTBHAI RATILAL PARIKH 19,000/- 5. CHIMANBHAI M.PATEL 17,000/- 3. THE BALANCE AMOUNT OF RS.64,000/- WAS CLAIMED TO BE THE DEPOSIT OUT OF CASH BALANCE AVAILABLE WITH THE ASSESSEE. THE LD. CIT(APPEALS) CALLED FOR A REMAND REPORT FROM THE A.O. DURING THE REMAND PROC EEDINGS, THE ASSESSING OFFICER EXAMINED THE CLAIM OF THE ASSESSEE AND FOUN D THAT THE CLAIM OF AVAILABILITY OF RS.64,000/- AS CASH BALANCE IS CORR ECT. ON THE BASIS OF REMAND REPORT, THE LD.CIT(APPEALS) DELETED THE ADDITION OF RS.64,000/-. HOWEVER, HE CONFIRMED THE ADDITION OF RS.93,000/-, BY OBSERVING AS UNDER:- 7.5. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS M ADE AS WELL AS ARGUMENTS PUTFORTH BY THE LEARNED COUNSEL FOR THE A PPELLANT. THE FINDING IN THE ASSESSMENT ORDER AND ARGUMENTS OF T HE AO ARE CONSIDERED. INSPITE OF AFFORDING OPPORTUNITIES, TH E APPELLANT FAILED TO ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 4 - ESTABLISH THE GENUINENESS OF DEPOSITS FROM WHOM CAS H DEPOSITS ARE RECEIVED AND DEPOSITED INTO BANK. CONSIDERING THE SAME THE ACTION OF THE AO OF MAKING ADDITION TREATING THE CASH DEPOSI TS AS UNEXPLAINED IS FOUND TO BE CORRECT TO THE EXTENT OF RS.93,000/-. HOWEVER, THE BALANCE AMOUNT OF RS.64,000 BEING DEPOSITED INTO BANK OUT O F CASH BALANCE AVAILABLE WITH THE APPELLANT HAS BEEN ACCEPTED BY T HE AO STANDS EXPLAINED AND ADDITION MADE TO THE EXTENT OF RS.64, 000 IS DIRECTED TO BE DELETED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. NO CONTRARY MATERIAL HAS BEEN PRODUCED BEFORE US TO SHOW THAT THE DEPOSI TS ARE GENUINE AND, THEREFORE, WE ARE UNABLE TO TAKE A DIFFERENT VIEW T HAN TAKEN BY THE LD.CIT(APPEALS). ACCORDINGLY, HIS ORDER IS CONFIRM ED. 5. AS A RESULT, THE APPEAL OF THE ASSESSEE, ITA NO. 575/AHD/2005 FOR ASSESSMENT YEAR 1995-96 IS DISMISSED. REVENUES APPEAL, ITA NO.682/AHD/2005 FOR ASST.YEAR 1995-96 6. THE SOLE ISSUE INVOLVED IN THIS APPEAL RELATES T O DELETION OF ADDITION OF RS.1,00,000/- MADE U/S.68 OF THE I.T. ACT, 1961 IN RESPECT OF UNEXPLAINED CASH CREDIT. 7. AT THE OUT SET, A QUERY WAS RAISED BY THE BENCH AS TO THE MAINTAINABILITY OF THE APPEAL, IN VIEW OF RECENT CBDT CIRCULAR REST RICTING FILING OF APPEAL BY THE REVENUE, THE LEARNED DR DID NOT CONTROVERT THE SAME, AND STATED THAT THE TAX EFFECT IN THE PRESENT CASE IS BELOW THE TAX LIM IT PRESCRIBED THE CBDT. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT IN V IEW OF THE VARIOUS ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 5 - INSTRUCTIONS OF THE CBDT RESTRICTING THE FILING OF APPEALS BEFORE THE APPELLATE TRIBUNALS, HIGH COURTS AND SUPREME COURT, THE APPEA L FILED BY THE REVENUE SHOULD BE DISMISSED IN LIMINE . 8. AFTER HAVING HEARD BOTH PARTIES, CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND THE CBDT CIRCULARS ON THIS ISSUE, WE FIN D THAT ITAT IS TAKING CONSISTENT VIEW IN NUMBER OF CASES ABOUT ADMISSIBIL ITY OF APPEAL FILED BY THE REVENUE IN VIEW OF VARIOUS INSTRUCTIONS ISSUED BY C BDT FROM TIME TO TIME, VIZ. INSTRUCTION NO.1979 DATED 27-3-2000, NO.1985 DATED 29-6-2000, NO.6 OF 2003 DATED 17-07-2003, NO.19 OF 2003 DATED 23-12-2003, N O.5/2004 DATED 27-5- 2004, NO.2/2005 DATED 24-10-2005 AND NO.5/2007 DATE D 16-7-2007 AND LASTLY INSTRUCTION NO.F.NO.279/MISC.142/2007-IT DATED 15-5 -2008 WHEREIN MONETARY LIMITS FOR FILING DEPARTMENTAL APPEALS (INCOME-TAX MATTERS) AND OTHER CONDITIONS WERE SPECIFIED, FOR FILING APPEALS BEFOR E APPELLATE TRIBUNALS, HIGH COURTS AND SUPREME COURT. DECISION OF COORDINATING BENCH OF ITAT, RAJKOT IN THE CASE OF ACIT VS. RAJOO ENGINEERS LTD.[2006] 100 ITD 555, WHEREIN THE HON'BLE BENCH HAS DISMISSED THE REVENUES APPEAL BY HOLDING AS UNDER (HEAD NOTES):- IT IS TRUE THAT THE HIGH COURT DECISION IN COMMISS IONER OF INCOME-TAX V. PITHWA ENGG. WORKS [2005], 276 ITR 519 WAS NOT D EALING WITH THE NEW LIMIT OF THE CIRCULAR DATED 24-10-2005. IT WAS WITH REFERENCE TO THE EARLIER CIRCULAR WHERE REFERENCE WAS NOT REQUIRED T O BE FILED TO THE HIGH COURT IF THE TAX EFFECT WAS LESS THAN RS.2 LAKHS. THE CONTENTION OF THE REVENUE IN THAT CASE WAS THAT RS.2 LAKHS LIMIT WAS INCREASED BY CIRCULAR DATED 27-3-2000 AND PRIOR TO THAT, THE LIMIT WAS ON LY RS.50,000/- AND THE CONTENTION OF THE REVENUE WAS THAT THE NEW LIMI T WOULD NOT BE APPLICABLE TO THE OLD REFERENCES. THE HIGH COURT R EJECTED THE SAID CONTENTION OF THE REVENUE. [PARAGRAPH 4]. IN THOSE CIRCUMSTANCES, THOUGH THE SAID HIGH COURT DECISION DID NOT DEAL WITH THE CIRCULAR DATED 24-10-2005, BUT IT HAD DEALT WITH THE EARLIER ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 6 - CIRCULAR AND THE LIMITS OF THAT CIRCULAR WERE APPLI ED EVEN TO THE CASES WHICH WERE PRIOR TO THE OLD CIRCULAR. THEREFORE, TH E RATIO OF THAT DECISION WAS APPLICABLE IN THE INSTANT CASE AS WELL . THE CBDT HAS TAKEN A POLICY DECISION NOT TO FILE APPEALS IN SUCH TYPE OF CASES AND THE CIRCULAR IS BINDING ON THE REVENUE EVEN TO APPEALS FILED BEFORE 31-10- 2005 AND THE DEPTT.. WOULD NOT BE JUSTIFIED IN PROC EEDING WITH THOSE APPEALS WITHIN THE MONETARY LIMIT OF TAX EFFECT PRE SCRIBED IN THE CIRCULAR DATED 24-10-2005 [PARAGRAPH 5]. THE CONTENTION OF THE REVENUE THAT THE CASE OF THE ASSESSEE WAS COVERED BY THE EXCEPTION 3 HAD ALSO NO FORCE INASMUCH AS TH E SAID EXCEPTION PROVIDES THAT THE CBDT HAS ALSO DECIDED THAT IN CAS ES INVOLVING SUBSTANTIAL QUESTION OF LAW OF IMPORTANCE AS WELL A S IN CASES WHERE THE SAME QUESTION OF LAW WILL REPEATEDLY ARISE, EITHER IN THE CASE CONCERNED OR IN SIMILAR CASES, SHOULD BE SEPARATELY CONSIDERE D ON MERITS WITHOUT BEING HINDERED BY THE MONETARY LIMITS [PARAGRAPH 6] . 9. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWI NG VARIOUS ORDERS OF THIS TRIBUNAL ON THIS ISSUE INCLUDING THE DECISION CITED ABOVE, WE DISMISS THE APPEAL OF THE REVENUE IN LIMINE . 10. IN THE RESULT, THE APPEAL OF THE REVENUE, I.E. ITA NO.682/AHD/2005 IS DISMISSED. REVENUES APPEALS, I.E.ITA NOS.683, 684 & 685/AHD/ 2005 FOR ASST.YEARS 1997-98, 1998-99 & 1999-2000 RESPECTIVELY. 11. IN THESE APPEALS ALSO, THE REVENUE HAS RAISED T HE COMMON GROUND (EXCEPT QUANTUM IN APPEALS) AS WERE RAISED IN ITA N O.682/AHD/2005 FOR ASSESSMENT YEAR 1995-96(SUPRA). SINCE THE FACTS AN D CIRCUMSTANCES OF THE CASE ARE SIMILAR TO THE FACTS IN REVENUES APPEAL ITA NO.682/AHD/2005, WE, FOR THE SAME REASONING, IE. REVENUE EFFECT IS LESS THAN, THE LIMIT PRESCRIBED IN ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 7 - BOARDS CIRCULAR REFERRED THEREIN, FOR FILING THE A PPEAL BY THE DEPARTMENT, DISMISS ALL THESE APPEALS OF THE REVENUE IN LIMINE . ASSESSEES APPEAL, ITA NO.576/AHD/2005 FOR ASST.YEA R 1997-98 12. IN THIS APPEAL, THE ASSESSEE RAISED THE FOLLOWI NG GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF AMOUNT DEPOS ITED IN THE BANK AND THE AMOUNT INTRODUCED AS CAPITAL TO THE EXTENT OF R S.1,74,500/- OUT OF TOTAL ADDITION OF RS.3,24,500/- AFTER HOLDING THAT THE BALANCE AMOUNT HAS NOT BEEN EXPLAINED BY THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING TH AT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED INTEREST OF RS.37,44 1/- HOLDING THAT THE APPELLANT HAS NOT ESTABLISHED THAT THE INTEREST BEA RING FUNDS HAVE NOT BEEN DIVERTED TO NON-INTEREST BEARING FUNDS. 3. YOUR APPELLANT PRAYS OF THE FOLLOWING: (I) TO DELETE THE ADDITION OF RS.1,74,500/- (II) TO DELETE THE DISALLOWANCE OF RS.37,441/- 4. YOUR APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AM END AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEALS. 12.1. THE BRIEF FACTS OF THE CASE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND FOLLOWING DEPOSITS HAVE BEEN MADE BY THE ASSESSEE IN BANK ACCOUNT NO.128 WITH UNITED WESTERN BANK LTD., ANAND:- ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 8 - SL NO(S) DATE AMOUNT (RS.) 1. 28/09/1996 5,000/- 2. 05/10/1996 49,000/- 3. 08/10/1996 1,00,000/- 4. 16/10/1996 1,00,000/- 5. 31/01/1997 5,000/- 6. 31/01/1997 1,000/- TOTAL 2,60,000/- 13. IN ADDITION TO ABOVE, FURTHER DEPOSITS OF RS.64 ,500/- WERE FOUND WITH M/S. MARUTI AGRO EQUIPMENT:- SL NO(S) DATE AMOUNT (RS.) 1. 18/05/1996 15,000/- 2. 08/07/1996 17,000/- 3. 27/09/1996 16,500/- 4. 02/02/1997 16,000/- TOTAL 64,500/- 14. IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT ABOVE CASH DEPOSITS AGGREGATING TO RS.3,24,500/- WERE MADE OUT OF CASH RECEIPT FROM SHRI AMBALAL H. PATEL, FATHER OF THE ASSESSEE. TWO LETTERS FROM SHRI AMBALAL H. PATEL WERE FILED WITH THE ASSESSING OFFICER CONFIRMING THE PAY MENT OF ABOVE AMOUNTS TO THE ASSESSEE, AS COMING OUT OF HIS (SHRI A.H. PATEL )S AGRICULTURAL INCOME. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE DETAILS OF AGRICULTURAL INCOME OF HIS FATHER, HIS CREDITWORTHINESS AND GE NUINENESS OF THE TRANSACTIONS. IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT SHRI AMBALAL PATEL RECEIVED A ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 9 - SUM OF RS.1,38,000/- FROM M/S.C.F. TOBACCO CO. OF SARSA THROUGH CHEQUES AS UNDER:- NAME OF BANK DATE AMOUNT (RS.) C.B.I., SARSA 30/04/1996 20,000/- -DO- 30/06/1996 21,000/- -DO- 31/08/1996 20,000/- -DO- 30/09/1996 14,000/- -DO- 31/10/1996 21,000/- -DO- 30/11/1996 14,000/- -DO- 31/01/1997 14,000/- -DO- 31/03/1997 14,000/- TOTAL 1,38,000/- 15. HOWEVER, THE COPY OF THE SALE BILLS OF AGRICU LTURAL PRODUCE WERE NOT FURNISHED. THE ASSESSING OFFICER VERIFIED THE CA SH DEPOSIT OF RS.3,24,500/- DEPOSITED ON VARIOUS DATES AND DATE-WISE WITHDRAWAL FROM THE BANK ACCOUNT OF SHRI AMBALAL PATEL. HE FOUND THAT THERE IS NO MATC HING OF CASH DEPOSIT IN ASSESSEES BANK ACCOUNT WITH CASH WITHDRAWALS IN TH E BANK ACCOUNT BY SHRI AMBALAL PATEL. WE REPRODUCE THE FOLLOWING FACTUAL DATA FROM THE ORDER OF THE ASSESSING OFFICER. 3.3.2. . FOR INSTANCE, THE ASSESSEE HAS MADE CASH DEPOSIT OF RS.49,000/- ON 05/10/1996 AND RS.1,00,000/- ON 08/1 0/1996 IN HIS BANK ACCOUNT WITH THE UNITED WESTERN BANK. ON COMPARIN G CORRESPONDING WITHDRAWAL IN THE BANK ACCOUNT OF SHRI A H PATEL WI TH THE CENTRAL BANK OF INDIA, IT IS FOUND THAT THERE IS CASH WITHDRAWAL OF RS.2,000/- ON 04/09/1996, RS.3,000/- ON 02/09/1996 AND RS.4,000/- PLUS RS.2,000/- IN THE MONTH OF AUGUST, 1996. ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 10 - 16. THE ASSESSING OFFICER ALSO NOTED THAT AS SHRI A MBALAL H.PATEL HAD A BANK ACCOUNT, HE COULD HAVE BEEN GIVEN MONEY BY CHE QUE TO THE ASSESSEE. HAVING NOT SATISFIED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER MADE THE ADDITION OF RS.3,24,500 /-. 17. THE LD.CIT(APPEALS) EXAMINED THE ISSUE AFRESH A ND ACCEPTED THE EXPLANATION RELATING TO A SUM OF RS.1,50,000/- AND CONFIRMED THE ADDITION OF RS.1,74,500/-, BY OBSERVING AS UNDER:- 4.3. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS M ADE AS WELL AS ARGUMENTS PUTFORTH BY THE LEARNED COUNSEL FOR THE A PPELLANT. THE FINDING IN THE ASSESSMENT ORDER AND ARGUMENTS OF T HE AO ARE CONSIDERED. IT IS NOTICED THAT SOURCE OF BANK DEPO SITS IN UNITED WESTERN BANK LTD. AGGREGATING TO RS.2,64,000 AND CREDIT ENT RIES AGGREGATING TO RS.64,500/- IN THE CAPITAL ACCOUNT OF M/S.MARUTI AG RO EQUIPMENTS TREATED BY THE AO AS UNEXPLAINED, IS OUT OF AMOUNT RECEIVED FROM HIS FATHER OUT OF HIS AGRICULTURAL INCOME. THE COUNSEL SUBMITTED COPY OF ACCOUNT OF SHRI AMBALAL HIRABHAI, (FATHER OF APPELL ANT) WITH M/S. C.F. TOBACCO CO WHEREIN AN AMOUNT AGGREGATING TO RS.1,38 ,000 HAS BEEN PAID. CONSIDERING THE OVERALL FACTS AND CIRCUMSTAN CES, AGRICULTURAL INCOME OF FATHER WHO IS AGRICULTURIST, CANNOT BE IG NORED IN TOTO, AND THE SOURCE OF FATHERS INCOME IS ACCEPTED TO THE EXTENT OF RS.1,50,000 AND IN TURN BANK DEPOSITS TO THE EXTENT OF RS.1,50,000 IS TREATED AS EXPLAINED. THE BALANCE ADDITION AGGREGATING TO RS.1,74,500 STA NDS CONFIRMED. ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 11 - 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. NO CONTRARY MATERIAL HAS BEEN PRODUCED BEFORE US TO SHOW THAT THE DEPOSITS A RE GENUINE AND, THEREFORE, WE ARE UNABLE TO TAKE A DIFFERENT VIEW THAN TAKEN B Y THE LD.CIT(APPEALS). ACCORDINGLY, HIS ORDER IS CONFIRMED. THEREFORE, TH IS GROUND OF APPEAL IS DISMISSED. 19. THE SECOND GROUND RELATES TO DISALLOWANCE OF INTEREST OF RS.37,441/-. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE ASSESSE E HAS CLAIMED AN EXPENDITURE OF RS.37,441/- UNDER THE HEAD INTEREST IN THE PROFIT & LOSS ACCOUNT ON THE SUM HE HAS BORROWED FROM M/S.SHREEJI FARMIN G AGENCY. HE ALSO FOUND THAT THE ASSESSEE HAS MADE ADVANCES OF RS.11, 85,000/- TO M/S.KAIVAL AGRO PRODUCT LTD. AND OF RS.50,000/- TO M/S.IMPEX PRODUCTS. THE ASSESSEE IS A PARTNER OF M/S.KAIVAL AGRO PRODUCT LTD., NO INTER EST WAS RECEIVED BY THE ASSESSEE FROM THIS COMPANY. FINDING THAT THE ASSE SSEE HAS NOT ESTABLISHED THE NEXUS BETWEEN INTEREST-FREE FUNDS AND ADVANCES GIVE N TO ITS SISTER-CONCERNS, THE ASSESSING OFFICER DISALLOWED INTEREST AMOUNTING TO RS.37,441/- BEING TOTAL CLAIM OF THE INTEREST IN THE PROFIT & LOSS ACCOUNT . 20. THE LD.CIT(APPEALS) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE FAILED TO ESTABLISH THAT THE INTEREST- BEARING FUNDS WERE NOT DIVERTED ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 12 - AS INTEREST-FREE ADVANCES TO THE SISTER-CONCERNS. THE RELEVANT PART OF THE ORDER OF THE LD.CIT(APPEALS), WHICH READS AS UNDER:- 5.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSE SSMENT PROCEEDINGS, ARGUMENTS PUTFORTH BY THE COUNSEL AND THE REPORT OF THE AO. THE FINDINGS IN THE ASSESSMENT ORDER IS ALSO CONSIDERE D. IT IS NOTICED THAT THE AO HAS MADE DISALLOWANCE INFERRING THAT THERE W ERE AMOUNT OUTSTANDING FROM SISTER CONCERNS AND APPELLANT HAS NOT ADVANCED AMOUNT WITHOUT INTEREST. THE COUNSEL ALSO ARGUED T HAT THERE IS NO DIVERSION OF INTEREST BEARING FUNDS TO THE INTEREST FREE ADVANCES BUT FAILED TO ESTABLISH THAT FUNDS WERE NOT DIVERTED TO NON-INTEREST BEARING ADVANCES SINCE NO LEDGER ACCOUNTS OF RELEVANT PARTI ES ARE FURNISHED AND NOTHING HAS BEEN BROUGHT ON RECORD SO AS TO ACCEPT THE PLEA THAT APPELLANT HAS SUFFICIENT FUNDS AVAILABLE WITH HIM A ND ADVANCES WERE NOT OUT OF BORROWED FUNDS. EVEN IT IS ALSO NOT CLEAR W HEN THE LOANS WERE TAKEN FROM FRIENDS AND RELATIVES AND HOW THE SAME W ERE UTILIZED. IN THE FACTS AND CIRCUMSTANCES OF APPELLANTS CASE, I DO N OT SEE ANY FORCE TO ACCEPT THE PLEA THAT DISALLOWANCE OF INTEREST BY TH E AO OF RS.37,441/- IS NOT JUSTIFIED. THE SAME STANDS CONFIRMED. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. NO CONTRARY MATERIAL HAS BEEN PRODUCED BEFORE US TO SHOW THAT THE DEPOSI TS ARE GENUINE AND, THEREFORE, WE ARE UNABLE TO TAKE A DIFFERENT VIEW T HAN TAKEN BY THE ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 13 - LD.CIT(APPEALS). ACCORDINGLY, HIS ORDER IS CONFIRM ED. THEREFORE, THIS GROUND OF ASSESSEES APPEAL IS ALSO DISMISSED. 22. AS A RESULT, THE APPEAL OF THE ASSESSEE, ITA NO .576/AHD/2005 FOR ASSESSMENT YEAR 1997-98 IS DISMISSED. ASSESSEES APPEAL, ITA NO.577/AHD/2005 FOR ASST.YEA R 1998-99 23. IN THIS APPEAL, THE ASSESSEE RAISED THE FOLLOWI NG GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF AMOUNT DEPOS ITED IN THE BANK AND THE AMOUNT INTRODUCED AS CAPITAL TO THE EXTENT OF R S.35,000/- OUT OF TOTAL ADDITION OF RS.1,10,000/- AFTER HOLDING THAT THE BA LANCE AMOUNT HAS NOT BEEN EXPLAINED BY THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING TH AT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED INTEREST OF RS.1,95, 300/- HOLDING THAT THE APPELLANT HAS NOT ESTABLISHED THAT THE INTEREST BEA RING FUNDS HAVE NOT BEEN DIVERTED TO NON-INTEREST BEARING FUNDS. 3. YOUR APPELLANT PRAYS OF THE FOLLOWING: (I) TO DELETE THE ADDITION OF RS.35,000/- (II) TO DELETE THE DISALLOWANCE OF RS.1,95,300/- 4. YOUR APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEALS. ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 14 - 24. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT FOLLO WING CASH DEPOSITS IN THE BANK ACCOUNT NO.128 WITH UNITED WESTERN BANK LTD.:- SL NO(S) DATE AMOUNT (RS.) 1. 24/07/1997 5,000/- 2. 10/12/1997 12,500/- TOTAL 17,500/- 25. IN ADDITION, THE FOLLOWING CASH DEPOSITS WERE A LSO MADE IN THE CAPITAL ACCOUNT OF THE ASSESSEE IN HIS PROPRIETARY CONCERN, MARUTI AGRO EQUIPMENT AS UNDER:- SL NO(S) DATE AMOUNT (RS.) 1. 22/06/1997 15,000/- 2. 28/07/1997 17,500/- 3. 25/11/1997 15,000/- 4. 15/02/1998 15,000/- TOTAL 62,500/- 26. IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT THE ASSESSEE RECEIVED MONEY FROM HIS FATHER SHRI AMBALAL PATEL WHO RECEI VED A SUM OF RS.1,08,800/- FROM M/S.C.F. TOBACCO CO. OF SARSA T HROUGH CHEQUES AS UNDER:- NAME OF BANK DATE AMOUNT (RS.) C.B.I., SARSA 31/05/1997 13,500/- -DO- 31/07/1997 14,000/- -DO- 30/09/1997 13,800/- -DO- 20/10/1997 20,000/- -DO- 25/11/1997 15,000/- -DO- 08/01/1998 15,000/- -DO- 28/02/1998 17,500/- TOTAL 1,08.,000/- ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 15 - 27. IT WAS EXPLAINED THAT ASSESSEES FATHER SHRI A MBALAL H. PATEL IS DOING AGRICULTURE AND HE RECEIVED MONEY BY CHEQUES AS S ALES PROCEEDS OF HIS AGRICULTURAL PRODUCE. WHEN THE ASSESSING OFFICER T RIED TO MATCH THE CASH DEPOSITS IN THE ACCOUNTS OF THE ASSESSEE WITH THE C ASH WITHDRAWALS FROM THE ACCOUNT OF SHRI AMBALAL H.PATEL, HE FOUND LOT OF DI SPARITIES. THE ASSESSING OFFICER HAS GIVEN FOLLOWING EXAMPLES:- 3.3.2 FOR INSTANCE, THE ASSESSEE HAS MADE CASH DEPOSIT OF RS.15,000/- ON 22/06/1997 IN HIS CAPITAL ACCOUNT WITH MARUTI AGRO EQUIPMENT. ON COMPARING CORRESPONDING WITHDRAWAL IN THE BANK ACCOUNT OF SHRI A H PATEL WITH THE CENTRAL BANK OF INDIA, IT IS FOUND THAT THERE IS CASH WITHDRAWAL OF RS.2,000/- ON 11/0 6/1997, RS.1,000/- ON 17/05/1997 AND RS.4,000/- ON 12/05/1997. SIMILARL Y, COMPARING CASH CREDIT OF RS.15,00/- ON 15/02/1998 WITH CASH WITHDR AWAL IN THE BANK, IT IS FOUND THAT THERE IS CASH WITHDRAWAL OF RS.1,500/ - ON 04/02/1998 AND RS.4,000/- ON 15/01/1998. 28. THE ASSESSING OFFICER FURTHER NOTED THAT IF SHR I AMBALAL H.PATEL HAD BANK ACCOUNT, THEN HE SHOULD HAVE GIVEN MONEY TO TH E ASSESSEE BY CHEQUE. AS THERE WERE DISPARITIES IN THE CASH DEPOSITED IN THE ACCOUNTS OF THE ASSESSEE AND CASH WITHDRAWALS MADE BY SHRI AMBALAL H.PATEL, THE ASSESSING OFFICER TREATED THE EXPLANATION AS UNSATISFACTORY AND MADE THE ADDI TION OF RS.80,000/-. 29. THE ASSESSING OFFICER FURTHER FOUND THAT THE CA PITAL ACCOUNT OF THE ASSESSEE WITH M/S.KAIWAL AGRO PRODUCTS SHOWS THE FO LLOWING CASH DEPOSITS:- ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 16 - SL.NO(S) DATE AMOUNT(RS.) 1. 15/06/1997 15,000/- 2. 12/12/1997 15,000/- TOTAL 30,000/- 30. IT WAS EXPLAINED THAT CASH WAS GIVEN BY THE ASS ESSEE TO M/S.KAIWAL AGRO PRODUCTS OUT OF HIS AGRICULTURAL INCOME BUT F OR BUSINESS PURPOSES, BUT NO EVIDENCE OF AGRICULTURAL INCOME, SUCH AS, LAND HOLD ING, ETC. WERE FURNISHED. THE ASSESSING OFFICER ACCORDINGLY MADE THE ADDITION OF RS.1,10,000/-. 31. IN APPEAL, THE LD.CIT(APPEALS) TREATED A SUM OF RS.35,000/- AS UNEXPLAINED AND REMAINING AMOUNT WAS TREATED AS EXP LAINED BY OBSERVING AS UNDER:- 6.3. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS M ADE AS WELL AS ARGUMENTS PUTFORTH BY THE LEARNED COUNSEL FOR THE A PPELLANT. THE FINDING IN THE ASSESSMENT ORDER AND ARGUMENTS OF T HE AO ARE CONSIDERED. IT IS NOTICED THAT SOURCE OF BANK DEPO SITS IN UNITED WESTERN BANK LTD. AGGREGATING TO RS.12,500/- AND CREDIT EN TRIES AGGREGATING TO RS.92,500/- IN THE CAPITAL ACCOUNTS OF M/S.MARUTI A GRO EQUIPMENTS / M/S. KAIVAL AGRO PRODUCTS TREATED BY THE AO AS UN EXPLAINED, IS STATED TO BE OUT OF AMOUNT RECEIVED FROM HIS FATHER OUT O F HIS AGRICULTURAL INCOME. THE COUNSEL SUBMITTED A COPY OF ACCOUNT O F SHRI AMBALAL HIRABHAI, (FATHER OF APPELLANT) WITH M/S. C.F. TOBA CCO CO WHEREIN AN AMOUNT AGGREGATING TO RS.1,10,800 HAS BEEN PAID. C ONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES, AGRICULTURAL INCOM E OF APPELLANTS FATHER WHO IS AGRICULTURIST, CANNOT BE IGNORED IN T OTO, AND THE SOURCE OF ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 17 - FATHERS INCOME IS ACCEPTED TO THE EXTENT OF RS.75, 000 AND IN TURN SOURCE OF APPELLANTS CREDITS TO THE EXTENT OF RS.7 5,000 IS TREATED AS EXPLAINED. THE BALANCE ADDITION MADE AGGREGATING T O RS.35,000 STANDS CONFIRMED. 32. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. NO CONTRARY MATERIAL HAS BEEN PRODUCED BEFORE US TO SHOW THAT THE DEPOSI TS ARE GENUINE AND, THEREFORE, WE ARE UNABLE TO TAKE A DIFFERENT VIEW T HAN TAKEN BY THE LD.CIT(APPEALS). ACCORDINGLY, HIS ORDER IS CONFIRM ED. THEREFORE, THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 33. THE NEXT GROUND RELATES TO INTEREST OF RS.1,95, 300/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER F OUND THAT THAT THE ASSESSEE HAS DEBITED A SUM OF RS.2,80,026/- AS BANK INTEREST AND ANOTHER SUM OF RS.54,276/- AS INTEREST CHARGES AGAINST DEPOSITS F ROM SHREEJI FARMING AGENCY. THE ASSESSEE MADE ADVANCES OF RS.11,85,000/- TO M/S .KAIVAL AGRO PRODUCTS AND RS.1,17,000/- TO OTHER PARTIES. IT WAS EXPLAIN ED TO THE ASSESSING OFFICER THAT THE ASSESSEE HAD INTEREST-FREE DEPOSITS OF RS .9,38,498/-FROM VARIOUS PARTIES AS UNDER:- SL.NO(S) NAME OF PERSON(S) AMOUNT (RS.) 1. AMBALAL M. PATEL 20,000/- 2. HASMUKHBHAI A.PATEL 25,000/- ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 18 - 3. HASMUKHBHAI AMTHA PATEL 31,767/- 4. PARIMALBHAI J.PATEL 1,07,800/- 5. RAJNIKANT C.PATEL 20,160/- 6. ROYAL INVESTMENT 30,000/- 7. IMPEX PRODUCTS 2,00,000/- 8. ADARSH PLANT PROT LTD. 5,03,771/- TOTAL 9,38,498/- 34. IT WAS CLAIMED THAT INTEREST-FREE ADVANCES TO S ISTER CONCERNS WAS GIVEN OUT OF SUCH INTEREST-FREE FUNDS. THE ASSESSING OF FICER DID NOT AGREE WITH THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS NOT ESTABL ISHED NEXUS BETWEEN INTEREST-FREE FUNDS AND INTEREST-FREE ADVANCES. H E, ACCORDINGLY, DISALLOWED INTEREST OF RS.1,95,300/-. 35. IN APPEAL, THE LD.CIT(APPEALS) CONFIRMED THE SA ME BY OBSERVING AS UNDER:-:- 8.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT, ARGUMENTS PUTFORTH BY THE COUNSEL AND THE REPORT OF THE AO. THE FINDINGS IN THE ASSESSMENT ORDER IS ALSO CONSIDERED. IT IS NOTIC ED THAT THE AO HAS MADE DISALLOWANCE INFERRING THAT THERE WERE AMOUNT OUTSTANDING FROM SISTER CONCERNS AND APPELLANT HAS NOT ADVANCED AMOU NT WITHOUT INTEREST. THE COUNSEL ALSO ARGUED THAT THERE IS NO DIVERSION OF INTEREST BEARING FUNDS TO THE INTEREST FREE ADVANCES BUT FAI LED TO ESTABLISH THAT FUNDS WERE NOT DIVERTED TO NON-INTEREST BEARING ADV ANCES SINCE NO LEDGER ACCOUNTS OF RELEVANT PARTIES ARE FURNISHED A ND NOTHING HAS BEEN BROUGHT ON RECORD SO AS TO ACCEPT THE PLEA THAT APP ELLANT HAS SUFFICIENT FUNDS AVAILABLE WITH HIM AND ADVANCES WERE NOT OUT OF BORROWED FUNDS. ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 19 - EVEN IT IS ALSO NOT CLEAR WHEN THE LOANS WERE TAKEN FROM FRIENDS AND RELATIVES AND HOW THE SAME WERE UTILIZED. IN THE F ACTS AND CIRCUMSTANCES OF APPELLANTS CASE, I DO NOT SEE ANY FORCE TO ACCEPT THE PLEA THAT DISALLOWANCE OF INTEREST BY THE AO OF RS .1,95,300/- IS NOT JUSTIFIED. THE SAME STANDS CONFIRMED. 36. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. NO CONTRARY MATERIAL HAS BEEN PRODUCED BEFORE US TO SHOW THAT THE DEPOSI TS ARE GENUINE AND, THEREFORE, WE ARE UNABLE TO TAKE A DIFFERENT VIEW T HAN TAKEN BY THE LD.CIT(APPEALS). ACCORDINGLY, HIS ORDER IS CONFIRM ED. THEREFORE, THIS GROUND OF ASSESSEES APPEAL IS ALSO DISMISSED. 37. AS A RESULT, THE APPEAL OF THE ASSESSEE, ITA NO .577/AHD/2005 FOR ASSESSMENT YEAR 1998-99 IS DISMISSED. ASSESSEES APPEAL, ITA NO.578/AHD/2005 FOR ASST.YEA R 1999-2000 38. IN THIS APPEAL, THE ASSESSEE RAISED THE FOLLO WING GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF AMOUNT DEPOS ITED IN THE BANK AND THE AMOUNT INTRODUCED AS CAPITAL TO THE EXTENT OF R S.71,550/- OUT OF TOTAL ADDITION OF RS.1,71,550/- AFTER HOLDING THAT THE BA LANCE AMOUNT HAS NOT BEEN EXPLAINED BY THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING TH AT THE ASSESSING ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 20 - OFFICER HAS RIGHTLY DISALLOWED INTEREST OF RS.1,95, 300/- HOLDING THAT THE APPELLANT HAS NOT ESTABLISHED THAT THE INTEREST-BEA RING FUNDS HAVE NOT BEEN DIVERTED TO NON-INTEREST BEARING FUNDS. 3. YOUR APPELLANT PRAYS OF THE FOLLOWING: (I) TO DELETE THE ADDITION OF RS.71,550/- (II) TO DELETE THE DISALLOWANCE OF RS.1,95,300/- 4. YOUR APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEALS. 39. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER FOUND THE FOLLOWING CASH DEPOSITS IN THE BANK ACCOU NT OF THE ASSESSEE WITH UNITED WESTERN BANK LTD., ANAND:- SL NO(S) DATE AMOUNT (RS.) 1. 21/05/1998 69,000/- 2. 30/06/1998 5,000/- 3. 18/11/1998 7,200/- 4. 30/11/1998 500/- 5. 15/12/1998 3,100/- 6. 05/01/1999 1,000/- 7. 10/02/1999 1,000/- 8. 16/03/1999 3,000/- TOTAL 89,800/- 40. IN ADDITION, FOLLOWING CASH DEPOSITS WERE FOUND WITH PROPRIETARY- CONCERN, M/S.MARUTI AGRO EQUIPMENT AS UNDER:- SL NO(S) DATE AMOUNT (RS.) ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 21 - 1. 01/03/1999 19,000/- 2. 06/03/1999 15,000/- 3. 10/03/1999 18,000/- 4. 19/03/1999 14,750/- 5. 25/03/1999 15,000/- TOTAL 81,750/- 41. IT WAS EXPLAINED THAT THE ASSESSEE HAS RECEIVED CASH FROM HIS FATHER SHRI AMBALAL H.PATEL, OUT OF HIS AGRICULTURAL INCOME. T HE ASSESSING OFFICER FOUND THAT SHRI AMBALAL PATEL HAS RECEIVED FOLLOWING AMOU NTS IN HIS BANK ACCOUNT:- NAME OF BANK DATE AMOUNT (RS.) C.B.I., SARSA 30/04/1998 17,500/- -DO- 30/06/1998 17,500/- -DO- 31/08/1998 19,500/- -DO- 30/09/1998 17,500/- -DO- 30/09/1998 12,000/- -DO- 31/10/1998 17,500/- -DO- 30/11/1998 11,000/- -DO- 31/01/1999 12,000/- -DO- 31/03/1999 11,000/- TOTAL 1,35,500/- 42. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND AN Y CONNECTION BETWEEN CASH DEPOSITS IN THE ACCOUNTS OF THE ASSESSEE AND C ASH WITHDRAWAL OF SHRI AMBALAL H.PATEL. THE ASSESSING OFFICER HAS GIVEN F OLLOWING EXAMPLE:- 3.2.2.. THE ASSESSEE HAS MADE CASH DEPOSIT OF RS.69,000/- ON 21/05/1998 IN HIS BANK ACCOUNT WITH THE UNITED WEST ERN BANK. ON COMPARING CORRESPONDING WITHDRAWAL IN THE BANK ACCO UNT OF SHRI A.H. PATEL WITH THE CENTRAL BANK OF INDIA, IT IS FOUND T HAT THERE IS CASH WITHDRAWAL OF RS.2,500/- ON 16/04/1998 AND RS.2,000 /- ON 11/04/1998. SIMILARLY, COMPARING CASH CREDIT OF RS.19,000/- ON 01/03/1999 IN MARUTI AGRO EQUIPMENT WITH CASH WITHDRAWAL IN THE B ANK IT IS FOUND ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 22 - THAT THERE IS CASH WITHDRAWAL OF RS.5,000/- ON 19/0 2/1999 AND RS.2,000/- ON 17/02/1999. 43. THE ASSESSING OFFICER FURTHER FOUND THAT SHRI A MBALAL PATEL DID NOT GIVE MONEY BY CHEQUE EVEN THOUGH HE HAD A BANK ACCO UNT. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE EXPLANATION AS UNSATI SFACTORY AND MADE THE ADDITION OF RS.1,71,500/-. THE ASSESSING OFFICER, FURTHER, FOUND THAT THE ASSESSEE HAS DEBITED A SUM OF RS.4,61,711/- IN THE PROFIT & LOSS ACCOUNT FOR INTEREST CHARGES. HE ALSO FOUND THAT THE ASSESSEE HAS MADE INTEREST-FREE ADVANCES OF RS.11,85,000/- TO M/S.KAIWAL AGRO PRODU CTS AND RS.1,17,000/- TO OTHER PARTIES. THE ASSESSEE EXPLAINED THAT HE HAD INTEREST-FREE DEPOSITS AMOUNTING TO RS.8,30,698/- AS UNDER:- SL.NO(S) NAME OF PERSON(S) AMOUNT (RS.) 1. AMBALAL M. PATEL 20,000/- 2. HASMUKHBHAI A.PATEL 25,000/- 3. HASMUKHBHAI AMTHA PATEL 31,767/- 4. RAJMIKANT C. PATEL 20,160/- 5. ROYAL INVESTMENT 30,000/- 6. IMPEX PROUDCTS 2,00,000/- 7. ADARSH PLANT PROT LTD. 5,03,771 TOTAL 8,30,698/- 44. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE EXPLANATION FURNISHED BY THE ASSESSEE ON THE GROUND THAT THE A SSESSEE FAILED TO ESTABLISH FIRSTLY, THE BUSINESS NECESSITY AND SECONDLY, THE N EXUS BETWEEN THE INTEREST-FREE ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 23 - FUNDS AND THE INTEREST-FREE ADVANCES TO SISTER-CONC ERNS. THE ASSESSING OFFICER ACCORDINGLY MADE THE ADDITION OF RS.1,95,300/-. 45. IN RESPECT OF ADDITION OF RS.1,71,500/-, THE LD.CIT(APPEALS) TREATED A SUM OF RS.1 LACS AS EXPLAINED AND CONFIRMED THE ADDITIO N OF RS.71,500/- BY OBSERVING AS UNDER:- 9.3. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS MADE AS WELL AS ARGUMENTS PUTFORTH BY THE LEARNED COUNSEL FOR THE A PPELLANT. THE FINDING IN THE ASSESSMENT ORDER AND ARGUMENTS OF T HE AO ARE CONSIDERED. IT IS NOTICED THAT SOURCE OF BANK DE POSITS IN BANK AGGREGATING TO RS.89,800 AND CREDIT ENTRIES AGGREGA TING TO RS.81,750 IN THE CAPITAL ACCOUNT OF M/S.MARUTI AGRO EQUIPMENTS T REATED BY THE AO AS UNEXPLAINED, IT STATED TO BE OUT OF AMOUNT RECEI VED FROM HIS FATHER OUT OF HIS AGRICULTURAL INCOME. THE COUNSEL SUBMI TTED A COPY OF ACCOUNT OF SHRI AMBALAL HIRABHAI, (FATHER OF APPELL ANT) WITH M/S. C F TOBACCO CO WHEREIN AN AMOUNT AGGREGATING TO RS.1,35 ,500 HAS BEEN PAID. CONSIDERING THE OVERALL FACTS AND CIRCUMSTAN CES AGRICULTURAL INCOME OF APPELLANTS FATHER WHO IS AGRICULTURIST, CANNOT BE IGNORED IN TOTO, AND THE SOURCE OF FATHERS INCOME IS ACCEPTED TO THE EXTENT OF RS.1,00,000 AND IN TURN SOURCE OF APPELLANTS CREDI TS TO THE EXTENT OF RS.1,00,000 IS TREATED AS EXPLAINED. THE BALANCE A DDITION MADE AGGREGATING TO RS.71,550 STANDS CONFIRMED. 46. IN RESPECT OF DISALLOWANCE OF INTEREST, THE LD. CIT(APPEALS) AGREED WITH THE ASSESSING OFFICER BY OBSERVING AS UNDER:- ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 24 - 10.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APP ELLANT, ARGUMENTS PUTFORTH BY THE COUNSEL AND THE REPORT OF THE AO. THE FINDINGS IN THE ASSESSMENT ORDER IS ALSO CONSIDERED. IT IS NOTIC ED THAT THE AO HAS MADE DISALLOWANCE INFERRING THAT THERE WERE AMOUNT OUTSTANDING FROM SISTER CONCERNS AND APPELLANT HAS NOT ADVANCED AMOU NT WITHOUT INTEREST. THE COUNSEL ALSO ARGUED THAT THERE IS NO DIVERSION OF INTEREST BEARING FUNDS TO THE INTEREST FREE ADVANCES BUT FAI LED TO ESTABLISH THAT FUNDS WERE NOT DIVERTED TO NON-INTEREST BEARING ADV ANCES SINCE NO LEDGER ACCOUNTS OF RELEVANT PARTIES ARE FURNISHED A ND NOTHING HAS BEEN BROUGHT ON RECORD SO AS TO ACCEPT THE PLEA THAT APP ELLANT HAS SUFFICIENT FUNDS AVAILABLE WITH HIM AND ADVANCES WERE NOT OUT OF BORROWED FUNDS. EVEN IT IS ALSO NOT CLEAR WHEN THE LOANS WERE TAKEN FROM FRIENDS AND RELATIVES AND HOW THE SAME WERE UTILIZED. IN THE F ACTS AND CIRCUMSTANCES OF APPELLANTS CASE, I DO NOT SEE ANY FORCE TO ACCEPT THE PLEA THAT DISALLOWANCE OF INTEREST BY THE AO OF RS .1,95,300/- IS NOT JUSTIFIED. THE SAME STANDS CONFIRMED. 47. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. NO CONTRARY MATERIAL HAS BEEN PRODUCED BEFORE US TO SHOW THAT THE DEPOSI TS ARE GENUINE AND, THEREFORE, WE ARE UNABLE TO TAKE A DIFFERENT VIEW T HAN TAKEN BY THE LD.CIT(APPEALS). ACCORDINGLY, HIS ORDER IS CONFIRM ED. THEREFORE, THIS GROUND OF ASSESSEES APPEAL IS ALSO DISMISSED. ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 25 - 48. AS A RESULT, THE APPEAL OF THE ASSESSEE, ITA NO .578/AHD/2005 FOR ASSESSMENT YEAR 1999-2000 IS DISMISSED. REVENUES APPEAL, ITA NO.681/AHD/2005, FOR ASSESSME NT YEAR 1994-95 49. IN THIS REVENUES APPEAL, THE FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF BOGUS PURCHASES P URPORTED TO BE MADE FROM M/S.GURU HARIKRISHNA INDS. AND M/S.MODERN SAL ES AGGREGATING TO RS.8,05,000/-. 2. IT IS THEREFORE, PRAYED THAT ON THE FACTS AND C IRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) DELETING THE ADDI TIONS BE QUASHED AND THAT THE ADDITIONS MADE BY THE AO OF RS.8,05,000/- BE RESTORED. 50. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN TO HAVE BEEN MADE PURCHASES FROM FOLLOWING SOURCES, AS UNDER:- (I) M/S.MODERN SALES CORPN RS.3,75,000/- (II) M/S.GURU HARIKRISHNA INDUSTRIES RS.4,30,000/- 51. WHEN THE ASSESSING OFFICER ASKED TO EXPLAIN, TH E ASSESSEE SUBMITTED A BILL FROM M/S.MODERN SALES CORPORATION WHICH WAS D ATED 28/09/1993, HOWEVER, ENTRY IN THE BOOKS OF THE ASSESSEE WERE MA DE ON 11/11/1993 FOR PURCHAES OF MACHINERY. IN RESPECT OF M/S.GURU HAR IKRISHNA INDUSTRIES, THE BILLS WERE DATED 02/10/1993 AND 05/10/1993 FOR PURC HASE OF MACHINERY, BUT ENTRIES WERE MADE IN THE BOOKS ON 11/11/1993. THE ASSESSEE HAS SHOWN THE PAYMENTS TO THESE CONCERNS, BUT NO BANK ACCOUNT SEE MS TO HAVE BEEN PRODUCED ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 26 - BEFORE THE ASSESSING OFFICER TO VERIFY THE SAME. THE ASSESSING OFFICER HOWEVER, INFERRED THAT PAYMENT TO THESE PARTIES MIG HT HAVE BEEN DONE BY TRANSFER ENTRIES IN THE BANK ACCOUNT, BUT FINDING N O EVIDENCE, THE ASSESSING OFFICER TREATED THE PURCHASES AS BOGUS AND MADE THE ADDITION. 52. THE LD.CIT(A) DELETED THE ADDITION ON THE GROUN D THAT PURCHASES FROM THESE PARTIES WERE MADE FOR THE PURPOSE OF CAPITAL GOODS AND THERE WERE NO PURCHASES OF RAW-MATERIAL, HENCE, THEY COULD NOT AF FECT PROFIT & LOSS ACCOUNT. THE LD.CIT(APPEALS) DELETED THE ADDITION BY OBSERVI NG AS UNDER:- 9.3. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS MADE AS WELL AS ARGUMENTS PUTFORTH BY THE LEARNED COUNSEL FOR THE A PPELLANT. THE FINDING IN THE ASSESSMENT ORDER, ARGUMENTS OF THE AO AND REPORT ARE CONSIDERED. THE ADDITIONS ARE FOUND TO BE MADE IN THE ABSENCE OF DETAILS AND THE SAME HAVE NOW BEEN FURNISHED. THE AO IN THE REPORT HAS SATED THAT LETTERS ISSUED IN CASE OF THESE PART IES REMAINED UNSERVED AND THEREFORE IT IS ONCE AGAIN STATED BY THE AO TH AT ADDITION HAS RIGHTLY BEEN MADE. IT IS NOTICED THAT DIES HAVE BEEN PURC HASED FROM GURU HARKRISHAN INDUSTRIES AND MACHINERIES HAVE BEEN PUR CHASED FROM M/S.MODERN SALES FOR WHICH APPELLANT HAS FURNISHED DETAILS ALONGWITH INVOICES RAISED BY THEM AS WELL AS C FORM ISSUED FO R THE PURPOSE OF SALES TAX. THE SAID ASSETS HAVE BEEN TRANSFERRED TO THE NEW COMPANY ADARSH PLANT PROTECT LTD ON 20.11.1993 AND NO ASSET S ARE APPEARING AS ON 31 ST 5 MARCH 1994 IN THE FINAL ACCOUNTS OF APPELLANT. IN VIEW OF THE ABOVE DISCUSSION, IT CAN BE CONCLUDED THAT THERE IS NO JUSTIFICATION ON THE PART OF THE AO TO TREAT SUCH ASSETS AS BOGUS I N THE HANDS OF APPELLANT WHICH HAS BEEN CONSIDERED GENUINE IN THE HANDS OF COMPANY ADARSH PLANT PROTECTS LTD. FURTHER, CONSIDERING T HE DOCUMENTS AND DETAILS FURNISHED BY THE APPELLANT, IT IS OBSERVED THAT THERE IS NO JUSTIFICATION TO ADD THE SAME AS BOGUS AND HENCE AD DITION MADE IS DIRECTED TO BE DELETED. ITA NOS.575,682,576,683,577,684 578, 685 & 681/AHD/2005 RASIKBHAI A.PATEL VS. ITO (CROSS APPEALS) - 27 - 53. WE HAVE HEARD THE BOTH THE PARTIES. FIRSTLY, T HESE PURCHASES ARE ON CAPITAL ACCOUNT AND THEY DO NOT AFFECT PROFIT & LOS S ACCOUNT. SECONDLY, ALL THESE PURCHASES/CAPITAL GOODS WERE TRANSFERRED TO THE COMPANY AND, HENCE, THEY DO NOT APPEAR IN THE BALANCE-SHEET. FINALLY, THERE IS NO SUBSTANTIAL MATERIAL TO HOLD THAT THE ASSESSEE HAS ACTUALLY NO T PURCHASED THE CAPITAL GOODS. THE ASSESSING OFFICER MADE ADDITION WITHOUT ANY BAS IS AND, THEREFORE, THE LD.CIT(APPEALS) WAS JUSTIFIED IN DELETING THE SAME. AS THERE IS NO CONTRARY MATERIAL PRODUCED BY THE REVENUE FOR TAXING THE SAM E BEFORE US, WE ARE UNABLE TO TAKE A DIFFERENT VIEW THAN TAKEN BY THE LD.CIT(A PPEALS). 54. AS A RESULT, REVENUES APPEAL, ITA NO.681/AHD/2 005 FOR ASSESSMENT YEAR 1994-95 IS DISMISSED. 55. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 21/08/2009. SD/- SD/- ( T.K.SHARMA ) ( D.C.AGRAWAL ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD; DATED 21/08/2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANTS. 2. THE RESPONDENTS 3. THE CIT CONCERNED. 4. THE LD. CIT(APPEALS)-II, BARODA 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD