DILSA DISTRIBUTORS COMBINES, MUMBAI V. ITO 11(1)(1), MUMBAI

ITA 5849/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71027 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-08-2013
• Assessment Year: 1997-1998
• Appeal Filed On: 18-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIPAK RIPOTE
• Keywords: Unexplained cash credit; Business income; Search and seizure; Bogus loan
• Section: 143(3); 131; 68; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL D DD D BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKAR D. KARUNAKAR D. KARUNAKAR D. KARUNAKARA AA A RAO RAO RAO RAO, AM , AM , AM , AM ./ I.T.A. NO.5849/MUM/2011 I.T.A. NO.5849/MUM/2011 I.T.A. NO.5849/MUM/2011 I.T.A. NO.5849/MUM/2011 ( $% $% $% $% & & & & / ASSESSMENT YEAR :1997-98) M/S DILSA DISTRIBUTERS COMINES NAAZ BULG, 1 ST FLOOR, LAMINGTON ROAD, MUMBAI-400004 % % % % / VS. ITO-11(1)(1) MUMBAI #' ! ./ ( ./ PAN/GIR NO. :AAAFD3288K ( ') / APP APP APP APPELLANT ELLANT ELLANT ELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ') ') ') ') , , , , / APPELLANT BY : SHRI DEEPAK TRALSHAWALA *+') *+') *+') *+') - -- - , , , , /RESPONDENT BY : SHRI DIPAK RIPOTE % % % % - -- - .! .! .! .! / DATE OF HEARING : 21 ST AUGUST 2013 /0& /0& /0& /0& - -- -.! .! .! .! /DATE OF PRONOUNCEMENT: 6 TH SEPTEMBER 2013 ' 1 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 30.6.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 1997-98. 2. THE ASSESSEE HAS FILED THE CONCISE GROUNDS AS UN DER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF COMMISSIONER OF INCOME TAX( APPEALS) 3, MUMBAI, ERRED IN I. CONFIRMING THE ADDITION OF ` 30,00,000/- AS UNEXPLA INED CASH CREDITS U/S 68, IGNORING THE SPECIFIC DIRECTIO NS OF THE HONBLE ITAT IN ITA NO. 6270-6272 DATED 11 TH SEPTEMBER 2009. ITA NO. 5849/M/2011 DILSA DISTRIBUTERS COMBINES 2 II. CONFIRMING THE ADDITION OF ` 31,250/- AS INTEREST O N THE SO-CALLED BOGUS LOANS/UNEXPLAINED CASH CREDITS. 3. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 24.1.2000 AT THE TOTAL ASSESSED INCOME OF ` 2,35,505/-. SUBSEQUE NTLY THE ASSESSMENT WAS REOPENED BY ISSUING A NOTICE U/S 148 DATED 31.3 .2004 ON THE REASON THAT UNDISCLOSED INCOME OF ` 30,00,000/- SHOWN AS L OAN AND INTEREST CLAIMED ON THE ALLEGED LOAN ESCAPED ASSESSMENT. IN FACT INTIMATION WAS RECEIVED BY THE AO FROM DDIT INVESTIGATION UNIT-(VI II)(4), MUMBAI AFTER COMPLETION OF THE ORIGINAL ASSESSMENT. IN THE SAID INTIMATION THE DDIT INVESTIGATION (INV.) HAS INTIMATED THAT MR. SURENDR A KHANDHAR WAS INDULGED IN GIVING BOGUS HAWALA ENTIRES/ACCOMMODATI ON ENTRIES TO VARIOUS PERSONS FOR WHICH HE FLOATED 35 CONCERNS. THE AO FO UND THAT THE ASSESSEE HAS SHOWN THE LOAN TAKEN FROM THE CONCERNS OF MR. S URENDRA KHANDHAR. THE ASSESSING OFFICER HAS RELIED UPON THE STATEMENT OF MR. SURENDRA KHANDHAR RECORDED BY THE INVESTIGATION UNIT DURING THE SEARCH AND SEIZURE ACTION AND PROPOSED THE ADDITION OF LOAN AMOUNT ALO NG WITH INTEREST THERE UPON. THE ASSESSEE HAS CLAIMED TO HAVE TAKEN LOANS FROM FIVE CONCERNS DETAILS OF WHICH ARE AS UNDER: SL. NO. NAME DATE AMOUNT 1. HARMESH TRADING 17.2.1997 10,00,000 2. RAJ ELECTRICALS 18.3.1997 5,00,000 3. AARKAY INCORPORATED 18.3.1997 5,00,000 4. RAJ ELECTRICALS 21.3.1997 5,00,000 5. HPS INTERNATIONAL 21.3.1997 5,00,000 TOTAL 30,00,000 ITA NO. 5849/M/2011 DILSA DISTRIBUTERS COMBINES 3 THE AO ISSUED SUMMONS U/S 131 TO ALL THE FIVE PART IES BUT THE SUMMONS WERE NOT SERVED TO THE PARTIES AND RECEIVED BACK WITH THE POSTAL REMARKS LEFT AND NOT KNOWN AS THE ADDRESS IS NOT TRACEABLE. THE AO HAS ALSO ISSUED SUMMONS TO MR. SURENDRA KHANDHAR BUT THE SAME COULD NOT BE SERVED ON THE ADDRESS GIVEN AS HE WAS NOT AVAILABLE THERE AND LEFT THE PLACE 3-4 YEARS BACK. 4. SINCE MR. SURENDRA KHANDHAR WAS NOT TRACEABLE AN D COULD NOT BE MADE AVAILABLE DURING THE ASSESSMENT PROCEEDINGS TH EREFORE THE AO COMPLETED THE REASSESSMENT BY MAKING THE ADDITION O F ` 30,00,000/- AS HAWALA LOAN AND INTEREST ON THE SAME. THE ASSESSEE CHALLENGED THE ACTION OF THE AO AND BROUGHT THE MATTER BEFORE THIS TRIBUN AL. THE ASSESSEE CONTENDED THAT THE AO HAS MADE THE ADDITION WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE OF MR. SURENDRA KHANDHAR. THIS TRIBUNAL DIRECTED THE AO TO DECIDE THE ISSUE A FRESH AFTER PROVIDING OPPORTUNITY OF CROSS-EXAMINATION. THEREAFTER THE AS SESSMENT IN THIS CASE WAS MADE AFRESH. THE AO TRIED TO LOCATE MR. SURENDR A KHANDHAR HOWEVER, HE FAILED TO SERVE NOTICE ON HIM OR TO TRACE HIM OU T FOR ALLOWING CROSS- EXAMINATION TO THE ASSESSEE. THE ASSESSING OFFICER REPEATED ALL THE ADDITIONS MADE ORIGINALLY. THE ASSESSEE AGAIN CHALL ENGED THE ACTION OF THE AO AND BROUGHT THE MATTER BEFORE THIS TRIBUNAL IN T HE SECOND ROUND OF LITIGATION. THE TRIBUNAL VIDE ORDER DATED 11.9.2009 IN ITA NO. 6272/M/2008 HAS AGAIN SET ASIDE THE ORDERS OF THE AUTHORITIES B ELOW AND RESTORED THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO PASS AFRESH ORDER ON MERITS BY IGNORING THE STATEMENT OF MR. SURENDRA KH ANDHAR. THE ASSESSING ITA NO. 5849/M/2011 DILSA DISTRIBUTERS COMBINES 4 OFFICER CONSEQUENTLY PASS THE ASSESSMENT ORDER DATE D 31.12.2010 AND AGAIN MADE THE ADDITION AS IN THE EARLIER ASSESSMEN T ORDERS. THE ASSESSEE HAS AGAIN CARRIED THE MATTER BEFORE THIS TRIBUNAL I N THE THIRD ROUND OF LITIGATION. 5. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSING OFFICER HAS NOT PASSED THE ORDER AS PER T HE DIRECTIONS OF THIS TRIBUNAL VIDE ORDER DATED 11.9.2009. HE HAS REFERRE D THE ASSESSMENT ORDER AND SUBMITTED THAT THE AO HAS REPEATED THE AD DITION ON THE BASIS OF THE STATEMENT OF MR. SURENDRA KHANDHAR AND HAS NOT DECIDED THE ISSUE ON MERITS BY IGNORING THE SAID STATEMENT. ON QUERY FRO M THE BENCH REGARDING THE REPAYMENT OF THE LOANS IN QUESTION THE ASSESSEE FILED THE DOCUMENTS SHOWING THE REPAYMENT OF LOANS IN QUESTION AND SUBM ITTED THAT THE ASSESSEE HAS ALREADY DISCHARGE THE LOANS AND THEREF ORE NO ADDITION CAN BE MADE U/S 68. THOUGH THE LD. AR HAS ALSO ARGUED A T LENGTH AGAINST THE SUSTAINABILITY OF THE ADDITION MADE BY THE AO HOWEV ER, WHEN THE ASSESSEE HAS CLAIMED THAT THE LOANS IN QUESTION HAVE BEEN RE PAID THEN WE PROPOSE TO DISPOSE OF THE APPEAL ON THE SHORT POINT OF REPA YMENT OF LOAN. THE LD. DR HAS SUBMITTED THAT THE CLAIM OF REPAYMENT OF LOA NS REQUIRES VERIFICATION AND IF THE ASSESSEE ESTABLISHES THAT T HE LOAN IN QUESTION HAVE BEEN REPAID THEN THE ISSUE MAY BE DECIDED ACCORDING LY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE EARLIER ROUND O F LITIGATION THIS TRIBUNAL HAS REMANDED THE MATTER TO THE RECORD OF THE ASSESS ING OFFICER VIDE ORDER DATED 11.9.2009 IN PARA 5 AND 5.1 AS UNDER: ITA NO. 5849/M/2011 DILSA DISTRIBUTERS COMBINES 5 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THEM CAREFULLY. AS MENTIONED ABOVE, THE ASSESSMENTS WERE COMPLETED ORIGINALLY WHICH WERE SET ASIDE BY THE TRIBUNAL WIT H A DIRECTION TO ALLOW CROSS EXAMINATION OF ONE SHRI KHANDHAR ON WHO SE STATEMENT BASIS, THE ADDITIONS WERE MADE IN THE HAN DS OF THE ASSESSEE. SHIR KHANDHAR COULD NOT BE TRACED OUT IN SPITE OF BEST EFFORTS MADE BY THE AO; THEREFORE, CROSS EXAMINATIO N COULD NOT BE ALLOWED. IT IS WELL SETTLED LAW THAT WITHOUT CON FRONTING THE STATEMENT OF WITNESS OR ALLOWING CROSS EXAMINATION, NO ADVERSE INFERENCE CAN BE MADE AGAINST A PERSON, AGAINST WHI CH STATEMENT OF A THIRD PARTY IS USED. SINCE CROSS EXA MINATION COULD NOT BE ALLOWED; THEREFORE, WE HOLD THAT THE STATEME NT OF SHIR KHANDHAR CANNOT BE USED AGAINST THE ASSESSEE. 5.1 HOWEVER, ON MERIT, WE ARE OF THE CONSIDERED VIE W THAT THE MATTER NEEDS RE-VERIFICATION AT THE END OF THE AO A S THE CASE HAS NOT BEEN EXAMINED PROPERLY ON MERIT. IF THE STATEME NT OF A THIRD PARTY IGNORED THEN IN THAT CASE, ONUS LAY UPON THE ASSESSEE TO PROVE THE TRANSACTION BY ADDUCING NECESSARY CONFIRM ATION AND EVIDENCES. NO SUCH EFFORTS WERE MADE BY THE ASSESSE E TO OBTAIN THE CONFIRMATION FROM THE RESPECTIVE PARTIES. NEITH ER THE DEPARTMENT HAS TRIED TO VERIFY FROM THE INCOME TAX DEPARTMENT, IN SPITE OF FURNISHING PAN ETC., OF THE RESPECTIVE PARTIES, AS STATED BY THE LD. COUNSEL OF THE ASSESSEE. THEREFORE, WE A RE OF THE CONSIDERED VIEW THAT TO MEET THE END OF JUSTICE, TH E MATTER SHOULD GO BACK TO THE FILE OF THE AO IN RESPECT TO ALL THESE APPEALS TO EXAMINE THE ISSUE AFRESH ON MERIT AND AF TER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE TO FILE NECE SSARY DETAILS IN RESPECT OF RESPECTIVE LOANS TAKEN BY THE ASSESSE E. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER A UTHORITIES AND RESTORE THE MATTER TO THE FILE OF THE AO TO PASS A FRESH ORDER AS PER OUT ABOVE OBSERVATIONS. 7. IT IS CLEAR FROM THE ORDER OF THIS TRIBUNAL THAT THE ADDITION MADE ON THE BASIS OF THE STATEMENT OF MR. SURENDRA KHANDHAR WITHOUT GIVING AN OPPORTUNITY OF CROSS-EXAMINATION WAS HELD TO BE NOT PROPER AND ACCORDINGLY IT WAS OBSERVED THAT THE STATEMENT OF M R. SURENDRA KHANDHAR CANNOT BE USED AGAINST THE ASSESSEE. THE AO WAS DIR ECTED TO DECIDE THE ISSUE ON MERITS AFTER AFFORDING AN OPPORTUNITY TO T HE ASSESSEE TO FILE NECESSARY DETAILS IN RESPECT OF RESPECTIVE LOANS TA KEN BY THE ASSESSEE. WE ITA NO. 5849/M/2011 DILSA DISTRIBUTERS COMBINES 6 NOTE THAT IN THE ASSESSMENT ORDER PASSED IN PURSUAN T TO THE DIRECTIONS OF THIS TRIBUNAL, THE AO HAS REPEATED THE ADDITION IN PARA 10-12 AS UNDER: 10. IN VIEW OF THE ABOVE, IT CAN BE SEEN THAT THER E IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. UNDER T HE CIRCUMSTANCES, THERE IS NO ALTERNATIVE THAN TO PASS THE ORDER WITH THE MATERIALS AVAILABLE ON RECORD. THE DETAILS AND FACTS OF THE CASE ARE ELABORATELY DISCUSSED IN THE ORIGINAL ORDE R PASSED ON 31.3.2005 BY THE ERSTWHILE ASSESSING OFFICER. HENCE THEY ARE NOT REPEATED HERE AGAIN. 11. I DO NOT FIND THAT THE SUBMISSION MADE BY THE A UTHORISED REPRESENTATIVE HAS ANY MATERIALS TO SERVE HIS PURPO SE. CONSIDERING THE STATEMENT ON OATH PROVIDED BY THE L ENDER OF THE LOAN, THERE IS NO IOTA OF DOUBT THAT THE ASSESSEE H AS INTRODUCED HIS UNDISCLOSED CASH UNDER THE GARB OF ACCOMMODATIO N LOAN. IN THE CIRCUMSTANCES, THE LOAN SO RECEIVED ARE UNEXPLA INED CASH CREDIT U/S 68 OF THE I.T. ACT, 1961 AND SAME ARE BR OUGHT TO TAX. ACCORDINGLY, A SUM OF ` 55,25,000/- IS ASSESSED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE YEAR. PENALTY PROCEE DINGS U/S 271(1)(C) OF THE I.T. ACT, 1961 ARE INITIATED SEPAR ATELY. 12. SUBJECT TO THE ABOVE REMARKS, THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: BUSINESS INCOME INCOME AS PER ORDER DTD. 31.3.2005 ` 2,35,505 ADD: DISALLOWANCE OF LOAN AS PER ORDER ` 30,00,000 DTD. 31.3.2005 INTEREST ON LOAN ` 25,25,000 TOTAL INCOME ` 57,60,505 ____________ ROUNDED OFF ` 57,60,510 ____________ 8. IT IS CLEAR THAT THE AO HAS NOT TAKEN PAIN TO EX AMINE THE ISSUE ON MERITS ON THE BASIS OF THE DETAILS TO BE FILED BY T HE ASSESSEE AS DIRECTED BY THE TRIBUNAL. NOW BEFORE US THE ASSESSEE HAS CLA IMED THAT THE LOANS HAVE BEEN REPAID THEREFORE, THE CLAIM OF THE ASSESS EE BASED ON THE RECORD SHOWING THE REPAYMENT OF LOAN IS REQUIRED TO BE VER IFIED. IF THE CLAIM OF THE ASSESSEE THAT LOANS HAVE ALREADY BEEN REPAID IS FOUND CORRECT THEN ITA NO. 5849/M/2011 DILSA DISTRIBUTERS COMBINES 7 THE ADDITION U/S 68 IS NOT SUSTAINABLE AND LIABLE T O BE DELETED. THEREFORE IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE FOR LIMITED PURPOSE OF VERIFICATION OF THE FACT AND THE RECORD FILED BY TH E ASSESSEE TO SHOW THAT THE LOANS IN QUESTION HAVE BEEN REPAID BY THE ASSES SEE. THE AO TO DECIDE THE ISSUE IN TERMS OF OUR OBSERVATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF SEPTEMBER 2013 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 6 TH SEPTEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI