Jayvantsinh Natubhai Vaghela, Surendranagar V. The Income Tax Officer, Ward-2, Surendranagar

ITA 584/RJT/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67234 (ITAT-RAJKOT)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-03-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Keywords: Unexplained investment; Business expenditure; Principle of natural justice; Deemed to accrue or arise in india; Additional evidence; Bad and doubtful debts
• Section: 69; 37; 28; 143(3); 142(1)

Judgement Text

U : S : IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT .. [, E 0 .. 0 , 0 BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 584/RJ T/2012 O O/ ASSESSMENT YEAR : 2009 - 10 SHRI JAYVANTSINH NATUBHAI VAGH ELA, V. ITO, WARD - 2, SURENDRANAGAR SHAHIBAUG SOCIETY, BLOCK NO.5, SURENDRANAGAR. PAN : AAPPV 2230 G DATE OF HEARING : 17.04.2013 DATE OF PRONOUNCEMENT : 19 .04.2013 ASSESSEE BY : NONE (WRITTEN SUBMISSION S FILED ) REVENUE BY : SHRI ANKUR GARG, DR / ORDER .. 0 / D. K. SRIVASTAVA : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - XVI, AHMEDAB AD ON 28.08.2012. THE ASSESSEE IS AN INDIVIDUAL. HE IS A CIVIL CONTRACTOR. HE FILED HIS RETURN OF INCOME ON 29.09.2009 RETURNING TOTAL INCOME AT RS.4,76,121/ - AS AGAINST WHICH HIS TOTAL INCOME HAS BEEN ASSESSED AT RS.62,71,850/ - U/S 143(3) OF THE INCOME - TA X ACT AFTER ADDING/DISALLOWING (1) A SUM OF RS.45,20,000/ - BEING UNEXPLAINED INVESTMENT U/S 69 OF THE INCOME - TAX ACT; (2) A SUM OF RS.8,69,727/ - BEING THE DISALLOWANCE ; (3) A SUM OF RS.2,51,000/ - BEING UNACCOUNTED RECEIPT; (4) A SUM OF RS.1,00,000/ - BEING DISALLOWANCE OUT OF EXPENSES; (5) A SUM OF RS.5,000/ - BEING DISALLOWANCE OUT OF OTHER EXPENSES AND (6) A SUM OF RS.50,000/ - BEING PERSONAL EXPENSES. 2 . AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD CIT(A ) WITHOUT SUCCESS. 3 . AGGRIEVED BY THE ORDER OF THE LD . CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. GROUND NOS. 1 AND 2 READ AS UNDER: - 1. THE HONBLE CIT (A) - XVI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS .57,75,727/ - OUT OF TOTAL ADDITION MADE OF RS.57,95,727/ - AS AGAINST RETURNED INCOME OF RS.4,76,121/ - . 2 ITA 584 /RJT/2012 2. THE HONBLE CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE ADDITIONAL EVIDENCES WHICH HAVE BEEN FURNISHED TO HIM DURING THE COURSE OF APPELLATE PROCEEDINGS AND HE HAS EVEN NOT REMANDED THE CASE TO THE LD. AO FOR HIS OPINION & SIMPLY REJECTED THE CONTENTIONS OF THE APPELLANT. THUS HE HAS ALSO FAILED TO GIVE THE JUSTICE AND SO THERE IS BREACH OF LAW OF NATURAL JUSTICE. 4 . AS ALREA DY STATED EARLIER, THE ASSESSEE HA S RETURNED HIS INCOME AT RS.4,76,121/ - AS AGAINST WHICH HIS INCOME HAS BEEN ASSESSED BY THE ASSESSING OFFICER AT RS.62,71,848/ - AFTER ADDING A SUM OF RS.57,95,727/ - . ON APPEAL, THE LD CIT(A) HAS CONFIRMED THE ADDITION/DISALLO WANCE TO THE EXTENT OF RS.57, 7 5,727. VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) HAVE SEPARATELY BEEN CHALLENGED IN G ROUND NOS. 3 TO 7 OF THE GROUNDS OF APPEAL. THEY WILL THEREFORE BE TAKEN UP WHILE DISPOS ING OF G ROUND NOS. 3 TO 7. 5 . GROUND NO.3 TAKEN BY THE ASSESSEE READS AS UNDER: - 3. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.45,20,000/ - U/S 69 TREATING THE INVESTMENT AS UNEXPLAINED AS AGAINST THE DETAILS FURNISHED WERE NO T CONSIDERED SUFFICIENT TO ESTABLISH THE INVESTMENT. THE APPELLANT HAS ALSO FURNISHED THE ADDITIONAL EVIDENCES WHICH HAVE ALSO NOT BEEN CONSIDERED PROPERLY. 6 . PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS RECEIVED DETAILS OF TRAN SACTIONS ENTERED INTO BY THE ASSESSEE THROUGH AIR DATA FROM THE SUB REGISTRAR, BHAVNAGAR F ROM WHICH IT TRANSPIRE D THAT THE ASSESSEE HAD PURCHASED IMMOVABLE PROPERTY FOR A SUM OF RS.45,20,000 / - . THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE NATURE AND SOURCE OF THE AFORESAID INVESTMENT. DESPITE SEVERAL OPPORTUNITIES GIVEN TO THE ASSESSEE, THE ASSESSEE DID NOT FURNISH THE REQUISITE EXPLANATION . THE ASSESSING OFFICER THEREFORE TREATED THE SAID INVESTMENT AS UNEXPLAINED INCOME AND CONSEQUENTLY BROUGHT THE SAME TO THE CHARGE OF INCOME - TAX WITH THE FOLLOWING OBSERVATIONS: - 3 ITA 584 /RJT/2012 4. AS PER DETAILS AVAILABLE WITH THIS OFFICE ON ACCOUNT OF ITS DETAILS OF AIR TRANSACTION FURNISHED BY THE SUB REGISTRAR - 2(RURAL), BEHIND MOTI BAUG, BHAVNAGAR 364001 IT IS NOTICED THAT YOU HAVE PURCHASED IMMOVABLE PROPERTY AMOUNTING TO RS.45,20,000/ - THE DETAILS/EVIDENCES IN RESPECT OF NATURE AND SOURCE OF INCOME OF INVESTMENT FOR PURCHASE OF IMMOVABLE PROPERTY AMOUNTING TO RS.45,20,000/ - WAS CALLED FOR VIDE THIS OFFICE NOTICES U/S 142(1) OF THE ACT MENTIONED ABOVE. HOWEVER, YOU HAVE FAILED TO FURNISH. IN ABSENCE OF EXPLANATION ABOUT THE NATURE AND SOURCE OF INCOME IN RESPECT OF INVESTMENT MADE IN IMMOVABLE PROPERTY AMOUNTING TO RS.45,20,000/ - , THIS INVESTMENT IN IMMOVABLE PROPERTY REQUIRES TO BE TREATED AS UNEXPLAINED INVESTMENT AND ALSO DEEMED TO BE YOUR INCOME OF FY 2008 - 09 RELEVANT TO AY 2009 - 10. IN THIS CONNECTION, YOU ARE REQUESTED TO SHOW ME THE CAUSE AS TO WHY INVESTMENT MADE IN IMMOVABLE PROPERTY AMOUNTING RS.45,20,000/ - SHOULD NOT BE TREA TED AS UNEXPLAINED INVESTMENT AND VALUE OF THIS INVESTMENT MAY BE DEEMED TO BE YOUR INCOME U/S69 OF THE ACT. 4(III) IN RESPONSE TO SHOW CAUSE NOTICE, THE AR OF THE ASSESSEE ATTENDED AND FURNISH THE REPLY VIDE LETTER DATED 20.12.2011 STATING THAT THE REPL Y IN RESPECT OF POINT NO.3(I) OF NOTICE DATED 23.11.2011 WILL BE FURNISHED BY 23.12.2011. ACCORDINGLY, THE CASE WAS ADJOURNED TO 23.12.2011. HOWEVER, THE ASSESSEE AND AR COULD NOT FURNISHED EXPLANATION IN RESPECT OF NATURE AND SOURCE OF INCOME ON THE DATE OF HEARING FIXED ON 23.12.2011 AND SUBSEQUENT, OPPORTUNITY GIVEN ON 27.12.2011 VIDE ORDER SHEET ENTRY DATED 20.12.2011 AND 23.12.2011. THEREFORE, IT IS QUITE CLEAR AND ESTABLISHED THAT THE ASSESSEE HAVING NO EXPLANATION IN RESPECT OF NATURE AND SOURCE OF I NCOME IN RESPECT OF PURCHASE OF IMMOVABLE PROPERTY AMOUNTING TO RS.45,20,000/ - . 4(IV) IN ABSENCE OF EXPLANATION ABOUT THE NATURE AND SOURCE OF INCOME IN RESPECT OF INVESTMENT MADE IN IMMOVABLE PROPERTY AMOUNTING TO RS.45,20,000/ - THE INVESTMENT IN IMMOVAB LE PROPERTY AMOUNTING TO RS.45,20,000/ - IS REQUIRED TO BE TREATED AS UNEXPLAINED INVESTMENT AND ALSO DEEMED TO BE INCOME OF FY 2008 - 09 RELEVANT TO AY 2009 - 10. ACCORDINGLY, 4 ITA 584 /RJT/2012 INVESTMENT IN PROPERTY AMOUNTING TO RS.45,20,000/ - IS TREATED AS UNEXPLAINED INVESTM ENT AND DEEMED INCOME OF THE ASSESSEE U/S 69 OF THE ACT AND ADDED TO TOTAL INCOME OF THE ASSESSEE OF FY 2008 - 09 RELEVANT TO AY 2009 - 10. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT INITIATED FOR CONCEALING OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7 . ON APPEAL, THE LD CIT (A) HAS CONFIRMED THE IMPUGNED ADDITION WITH THE FOLLOWING OBSERVATIONS: - 2.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD COUNSEL AND THE FACTS OF THE CASE. IT IS EVIDENT FROM THE SUBMISSION OF THE APPELLA NT THAT NO EXPLANATION WAS FURNISHED BEFORE THE ASSESSING OFFICER FOR THE SOURCES OF ACQUISITION OF IMMOVABLE PROPERTY OF RS.45,20,000/ - ACQUIRED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. IN ABSENCE OF TOTAL NON - COMPLIANCE TO THE VARIOUS NOTICE S, THE ASSESSING OFFICER HAD NO ALTERNATIVE EXCEPT TO PASS THE ORDER MAKING THE ADDITION OF THE SAID AMOUNT AS AN EXPLAINED INVESTMENT. IT IS PERTINENT TO NOTE THAT IN THIS CASE THE ASSESSEE HAD NOT ORIGINALLY DISCLOSED THE SAID TRANSACTION IN ITS RETURN O F INCOME WHICH WAS NOTED BY THE ASSESSING OFFICER ONLY ON ACCOUNT OF ITS DETAILS OF A AIR TRANSACTIONS. THE POSITION THUS APPARENTLY IS VERY CLEAR, THERE WAS A CLEAR ATTEMPT ON THE PART OF THE APPELLANT NOT TO DISCLOSE THE INVESTMENTS IN THE IMPUGNED PROPE RTY IN ITS RETURN OF INCOME. IT IS ONLY WHEN THE AO STARTS HIS ENQUIRIES AND INVESTIGATIONS IN INVESTMENT IN THE IMPUGNED PROPERTY, THE ASSESSEE STARTS BUILDING UP A STORY SO AS TO ADD CREDENCE TO ITS MISDEMEANOR. IT APPEARS THAT THE THEORY SUBSEQUENTLY PR OPOUNDED BY THE APPELLANT THAT THE INVESTMENT HAS BEEN SOURCED THROUGH ADVANCE RECEIVED IN CASH FROM AGRICULTURIST IS CLEARLY AN AFTERTHOUGHT AND DESERVES TO BE REJECTED. TO ADD CREDENCE TO THE THEORY THE APPELLANT HAS FURTHER BUILDUP THE ISSUE OF HIS ILLN ESS. IT IS SURPRISING THAT THE ASSESSEE HAD SHIFTED ALL THE RESPONSIBILITIES FOR THE IMPUGNED ADDITION ON THE ASSESSING OFFICER HOLDING THAT THE DETAILS WERE FOUND TO BE INSUFFICIENT. THE FACT OF THE MATTER IS THAT ON THIS ISSUE NO DETAILS WERE SUBMITTED B Y THE APPELLANT. THE APPELLANT WAS REQUIRED EITHER TO 5 ITA 584 /RJT/2012 PERSONALLY ATTEND BEFORE THE ASSESSING OFFICER OR ASK HIS COUNSEL TO REPRESENT BEFORE THE ASSESSING OFFICER ON THE DATES OF HEARING. THIS WAS NOT DONE BY HIM AND NOW TAKING THE SHELTER OF THE ALLEGED IL LNESS THE APPELLANT WANTS TO GET ADDITIONAL EVIDENCE IS ADMITTED. THEREFORE, THERE IS NO SUBSTANCE IN THE REASONS GIVEN FOR NON - COMPLIANCE OF THE NOTICES ISSUED AND SERVED UPON THE ASSESSEE BY THE ASSESSING OFFICER. THE ADDITIONAL EVIDENCE FURNISHED THEREF ORE, CANNOT BE ADMITTED AND DESERVES TO BE REJECTED. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF RAJAT BANSAL VS. CIT [2011] 200 TAXMAN 72 (PUNJ & HAR.). IN THAT CASE THE HONBLE COURT HAD QUOTED THE FINDI NG OF THE TRIBUNAL AS IN OUR VIEW, THE ASSESSEE DOES NOT DESERVE ANY LENIENT VIEW FROM THE COURT OF LAW ON THE ISSUE OF ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE BEFORE THE LD. FIRST APPELLATE AUTHORITY. THIS EVIDENCE WAS VERY MUCH AVAILABLE WITH TH E ASSESSEE DURING THE COURSE OF ASSESSMENT BUT THE ASSESSEE COULD NOT ESTABLISH THE CIRCUMSTANCES AND THE REASONS AS TO WHY HE HAS NOT PRODUCED THE SAME BEFORE THE ASSESSING OFFICER. THEREFORE, THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY REJECTED THE SAM E. SECONDLY, THE ASSESSEE COULD NOT ESTABLISH THAT THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE BEFORE THE LD. CIT(A) IS VERY MUCH ESSENTIAL FOR JUST AND PROPER DECISION IN THE CASE OF THE ASSESSEE. IT IS FURTHER NOTED THAT THE APPELLANTS RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT PRABHAVAT S. SHAH 231 ITR 1 ON THE ISSUE OF ADMISSION OF ADDITIONAL EVIDENCE IS ALSO MISPLACED. IN THE CITED DECISION THE FACTS CONSIDERED BY THE HONBLE COURT WERE DIFFERENT THAN THOSE PRESENT IN THE PRESENT CASE. IN THE CASE OF SMT PRABHAVAT S SHAH 231 ITR 1 THE AO HAD ISSUED SUMMONS TO THE CREDITORS WHO HAD NOT RESPONDED AND THE AO PROCEEDED TO MAKE THE ADDITIONS. BEFORE THE COMMISSIONER APPEALS, THE APPELLANT REQUESTED FOR ADMISSION OF EVIDEN CE IS PERTAINING TO SUCH CREDITORS WHICH WAS NOT ALLOWED. THUS THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE. SUCH IS THE CASE OF THE ASSESSEE AND THUS THE ASSESSEE DOES NOT DESERVE ANY LENIENT VIEW AND THE ADDITIONAL EVIDENCES SO FURNISHED ARE REJECTED AT APPELLATE STAGE. 6 ITA 584 /RJT/2012 2.6 THE FIRST ISSUE INVOLVED IN GROUND OF APPEAL IS REGARDING ADDITION MADE OF RS.45,20,000/ - U/S 69 TREATING THE INVESTMENT AS UNEXPLAINED AS THE DETAILS WERE NOT FURNISHED IN THE. THE ASSESSING OFFICER HAD DISCUSSED THIS I SSUE IN PARA 4(1) TO 4(IV) OF THIS ORDER ON PAGE 2, 3 AND 4. THE ASSESSING OFFICER HAD NOTED THROUGH THE ITS DETAILS OF AIR TRANSACTIONS THAT THE APPELLANT HAD PURCHASED AN IMMOVABLE PROPERTY FOR RS.45,20,000/ - . SEVERAL NOTICES AS MENTIONED IN THE PRECEDIN G PARAGRAPHS WERE ISSUED REQUESTING FOR EXPLAINING THE SOURCES OF SUCH INVESTMENT. THE APPELLANT CHOSE NOT TO FILE ANY DETAILS BEFORE THE ASSESSING OFFICER. CONSEQUENTLY, THE ASSESSING OFFICER PROCEEDED TO MAKE THE ADDITION OF THE IMPUGNED AMOUNT. DURING T HE APPELLATE PROCEEDINGS, THE APPELLANT HAS MADE A MOVE TO GET THE DETAILS AND EVIDENCES TOWARDS SOURCES OF THE SAID PROPERTY ADMITTED AND CONSIDERED UNDER THE MEANING OF RULE 46A. IT HAS BEEN HELD ABOVE THAT THE SAID EVIDENCES CANNOT BE ADMITTED AT THIS S TAGE NOW. WITHOUT PREJUDICE TO THE DECISION OF NOT ADMITTING THE EVIDENCE PRODUCED BY THE APPELLANT, IT IS SEEN THAT THE EVIDENCES NOW BEING INTRODUCED BY THE APPELLANT DO NOT HELP HIS CASE. AS STATED ABOVE, DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED THAT IT HAD PURCHASED A PLOT OF LAND ADMEASURING 2013 SQ. MTR ALONGWITH SOME EXISTING HUTMENTS. IT WAS SUBMITTED THAT THE APPELLANT RECEIVED ADVANCE FROM SOME 20 PERSONS ON ACCOUNT OF BOOKING OF SHOPS AND OFFICES PROPOSED TO BE BUILT ON THE S AID LAND. IT WAS SUBMITTED THAT ALL THESE 20 PERSONS ARE BIG AGRICULTURIST WHO DO NOT HAVE ANY TRUST IN BANK ACCOUNTS. THUS, ALL THE ADVANCES WERE RECEIVED IN CASH. THE APPELLANT HAS FURTHER SUBMITTED THAT THE APPELLANT MAINTAINS HIS SEPARATE INDIVIDUAL BA LANCE SHEET AND A SEPARATE BALANCE SHEET FOR ITS BUSINESS. THUS, IT WAS SUBMITTED THAT THE ADVANCE RECEIVED FROM THE SAID 20 AGRICULTURISTS AND THE INVESTMENT IN THE PROPERTY WAS INDICATED IN THE INDIVIDUAL BALANCE SHEET. COPIES OF SAID BALANCE SHEET, THE CONFORMATION OF THE 20 AGRICULTURIST, LAND HOLDING DOCUMENTS OF THE SAID 20 AGRICULTURIST WERE FILED. THE EVIDENCES HITHERTO PRODUCED DO NOT SUPPORT APPELLANTS CASE. THE APPELLANT IS DOING HIS BUSINESS OF CONTRACTOR IN THE CAPACITY OF THE PROPRIETOR AND H ENCE PREPARATION 7 ITA 584 /RJT/2012 OF TWO DIFFERENT BALANCE SHEET IS NOT REQUIRED. THE CONFORMATIONS OF THE SAID 20 AGRICULTURIST ARE ALL HANDWRITTEN CONFIRMATIONS BEREFT OF ANY AUTHENTICITY. NONE OF THE CONFIRMATIONS CONTAIN ANY DATE. THERE ARE NO RECEIPTS TOWARDS AMOUNTS RECEIVED AS ADVANCE. M E RE PRODUCTION OF 7/12 DOCUMENTS INDICATING LANDHOLDING OF THE SAID 20 AGRICULTURIST DOES NOT CONCLUSIVELY PROVES THAT THE CASH ADVANCES HAVE BEEN PAID BY THEM. THE APPELLANT HAS NOT FILED ANY BANK ACCOUNT WHERE THE SAID CASH ADVANCES RECEIVED FROM THE 20 AGRICULTURIST WAS DEPOSITED. THE APPELLANT HAS ALSO NOT PROVIDED A COPY OF THE SALE DEED OF THE SAID PROPERTY. THE APPELLANT HAS ALSO NOT PRODUCED ANY EVIDENCE TO INDICATE THAT ANY SHOPPING COMPLEX CUM OFFICE BUILDING WAS PROPOSED TO BE BUILD ON THE IMPUGNED LAND. IN THE ABSENCE THEREOF THE ARGUMENT THAT THE APPELLANT RECEIVED SUCH A HUGE AMOUNT OF MONEY FROM ANY PERSON APPEARS TO BE AN UNACCEPTABLE STORY. NO PERSON WOULD GIVE ANY ADVANCE TOWARDS SHOPS OR OFFICE COMPLEXES UNLESS THERE IS SOME DEFINITE EVIDENCE OF ANY STRUCTURE COMING UP. IN THE ABOVE BACKGROUND IT IS CLEAR THAT THE ENTIRE STORY BUILT UP BY THE APPELLANT IS AN AFTERTHOUGHT WHICH HAS IN ITS NEXUS THE INFORMATION AVAILABLE WITH THE ASSESSING OFFICER REGARDING HIS UNDISCLOS ED INVESTMENT. IT IS ACCORDINGLY HAD THAT THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.45,20,000/ - IS CORRECT AND NO INTERFERENCE IS REQUIRED TO BE MADE AT THIS STAGE. THE GROUND OF APPEAL RAISED BY THE APPELLANT IS ACCORDINGLY REJECTED AN APPEAL ON TH IS POINT IS DISMISSED. 8 . AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. THE ASSESSEE HAS FURNISHED WRITTEN SUBMISSION S IN WHICH FOLLOWING SUBMISSIONS HAVE BEEN MADE: - 2.1 THE FIRST ADDITION IS OF RS.4 5,20,000/ - ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT U/69: - THE APPELLANT IS A CIVIL CONTRACTOR OF RESIDENTIAL BUILDINGS AND SHOPS ON SMALL SCALE BASIS. THE APPELLANT HAD PURCHASED LAND 2013.50 SQUARE MTR AT BHAVNAGAR ALONGWITH 100 SMALL HOUSES (ROOMS I .E. HUTS) CONSTRUCTED AREA 467.70 SQUARE MTR WHICH WERE CONSTRUCTED NEARLY BEFORE 100 YEARS AND THE 8 ITA 584 /RJT/2012 APPELLANT HAD PURCHASED THE LAND ALONGWITH THESE SMALL ROOMS. THE TENANTS WERE ALSO RESIDING THERE. THE POSSESSION WAS TAKEN BY THE APPELLANT WITH TENANTS. THE APPELLANT W ANTED TO DEMOLISH ALL THE HUNDRED ROOMS AND WAS DESIRED TO CONSTRUCT THE SHOPS AND OFFICES . THIS WAS THE PURPOSE TO PURCHASE THE LAND ALONGWITH CONSTRUCTED SMALL ROOMS. THEREFORE, THE APPELLANT HAD PURCHASED THE ABOVE PROPERTY ALONGWITH LAN D FROM SHRI BHAVNAGAR MARU TAILOR CASTE TRUST THROUGH HIS POWER OF ATTORNEY HOLDER NAMED SHRI MAHASUKHBHAI DHANJIBHAI VAGHELA. THE PURCHASE PRICE WAS OF RS.45,20,000/ - . THE COPY OF THE PURCHASE DEED WAS PRODUCED BEFORE THE LD. ASSESSING OFFICER. THE APPELL ANT HAD MADE PAYMENT THROUGH CHEQUES IN THREE INSTALLMENTS AS UNDER: - THE FIRST INSTALLMENT IS OF - RS. 6,08,250/ - THE SECOND INSTALLMENT IS OF - RS. 69,750/ - THE THIRD INSTALLMENT IS OF - RS.38,42,000/ - --------------------- TOTAL RS.45,20,0000/ - THE SOURCES OF THIS INVESTMENT OF RS.45,20,000/ - WERE TO BE EXPLAINED THE LD. ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER ORDER SHEET ENTRY DATED 23.12.2011. HOWEVER, THE APPELLANT COULD NOT ATTEND THE OFFICE OF T HE LD. ASSESSING OFFICER ON 27.12.2011 BECAUSE OF ILLNESS OF APPELLANT. THE CERTIFICATE OF ILLNESS WAS ALSO FILED BEFORE THE HONBLE CIT(A). THE APPELLANT HAD ATTENDED THE OFFICE ON 29.12.2011 WITH ALL THE FURTHER DETAILS TO HANDOVER THE LD. ASSESSING OFF ICER. THE LIST OF 20 PERSONS WHO HAD GIVEN THE ADVANCE TO THE APPELLANT FOR BOOKING OF THEIR SHOPS AND OFFICES WAS ALSO FURNISHED BEFORE THE HONBLE CIT(A). THE LD. ASSESSING OFFICER HAD REPLIED TO THE APPELLANT THAT THE ASSESSMENT ORDER HAD ALREADY BEEN P ASSED ON 28.12.2011 AND HENCE IT IS USELESS TO RECEIVE ANY PAPERS FROM THE APPELLANT. THUS, THERE IS BREACH OF PRINCIPLE OF NATURAL JUSTICE. SO, THE ACTION OF THE LD. ASSESSING OFFICER WAS NOT JUSTIFIED. THE COPY OF THE LIST OF 20 PERSONS WHO HAD GIVEN THE ADVANCE ALONGWITH ALL OTHER NECESSARY DOCUMENTS WERE FILED BEFORE THE HONBLE CIT (A) SEPARATELY WITH A REQUEST 9 ITA 584 /RJT/2012 APPLICATION TO ENTERTAIN THE ADDITIONAL EVIDENCES AS PER PROVISIONS OF RULE 46A OF THE IT RULES, 1962. THE DISCRETION POWERS ARE VESTED WITH HI M. EVEN THOUGH THE HONBLE CIT(A) HAS NOT ENTERTAINED THE ADDITIONAL EVIDENCES AND DISMISSED THE APPEAL ON THIS ISSUE. THE HONBLE CIT(A) COULD HAVE ENTERTAINED THE ADDITIONAL EVIDENCES AND SHOULD HAVE TAKEN THE LENIENT VIEW AS THE APPELLANT WAS ILL ON 28. 12.2011 I.E. ON THE LAST HEARING DATE. THE APPELLANT IMMEDIATELY RUSHED TO THE LD ASSESSING OFFICER ON 29.12.2001 FOR SUBMISSION OF EVIDENCES BUT THE LD ASSESSING OFFICER HAS REFUSED TO ACCEPT IT. AS PER THE PROVISIONS OF RULE 46 - A OF THE I.T. RULES, 1962 AND AS PER THE DECISION OF THE HONBLE MUMBAI HIGH COURT IN THE CASE OF SMT. PRABHAVATI S. SHAH VS CIT: 231 ITR 1, THE HONBLE CIT(A) SHOULD HAVE ENTERTAINED THE ADDITIONAL EVIDENCES IN PROSPECTIVE MANNER. THE APPELLANT HAD RECEIVED ADVANCE FROM THE 20 P ERSONS ON ACCOUNT OF BOOKING OF SHOPS AND OFFICES. ALL THE 20 PERSONS ARE AGRICULTURISTS AND THEY HAVE POSSESSED BIG AGRICULTURAL LAND. THE COPIES OF 7/12 UTARA OF EACH PERSONS ARE OBTAINED AND WERE SUBMITTED BEFORE THE HONBEL CIT(A) WITH SEPARATE REQUEST APPLICATION. THE CONFIRMATIONS HAVE ALSO BEEN RECEIVED IN RESPECT OF ADVANCE RECEIVED FROM THEM BY THE APPELLANT. THE AGRICULTURISTS ARE STAYING IN SMALL VILLAGE UTELIA TAL. DHOLKA, DIST. AHMEDABAD. THE AGRICULTURISTS ARE STAYING IN SMALL VILLAGE AND IT I S THE PRACTICE THAT THEY HAVE NO TRUST ON BANK AND HENCE THEY KEEP THE INCOME AND SAVINGS WITH THEM. THEY UTILIZE MONEY FOR THEIR DAY TO DAY WORK AND ALSO THEY GIVE THE MONEY A LOAN WITHOUT INTEREST TO THEIR NEIGHBOURS AND RELATIVES. THIS CALLED HATH UCHHI NA. THERE ARE TWO TYPES OF BALANCE SHEETS, ONE IS FOR BUSINESS AND ANOTHER IS FOR PERSONAL INDIVIDUAL ACCOUNT. THE BALANCE SHEET FOR BUSINESS HAVE ALREADY BEEN SUBMITTED TO THE LD ASSESSING OFFICER. THE PERSONAL INDIVIDUAL BALANCE HSEET WAS TO BE HANDED OV ER TO THE LD ASSESSING OFFICER ON 29 .12.2011. BUT HE HAD REFUSED TO ACCEPT ANY PAPER AS STATED SUPRA. THE COPY OF THE SAME WAS FILED WITH A REQUEST APPLICATION BEFORE THE HONBLE CIT(A). THE ACCOUNTS HAVE ALSO BEEN AUDITED BY THE CHARTERED ACCOUNTANT AS RE QUIRED BY THE PROVISIONS OF SEC 44AB OF THE I.T. ACT. FROM THE 7/12 UTRA 10 ITA 584 /RJT/2012 IDENTITY OF THE PERSON WHO HAS MADE THE ADVANCE PAYMENT TO THE APPELLANT CAN BE PROVED. THEY HAVE SUFFICIENT LAND AND SO THE CREDITWORTHINESS IS ALSO PROVED AND THEY HAVE FILED THE CO NFIRMATIONS ON OATH STATING THAT THEY HAVE GIVEN THE ADVANCE TO THE APPELLANT FOR BOOKING OF SHOPS AND OFFICES. THUS, THE GENUINENESS IS ALSO PROVED. THEREFORE, THIS IS NOT UNEXPLAINED INVESTMENT AS PER THE HONBLE SUPREME COURTS DECISION IN THE CASE OF C IT VS. ORISSA CORPORATION PVT LTD : 159 ITR 78, ALL THE THREE CRITERIA ARE FULFILLED. THE HONBLE CIT(A) HAS HELD THAT THE EVIDENCES WERE READY WITH THE APPELLANT, THEN, WHY THEY WERE NOT SUBMITTED BEFORE THE LD ASSESSING OFFICER. SIRS, THE REASON WAS EXPL AINED BEFORE THE HONBLE CIT (A) THAT THE APPELLANT WAS ILL ON 28.12.2011 AND SO HE COULD NOT ATTENDED THE OFFICE OF THE LD ASSESSING OFFICER. THE APPELLANT HAD ATTENDED THE OFFICE VERY NEXT DAY MORNING I.E. 29.12.2011 ALONGWITH ALL THE EVIDENCES BUT THE LD ASSESSING OFFICER DENIED TO ACCEPT THE SAME. IN THE CIRCUMSTANCES, THE APPELLANT IS ONCE AGAIN REQUESTED TO TAKE THE LENIENT VIEW AND TO ACCEPT THE ADDITIONAL EVIDENCES AND SET ASIDE THE ORDERS OF BOTH THE LOWER AUTHORITIES AND KINDLY DIRECT TO ENTERTAI N THE ADDITIONAL EVIDENCES AND FINALIZE THE MATTER ON MERITS. 9 . IN REPLY, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND THE LD CIT (A). 1 0 . WE HAVE HEARD BOTH THE PARTIES. THE ISSUES RAISED BY THE ASSE SSEE IN HIS WRITTEN SUBMISSION S HAVE BEEN ELABORATELY DEALT WITH BY THE LD CIT(A) IN HIS APPELLATE ORDER. THE CONCLUSION REACHED BY HIM AND THE REASON S GIVEN BY HIM IN SUPPORT THEREOF HAVE NOT BEEN REBUTTED BY THE ASSESSEE BEFORE US. IT IS A SIMPLE CASE WH ERE THE ASSESSEE WAS FOUND TO HAVE MADE INVESTMENT OF R S .45,20,000/ - . IT WAS FOR THE ASSESSEE TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF THE SAID INVESTMENT FOR WHICH PURPOSE SEVERAL OPPORTUNITIES WERE GIVEN BY THE ASSESSING OFFICER TO THE ASSESSEE . THE ASSESSEE, HOWEVER, PREFERRED NOT TO OFFER ANY SATISFACTORY EXPLANATION TILL THE ASSESSMENT WAS COMPLETED . EVEN BEFORE THE LD. CIT(A) , THE ASSESSEE COULD NOT OFFER SATISFACTORY EXPLANATION. THERE IS NO 11 ITA 584 /RJT/2012 SATISFACTORY EXPLANATION OFFERED EVEN BEFORE US W ITH REGARD TO THE NATURE AND SOURCE OF THE IMPUGNED INVESTMENT. WHATEVER HAS BEEN STATED IN THE WRITTEN SUBMISSION S IS NOT AT ALL SUPPORTED BY ANY EVIDENCE. 1 1 . THE CASE OF THE ASSESSEE IS THAT HE HA S TAKEN SHOP ADVANCE OF RS.4 8 LACS FROM 20 PERSONS. MOS T OF THE PERSONS FROM WHOM THE ADVANCE S ARE CLAIMED TO HAVE BEEN TAKEN ARE FAMILY MEMBERS OR RELATIVES OF THE ASSESSEE. NO MATERIAL HAS BEEN PLACED TO ESTABLISH THAT A SUM OF RS.48 LACS WAS GIVEN BY THEM BY WAY OF SHOP ADVANCE. THERE IS NO MATERIAL ON RECO RD TO SHOW THAT THERE WAS ANY SHOP IN EXISTENCE OR CONSTRUCTION OF ANY SHOP WAS CONTEMPLATED FOR WHICH ADVANCES CLAIMED TO HAVE BEEN RECEIVED WERE ACTUALLY RECEIVED . THE CREDITWORTHINESS OF THE PERSONS FROM WHOM THE SAID SUM OF ADVANCE S ARE CLAIMED TO HAVE BEEN RECEIVED HAVE ALSO NOT BEEN ESTABLISHED. THERE IS NO MATERIAL ON RECORD TO ESTABLISH THE GENUINENESS OF SHOP ADVANCE. MOST OF T HE CONFIRMATIONS FILED BY THE ASSESSEE IN THIS BEHALF ARE IDENTICALLY WORDED. THE AFORESAID CONFIRMATIONS D O NOT INSPIRE CO NFIDENCE FIRSTLY FOR THE REASON THAT THEY WERE NOT FILED AT THE EARLIEST POSSIBLE OPPORTUNITY BEFORE THE ASSESSING OFFICER AND SECONDLY FOR THE REASON THAT THEY ARE NOT SUPPORTED BY ANY EVIDENCE TO ESTABLISH THEIR GENUINENESS AND CORRECTNESS AS ALSO THE CR EDITWORTHINESS OF THE PARTIES FROM WHOM THEY ARE CLAIMED TO HAVE BEEN RECEIVED . THE LD CIT(A) HAS RIGHTLY REJECTED THEM. IN VIEW OF THE FOREGOING, THE ORDER PASSED BY THE LD CIT (A) IN THIS BEHALF IS CONFIRMED. GROUND NO.3 IS DISMISSED. 12. GROUND NO.4 T AKEN BY THE ASSESSEE READS AS UNDER: - 4. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE DISCOUNT EXPS (WHICH WAS GRANTED TO GOVERNMENT CONCERNS) OF RS.8,69,727/ - WHICH HAS BEEN CONSIDERED BY THE APPELLANT AS BAD DEBTS. 13. THE IMPUGNED ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: - 6(III) IN RESPONSE TO SHOW CAUSE NOTICE DATED 20.11.2011, THE ASSESSEE HAS REPLIED VIDE LETTER DATED 20.12.2011 AND FURNISHED COPY OF INTEREST ACCOUNT. 12 ITA 584 /RJT/2012 ON V ERIFICATION OF ACCOUNT IT WAS NOTICED THAT THE ASSESSEE HAS CREDITED INTEREST AMOUNTING TO RS.21,39,689/ - AND AFTER DEBITING INTEREST EXPENSES, NET INTEREST AMOUNTING TO RS.2,59,372/ - WAS SHOWN AS INTEREST INCOME IN RETURN OF INCOME AS WELL IN ACCOUNTS. ON FURTHER VERIFICATION OF INTEREST ACCOUNT IT WAS NOTICED THAT THE ASSESSEE HAS CREDITED VARIOUS INTEREST DURING THE YEAR AGGREGATING TO RS.21,39,689/ - . THE ASSESSEE HAS ALSO DEBITED EXPENSES UNDER THE HEAD BANK COMMISSION/BANK INTEREST EXPENSES AMOUNTING T O RS.4,40,648/ - AND VATAV EXPE NSES AMOUNTING TO RS.16,99,041/ . ON VERIFICATION OF RELEVANT COPY OF ACCOUNTS IN SUPPORT OF VATAV EXPENSES IT WAS NOTICED THAT THE EXPENSES CLAIMED BY THE ASSESSEE IS NOT ACTUAL VATAV EXPENSES BUT ACTUALLY IT IS BAD DEBTS WHIC H WAS CLAIMED BY THE ASSESSEE UNDER THE HEAD VATAV IN INTEREST ACCOUNT. ON PERUSAL OF ACCOUNTS AND RELEVANT DOCUMENTS FILED IN SUPPORT OF CLAIM OF THE ASSESSEE IT WAS NOTICED THAT FOLLOWING AMOUNT CLAIMED BY THE ASSESSEE UNDER THE HEAD VATAV EXPENSES ARE N OT ESTABLISHED AS GENUINE BAD DEBT BECAUSE ON VERIFICATION OF ACCOUNTS OF BHARAT SANCHAR NIGAM AND PGVCL IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN RECEIPT DURING THE YEAR THEREFORE NO QUESTION REMAINS FOR ANY BAD DEBT. IT WAS ALSO NOTICED FROM AUDIT REP ORT OF EARLIER YEAR THAT THE ASSESSEE HAS GIVEN LOAN/DEPOSIT TO VISHUDHA MARBLE AND THE ASSESSEE COULD NOT ESTABLISHED THAT THE DEBT CLAIMED WAS TAKEN INTO ACCOUNT IN THE COMPUTATION OF INCOME OF PREVIOUS YEAR OR OF AN EARLIER YEAR AND HENCE NOT ALLOWABLE AS DEDUCTION AND REQUIRES TO BE DISALLOWED. NAME OF THE PARTY DATE AMOUNT BHARAT SANCHAR NIGAM 31.03.2009 4,59,336 VISHUDHA MARBLE 31.03.2009 2,81,238 PGVCL BHAVNAGAR 31.03.2009 1,29,153 TOTAL 8,69,727 13. ON APPEAL , THE LD CIT(A) HAS CONFIRMED T HE IMPUGNED ADDITIONS WITH THE FOLLOWING OBSERVATIONS: - 2.8 I CAREFULLY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF SUBMISSIONS MADE BY THE APPELLANT AND THE ARGUMENTS GIVEN BY THE ASSESSING OFFICER. AS 13 ITA 584 /RJT/2012 FAR AS THE AMOUNT OF RS.2,81,238/ - ON ACCOUNT OF ONE VISHUDHA MARBLE IS CONCERNED THE APPELLANT HAS ONCE AGAIN FAILED TO GIVE NECESSARY EVIDENCES TO INDICATE THAT THE SAID AMOUNT WAS SHOWN AS INCOME IN THE EARLIER YEAR SO THAT IT CAN BE CONSIDERED AS BAD DEBT. WITHOUT PREJUDICE TO THE SAME THE AMOUNT OF BAD DEBTS CAN ONLY BE ALLOWED ONCE IT IS WRITTEN OFF BY AN ASSESSEE IN ITS BOOKS OF ACCOUNT. THE SAME HAS NOT BEEN DONE BY THE APPELLANT. AS REGARDS THE AMOUNTS OF RS.4,59,336/ - ON ACCOUNT OF BSNL AND RS.1,29,153/ - ON ACCOUNT OF A PARTY NAMED PGVCL, TH E APPELLANTS ARGUMENTS ARE NOT SUPPORTED BY ANY EVIDENCES THAT THEY ARE KASAR/VATAV EXPENSES. IT IS ACCORDINGLY HELD THAT THE ADDITION MADE BY THE AO OF RS.8,69,727/ - IS CORRECT AND NO INTERFERENCE IS REQUIRED TO BE MADE AT THIS STAGE. THE GROUND OF APPEA L RAISED BY THE APPELLANT IS ACCORDINGLY REJECTED AND APPEAL ON THIS POINT IS DISMISSED. 14. IN SUPPORT OF APPEAL , THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS IN THIS BEHALF WHICH READ AS UNDER: - 2.3 THE THIRD ADDITION IS OF RS.8,69,727/ - TREATING THE E XPENSES NOT GENUINE THE APPELLANT HAS CREDITED INTEREST AMOUNTING TO RS.21,39,689/ - AND AFTER DEBITING THE AMOUNT OF RS.18,80,316/ - INTEREST EXPENSES, NET INTEREST AMOUNT OF RS.2,59,372/ - HAS BEEN OFFERED FOR TAXATION PURPOSES. THE APPELLANT HAS DEBITED EX PENSES UNDER THE HEAD BANK COMMISSION / BANK INTEREST EXPENSES AMOUNTING TO RS.18,80,316/ - WHICH INCLUDES FOLLOWING AMOUNT. RS.4,59,336 - BHARAT SANCHAR NIGAM LTD RS.2,81,238/ - VISUDHA MARBEL RS.1,29,153/ - PGVCL BHAVNAGAR ------------------- RS.8,69,727/ - TOTAL =========== THE AMOUNT OF RS.4,59,336/ - IS NOT BAD DEBTS BUT THE PARTY NAMED BSNL HAVE CONSIDERED IT AS KASAR AND SO THE APPELLANT HAS CONSIDERED AS VATAV EXPENSES AND WRONGLY DEBITED IN INTEREST ACCOUNT INSTEAD OF VATAV ACCOUNT. 14 ITA 584 /RJT/2012 LIKEWISE THE AMOUNT OF RS.1,29,153/ - IS ALSO NOT BAD DEBTS BUT IT IS KASAR SO IT SHOULD HAVE BEEN DEBITED TO VATAV ACCOUNT BUT WRONGLY DEBITED IN INTEREST ACCOUNT. THE AMOUNT OF RS.2,81,238/ - IS BAD DEBT. THE PARTY NAMED VISUDHA MARBLE RUN AWAY AND WHEREABOUT WAS NOT KNOWN A ND SO THE SAME IS DEBITED IN INTEREST ACCOUNT WRONGLY INSTEAD OF PROFIT & LOSS ACCOUNT SO THIS CAN BE CONSIDERED AS BAD DEBT AND HENCE IT IS ALLOWABLE AS PER THE HONBLE SUPREME COURT DECISION IN THE CASE OF T.R.F LTD VS CIT : 323 ITR 397. IF THE AMOUNT OF RS.8,69,727/ - IS NOT ALLOWABLE, THEN, IT SHOULD BE ALLOWED U/S 28 R.W.S. 37 AS BUSINESS LOSS. THIS VIEW IS SUPPORTED BY THE HONBLE DELHI HIGH COURTS DECISION IN THE CASE OF CIT VS ROSE SERVICES APARTMENT INDIA P LTD : 225 TAXATION 461 (DATE OF DECISION 20.02.2009). THUS, ALL THE THREE AMOUNTS TOTALING OF RS.8,69,727/ - ARE WRONGLY ADDED BY THE LD ASSESSING OFFICER WHICH MAY KINDLY BE DELETED. FURTHERMORE, THE HONBLE SUPREME COURT HAS HELD AS UNDER: - WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUC TION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHTS NOR CAN THE EXISTENCE OR ABSENCE OR ENTRIES IN THE BOOKS OF ACCOUNT DECISIVE OR CONCLUSIVE IN THE MATTER: THIS VIEW IS SUPPORT ED BY THE HONBLE SUPREME COURTS DECISION IN THE CASE OF KEDARNATH JUTE MFG CO. LTD. VS CIT ; 82 ITR 363. IN THE CIRCUMSTANCES AMOUNT OF RS.8,69,727/ - MAY KINDLY BE DELETED AS A BUSINESS LOSS U/S 28. 15. IN REPLY, THE LD DEPARTMENTAL REPRESENTATIVE SUPP ORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND THE LD CIT (A) IN THIS BEHALF. 16. WE HAVE HEARD BOTH THE PARTIES. THE IMPUGNED SUM HAS BEEN SHOWN BY THE ASSESSEE IN HIS BOOKS AS BANK COMMISSION/BANK INTEREST. T HE ASSESSEE CLAIM S THAT THEY ARE NOT IN THE NATURE OF BANK COMMISSION/BANK INTEREST. IT IS CLAIMED THAT SOME OF THE D EDUCTION S ARE IN THE NATURE OF BAD DEBTS WHILE OTHERS ARE IN THE NATURE OF VATAV OR KASAR EXPENSES. B AD DEBT CAN BE ALLOWED AS DEDUCTION ONLY UPON FULFILLMENT OF THE CONDITIONS LA ID DOWN UNDER SECTION 36(1)(VII) R.W.S. 37(2) OF THE INCOME - TAX ACT. NO MATERIAL HAS BEEN PLACED BY THE ASSESSEE TO SHOW THAT THE 15 ITA 584 /RJT/2012 REQUISITE CONDITIONS LAID DOWN IN THE AFORESAID PROVISIONS ARE FULFILLED BY THE ASSESSEE. THE ASSESSEE HAD THE OPPORTUNITY TO DO SO BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). THE ASSESSEE HAD ALSO THE OPPORTUNITY TO DO SO BEFORE THIS TRIBUNAL. THE WRITTEN SUBMISSION S FILED BY THE ASSESSEE DO NOT SHOW AS TO HOW THE CONDITIONS LAID DOWN UNDER SECTION 36(1)(VII) READ WITH SECTION 37(2) ARE SATISFIED. AS REGARDS THE NATURE OF EXPENSES CLAIMED TO BE VATAV OR KASAR, THE ASSERTIONS MADE BY THE ASSESSEE IN THIS BEHALF IN THE WRITTEN SUBMISSIONS ARE NOT SUPPORTED BY ANY EVIDENCE. IN THIS VIEW OF THE MATTER, WE HAVE NO OPTIO N EXCEPT TO CONFIRM THE ORDER OF THE LD CIT(A) IN THIS BEHALF. GROUND NO.4 IS DISMISSED. 17. GROUND NO S .5 AND 6 TAKEN BY THE ASSESSEE R EAD AS UNDER: - 5. THE HONBLE CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1,00,000/ - M ADE BY THE LD A.O. FOR WANT OF CHECK OF EXPENSES WITHOUT SPECIFYING ANY PARTICULAR DEFECTS. 6. THE HONBLE CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.5,000/ - ON ACCOUNT OF CERTAIN EXPENSES WERE NOT SUPPORTED BY EVIDENCE S. 18. THE IMPUGNED ADDITION/DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS. 7(I) ON VERIFICATION OF PROFIT AND LOSS ACCOUNT OF RETURN OF INCOME IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED RS.5,43,58,618/ - UNDER THE PURCHASES. THE DETAILS EVIDENCES WERE CALLED FOR VIDE NOTICE U/S 142(1) OF THE ACT MENTIONED ABOVE. HOWEVER, THE ASSESSEE COULD NOT FURNISH THE DETAILS/EVIDENCES IN RESPONSE TO THE NOTICE U/S 142(1). THEREFORE, A SHOW CAUSE NOTICE U/S 142(1) DATED 23.11.2 011 ISSUED AND SERVED ON 26.11.2011 CALLING EXPLANATION OF THE ASSESSEE BY 5.12.2011 AS TO WHY RS.5,00,000/ - SHOULD NOT BE DISALLOWED AND ADDED TO TOTAL INCOME IN ABSENCE OF DETAILS / EVIDENCES. 16 ITA 584 /RJT/2012 7(II) IN RESPONSE TO SHOW CAUSE NOTICE DATED 23.11.2011, TH E AR OF THE ASSESSEE ATTENDED AND FURNISHED THE DETAILS/EVIDENCES IN RESPECT OF PURCHASES CLAIMED IN RETURN OF INCOME AND ACCOUNTS. 7(III) HOWEVER, ON VERIFICATION OF BILLS/VOUCHERS IT WAS NOTICED THAT SOME OF THE EXPENSES CLAIMED AND DEBITED IN ACCOUNTS WERE NOT SUPPORTED BY EVIDENCES I.E. BILLS/VOUCHERS. IN ABSENCE OF EVIDENCES, THE EXPENSES CLAIMED AND DEBITED TO THE ACCOUNTS CANNOT VERIFIABLE. ACCORDINGLY, AFTER DISCUSSION WITH THE AR RS.1,00,000/ - IS DISALLOWED AND ADDITION MADE TO TRADING ACCOUNT AND ADDED TO TOTAL INCOME FOR WANT OF CHECK OVER THESE EXPENSES AND ALSO TO COVER UP ANY DEFECTS/DISCREPANCIES IN DEBITING OF THESE EXPENSES. 8(I) ON VERIFICATION IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED RS.2,06,751/ - UNDER VARIOUS HEADS. IN ABSENCE OF DE TAILS/EVIDENCES EXPENSES CLAIMED CANNOT VERIFIABLE. THE ASSESSEE WAS THEREFORE, ASKED VIDE THIS OFFICE NOTICE DATED 23.11.2011 CALLING EXPLANATION OF THE ASSESSEE BY 5.12.2011 AS TO WHY RS.10,000/ - SHOULD NOT BE DISALLOWED FOR WANT OF CHECK OVER EXPENSES. 8(II) IN RESPONSE TO SHOW CAUSE NOTICE DATED 23.11.2011, THE AR OF THE ASSESSEE ATTENDED AND FURNISHED/PRODUCED THE DETAILS/EVIDENCES IN RESPECT OF EXPENSES CLAIMED AMOUNTING TO RS.2,06,752/ - . 8(III) HOWEVER, ON VERIFICATION OF BILLS/VOUCHERS IT WAS NOTI CED THAT SOME OF THE EXPENSES CLAIMED AND DEBITED IN ACCOUNTS WERE NOT SUPPORTED BY EVIDENCES I.E. BILLS/VOUCHERS. IN ABSENCE OF EVIDENCES, THE EXPENSES CLAIMED AND DEBITED TO THE ACCOUNTS CANNOT VERIFIABLE. ACCORDINGLY, AFTER DISCUSSION WITH THE AR RS.5,0 00/ - IS DISALLOWED AND ADDED TO TOTAL INCOME FOR WANT OF CHECK OVER THESE EXPENSES AND ALSO TO COVER UP ANY DEFECTS/DISCREPANCIES IN DEBITING OF THESE EXPENSES. 19. ON APPEAL, THE LD CIT (A) HAS CONFIRMED THE IMPUGNED ADDITIONS WITH THE FOLLOWING OBSERVA TIONS: - 17 ITA 584 /RJT/2012 3.0 I CAREFULLY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF SUBMISSIONS MADE BY THE APPELLANT AND THE ARGUMENTS GIVEN BY THE ASSESSING OFFICER. IT IS THE CASE OF THE APPELLANT THAT THE AO HAS NOT BROUGHT ON RECORD EVEN A SINGLE INCIDENT THA T BILLS AND VOUCHERS WERE NOT AVAILABLE. HOWEVER SINCE THE IMPUGNED ADDITION WAS MADE BY THE AO AFTER DISCUSSION WITH THE AR OF THE APPELLANT, NO INFIRMITY CAN BE ATTACHED TO THE ORDER OF THE AO. IT IS ACCORDINGLY HELD THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER OF RS.1,05,000/ - IS CORRECT AND NO INTERFERENCE IS REQUIRED TO BE MADE AT THIS STAGE. THE GROUND OF APPEAL RAISED BY THE APPELLANT IS ACCORDINGLY REJECTED AND APPEAL ON THIS POINT IS DISMISSED. 20. IN SUPPORT OF APPEAL, THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS WHICH READ AS UNDER: - 2.4 DISALLOWANCE OF EXPS. OF RS.1,00,000/ - OUT OF PURCHASE A/C : . THE APPELLANT HAD CLAIMED EXPS RS.5,43,58,618/ - UNDER THE HEAD PURCHASES. THE AR OF THE APPELLANT HAD ATTENDED THE OFFICE ON 23.11.2011 AND FURNI SHED THE DETAILS/EVIDENCES IN RESPECT OF PURCHASES CLAIMED IN THE RETURN OF INCOME AND IN ACCOUNTS. HOWEVER, THE LD AO HAD NOT GONE THROUGH THE DETAILS AND ON PRESUMPTION HE HAS OBSERVED THAT SOME OF THE EXPENSES CLAIMED AND DEBITED IN ACCOUNTS WERE NOT SU PPORTED BY EVIDENCES I.E. BILLS/VOUCHERS AND SO HE HAS DISALLOWED RS.1,00,000/ - ON LUMP SUM BASIS. HE HAS NOT BROUGHT ON RECORDS EVEN A SINGLE INCIDENT THAT THE EXPENSES ARE CLAIMED WITHOUT ANY BILLS/VOUCHERS. FOR DISALLOWANCE OF EXPENSE, HE HAS TO FIND OU T THE DEFECTS THAT THE BILLS & VOUCHERS ARE NOT FURNISHED FULLY. THE HONBLE CIT (A) HAS ALSO ERRED IN CONFIRMING THIS DISALLOWANCE. SO IT IS HUMBLY PRAYED THAT T HE DISALLOWANCE MAY BE DELETED. 2.5 DISALLOWANCE OF RS.5,000/ - OUT OF EXPENSES CLAIMED OF RS .2,06,752/ - : THE AR OF THE APPELLANT ATTENDED THE OFFICE ON 02.03.2011 AND FURNISHED THE DETAILS/EVIDENCES FOR EXPENSES OF RS.2,06,752/ - . THE LD AO HAS HERE ALSO NOT GONE THROUGH THE DETAILS AND ONLY ON PRESUMPTION DISALLOWED OF RS.5,000/ - . HE HAS NOT QUOT ED EVEN A SINGLE EVENT WHERE THE EVIDENCE WAS 18 ITA 584 /RJT/2012 NOT FILED AND THE HONBLE CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE WITHOUT ANY INQUIRY. IN THE CIRCUMSTANCES THE DISALLOWANCE IS NOT WARRANTED. IT MAY KINDLY BE DELETED. 21 . IN REPLY, THE LD DEPARTMENTAL RE PRESENTATIVE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND THE LD CIT (A). 2 2 . WE HAVE HEARD CONSIDERED THE SUBMISSIONS MADE BY BOTH THE PARTIES. THE LD CIT(A) HAS EVEN GIVEN COGENT REASON FOR CONFIRMING THE IMPUGNED DISALLOWANCE. NO MATERIAL H AS BEEN PLACED BEFORE US TO SHOW THAT HIS DECISION IN THIS BEHALF IS INCORRECT OR SUFFERS FROM ANY INFIRMITY. THE IMPUGNED ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER AFTER DISCUSSIONS WITH THE ASSESSEES REPRESENTATIVE. IN THIS VIEW OF THE MATTER, B OTH THE DISALLOWANCES HAVE RIGHTLY BEEN CONFIRMED BY THE LD CIT(A). GROUND NOS.5 & 6 ARE DISMISSED. 23 . GROUND NO.7 TAKEN BY THE ASSESSEE READS AS UNDER: - 7. THE HONBLE CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN NOT DELETING THE TOTAL DISALLOWANCE O F RS.50,000/ - AND ONLY HAS GIVEN RELIEF OF RS.20,000/ - 24 . THE IMPUGNED DISALLOWANCE HA S BEEN MADE BY THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: - 9(I) IT IS ALSO NOTICED THAT THE ASSESSEE HAS CLAIMED RS.3,12,856/ - UNDER THE HEAD HOSPITALIT Y TRAVELING EXPENSES, CONVEYANCE EXPENSES AND TELEPHONE EXPENSE. IN ABSENCE OF DETAILS/EVIDENCES THE EXPENSES CLAIMED CANNOT BE VERIFIABLE. THE PERSONAL USE OF THESE ELEMENTS CANNOT BE DENIED AND PERSONAL NATURE OF EXPENSES ALSO CANNOT BE RULED OUT. THE AS SESSEE WAS THEREFORE ASKED VIDE THIS OFFICE NOTICE DATED 23.11.2011 TO FURNISH HIS EXPLANATION/OBJECTION AGAINST DISALLOWANCE OF RS.62,500. 9(II) IN RESPONSE TO SHOW CAUSE NOTICE DATED 23.11.2011, THE AR OF THE ASSESSEE ATTENDED AND FURNISHED/PRODUCED THE DETAILS/EVIDENCES IN RESPECT OF EXPENSES CLAIMED AMOUNTING TO RS.3,12,856. 19 ITA 584 /RJT/2012 9(III) HOWEVER, PERSONAL USE OF THESE ELEMENTS CAN NOT BE RULED OUT. THE PERSONAL NATURE OF EXPENSES OUT OF THESE EXPENSES ALSO CANNOT BE DENIED. THEREFORE AFTER DISCUSSION WITH T HE AR LUMP SUM DISALLOWANCES OF RS.50,000/ - IS MADE TREATING AS PERSONAL NATURE AND NON BUSINESS EXPENSES OUT OF THESE EXPENSES. 25 . THE IMPUGNED DISALLOWANCE HAS BEEN CONFIRMED BY THE LD CIT (A) WITH THE FOLLOWING OBSERVATIONS: - 3.2. I CAREFULLY CONSI DERED THE FACTS OF THE CASE IN THE LIGHT OF SUBMISSIONS MADE BY THE APPELLANT AND THE ARGUMENTS GIVEN BY THE ASSESSING OFFICER. IT IS THE CASE OF THE APPELLANT THAT TOTAL EXPENSES DEBITED ON THESE CATEGORY OF EXPENSES AMOUNTED TO RS.3,12,856/ - . IT WAS SUBM ITTED THAT ALL THE DETAILS ARE FURNISHED TO THE ASSESSING OFFICER AND THAT LOOKING TO THE VOLUME OF BUSINESS TRANSACTIONS THE EXPENSES ARE REASONABLE AND NO DISALLOWANCE IS REQUIRED TO BE MADE. THERE CAN BE NO DISPUTE THAT PERSONAL ELEMENT DOES GETS INVOLV ED IN EXPENSES LIKE TELEPHONE, HOSPITALITY AND CONVEYANCE ETC.. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER COMES TO ABOUT 15% OF THE TOTAL EXPENSES. I DEEM IT REASONABLE IF THE SAME ARE RESTRICTED TO 10% OF TOTAL EXPENSES, ACCORDINGLY ADDITION TO THE E XTENT OF RS.30,000/ - AGGREGATING TO ABOUT 10% IS CONFIRMED WHICH WILL MEAN THAT THE APPELLANT GETS THE RELIEF OF RS.20,000/ - . THE GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. 26 . IN SUPPORT OF APPEAL, THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS IN TH IS BEHALF WHICH READ AS UNDER: - 2.6 DISALLOWANCE OF RS.50,000/ - OUT OF VARIOUS EXPENSES LIKE HOSPITALITY EXPS., TRAVELLING EXPS., CONVEYANCE EXPS.: THE APPELLANT HAD DEBITED TOTAL EXPS. OF RS.3,12,856/ - FOR VARIOUS EXPS. THE AR OF THE APPELLANT HAD FURNI SHED ALL THE DETAILS/EVIDENCES I.E. BILLS/VOUCHERS. THE LD AO HAS NOT ABLE TO FIND OUT EVEN A SINGLE ITEM WHICH IS NOT CLARIFIED OR NO EVIDENCE IS THERE. THE MOBILE FACILITY IS THERE WITH THE APPELLANT FOR PERSONAL USE. THE ENTIRE EXPENSES HAVE BEEN INCURR ED WHOLLY & EXCLUSIVELY 20 ITA 584 /RJT/2012 FOR BUSINESS PURPOSES. THE LD AO WAS NOT ABLE TO POINT OUT EVEN A SINGLE SPECIFIC DEFECT IN ENTIRE BOOKS OF ACCOUNT. NO EVIDENCE IS IN THE POSSESSION OF THE LD AO THAT SAME ARE NOT SUPPORTED BY BILLS/VOUCHERS & NOT INCURRED FOR BUSI NESS PURPOSES EXCEPT PERSONAL SURMISES. LOOKING TO THE VOLUME OF BUSINESS TRANSACTIONS THE EXPENSES ARE REASONABLY INCURRED. ALL THE THREE DISALLOWANCES (2.4., 2.5 & 2.6 ARE MADE BY THE LD. ASSESSING OFFICER PURELY ON GUESS WORK AND THE SAME CAN NOT BE SUS TAINED. THIS VIEW IS SUPPORTED BY THE HONBLE ITAT JODHPUR BENCH IN THE CASE OF ITO V. SHRI PRAVINDER SINGH BHATIA; (2007) : 197 TAXATION 99. THE CIT(A) HAS ALSO ERRED IN CONFIRMING THE DISALLOWANCES. THEREFORE, IT IS HUMBLY REQUESTED TO DELETE THE DISALLO WANCES AND ALLOW THE APPEAL. 27 . IN REPLY, THE LD DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND THE CIT(A) IN THIS BEHALF. 28 . WE HAVE HEARD BOTH THE PARTIES. SECTION 37 REQUIRES DISALLOWANCE OF EXPENSES OF CAPITA L OR PERSONAL NATURE. THE ASSESSEE IS AN INDIVIDUAL. HE HAS CLAIMED EXPENSES TOWARDS TELEPHONE , HOSPITALITY, CONVENIENCE, ETC. PERSONAL ELEMENT IN SUCH EXPENSES CANNOT BE RULED OUT. THE LD CIT(A) HAS RESTRICTED THE DISALLOWANCES TO 10% OF SUCH EXPENSES, WH ICH, IN OUR OPINION IS QUITE REASONABLE ON THE FACTS OF THE CASE. GROUND NO.7 IS DISMISSED. 29 . GROUND NO.8 IS GENERAL IN NATURE AND THEREFORE DOES NOT REQUIRE ADJUDICATION. A 19 .04 . 2013 A ORDER PRONOUNCED ON 19 .0 4. 201 3 SD/ - SD/ - ( .. O / T. K. SHARMA) ( .. WE / D. K. SRIVASTAVA) S E / JUDICIAL MEMBER / ACCOUNTANT MEMBER RAJKOT: 19 .04.2013 BT 21 ITA 584 /RJT/2012 1 EHS IS / COPY OF ORDER FORWARDED TO: - 6. 3 / APPELLANT SHRI JAYVANTSINH NATUBHAI VAGHELA, SHAHIBAUG SOCIETY, BLOCK NO.5, SURENDRANAGAR. 2. V3 / RESPONDENT - ITO, WARD - 2, SURENDRANAGAR . U B / CIT - V, AHMEDABAD 4. B - / CIT (A) - XVI, AHMEDABAD 5. VU, U, / DR, ITAT, RAJKOT 6. O / GUARD FILE. / BY ORDER , TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT