BLUE PLAST CORPORATION, MUMBAI V. ITO WD 24(3)(4), MUMBAI

ITA 5849/MUM/2010

• Counselvise Citation: 584919914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Assessee Lawyers: M N VAISHNAV
• Keywords: Unexplained cash credit; Business income; Corroborative evidences; Non compliance; Commercial expediency; TDS; Set aside
• Section: 131; 143(3); 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE SHRI R.S. SYAL (A.M.) AND SHRI D.K.AGARWAL (J M) ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S BLUPLAST CORPORATION, 113,VIVEK INDL.ESTATE, NEAR LITOLIER CAMA ESTATE, GOREGAON (E), MUMBAI-400063 PAN:AABFB8996K INCOME TAX OFFICER, 24(3)(4), PRATYAKSHAKAR BHAVAN, BANDRA- KURLA- COMPLEX, BANDRA (E), MUMBAI 400051 APPELLANT V/S RESPONDENT DATE OF HEARING : 7.12.2011 DATE OF PRONOUNCEMENT : 9.12.2011 APPELLANT BY : SHRI M.N.VAISHNAV RESPONDENT BY : SHRI O.A.MAO O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.3.2010 PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING ACTIVITY OF THERMOWARE, VACCUMWARE, GLASSWARE AND IMPORTED ARTICLES. IT FILED RETURN DECLARING TOTAL INCOME OF RS.5,93,000/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.48,72,255/- AFTER MAKING VARIOUS DISALLOWANCES /ADDITIONS INCLUDING ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 2 DISALLOWANCE OF INTEREST OF RS.17,51,997/- AND UNEXPLAINED CASH CREDITS OF RS.23,50,000/-, VIDE ASSESSMENT ORDER DATED 26.12.2008 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). O N APPEAL, THE LD. CIT(A), PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF INTEREST OF RS. 17,51,997/-. 5. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT, THE AO FROM THE P&L ACCOUNT OBSERVED THAT THE ASSESSEE FIRM HAS DEBITED INTEREST OF RS.17,51,997/- AGAINST THE BUSINESS INCOME AND ROYALTY INCOME. HE FURTHER OBSERVED, FROM THE BALANCE SHEET, THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN UNSECURED LOAN OF RS.2,32,42,889/- AND PAID INTERES T OF RS.17,51,997/- THEREON. HE FURTHER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE PARTNERS HA VE WITHDRAWN THE FUNDS FROM THE FIRM TO THE TUNE OF RS. 2,34,33,638/- AND LOAN AND ADVANCES GIVEN RS. 1,46,73,258/- TO VARIOUS ENTITIES ON WHICH THE ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 3 ASSESSEE HAS NOT CHARGED ANY INTEREST EXCEPT RS. 3,74,375/- FROM M/S BLUPLAST INDUSTRIES LTD. ON BE ING ASKED TO EXPLAIN AS TO WHY THE INTEREST PAID RS.17,51,997/-ON UNSECURED LOAN SHOULD NOT BE DISALLOWED, IT WAS SUBMITTED BY THE ASSESSEE THAT A S PER PARA 3 OBLIGATION OF THE LICENSOR OF ADDENDUM DATED 14.3.2005 AN OBLIGATION WAS PUT ON THE FIRM TO INVEST RS. 2 CRORES TO THE SHARE CAPITAL OF THE COMPANY AS THE COMPANY HAS DECIDED TO GO FOR AN IP0 . THIS IS THE ONLY REASON THAT THE FIRM HAS BORROWED MONEY FROM VARIOUS PARTIES AND TRANSFERRED TO THE SHARE CAPITAL OF THE COMPANY THROUGH ITS PARTNERS A ND FIRM HAD TO PAY INTEREST ON LOANS. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION. ACCORDI NG TO THE AO, THE ASSESSEE IS NOT INTO BUSINESS OF MONEY LENDING AND FROM THE FACTS, IT IS CLEAR THAT THE INTEREST BEARING FUNDS HAVE BEEN UTILIZED BY ASSES SEE FOR GIVING NON INTEREST BEARING LOAN & ADVANCES TO PARTNERS AND OTHER ENTITIES. U/S 36(1 )(III) OF T HE ACT THE INTEREST IS ALLOWABLE AS A DEDUCTION ONLY WHEN THE MONEY ON WHICH THE INTEREST PAID IS UTILIZED FOR T HE BUSINESS OF ASSESSEE. IN THIS CASE THE ASSESSEES ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 4 BUSINESS IS TRADING OF THERMOWARE, VACCUMWARE, GLASSWARE AND IMPORTED MATERIALS AND IT IS VERY C LEAR THAT THE INTEREST BEARING FUNDS HAVE NOT BEEN UTILI ZED FOR ITS BUSINESS AND ACCORDINGLY HE DISALLOWED THE INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT. HE FURTHER NOTED THAT THE ASSESSEE MADE THE INTEREST PAYMENT OVER RS.5,000/- TO THE 14 PARTIES AGGREGATI NG TO RS.91,725/- BUT HAS NOT DEDUCTED TDS. ON BEING ASKED IT WAS EXPLAINED BY THE ASSESSEE THAT HE HAS OBTAINED FORM NO.15H IN RESPECT OF INTEREST PAID TO KUNDANDAS PANJWANI AND SMT. NIRMALA BAJAJ BUT IT HA S NOT SUBMITTED THE SAME IN THE TDS CIRCLE. IN RESPEC T OF OTHERS, THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION. ACCORDING TO THE AO THE ASSESSEE FIR M WAS LIABLE TO DEDUCT TDS, HOWEVER, IT HAS FAILED TO DO SO. IN VIEW OF THE ABOVE, THE AO DISALLOWED THE AMOUNT OF RS.91,725/- NOT ALLOWABLE AS PER THE PROVISION OF SECTION 40 (A) (IA) OF THE ACT, AS ON THE SAID PAYMENT/EXPENSES, THE ASSESSEE FAILED TO DEDUC T TAX AT SOURCE (TDS) AS PER THE PROVISION OF SECTIO N 194C OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE INTEREST OF RS.17,51,997/- (INCLUDING DISALLOWANCE U/S ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 5 40(A)(IA) RS.91,725/-) AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 6. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT THE INVESTMENT OF RS.2 CRORES THROUGH PARTNERS IN THE SHARE CAPITAL OF THE COMPANY BY TAKING INTEREST BEARING LOAN FROM THE MARKET IS AN IN-HOUSE ARRANGEMENT WHICH IS NOT ACCORDING TO BUSINESS PRINCIPLES, CONFIRMED THE DISALLOWANCE MADE BY THE AO. 7. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSION S AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) FURT HER SUBMITS THAT IN VIEW OF CLAUSE 3 OF ADDENDUM AGREEMENT DATED 14.3.2005 APPEARING AT PAGE 1 TO 6 OF THE ASSESSEES PAPER BOOK AN OBLIGATION WAS ON THE FIRM TO INVEST RS.2 CRORES TO THE SHARE CAPITAL OF THE COMPANY AS THE COMPANY HAS DECIDED TO GO FOR AN IPO. THIS IS THE REASON THAT THE FIRM HAS BORROWED THE MONEY FROM VARIOUS PARTIES AND CONTRIBUTED TO THE SHARE CAPITAL OF THE COMPANY THROUGH ITS PARTNERS A ND FIRM HAD TO PAY INTEREST ON LOANS OF RS.17,51,997/ -. HE FURTHER SUBMITS THAT AS PER CLAUSE 2.1 OF THE SA ID ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 6 AGREEMENT, THE ASSESSEE HAS RECEIVED INTEREST FREE DEPOSITS OF RS.1.50 CRORES FROM THE SAID COMPANY WHICH IS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE FIRM. HE FURTHER SUBMITS THAT AS PER CLAU SE 0.2 OF THE SAID AGREEMENT THE ASSESSEE HAS RECEIVE D ROYALTY CHARGES OF RS.25,86,656/-. IN THE LIGHT O F THE ABOVE, HE SUBMITS THAT THE AMOUNT OF RS.2 CRORES WAS GIVEN FOR THE PURPOSE OF BUSINESS OF THE ASSESS EE, THEREFORE, THE DISALLOWANCE OF INTEREST IS UNCALLED FOR . THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS : 1. S.A.BUILDERS LTD. V/S CIT(A) (2007)288 ITR 1(SC) , 2. CIT DELHI V/S BHARTI TELEVENTURE LTD. (2007) 11 TAXMAN 356.(DEL), AND 3. M/S R.M.PATEL & SONS V/S ITO- ITA NO.1845/AHD/2009 DATED 31.01.2011 (AHMEDABAD-C BENCH) 8. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDE R OF THE AO AND LD. CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE RELEVANT CLAUSES OF ADDEND UM ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 7 AGREEMENT DATED 14.3.2005 ENTERED INTO WITH ASSESSE E (THE LICENSOR) AND M/S BLUPLAST INDUSTRIES PVT.LTD. (THE LICENSEE) ARE AS UNDER : 2.1 INTEREST FREE DEPOSITS IN CONSIDERATION OF THE EXCLUSIVE RIGHT TO USE OF LICENSED RIGHTS SPECIFIED IN THE AGREEMENT, LICENSEE SHALL PAY TO THE LICENSOR AN INTEREST FREE DEPOSIT OF RS.1,50,000/- (RUPEES ONE CRORE FIFTY LAKHS ONLY), WITHIN 180 DAYS OF ENTERING INTO THIS AGREEMENT OR 90 DAYS OF THE OPENING OF THE IPO. 0.2 ROYALTY CHARGES THE LICENSEE ALSO HEREBY AGREES THAT IT WOULD PAY TO THE LICENSOR ROYALTY CHARGES ON YEARLY BASIS AT THE FOLLOWING SCHEDULE OF RATES: YEARLY TURNOVER % ROYALTY UPTO RS.50 CRORES 0.50% MORE THAN RS.50 CRORES UP TO RS.100 CRORES RS.25,00,000/- PLUS 0.25% OF THE EXCESS TURNOVER ABOVE RS.50 CRORES ABOVE RS.100 CRORES RS.37,50,000/- PLUS 0.1% OF THE EXCESS TURNOVER ABOVE RS.100 CRORES THE ABOVE TURNOVER WOULD BE CONSIDERED FOR THE PERIOD APRIL TO MARCH EVERY YEAR. ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 8 IN VIEW OF WHAT IS STATED IN PARA 1 ABOVE, THE PERIOD FOR CALCULATING TURNOVER IN THE FIRST YEAR WOULD BE CONSIDERED FROM 01 ST JULY 2005 TO 31 ST MARCH 2006. 2.3 2.4.. 2.5.. 3 3.1.. 3.2 3.3 FURTHER, IT IS AGREED THAT THE FIRM DIRECTLY OR THROUGH PARTNERS HAS TO INVEST IN SHARES WORTH RS.2 CRORE (PROMOTER QUOTA) IN THE SHARE CAPITAL OF THE COMPANY DURING FY 05-06 AS THE COMPANY IS IN THE PROCESS OF IPO. FROM THE ABOVE CLAUSES OF THE AGREEMENT WITH THE COMPANY, WE FIND THAT THERE WAS AN OBLIGATION TO TH E ASSESSEE, DIRECTLY OR THROUGH PARTNERS, TO INVEST I N SHARES WORTH RS.2 CRORES IN THE SHARE CAPITAL OF TH E COMPANY AS THE COMPANY WAS IN THE PROCESS OF IPO. THE COMPANY IN CONSIDERATION OF THE EXCLUSIVE RIGHT S TO USE OF LICENSED RIGHTS SHALL PAY TO THE ASSESS EE AN INTEREST FREE DEPOSIT OF RS.1.50 CRORES WITHIN 180 DAYS OF THE ENTERING INTO THE SAID AGREEMENT OR 90 DAYS OF THE OPENING OF THE IPO WHICHEVER IS LATER. THE ASSESSEE WAS ALSO ENTITLED TO THE ROYALTY FROM THE ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 9 COMPANY AT THE SPECIFIED RATES ON THE TURNOVER. IN ORDER TO FULFILMENT OF THE CONDITION, THE ASSESSEE THROUGH ITS PARTNERS HAS DEPOSITED RS.2 CRORES AFTE R TAKING UNSECURED LOANS FROM THE VARIOUS PARTIES AN D IN LIEU THEREOF THE ASSESSEE HAS RECEIVED THE INTE REST FREE DEPOSITS OF RS.1.50 CRORES AND ROYALTY DURING THE YEAR RS.25,86,656/-. THUS THE AMOUNT ADVANCED TO THE COMPANY BY THE ASSESSEE FIRM THROUGH ITS PARTNE RS IS A MEASURE OF COMMERCIAL EXPEDIENCY AND THE AO HAS ERRED IN HOLDING THAT THE INVESTMENT CANNOT BE SAID FOR BUSINESS CONSIDERATION AND THE LD. CIT(A) WAS ALSO NOT JUSTIFIED IN HOLDING THAT THE INVESTMENT OF RS.2 CRORES WITH THE COMPANY WAS AN IN-HOUSE ARRANGEMENT WHICH IS NOT ACCORDING THE BUSINESS PRINCIPLES. 10. IN S.A.BUILDERS LTD.(SUPRA) HELD (PLACITUM 36, PAGE 10 OF 288 ITR 1): .WHERE IT IS OBVIOUS THAT A HOLDING COMPANY HAS A DEEP INTEREST IN ITS SUBSIDIARY, AND HENCE IF THE HOLDING COMPANY ADVANCES BORROWED MONEY TO A SUBSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINESS PURPOSES, THE ASSESSEE WOULD, IN OUR OPINION, ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 10 RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE DECIS ION, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF INTERES T TO THE PARTIES EXCEPT 3 PARTIES VIZ. UMESH BAJAJ, NIM ESH BIHARILAL AND KUNDANDAS PUNJWANI IS NOT SUSTAINABL E IN LAW AND ACCORDINGLY THE SAME IS DELETED. 11. AS REGARDS THE INTEREST PAID TO 3 PARTIES VIZ. UMESH BAJAJ, NIMESH BIHARILAL AND KUNDANDAS PUNJWANI, WE FOR THE REASONS MENTIONED IN SUBSEQUEN T PARAGRAPH OF THIS ORDER SET ASIDE THE ISSUE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH IN THE LIGHT O F THE DIRECTION GIVEN THEREIN. 12. AS REGARDS THE APPLICATION OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON THE DISALLOWANCE OF RS.91,725/-, WE FIND THAT THERE IS NO DISPUTE THAT BEFORE THE AO, THE ASSESSEE HAS SUBMITTED FORM NO.15H IN RESPECT OF KUNDANDAS PUNJWANI, SMT. NIRMALA BAJAJ FOR NOT DEDUCTING TDS. HOWEVER, DUE TO CERTAIN REASONS THE SAME COULD NOT BE SUBMITTED BY THE ASSESSEE IN THE TDS CIRCLES. SINCE IT IS A FA CT THAT THE ASSESSEE HAS OBTAINED FORM NO.15H FROM THE SAID PARTIES, THEREFORE, THERE IS NO DEFAULT ON THE PART ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 11 OF THE ASSESSEE IN RESPECT OF PAYMENT OF INTEREST WITHOUT DEDUCTING TDS TO KUNDANDAS PUNJWANI AND SMT. NIRMALA BAJAJ. THE AO IS DIRECTED NOT TO CONSIDER THE PAYMENT OF INTEREST TO THESE TWO PARTI ES WITHOUT TDS FOR THE PURPOSE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 13. AS REGARDS PAYMENT OF INTEREST TO OTHER 12 PARTIES AS APPEARING AT PARAGRAPH 4.4 OF THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION IN THIS REGARD EVEN AT TH IS STAGE, THEREFORE, THE DISALLOWANCE MADE BY THE AO TO THIS EXTENT U/S 40(A)(IA) IS UPHELD. THE GROUND TAK EN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED. 14. GROUND NO.2 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF UNEXPLAINED CASH CREDIT OF RS.4 LA KHS. 15. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE FIRM HAS SHOWN LOAN OF RS. 2,32,42,889/-. THE ASSESSEE WAS ASKED TO FURNI SH THE LOAN CONFIRMATION ALONG WITH COPY OF BANK STATEMENTS AND COPY OF RETURN OF THE LOAN CREDITORS . IN THIS REGARD, THE ASSESSEE HAS FILED THE LOAN ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 12 CONFIRMATION FROM THE LOAN CREDITORS BUT IT HAS NO T FILED THE COPY OF BANK STATEMENTS AND COPY OF RETUR NS OF LOAN CREDITORS TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS. THE AO ISSUED SUMMONS U/S 131 TO VARIOUS PARTIES. OUT OF THESE PARTIES 11 SUMMONS RETURNED BACK BY THE POSTAL AUTHORITY AS UN-SERVED WITH REMARK LEFT/NOT KNOWN/UNCLAIMED AND 23 LOAN CREDITORS HAVE NOT FIL ED ANY SUBMISSION IN RESPONSE TO SUMMONS ISSUED TO THEM. IN THE LIGHT OF THE ABOVE, THE ASSESSEE WAS GIVEN OPPORTUNITY TO PROVE THE SAME. IN RESPONSE, THE ASSESSEE FILED COPY OF BANK STATEMENT AND COPY OF RETURN OF SOME OF THE LOAN CREDITORS BUT HAS FAILE D TO FILE ANY SUPPORTING EVIDENCE TO PROVE THE GENUINENE SS OF 12 LOAN CREDITORS AGGREGATING TO RS.23,50,000/- . IN ABSENCE THEREOF, THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE ASSESSEE HAS FILED CERTAIN NEW EVIDENCE BEFORE LD. CIT(A), THEREFORE, THE LD. CIT(A) REMANDED THE MATTER TO TH E FILE OF THE AO FOR VERIFICATION AND REPORT. THE LD . CIT(A) AFTER CONSIDERING THE REMAND REPORT AND THE ASSESSEE SUBMISSION WHILE CONFIRMING THE ADDITION ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 13 IN THE ACCOUNT OF S/SHRI OMESH BAJAJ RS.1,00,000/-, NIMESH BIHARILAL RS.1,00,000/- AND KUNDANDAS PANJWANI RS.2,00,000/- AGGREGATING TO RS. 4,00,000 /- ON THE GROUND THAT THE ASSESSEE FAILED TO FILE CONFIRMATION AND PAN TO ESTABLISH IDENTITIES, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF LOAN CREDITORS, DELETED THE BALANCE AMOUNT OF ADDIT ION. 16. AT THE TIME OF HEARING, THE LD.COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THESE LOANS ARE HUNDI , LOANS WHICH WERE TAKEN THROUGH THE BROKERS BY CHEQUES AND THE ASSESSEE HAS DEDUCTED TDS ON INTEREST AND HAS SQUARED UP THE LOANS DURING THE YE AR, THEREFORE, THE ADDITION SUSTAINED BY THE LD. CIT(A) BE DELETED. IN THE ALTERNATIVE, HE SUBMITS THAT NOW HE IS ABLE TO FILE CONFIRMATION LETTERS AND PAN, THEREFO RE, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO FO R FRESH CONSIDERATION AND ADJUDICATION. 17. ON THE OTHER HAND, THE LD. DR SUBMITS THAT SINC E THE ASSESSEE HAS FAILED TO FILE LOAN CONFIRMATIONS WITH PAN, THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE AO. ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 14 18. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND FROM THE ASSESSMENT ORDER THAT THE AO HAD ISSUED SUMMONS U/S 131 TO ALL THE PARTIES. HOWEVER, IN THE ABSENCE OF ANY RESPONSE, HE HAS ADDED RS.23,50,000/- AS UNDISCLOSED INCOME. WE FURTHER FIND THAT IN THE REMAND REPORT DATED 25.2.2010, THE AO HAS OBSERVED AS UNDER : S.NO. NAME OF THE LOAN CREDITORS AMOUNT OF LOAN SHOWN BY THE ASSESSEE COMPLIANCE OF LOAN CREDITORS 1. KUNDANDAS PUNJWANI RS.2,00,000 NON COMPLIANCE FROM THE LOAN PARTY. HOWEVER, THE ASSESSEE FILED COPY OF ITS OWN BANK STATEMENT, COPY OF BILLS OF EXCHANGE. THE DETAILS FILED BY THE ASSESSEE HAS BEEN CONSIDERED. HOWEVER, THE SAME IS NOT ACCEPTABLE IN ABSENCE OF ANY LOAN CONFIRMATION, IDENTIFY, CREDITWORTHINESS OF THE SAID LOAN PARTY. ACCORDINGLY, THE LOAN STANDING IN THE NAME OF THE SAID PARTY REMAINS UNEXPLAINED. 2. NIMESH BIHARILAL RS.1,00,000 NON COMPLIANCE FROM THE LOAN PARTY. HOWEVER, THE ASSESSEE FILED COPY OF ITS OWN BANK STATEMENT, COPY OF BILLS OF EXCHANGE. THE DETAILS FILED BY THE ASSESSEE HAS BEEN CONSIDERED. HOWEVER, THE SAME IS NOT ACCEPTABLE IN ABSENCE OF ANY LOAN CONFIRMATION, IDENTIFY, CREDITWORTHINESS OF THE SAID LOAN PARTY. ACCORDINGLY, THE LOAN STANDING IN THE NAME OF THE SAID PARTY REMAINS UNEXPLAINED. 3. UMESH BAJAJ RS.1,00,000 NON COMPLIANCE FROM THE LOAN PARTY. HOWEVER, THE ASSESSEE FILED COPY OF ITS OWN BANK ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 15 THE LD.CIT(A) IN THE ABSENCE OF ANY CONFIRMATION AN D PAN TO ESTABLISH IDENTITY, GENUINENESS OF TRANSACTI ON AND CREDITWORTHINESS OF THE LOAN CREDITORS, CONFIRM ED THE ADDITION OF RS.4 LAKHS MADE BY THE AO. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT APART FROM ISSUING NOTICE U/S 133(1) AS TO HOW THE AO PURSUED THE MATTER FURTHER WITH THE SAID PARTIES AND KEEPI NG IN VIEW THAT THE ASSESSEE IS READY TO FILE CONFIRMA TION LETTER ALONG WITH THE PAN, WE ARE OF THE VIEW THAT IN THE INTERESTS OF JUSTICE, THE MATTER SHOULD GO BACK TO THE FILE OF THE AO AND ACCORDINGLY WE SET ASIDE TH E ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE ISSUE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOVE AND IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HE ARD STATEMENT, COPY OF BILLS OF EXCHANGE. THE DETAILS FILED BY THE ASSESSEE HAS BEEN CONSIDERED. HOWEVER, THE SAME IS NOT ACCEPTABLE IN ABSENCE OF ANY LOAN CONFIRMATION, IDENTIFY, CREDITWORTHINESS OF THE SAID LOAN PARTY. ACCORDINGLY, THE LOAN STANDING IN THE NAME OF THE SAID PARTY REMAINS UNEXPLAINED. ITA NO.5849/MUM/2010 (ASSESSMENT YEAR: 2006-07) 16 TO THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE I S, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSE. 19. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DEC.,2011. SD SD ( R.S. SYAL) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, 9TH DECEMBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI