Mount Shivalik Secfin (P) Ltd., V. ITO, Ward-5(4),

ITA 640/DEL/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3606 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-07-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 23-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Wrong claim
• Section: 142(1); 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI R.C.SHARMA, AM ITA NO.640/DEL/2006 ASSESSMENT YEAR : 2002-03 M/S MOUNT SHIVALIK SECFIN PVT.LTD., 306-VAKIL CHAMBER, A-115, SHAKARPUR, DELHI 110 092. PAN NO.AABCM4028L. VS. INCOME TAX OFFICER, WARD-5(4), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA, ADVOCATE. RESPONDENT BY : SMT.PRATIMA KAUSHIK, SR.DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 13.12.2005, IN THE MATTER OF ORDER PASSED U/S 143(3 ) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE COMPANY HAS RECEIVED FRESH UNSECURED LOANS AMOUNTING TO RS.7.15 LAKHS OUT OF W HICH RS.6,10,000/- IS RECEIVED FROM M/S OBSERVER INVESTMENT AND FINANCE (P) LTD. THE DIRECTORS OF THIS COMPANY AS WELL AS THE ASSESSEE COMPANY ARE COMMON DIRECTORS. THE ASSESSEE COMPANY WAS REQUIRED TO FURNISH SOURCE OF THE TRANS ACTION AS WELL AS RELEVANT EVIDENCES. THE ASSESSEE COMPANY HAS FILED COPY OF BANK STATEMENT WHERE FROM IT WAS NOTICED THAT M/S OBSERVER INVESTMENT AND FINANC E (P) LTD. HAD RECEIVED CHEQUES OF THE AMOUNT OF RS.2,70,000/- ON 9.4.2001 AND RS.2,50,000/- ON 18.2.2002 FROM SHRI NARESH KUMAR, PROP. JANTA ENTER PRISES WHO HAD MAINTAINED HIS ACCOUNT IN VIJAYA BANK, ANSARI ROAD AND WHO HAD INTRODUCED CASH IN HIS ACCOUNT OF THESE AMOUNTS A DAY BEFORE ADVANCING CHE QUES TO OBSERVER INVESTMENT AND FINANCE (P) LTD. AND OUT OF TOTAL ADVANCES TO A SSESSEE COMPANY AT ITA-640/DEL/2006 2 RS.6,10,000/-, RS.5.40 LAKHS WERE THROUGH CASH INTR ODUCTION IN THE ACCOUNT OF SHRI NARESH KUMAR. IT WAS FURTHER STATED THAT SHRI SANJ IV VOHRA AND SHRI DEEPAK TIWARI ARE ALSO THE DIRECTORS OF ASSESSEE COMPANY. FURTHER, DEEPAK TIWARI AND ASHWANI UPPAL ARE ALSO DIRECTORS/SHAREHOLDERS IN M/ S OBSERVER INVESTMENT AND FINANCE (P) LTD. DURING THE YEAR, THE ASSESSEE COM PANY HAS SOLD SHARES WHICH IT HAS CLAIMED TO BE HELD ON 1.4.2001, DETAILS OF WHIC H ARE AS UNDER:- 1. M/S HI-TECHNO CRATS (P) LTD. : RS.5,00,000/- 2. M/S LIME LITE CONSULTANTS (P) LTD. : RS.5,00,000 /- 3. M/S SAMSON FINANCIAL SERVICES (P) LTD. : RS.7,40 ,000/- 4. M/S VIRAT INVESTMENT & MERCANTILE(P) LTD. : RS.7 ,50,000/- 3. NOTICES U/S 131 WERE ISSUED TO COMPANIES AT 1,3 & 4 AND NOTICE U/S 133(6) WAS SENT TO M/S LIME LITE CONSULTANTS (P) LTD. AT L UDHIANA. WHILE THE NOTICES FROM THIS CONCERN WAS RECEIVED BACK UNSERVED WITH R EMARKS NO SUCH COMPANY AT THE ADDRESS, THE COMPANIES M/S HI-TECHNO CRATE (P) LTD., M/S SAMSON FINANCIAL SERVICES (P) LTD. AND M/S VIRAT INVESTMENT & MERCAN TILE (P) LTD. VIDE THEIR REPLIES FILED STATED THAT DURING THE PERIOD 1.4.2001 TO 31. 3.2002 THEY DID NOT ENTER INTO ANY FINANCIAL TRANSACTION WITH THE ASSESSEE. SINCE THE ASSESSEE COMPANY HAD RECEIVED CHEQUES OF SAME SERIES FROM THESE COMPANIES, ENQUIR IES CONDUCTED FROM BANKS REVEALED THAT ABOVE CHEQUES WERE ISSUED BY ONE SHRI NARESH KUMAR PROP. M/S JANTA ENTERPRISE, NAYA BAZAR FROM ACCOUNT MAINTAINE D IN VIJAY BANK, ANSARI ROAD. PERUSAL OF THIS BANK ACCOUNT REVEALED THAT H E HAD ISSUED CHEQUES THROUGH OUT THE YEAR WITH INTRODUCING HUGE CASH IN HIS ACCO UNT. ALL THE CHEQUES RECEIVED BY ASSESSEE COMPANY AMOUNTING TO RS.19.90 LAKHS WER E ISSUED THROUGH INTRODUCING CASH A DAY BEFORE ISSUING CHEQUES TO AS SESSEE COMPANY. DUE OPPORTUNITY WAS GIVEN BY THE AO TO THE ASSESSEE ON THE ABOVE TO WHICH THE ONLY REPLY WAS : SH.NARESH KUMAR PROP. M/S JANTA ENTERPRISES FROM W HOM THE ASSESSEE COMPANY NEVER RAISED LOAN BUT DEALT WITH S ECURITY TRANSACTIONS. THE SECURITY TRANSACTIONS WERE ENTER ED INTO ONLY ITA-640/DEL/2006 3 THROUGH ACCOUNT PAYEE CHEQUES. IT IS HIS BURDEN HO W DID HE MAKE ARRANGEMENT OF THE FUNDS AS THE ONUS OF SUCH FUNDS LIES ON BUYER. 4. THE SUBMISSION OF THE ASSESSEE COMPANY WAS REJEC TED BY THE AO STATING THAT IT SEEMS UNBELIEVABLE THAT THE ASSESSEE WHO SO LD ITS SHARES WAS NOT AWARE OF THE PERSON THROUGH WHOM IT MADE SECURITY TRANSACTIO NS. NO EVIDENCE IN THIS REGARD WAS FURNISHED BY THE ASSESSEE BEFORE THE AO. REPOR T OF THE ITI WAS ALSO NOT INDICATIVE OF ANY SALE OF SHARES. THE ASSESSEE HIM SELF HAS NOT BEEN ABLE TO FURNISH ANY DOCUMENTARY EVIDENCE IN ITS SUPPORT. THUS, THE ADDITION WAS MADE BY THE AO. 5. WITH REGARD TO ADDITION OF RS.5.40 LACS SHOWN AS LOAN RECEIPTS FROM M/S OBSERVER INVESTMENT & FINANCE LTD. THE CONTENTION O F LEARNED CIT-DR SMT. PRATIMA KAUSHIK, WAS THAT THE DIRECTORS IN BOTH THE COMPANY I.E., THE ASSESSEE COMPANY AND M/S OBSERVER INVESTMENT & FIN LTD. FROM WHOM THE LOAN HAS BEEN RECEIVED ARE SAME I.E. SHRI DEEPAK TIWARI AND VEERA GHWAN. FURTHER, IT IS SEEN THAT PRIOR TO GIVING THE LOAN M/S OBSERVER INVESTMENT & FINANCE HAS RECEIVED THE AMOUNT FROM THE ACCOUNT OF SHRI NARESH KUMAR PROP. JANTA ENTERPRISES. IT WAS ALSO SEEN THAT IN THE ACCOUNT OF SHRI NARESH KUMAR CASH WAS DEPOSITED A DAY PRIOR TO ISSUING THE CHEQUES TO M/S OBSERVER INVESTMENT & FINANCE LTD. THE ABOVE IS CLEARLY DEMONSTRATED FROM THE COPIES OF BANK ACCOUN TS IN THE POSSESSION OF ASSESSING OFFICER WHICH THE ASSESSEE WAS ASKED TO E XPLAIN. THE ASSESSEE COMPANY IN RESPONSE TO NOTICE U/S 142(1) DATED 21.0 2.2005 WAS SPECIFICALLY ASKED TO PRODUCE SHRI NARESH KUMAR ALONG WITH HIS BOOKS O F ACCOUNTS TO WHICH THE ASSESSEE REPLIED THAT THE CONFIRMATION HAD BEEN FIL ED AND ASSESSING OFFICER MAY DIRECTLY SUMMON THE PARTY AS THE ASSESSEE HAD NO BU SINESS TRANSACTION WITH THE COMPANY. SHE FURTHER CONTENDED THAT THE REPLY OF T HE COMPANY IS NOT ACCEPTABLE AS THE DIRECTORS OF BOTH THE COMPANIES ARE SAME. T HEY OPERATE FROM THE SAME PREMISES AND ARE IN THE SAME LINE OF BUSINESS. FUR THER, THE REPLIES AND CONFIRMATION ON BEHALF OF M/S OBSERVER INVESTMENT & FINANCE LTD. HAS BEEN SIGNED BY SHRI DEEPAK TIWARI WHO IS ALSO THE DIRECT OR MAKING SUBMISSIONS IN THE ASSESSEES CASE. SHE FURTHER CONTENDED THAT THE AS SESSING OFFICER ISSUED SUMMONS DATED 18.03.2005 TO APPEAR ON 21.03.2005 AND PRODUC E THE INFORMATION WHICH HAD ITA-640/DEL/2006 4 ALREADY BEEN CALLED FOR BY HIM VIDE NOTICE U/S 131 DATED 11.01.2005 TO THE M/S OBSERVER INVESTMENT & FINANCE LTD. CO. COMPRISING O F DETAILS REGARDING THE ADVANCES MADE TO MOUNT SHIVALIK THROUGH DD AND CHEQ UES RECEIVED FROM SHRI NARESH KUMAR PROP. JANTA ENTERPRISES IN WHOSE ACCOU NT CASH IS DEPOSITED A DAY BEFORE ISSUING CHEQUES ALONG WITH THE BOOKS OF ACCO UNTS. SINCE THERE WAS NO COMPLIANCE FROM THE ASSESSEE A SHOW CAUSE PENALTY N OTICE WAS ALSO ISSUED ON 18.03.2005 TO WHICH ALSO THE ASSESSEE DID NOT COMPL Y. AS PER LD. DR THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS TO EXPLAIN THE TRA NSACTIONS AND HENCE THE AMOUNT WAS CORRECTLY TREATED AS UNEXPLAINED BY THE ASSESSI NG OFFICER AND AN ADDITION WAS MADE U/S 68 OF THE INCOME-TAX ACT, 1961. THE ASSES SEE HAS NOT DOUBT FILED EVIDENCES WITH REGARD TO THE IDENTITY BUT THE GENUI NENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE PARTY EXTENDING THE LOAN HA S NOT BEEN ESTABLISHED BY THE ASSESSEE EVEN THOUGH A VERY STRONG ONUS LAY ON IT B ECAUSE THE SAME DIRECTOR WAS RELYING ON BEHALF OF BOTH THE COMPANIES. HE WAS CO NVERSANT WITH THE ACCOUNTS OF BOTH THE COMPANIES AND HENCE HAD PURPOSELY NOT PROV IDED THE INFORMATION AND THUS THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION U/S 68. IN THE WRITTEN SUBMISSION THE ASSESSEE HAS STATED THAT THE LENDER COMPANY DID NOT FURNISH ANY REPLY AND THAT BEING A THIRD PARTY, THE APPELLA NT CANNOT BE FOUND FAULT WITH. SHE CONTENDED THAT THE PLEA OF THE ASSESSEE HAS NO STRENGTH. THE REPLY OF THE ASSESSEE DATED 20.03.2005 IS ENCLOSED IN THE DEPART MENTAL PAPER BOOK AT PAGES 9 TO 11. AS REGARDS ASSESSEES SUBMISSION ON PAPER BOOK PAGE 22 PARA 4 TO 7 REFERRED BY IT AT PAGE 9 OF ITS SUBMISSION, THEY ARE IRRELEV ANT. THE ADDITION HAS BEEN MADE BECAUSE OF INDEPENDENT EVIDENCE AVAILABLE WITH THE ASSESSING OFFICER, AND NOT FOR REASONS ENUMERATED BY THE ASSESSEE ON PAGES 22,23, PARA 4 TO 7. 6. ALL THE ABOVE ADDITIONS WERE CONFIRMED BY CIT(A) . EVEN WITH REGARD TO SERVICE OF NOTICE U/S 143(2), THE CIT(A) RECORDED A CATEGORICAL FINDING TO THE EFFECT OF ITS SERVICE WITHIN THE STATUTORY TIME PERIOD. A GAINST THIS ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA-640/DEL/2006 5 7. IT WAS CONTENDED BY THE LEARNED AR SHRI ASHWANI TANEJA THAT DEPARTMENT COULD NOT PROVE THE SERVICE OF NOTICE U/S 143(2) WI THIN THE STATUTORY TIME PERIOD, THEREFORE THE ASSESSMENT SHOULD BE HELD NULL AND VO ID, AS NO PROPER JURISDICTION WAS ASSUMED BY THE AO. ON MERITS OF THE ADDITION, HE CONTENDED THAT ALL DOCUMENTARY EVIDENCE WITH REGARD TO LOAN OF RS.5.40 LAKHS TAKEN FROM OBSERVER INVESTMENT & FINANCE LTD. CO. WAS FILED BEFORE THE AO. NOTHING WAS BROUGHT ON RECORD TO SHOW THAT IMPUGNED AMOUNT WAS DEPOSITED I N THE BANK ACCOUNT OF THE ASSESSEE COMPANY AND THAT ADDITION HAS BEEN MADE ON THE WHIMS AND FANCIES AND ON SUSPICION. BY REFERRING TO THE VARIOUS DECISION S, LEARNED AR CONTENDED THAT ONCE ALL THE DOCUMENTARY EVIDENCES HAVE BEEN FILED, THE ONUS SHIFTED ON THE REVENUE TO HOLD THAT TRANSACTION WAS NOT GENUINE OR THAT MONEY SO RECEIVED BY THE ASSESSEE WENT OUT OF THE COFFERS OF THE ASSESSEE. WITH REGARD TO ADDITION OF RS.19.90 LAKHS IN RESPECT OF SALE PROCEEDS OF SHARE S SOLD THROUGH SHRI NARESH KUMAR, CONTENTION OF LEARNED AR WAS THAT THE COMPAN Y WHOSE SHARES WERE SOLD BY THE ASSESSEE, WERE PUT WRONG QUERIES BY THE AO A ND THAT IS WHY PROPER REPLY COULD NOT BE RECEIVED BY THE AO. HE CONTENDED THAT THE AO HAS ASKED ABOUT ANY FINANCIAL TRANSACTION ENTERED BY THE ASSESSEE COMPA NY DURING THE YEAR UNDER APPEAL WHEREAS THE FACT WAS THAT NO TRANSACTION WAS MADE BY THEM AND THE ASSESSEE COMPANY PURCHASED THE SHARES OF THESE COMP ANIES IN THE IMMEDIATELY PREVIOUS YEAR AND THESE SHARES WERE DULY REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2001. SINCE THE SHARES OF ALL THE THREE COMPANIES ALREADY STOOD IN THE LAST YEAR AND NO ASSESSMENT WAS DONE I N THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS NO REASON FOR DOUBTING THE SALE OF THE SHARES WHICH WERE ALREADY HELD BY THE ASSESSEE. OUR ATTENTION WAS AL SO DRAWN TO THE FRESH CONFIRMATION OBTAINED FROM ALL THE THREE PARTIES, C OPIES OF WHICH WERE PLACED ON RECORD. WITH REGARD TO ADVERSE OBSERVATIONS FROM T HE STATEMENT OF SHRI ASHWANI UPPAL, IT WAS SUBMITTED BY THE LEARNED AR THAT THIS STATEMENT HAS NEVER COME ON RECORD AND THEREFORE NO CREDENCE SHOULD BE GIVEN TO IT. 8. WITH REGARD TO ADDITION OF RS.8.80 LAKHS BEING A MOUNT RECEIVED FROM SHRI LOKESH GROVER AS REFUND OF LOAN, THE CONTENTION OF THE LEARNED AR WAS THAT IT WAS ITA-640/DEL/2006 6 AN AMOUNT RECEIVED BACK FROM SHRI LOKESH GROVER AND THE SAME STOOD DULY CORROBORATED WITH THE BALANCE SHEET OF THE ASSESSEE COMPANY. IN THIS RESPECT, APPLICATION FOR ADDITIONAL EVIDENCE DATED 14.1.2009 WAS ALSO FILED. HE CONTENDED THAT IT IS NOT THE CASE OF THE REVENUE THAT CONFIRM ATION OF SHRI LOKESH GROVER WAS NOT FILED BEFORE THE AUTHORITIES BELOW. 9. WITH REGARD TO ADDITION OF RS.19.09 LACS BEING T HE AMOUNT OF SALE PROCEEDS OF SHARES SOLD THROUGH SHRI NARESH KUMAR, THE CONTE NTION OF LEARNED SR. DR WAS THAT THE ASSESSING OFFICER ISSUED NOTICES U/S 131 T O THREE COMPANIES AND NOTICE U/S 133(6) TO THE FOURTH COMPANY. THE NOTICE SENT TO M /S LIME LITE CONSULTANT LTD., LUDHIANA CAME BACK WITH REMARK NO SUCH COMPANY AT THE ADDRESS THE OTHER THREE COMPANIES STATED THAT DURING THE PERIOD 01.04 .2001 TO 31.03.2002 THEY DID NOT ENTER INTO ANY FINANCIAL TRANSACTION WITH M/S M OUNT SHIVALIK LTD. THE ASSESSEE HAS FURNISHED THE CHEQUE NOS. THROUGH WHIC H REALIZATION OF PROCEEDS WAS MADE AND IT WAS FOUND THAT ALL THESE CHEQUES WERE I SSUED BY ONE SHRI NARESH KUMAR PROP. JANTA ENTERPRISES FROM THE ACCOUNT MAIN TAINED IN VIJAY BANK OUT OF INTRODUCTION OF HUGE CASH IN HIS ACCOUNT A DAY BEFO RE ISSUING THE CHEQUES AND ALL THE CHEQUES WERE IN A SERIES (CHEQUE NOS. 175574 AN D 75, 175577 & 78, 175580 & 97). LD. DR FURTHER DRAWN OUR ATTENTION TO THE OB SERVATION OF ASSESSING OFFICER THAT HIS BANK ACCOUNT SHOWED THAT HE HAD ISSUED CHE QUES TO PERSONS WHOSE NAMES HAD EMERGED IN RECEIVING AND GIVING BOGUS ENTRIES I N SANJAY RASTOGI GROUP OF CASES WHEREIN SURVEY HAD BEEN CONDUCTED BY THE INVE STING WING AND ON THE BASIS OF WHICH ASSESSEE OWN CASE FOR ASSESSMENT YEAR 200 0-01 HAD BEEN RE-OPENED. SHRI NARESH KUMAR CLOSED HIS ACCOUNT ON 26.02.2002 AND WAS NOT AVAILABLE AT HIS LAST KNOWN ADDRESS. HIS INTRODUCER IN THE BANK HAD ALSO CLOSED HIS ACCOUNT. WHEN ASKED TO CLARIFY THE ASSESSEE STATED AS FOLLOWS: SHRI NARESH KUMAR PROP. JANTA ENTERPRISES FROM WHO M THE ASSESSEE COMPANY NEVER RAISED LOAN BUT DEALT WITH SECURITY T RANSACTIONS. THE SECURITY TRANSACTIONS WERE ENTERED INTO ONLY THROUG H ACCOUNT PAYEES CHEQUE. IT IS HIS BURDEN HOW DID HE MAKE ARRANGEME NT OF THE FUNDS AS THE ONUS OF SUCH FUNDS LIES ON BUYER. ITA-640/DEL/2006 7 10. AS PER LD. DR THIS TRANSACTION CANNOT BE ACCEPT ED AS - 1. THE ASSESSEE COULD NOT GIVE THE WHERE ABOUT OF THE PERSON THROUGH WHOM THE TRANSACTION WERE MADE. 2. NO COPIES OF BILL VOUCHERS OR ANY OTHER RELEVANT DO CUMENT PLACED ON RECORDS TO PROVIDE THE GENUINENESS OF THE TRANSACTI ON. 3. THE INSPECTORS REPORT DATED 02.03.2005 MAKING LOCA L ENQUIRIES DID NOT SUGGEST THAT SHRI NARESH KUMAR WAS ENGAGED IN ANY S HARE SALE OR PURCHASE. 11. AS PER LD. DR SINCE THE TRANSACTION COULD NOT B E PROVED THE AMOUNT CREDITED WAS UNEXPLAINED AND CORRECTLY ADDED U/S 68 BY THE A SSESSING OFFICER. THE CIT(A) HAS HELD THAT DUE TO REASON DISCUSSED IN THE ASSESS MENT ORDER AND NO EVIDENCE WAS PROVIDED BY THE ASSESSEE FOR THE TRANSACTION AS ALS O THE RECEIPT OF MONEY FROM AN ACCOUNT IN WHICH CASH WAS INTRODUCED A DAY BEFORE T HE CHEQUE PAYMENTS, THE ADDITION MADE BY THE ASSESSING OFFICER WAS JUSTIFIE D. THE CIT(A) HAS FURTHER RECORDED THAT AS PER RECORDS THE ASSESSEE HAS FILED A LETTER DATED 20.02.2002 OF M/S VIRAT MERCANTILE FOR ALLOTMENT OF SHARES WHILE THE SALE PROCEED OF THESE SHARES FROM THE SO CALLED BROKER NARESH KUMAR ARE RECEIVED ON 20.07.2001. SHE FURTHER CONTENDED THAT THE ASSESSEE HAS SOLD THE SHARES EVE N BEFORE THE SAME WERE ALLOTTED TO HIM. NO DETAILS OF THE TRANSACTION WITH M/S SAM SON FINANCIAL SERVICES AND M/S HI-TECHNO CRAFTS WERE FILED BY THE ASSESSEE. 12. WITH REGARD TO GROUND NO.4, THE CONTENTION OF S MT. PRATIMA KAUSHIK, SR. DR WAS THAT AN ADDITION OF RS.8 LAKHS ON ACCOUNT OF LOAN RECEIVED BACK FROM SHRI LOKESH GROVER AT THE TIME OF ASSESSMENT IT WAS CLAI MED THAT THIS AMOUNT HAS BEEN REALIZED THROUGH CHEQUE NOS.474816 & 474819 AMOUNTI NG TO 5 LACS AND 6 LAKHS RESPECTIVELY. HOWEVER, THE ASSESSING OFFICER NOTIC ED THAT THESE CHEQUES WERE RECEIVED FROM THE ACCOUNT OF SHRI NARESH KUMAR ALRE ADY DISCUSSED IN THE EARLIER TWO ADDITIONS AND WHERE CASH HAD BEEN INTRODUCED BE FORE ADVANCING THESE CHEQUES ITA-640/DEL/2006 8 TO THE ASSESSEE COMPANY. THE ASSESSEE WAS ASKED TO PRODUCE SHRI NARESH KUMAR. HOWEVER, THE ASSESSEE STATED THAT HE NEVER RAISED L OANS FROM NARESH KUMAR AND ONLY DEALT WITH SECURITY TRANSACTIONS. HOWEVER, AS CAN CLEARLY BEEN SEEN THESE RS. 8 LACS ALLEGEDLY RELATED TO SHRI LOKESH GROVER AND A RETURN OF LOAN AND NOT A SECURITY TRANSACTION, THEREFORE, THOUGH THE AMOUNT WAS SHOWN AS RETURN OF LOAN FROM NARESH KUMAR IN REALITY IT WAS A CREDIT RECEIP T OF 8 LACS FROM THE ACCOUNT OF NARESH KUMAR. THE ASSESSEE HAS SUBMITTED A CONFIRM ATION FROM LOKESH GROVER WHICH DOES NOT BEAR ANY SIGNATURE OF SHRI LOKESH GR OVER. THUS, IT WAS SELF SERVING DOCUMENT WITH NO EVIDENTIARY VALUE AND THE NAME OF LOKESH GROVER HAS BEEN USED TO COVER UP THE RECEIPT FROM THE ACCOUNT OF NARESH KUMAR. LD. DR FURTHER CONTENDED THAT BEFORE THE CIT(A) ALSO, THE ASSESSEE HAS SIMPLY REITERATED ITS EARLIER SUBMISSION IN THE PRESENT PROCEEDINGS T HE ASSESSEE IS FILING A CONFIRMATION FROM LOKESH GROVER AS ADDITIONAL EVIDE NCE, HOWEVER, THE SAME SHOULD NOT BE ADMITTED BECAUSE AMPLE OPPORTUNITY WA S PROVIDED BY THE INCOME TAX OFFICER AS WELL AS CIT(A) AND THE ASSESSEE DID NOT FURNISH ANY EVIDENCE. THE CONFIRMATION FILED BY IT WAS A BALD PIECE OF PAPER BECAUSE IT DID NOT BEAR THE SIGNATURE OF SHRI LOKESH GROVER. IN THE ABOVE CIRC UMSTANCE, FILING OF A CONFIRMATION AFTER SO LONG AND ONE WHICH CANNOT BE CO-RELATED TO THE ONE FILE EARLIER, THE ADDITIONAL EVIDENCE SOUGHT TO BE ADMIT TED SHOULD NOT BE ADMITTED. 13. SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS REF ERRED TO HIS PAPER BOOK PAGE 44 AS CONFIRMATION OF ACCOUNT OF LOKESH GROVER WITH PAN AND DETAILS OF TRANSACTIONS AND HAS STATED IN HIS CERTIFICATE ON T HE PAPER BOOK THAT ITEM NO.45 HAS BEEN EXTRACTED FROM THE RECORD. SHE POINTED OUT TH AT THIS ALLEGED CONFIRMATION DOES NOT APPEAR ANYWHERE IN THE RECORDS AS POINTED OUT EARLIER THE ONLY CONFIRMATION AVAILABLE IN RECORDS IS THE ONE WHICH DOES NOT BEAR SIGNATURE OF THE ASSESSEE. 14. SHE FURTHER SUBMITTED THAT IT IS THE STAND OF T HE DEPARTMENT THAT RS.8 LAKHS WERE RECEIVED BY THE ASSESSEE FROM THE ACCOUNT OF S HRI NARESH KUMAR. THE CREDITWORTHINESS OF SHRI NARESH KUMAR IS DOUBTFUL A ND HENCE THIS TRANSACTION COULD ITA-640/DEL/2006 9 NOT BE SUBSTANTIATED AND THE AMOUNT DESERVES TO BE ADDED AS UNEXPLAINED CREDIT. THE STORY BEING BUILD BY THE ASSESSEE REGARDING THE SOURCE THEREOF FROM SHRI LOKESH GROVER SEEMS TO BE A MANUFACTURED ONE SPECIA LLY WITH REGARD TO FALSE CLAIM BEING MADE REGARDING THE CONFIRMATION FILED I N THE PAPER BOOK FILED BEFORE THE HONBLE TRIBUNAL. THEREFORE, THE ADDITIONAL EV IDENCE IN THE FORM OF THE CONFIRMATION FROM SHRI LOKESH GROVER SHOULD NOT BE ADMITTED AND CONSEQUENTLY THERE WOULD BE NO REQUIREMENT TO REMAND THE CASE TO ASSESSING OFFICER FOR VERIFICATION. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREF ULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED UPON THE CASE LAWS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WEL L AS CITED BY THE LEARNED AR AND LEARNED SR. DR DURING THE COURSE OF HEARING BEFORE US, IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. 16. WITH REGARD TO GROUND TAKEN BY THE ASSESSEE FOR ANNULLING THE ASSESSMENT ON THE PLEA OF NON SERVICE OF NOTICE U/S 143(2), WE FOUND THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE CIT(A) HAS CALLED FOR THE REMAND REPORT WHEREIN IT IS FOUND THAT A NOTICE U/S 143(2) WAS SENT BY REGISTER ED POST AT THE CORRECT ADDRESS I.E. THE SAME AT WHICH A REFUND HAS ALSO BEEN SENT AND W AS DULY ENCASHED. THE ASSESSEE DID NOT RAISE ANY GRIEVANCE BEFORE THE A.O . DURING THE ASSESSMENT PROCEEDINGS, THEREFORE, THE AO DID NOT CALL FOR ANY REPORT FROM THE POST OFFICE. THE CIT(A) OBSERVED THAT BY NOT ASKING THE AO REGA RDING NON SERVICE OF NOTICE THE ASSESSEE DEPRIVED THE AO FROM MAKING THE RELEVA NT ENQUIRIES FROM THE POST OFFICE IN TIME, AND SINCE THE POST OFFICE RULES FOL LOW A TIME LIMIT POLICY OF SIX MONTHS ONLY FOR PROVIDING SUCH INFORMATION, THE DEL AY ON THE PART OF THE ASSESSEE HAS COME IN THE WAY OF THE A.O. WE FOUND THAT AFTE R FILING THE RETURN ON 3.10.2002, THE AO ISSUED NOTICE U/S 143(2) DATED 10 .10.2003. AS PER RELEVANT PROVISIONS AS APPLICABLE FOR AY 2002-03 UNDER CONSI DERATION, THE AO MAY ISSUE AND SERVE NOTICE UPTO 31.10.2003. NOTHING WAS BROU GHT ON RECORD BY THE ASSESSEE TO SHOW THAT NOTICE ISSUED ON 10.10.2003 WAS SERVED AFTER 31.10.2003, ACCORDINGLY ITA-640/DEL/2006 10 THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) FOR UP HOLDING THE SERVICE OF MANDATORY NOTICE U/S 143(2) OF THE ACT WITHIN THE STATUTORY T IME LIMIT. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE IN THEIR ORDERS HOLDIN G THAT THERE WAS VALID SERVICE OF NOTICE WITHIN THE STATUTORY TIME LIMIT. 17. WITH REGARD TO MERIT OF THE ADDITION ON ACCOUNT OF LOAN OF RS.5.4 LAKHS RECEIVED FROM M/S OBSERVERS INVESTMENT AND FINANCE CO. (P) LTD., WE FOUND THAT TOTAL AMOUNT RECEIVED FROM THE SAID PARTY WAS RS.6. 10 LACS OUT OF WHICH SUM OF RS.70,000/- HAS BEEN ACCEPTED BY AO AND BALANCE OF RS.5.40 LACS HAS BEEN ADDED BY AO. THUS, AO HAS ACCEPTED THE EXISTENCE OF THE SAID PARTY. WITH REGARD TO THE OBSERVATION MADE BY AO IN THE ASSESSMENT ORDER WITH REFERENCE TO CREDITWORTHINESS OF THE SAID PARTY, IT WAS CONTENDE D THAT MR.NARESH KUMAR WAS SOURCE OF THE SOURCE IN THE HANDS OF LENDER COMPANY NAMELY M/S OBSERVER INVESTMENT & FINANCE (P) LTD. THE ASSESSEE DID NOT AND COULD NOT HAVE ANY CONTROL OVER THIS PERSON AND THAT IS HOW HE COULD N OT BE PRODUCED. AS PER LEARNED AR, IT WAS NOT POSSIBLE FOR THE ASSESSEE COMPANY TO FIND OUT IF AT ALL ANY CASH WAS DEPOSITED IN THE BANK ACCOUNT OF THE CREDITOR OF TH E CREDITOR. AS PER DOCUMENTS PLACED ON RECORD, THE SAID CREDITOR COMPANY IS ASSE SSED IN THE COMPANY CIRCLE, NEW DELHI ITSELF AND ASSESSMENT ORDER OF THE CREDIT OR COMPANY HAD ALSO BEEN FRAMED BY THE DEPARTMENT AND ALL THE TRANSACTIONS W ERE EASILY VERIFIABLE BUT NO PROPER EXERCISE WAS MADE IN THIS BEHALF. WITH REGAR D TO THE ADDITION OF RS.19.90 LAKHS BEING THE AMOUNT OF SALE PROCEEDS OF SHARES, WE FOUND THAT THE ASSESSEE PURCHASED THE SHARES OF THREE COMPANIES AS MENTIONE D IN THE ASSESSMENT ORDER, IN THE IMMEDIATELY PRECEDING PREVIOUS YEAR AND THE SAM E GOT REFLECTED DULY IN THE BALANCE SHEET AS ON 31 ST MARCH, 2001. NO TRANSACTION WITH RESPECT TO THESE SHARES WAS DONE IN THE A.Y. 2002-2003 AND FRESH CONFIRMATI ON WAS ALSO OBTAINED FROM ALL THE THREE PARTIES, WHICH WERE PLACED ON RECORD. EV IDENCE WITH REGARD TO ACQUISITION OF SHARES, HOLDING OF SHARES, SALE OF S HARES AND REALIZATION OF RECEIPT ON SALE OF SHARES WHICH WERE ALSO PLACED ON RECORD. I T WAS THE CONTENTION OF THE LD. A.R. THAT SHARE MARKET BUSINESS IS HIGHLY VOLATILE AND THERE ARE CONSTANT EFFORTS TO SO AS TO MAXIMIZE ITS PROFIT AND MINIMIZE ITS RISK. IF THERE WAS AN OPPORTUNITY TO ITA-640/DEL/2006 11 RECEIVE ADVANCE AND BOOK THE SALE OF THE SHARES WHO SE ALLOTMENT WAS PENDING, SO AS TO MAINTAIN THE LIQUIDITY AND MINIMIZE THE RISK, IT WAS PURELY A BUSINESS DECISION AS PER OUR BELIEF AND UNDERSTANDING OF THE LAW. IT WAS ALSO CONTENDED THAT SINCE THE STATEMENT OF SHRI ASHWANI UPPAL WAS NOT P LACED ON RECORD, THEREFORE, NO ADVERSE INFERENCE SHOULD BE CALLED FOR NOR ANY CRED ENCE SHOULD BE GIVEN TO IT. WITH REGARD TO ADDITION OF RS.8,80,000/- BEING THE AMOUN T RECEIVED FROM MR.LOKESH GROVER AS REFUND OF LOAN WE FOUND THAT THE ADDITION MADE REPRESENTED RECEIVING BACK LOAN FROM SHRI LOKESH GROVER AND THIS FACT IS DULY SUPPORTED BY THE BALANCE SHEET OF THE ASSESSEE COMPANY. BUT AN ALLEGATION H AS BEEN MADE THAT THE CONFIRMATION FILED BEFORE THE AUTHORITIES BELOW WAS NOT SIGNED BY SHRI LOKESH GROVER. IN THIS REGARD THE ASSESSEE HAS PLACED ON RECORD APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE DATED 14.1.2009 WHEREIN CONF IRMATION OF SHRI LOKESH GROVER WAS ENCLOSED. LOOKING TO THE FACTS AND CIRC UMSTANCES OF THE CASE AND THE REASONS GIVEN FOR ADDITION, WE HEREBY ACCEPT THE AD DITIONAL EVIDENCE PLACED ON RECORD AND RESTORE THE MATTER BACK TO THE FILE OF A .O. FOR EXAMINING THE SAME AND FOR RE-DECIDING THE ISSUE OF RS.8.8 LAKHS. 18. WITH REGARD TO ADDITIONS MADE ON MERIT, THE CON TENTION OF LD. AR WAS THAT NEITHER ANY ADVERSE MATERIAL WAS CONFRONTED TO THE ASSESSEE NOR PROPER OPPORTUNITY WAS GRANTED BY THE A.O. OUR ATTENTION WAS DRAWN TO THE OBSERVATION OF THE A.O. TO THE EFFECT THAT THERE WAS SOME ADVERSE STATEMENT RECORDED BY THE ITO, WARD 2(4) OF SHRI ASHWANI UPPAL ON 15.3.2005 AND HE HAS FURTHER MENTIONED THAT THIS STATEMENT HAS BEEN ENCLOSED AS ANNEXURE TO THE ASSE SSMENT ORDER. IT WAS CONTENDED THAT NEITHER THE STATEMENT OF SHRI ASHWAN I UPPAL WAS EVER GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR IT WAS ANN EXED WITH THE ORDER AS ANNEXURE. THIS FACT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A), WHO HAS ALSO FAILED TO PROVIDE OPPORTUNITY TO CONFRONT WITH THE ADVERSE MATERIAL. THUS THERE WAS VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AND THIS FACT HAS ALSO BEEN DEPOSED ON OATH BY WAY OF AN AFFIDAVIT BY THE DIREC TOR OF THE ASSESSEE COMPANY. ITA-640/DEL/2006 12 19. IN VIEW OF THE DISCUSSION MADE HEREIN ABOVE WIT H REGARD TO PROPER OPPORTUNITY NOT HAVING BEEN GIVEN, NOR ADVERSE MATE RIAL WERE PLACED BEFORE THE ASSESSEE FOR CONFRONTATION, WHICH IS DULY SUPPORTED BY THE AFFIDAVIT FILED BY DIRECTORS OF THE COMPANY, WE ARE INCLINED TO RESTOR E ALL THE ADDITIONS MADE BY THE A.O. TO HIS FILE FOR DECIDING AFRESH, AFTER CONSIDE RING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE A.O. IN FURNISHING THE REQUIRED INFORMATION TO SUBSTANTIATE THEIR CLAIMS. WE DIRECT ACCORDINGLY. 20. IN THE RESULT, THE APPEAL IS ALLOWED IN PART, I N TERMS INDICATED HEREIN ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2010. SD/- SD/- (C.L.SETHI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25.06.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR