DILIP M. KEJARIWAL, MUMBAI V. 3RD ITO WD 14(2)(3), MUMBAI

ITA 6535/MUM/2009

• Counselvise Citation: 653519914 RSA 2009
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-11-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 22-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Gift; Business income; Depreciation; Opportunity of being heard; Period of limitation; Proportionate interest; Additional evidence; Tangible material; Reason to believe; Reassessment proceedings
• Section: 143(3)

Judgement Text

1 DILIP M KEJRIWAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI D DD D BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R K PANDA R K PANDA R K PANDA R K PANDA, ,, , AM AM AM AM & SHRI & SHRI & SHRI & SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 6535/MUM/2009 (AY 2001 6535/MUM/2009 (AY 2001 6535/MUM/2009 (AY 2001 6535/MUM/2009 (AY 2001- -- -02) 02) 02) 02) ITA NO. 6518/MUM/2009 ( ITA NO. 6518/MUM/2009 ( ITA NO. 6518/MUM/2009 ( ITA NO. 6518/MUM/2009 (A AA AY 2002 Y 2002 Y 2002 Y 2002- -- -03 0303 03) )) ) ITA NO. 6534/MUM/2009 (AY 2003 ITA NO. 6534/MUM/2009 (AY 2003 ITA NO. 6534/MUM/2009 (AY 2003 ITA NO. 6534/MUM/2009 (AY 2003- -- -04) 04) 04) 04) DILIP M KEJRIWAL C/O M/S PRIYA INTERNATIONAL 413 COTTON EXCHANGE BLDG 134 KALBADEVI RO0AD MUMBAI VS THE INCOME TAX OFFICER WARD 14(2)(3), MUMBAI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AABPK9487E AABPK9487E AABPK9487E AABPK9487E ASSESSEE BY SH VIJAY KOTHARI REVENUE BY SH C G K NAIR DT.OF HEARING 29 TH NOV 2011 DT OF PRONOUNCEMENT 30 TH , DEC 2011 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THREE SEPARATE ORDERS OF THE CIT(A) ALL DATED 25 TH SEPT 2009 FOR THE AYS 2001-02, 2002-03 AND 2003-04 RESPECTIVELY. 2 THE ASSESSEE HAS RAISED THE COMMON GROUND IN ALL THE THREE APPEALS EXCEPT THE QUANTUM DISALLOWANCE. THEREFORE, ASSESSM ENT 2001-02 IS TAKEN A BASE ORDER AND THE GROUNDS RAISED IN THE SAID YEAR ARE AS UNDER 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE VALIDITY OF NOTICE ISSUED U/S. 148 AN D THE ASSESSMENT ORDER FRAMED U/S. 143(3) R.W.S. 147 AND WHILE DOING SO HE AMONGST OTHERS FAILED TO APPRECIATE THAT: A. COPIES OF REASONS RECORDED IN WRITING WERE NOT P ROVIDED TO THE APPELLANT IN SPITE OF THE FACT THAT THE APPELLA NT HAD 2 DILIP M KEJRIWAL SPECIFICALLY REQUESTED FOR PROVIDING HIM WITH THE R EASONS RECORDED U/S. 148(2) B. MERELY ORALLY DISCUSSING AND EXPLAINING THE REAS ONS RECORDED IN WRITING, ALMOST AT THE END OF ASSESSMEN T PROCEEDINGS, COULD NOT BE TREATED AS PROPER AND SUF FICIENT COMMUNICATION OF REASONS AS WOULD ENABLE THE APPELL ANT TO RAISE OBJECTIONS. C. THERE WAS NO INCOME WHICH HAD ESCAPED ASSESSMENT 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING THE CLAIM OF DEDUCTION OF EXPENDITURES DEBITED TO PROFIT & LOSS ACCOUNT WHICH WERE INCURRED WHOLLY AND EXCLUSI VELY FOR THE PURPOSES OF APPELLANTS BUSINESS AND WHILE DOING SO HE AMONGST OTHERS ERRED IN HOLDING THAT THE APPELLANT HAD DISC ONTINUED HIS BUSINESS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING THE CLAIM OF DEDUCTION OF INTEREST U/S. 36(1)(III) ON THE BORROWINGS MADE IN THE EARLIER YEARS FOR THE PURPOS ES OF BUSINESS AND WHILE DOING SO HE AMONGST OTHERS ERRED IN HOLDI NG THAT THE APPELLANT HAD DISCONTINUED HIS BUSINESS. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN MAKING AN ADDITION OF `. 16,76,467/- U/S. 41(1) OF THE ACT IN SPITE OF THE FACT THAT A DECREE HAD BEEN ISSUED AGAINST THE APPELLANT FOR THE SAID AMOUNT 3 FIRST GROUND IS REGARDING VALIDITY OF THE NOTICES ISSUED U/S 148 AND REASSESSMENT U/S 147. 3.1 THE FACTS RELEVANT TO THE GROUNDS EMERGING FROM THE RECORDS ARE COMMON FOR ALL THE THREE YEARS. THE ASSESSEE IS AN INDIVID UAL AND CARRYING OUT PROPRIETARY BUSINESS IN THE NAME OF M/S VIVEK INTERNATIONAL AND M/S PRIYA INTERNATIONAL. THE RETURNS OF INCOME FOR AYS UNDER CONSIDERATION FILED BY THE ASSESSEE WERE PROCESSED U/S 143(1). SUBSEQUENTLY, DURING THE COUR SE OF ASSESSMENT PROCEEDINGS FOR THE AY 2005-06, THE ASSESSING OFFIC ER OBSERVED THAT THE ASSESSEE CLAIMED BUSINESS LOSS ON ACCOUNT OF BOTH P ROPRIETARY CONCERNS; 3 DILIP M KEJRIWAL WHEREAS ON VERIFICATION OF P&L ACCOUNT, IT WAS FOUN D THAT THE ASSESSEE HAS NOT CARRIED OUT ANY SORT OF BUSINESS ACTIVITIES IN BOTH THE PROPRIETARY CONCERNS; BUT HAD DEBITED VARIOUS EXPENSES WHICH WERE NOT RELATED TO BUSINESS INCOME. ACCORDINGLY, FOR THE AY 2005-06 THE LOSS CLAIMED BY THE ASSESSEE WAS DISALLOWED WHILE PASSING THE ASSESSMENT ORDER. 3.2 ON THE BASIS OF THE VIEW TAKEN BY THE ASSESSING OFFICER FOR THE AY 2005-06, THE ASSESSING OFFICER ISSUED NOTICE U/ S 148 OF THE I T ACT AFTER OBTAINING NECESSARY APPROVAL OF THE JCIT. THE ASSES SMENTS OF THESE ASSESSMENT YEARS UNDER CONSIDERATION WERE COMPLETED U/S 143(3) R.W.S 147 OF THE I T ACT ON 29 TH DEC 2008 WHILE MAKING THE CERTAIN ADDITIONS/DISALL OWANCES. 3.3 THE ASSESSEE CHALLENGED THE ACTION OF THE ASSES SING OFFICER BEFORE THE CIT(A) AND RAISED THE GROUND OF VALIDITY OF THE REO PENING OF THE ASSESSMENT U/S 148 WITHOUT SUPPLYING THE REASONS TO THE ASSESSEE. THE CIT(A) REJECTED THE GROUNDS RAISED BY THE ASSESSEE VIDE THE IMPUGNED OR DER AND HELD THAT THERE IS NO INFIRMITY IN THE ACTION OF THE ASSESSING OFFICER IN ISSUING THE NOTICES U/S 148 OF THE I T ACT. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE COPY OF THE REASONS RECORDED IN WRITING WERE NOT PROVIDED TO TH E ASSESSEE IN SPITE OF THE FACT THAT THE ASSESSEE HAS SPECIFICALLY REQUESTED FOR TH E SAME. THE LD AR HAS REFERRED THE REPLY DATED 6.3.2008 FILED ON 7 TH MAR 2008 AND REQUESTED THAT THE ASSESSEE HAS SPECIFICALLY REQUESTED THE ASSESSING OFFICER TO SUPPLY THE REASONS FOR REOPENING OF THE ASSESSMENT. THUS, THE LD AR HAS SU BMITTED THAT IN THE ABSENCE OF REASONS SUPPLIED TO THE ASSESSEE, THE NOTICES IS SUED U/S 148 AS WELL AS THE REASSESSMENT U/S 147 ARE INVALID. HE HAS RELIED UP ON THE DECISION OF THE HONBLE JHARKHAND HIGH COURT IN THE CASE OF KAVEE ENTERPRISES P. LTD. V. CIT REPORTED IN 301 ITR 156 AND SUBMITTED THAT THE HONBLE HIGH COU RT HAS HELD THAT IT IS ALSO 4 DILIP M KEJRIWAL INCUMBENT UPON THE ASSESSING OFFICER TO COMPLY WITH THE MANDATORY REQUIREMENTS OF SECTION 148 WHICH CASTS AN OBLIGATI ON ON HIM TO ISSUE NOTICE BEFORE MAKING ANY ASSESSMENT OR REASSESSMENT AND BE FORE ISSUANCE OF NOTICE HE MUST RECORD HIS REASONS. SINCE THE ASSESSING OFFICE R HAS NOT PROVIDED THE REASONS FOR REOPENING OF THE ASSESSMENT TO THE ASSE SSEE; THEREFORE, THE ENTIRE PROCEEDINGS AND CONSEQUENTIAL ORDER BECOME VOID-AB- INITIO. HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. V. CIT REPORTED IN 308 ITR 38. H E HAS ALSO RELIED UPON THE ORDER DATED 14.1.2011 OF THE ITAT DELHI BENCHES O F THE TRIBUNAL IN THE CASE OF SHRI BALWANT RAI WADHAWA VS ITO IN ITA NO.4806/DEL /10 AND SUBMITTED THAT THE TRIBUNAL BY FOLLOWING THE DECISION OF THE HONBLE D ELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO.(SUPRA) HAS DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE HAS SUBMITTED THAT WHEN THE REASONS H AVE NOT BEEN SUPPLIED WITHIN THE PERIOD OF SIX YEARS AS PROVIDED U/S 149 , THEN THE NOTICES ISSUED U/S 148 AND CONSEQUENTIAL ORDERS ARE NOT VALID. 4.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE REASONS FOR REOPENING WAS VERY MUCH IN THE KNOWLEDGE OF THE ASS ESSEE AND THE ASSESSING OFFICER HAS SPECIFICALLY MENTIONED IN THE ASSESSME NT ORDER THAT THE REASONS WERE EXPLAINED TO THE ASSESSEE AND WHEN THE ASSESSE E HAS NOT RAISED ANY OBJECTION AGAINST THE VALIDITY OF THE NOTICES ISSUE D U/S 148 AND PARTICIPATED IN THE RE-ASSESSMENT PROCEEDINGS WITHOUT ANY OBJECTION, TH EN THE SUBSEQUENT OBJECTION RAISED BY THE ASSESSEE IS AN AFTERTHOUGHT. HE HAS SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT WHEN THE ASSES SING OFFICER DULY RECORDED THE REASONS AND THE ASSESSMENTS WERE REOPENED AFTER TAKING THE REQUISITE NECESSARY APPROVAL FROM THE JCIT, THEN EXISTENCE AN D RECORDING OF THE REASONS CANNOT BE DOUBTED AND EVEN THE SAME HAS NOT BEEN D ISPUTED BY THE ASSESSEE. HE HAS RELIED UPON THE ORDER OR THE CIT(A) AS WELL AS THE ORDER DATED 10.6.2011 5 DILIP M KEJRIWAL OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF SHRI KAILASHPATI GUPTA VS ITO IN ITA NO. 4866/MUM/2008 AND 243/MUM/2008. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. THE RETURNS FILED FOR THE AYS WERE PROC ESSED U/S 143(1) AND NO SCRUTINY ASSESSMENT WAS DONE. THEREFORE, THIS CASE DOES NOT FALL UNDER THE FIRST PROVISO TO SEC. 147 AND THE PRE-REQUISITE CONDITION FOR EXERCISING THE JURISDICTION U/S 148 IS THE EXISTENCE OF THE REASONS TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION ARE SI MILAR AND THEREFORE, THE REASONS RECORDED FOR THE AY 2001-02 AS REPRODUCED B Y THE CIT(A) IN THE IMPUGNED ORDER ARE AGAIN REPRODUCED AS UNDER: THE ASSESSEE HAS FILED RETURN OF INCOME FOR A. Y.2 001-02 ON 30-07- 2001 DECLARING LOSS OF RS.11,19,641/-. THE RETURN W AS PROCESSED U/S.143(1). NO SCRUTINY ASSESSMENT WAS DONE U/S.143 (3) FOR A. Y.2001-02. 2. IN THIS CASE, ON VERIFICATION OF THE DETAILS FIL ED DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR A. Y. 2005-06, IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED BUSINESS LOSS OF RS.1 ,19,805/- ON ACCOUNT OF PROPRIETARY BUSINESS IN THE NAME OF MIS. VIVEK INTERNATIONAL AND ALSO CLAIMED BUSINESS LOSS OF RS. 10,50,000/- ON ACCOUNT OF PROPRIETARY BUSINESS IN THE NAME OF M/S. PRIYA INTERNATIONALFOR A. Y.2001-02. ON VERIFICATION OF T HE RESPECTIVE P & L A/C., IT IS FURTHER OBSERVED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY SORT OF BUSINESS ACTIVITIES IN BOTH THESE PROPRIETA RY CONCERNS IN THE SAID YEAR, BUT HAS DEBITED VARIOUS EXPENSES WHICH A RE NOT RELATED TO BUSINESS ACTIVITIES AND HENCE NOT ALLOWABLE. TO BE MORE SPECIFIC, IN THE CASE OF M/S. VIVEK INTERNATIONAL, THE ASSESSEE S RECEIPTS FOR THE YEAR ENDED 31-03-2001 CONSISTED OF DIVIDEND (RS. 72 5.91), INTEREST ON PPF (RS.5754/-), BANK INTEREST (RS.164/-) AND CA R INSURANCE CLAIM RS.9,440/-) AGAINST WHICH THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES DEPRECIATION, WHICH ARE NOT ALLOWABLE TO THE ASSESS EE, SINCE THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY . FURTHER, IN THE CASE OF M/S PRIYA INTERNATIONAL, THE RECEIPTS OF T HE ASSESSEE CONSISTED OF INTEREST (RS.29,946/- AND RS.8000/-) AND RENT AND COMPENSATION(RS 10,200/-) AGAINST WHICH THE ASSESSE E HAS CLAIMED TOTAL EXPENSES OF RS 10,146.90 WHICH IS INCLUSIVE O F INTEREST OF RS.10, 76,250/-. THE HAS ADVANCED LOAN OF RS.1,22,7 2,745/- TO OTHER PERSONS, BUT HAS NOT RECEIVED ANY INTEREST FROM THE M. THE FUNDS 6 DILIP M KEJRIWAL HAVE BEEN ADVANCED OUT OF THE BORROWED MONEY ON WHI CH THE ASSESSEE HAS PAID INTEREST OF RS.10, 76,250/-. HENC E, THE PROPORTIONATE INTEREST IS DISALLOWABLE U/S.36(1)(II I) WHICH WILL BE MORE THAN RS.10 LACS, EVEN IF THE INTEREST RATE IS @ 12% P.A., PAID ON BORROWED CAPITAL. MOREOVER, SINCE THE ASSESSEE HAS NOT DONE ANY BUSINESS IN THIS YEAR, IT IS QUITE EVIDENT THAT THE BORROWED CAPITAL IS NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND HENCE IT IS NOT AN ALLOWABLE DEDUCTION. IT MAY BE FURTHER OBSERVED HERE THAT THE INTEREST INCOME IS ASSESSABLE UNDER THE HEAD INCOM E FROM OTHER SOURCES AND RENT AND COMPENSATION IS ASSESSABLE UN DER THE HEAD INCOME FROM HOUSE PROPERTY THUS, IT IS CRYSTAL CLE AR THAT THE ASSESSEE HAS INTENTIONALLY TREATED THE RECEIPTS IN QUESTION AS BUSINESS RECEIPTS AND CLAIMED VARIOUS EXPENSES TO A RRIVE AT A NEGATIVE INCOME, THEREBY REDUCING HIS TAX LIABILITI ES. 3 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, I H AVE REASON TO BELIEVE THAT THE INCOME OF MORE THAN ONE LAKH CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTIO N 147 OF THE I. T. ACT, 1961. 5.1 IT IS MANIFEST FROM THE REASONS RECORDED THAT THE REOPENING OF THE ASSESSMENT ARE ON THE BASIS OF MATERIAL/INFORMATION GATHERED BY THE ASSESSING OFFICER, IN VERIFICATION AND ENQUIRY DURING THE ASS ESSMENT PROCEEDINGS FOR AY 2005-06. THUS, IT IS NOT THE CASE WHERE THE ASSESSI NG OFFICER ISSUED NOTICE U/S 148 ON THE BASIS OF REASONS WHICH WAS NOT KNOWN T O THE ASSESSEE. BUT IN THE CASE IN HAND, THE ISSUE OF DISALLOWANCE OF EXPENDIT URE AND TREATMENT OF THE INCOME AS INCOME FROM OTHER SOURCES WAS VERY MUCH I N THE KNOWLEDGE OF THE ASSESSEE AS THE ASSESSEE HAS CONTESTED THE SAME IN THE ASSESSMENT PROCEEDINGS FOR THE AY 2005-06 WHEREIN SUCH ISSUES WERE ADJUDICATED BY THE ASSESSING OFFICER AGAINST THE ASSESSEE. 5.2 EVEN OTHERWISE THE ASSESSEE HAS NOT CHALLENGED THE SUFFICIENCY OF REASON TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ES CAPED ASSESSMENT; BUT THE ASSESSEE HAS RAISED THE VALIDITY OF THE NOTICE ISSU ED U/S 148 FOR NON SUPPLY OF THE REASONS FOR REOPENING. VIDE LETTER DATED 6 TH MAR 2008, THE ASSESSEE HAS REPLIED TO THE NOTICE U/S 148 AS UNDER: 7 DILIP M KEJRIWAL WITH REFERENCE TO YOUR ABOVE NOTICES TO OUR ABOVE CLIENT AND AS PER INSTRUCTION FROM OUR ABOVE CLIENT WE WOULD LIKE TO INFORM YOUR HONOUR AS UNDER:- OUR ABOVE CLIENT HAS FILED THE RETURN FOR ABOVE THR EE YEAR IN YOUR OFFICE AS DETAILED BELOW : A.Y. DATE OF FILING MACHINE NO. A.Y. DATE OF FILING MACHINE NO. A.Y. DATE OF FILING MACHINE NO. A.Y. DATE OF FILING MACHINE NO. 2001 2002 30TH JULY 2001 000410 2002 2003 2 AUGUST 2002 00037 2003 2004 10TH MARCH 2004 3260 AS ABOVE THREE YEAR RETURN ARE ALREADY FILED IN YOU R OFFICE, HENCE YOU MAY CONSIDERED THE SAME AS FILED IN COMPLIANCE TO YOUR ABOVE NOTICE IN THE MEAN TIME WE WOULD LIKE TO INFORM YOUR HONOU R THAT YOUR GOODSELF HAS NOT GIVEN ANY REASON FOR RE-OPENING OF ABOVE AS SESSMENT, IN YOUR NOTICE THUS PRAY YOUR HONOUR TO KINDLY GIVE THE REA SON FOR RE-OPENING OF ABOVE ASSESSMENT & OBLIGE. 5.3 IT IS CLEAR FROM THE REPLY OF THE ASSESSEE THAT THE ASSESSEE DID NOT CHOOSE TO FILE ANY RETURN OF INCOME IN RESPONSE TO THE NOT ICE U/S 148; BUT REQUESTED THE ASSESSING OFFICER TO TREAT THE RETURN OF INCOME ALR EADY FILED AS FILED IN COMPLIANCE OF THE NOTICE ISSUED U/S 148; THOUGH THE ASSESSEE ALSO REQUESTED THE ASSESSING OFFICER TO SUPPLY THE REASONS FOR REOPENI NG. IN RESPONSE TO THE SAID REQUEST OF THE ASSESSEE FOR SUPPLY OF THE REASON FO R REOPENING, THE ASSESSING OFFICER, IN PARA 3 HAS SPECIFICALLY MENTIONED THAT THE REASONS FOR REOPENING WERE EXPLAINED TO THE CHARTERED ACCOUNTANT OF THE ASSESS EE, WHO HAD ATTENDED THE PROCEEDINGS BEFORE THE ASSESSING OFFICER. THEREAFTE R, THE ASSESSEE HAS NOT RAISED ANY OBJECTION AGAINST THE NOTICE ISSUED U/S 148 AND PARTICIPATED IN THE REASSESSMENT PROCEEDINGS FOR THE AY UNDER CONSIDERA TION, WHICH CLEARLY SHOWS THAT THE ASSESSEE WAS SATISFIED WITH THE REASONS EX PLAINED BY THE ASSESSING OFFICER. 6 IN THE CASE OF KAVEE ENTERPRISES P. LTD. (SUPRA), THE HONBLE JHARKHAND HIGH COURT HAS OBSERVED THAT THE FACTS RECORDED BY THE T RIBUNAL CLEARLY SHOW THAT NO 8 DILIP M KEJRIWAL REASON HAS BEEN ASSIGNED BY THE ASSESSING OFFICER WHILE ISSUING NOTICE U/S 148 OF THE I T ACT NOR THE ASSESSEE WAS FURNISHED THE DETAILED REASONS FOR ISSUANCE OF NOTICE; THEREFORE, THE HONBLE HIGH COURT HAS HE LD THAT THE MANDATE OF SEC. 147/148 OF THE ACT HAD NOT BEEN COMPLIED WITH AND T HE ENTIRE PROCEEDINGS AND THE CONSEQUENTIAL ORDERS BECAME VOID-AB-INITIO. 6.1 IT IS TO BE NOTED THAT WHEN THE REASONS WERE DI SCLOSED TO THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS AND EVEN THEREAF TER WHICH WERE REPRODUCED BY THE CIT(A) IN THE IMPUGNED ORDER, THEN IF THE A SSESSEE HAS ANY OBJECTION AGAINST THE REASONS RECORDED, HE COULD HAVE RAISED THE SAME. BUT EVEN BEFORE US, THE ASSESSEE HAS NOT RAISED ANY SUCH OBJECTION AND ONLY OBJECTION RAISED AGAINST THE VALIDITY OF THE NOTICE ISSUED U/S 148 I S NON SUPPLY OF THE REASONS. IT IS CLEAR THAT THE ASSESSEE WAS OTHERWISE SATISFIED WIT H THE REASONS RECORDED BY THE ASSESSING OFFICER AND RAISED ONLY A TECHNICAL OBJEC TION OF NON SUPPLY OF THE REASONS. THE ASSESSEE AFTER KNOWING THE REASONS AS EXPLAINED BY THE ASSESSING OFFICER DID NOT RAISE ANY OBJECTION AND ALLOWED THE ASSESSMENT TO BE COMPLETED. EVEN OTHERWISE THE REASONS WERE KNOWN TO THE ASSESS EE AS THE REOPENING IS BASED ON THE ASSESSMENT PROCEEDINGS FOR THE AY 2005 -06, WHICH WAS DULY CONTESTED BY THE ASSESSEE. THEREFORE, IT IS NOT THE CASE WHERE THE REASONS WERE NOT DISCLOSED TO THE ASSESSEE AT ALL. 7 IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V. INCOME-TAX OFFICER REPORTED IN 259 ITR 19, THE HONBLE SUPREME COURT HAS OBSERVED THAT W HEN A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE THE RETURN AND, IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING THE NOTICES. THUS, THE APPROPRIATE OBJECT O F SUPPLY OF REASONS IS TO DISCLOSE THE SAME TO THE ASSESSEE FOR THE PURPOSE O F FILING THE RETURN IN RESPONSE 9 DILIP M KEJRIWAL TO THE NOTICE U/S 148 AS WELL AS TO CHALLENGE NOTIC E U/S 148 ON THE GROUND OF INSUFFICIENCY OF REASONS. 7.1 ON RECEIPT OF THE REASONS THE ASSESSEE IS ENTIT LED TO FILE THE OBJECTION TO THE ISSUANCE OF NOTICE BUT IN THIS CASE, DESPITE KN OWING THE REASONS RECORDED BY THE ASSESSING OFFICER, THE ASSESSEE DID NOT CHOOSE TO FILE ANY OBJECTION AND MORE IMPORTANTLY, AFTER THE REASONS DISCLOSED AND EXPLAI NED TO THE ASSESSEE, THE ASSESSEE HAS NOT RAISED ANY OBJECTION AGAINST THE R EASONS OR ISSUANCE OF NOTICE U/S 148 RATHER PARTICIPATED IN THE REASSESSMENT PRO CEEDINGS AND ALLOWED THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER . THE REFORE, IN OUR HUMBLE VIEW THE SAID DECISION OF THE HONBLE JHARKHAND HIGH COU RT WOULD NOT HELP THE CASE OF THE ASSESSEE. 7.2 IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO .(SUPRA) THE HONBLE HIGH COURT HAS HELD THAT IF THE REASONS FOR REOPENING AR E NOT SUPPLY TO THE ASSESSEE WITHIN THE PERIOD OF SIX YEARS, AS PRESCRIBED LIM ITATION FOR ISSUING THE NOTICE, THEN NOTICE ISSUED U/S 148 IS WITHOUT JURISDICTION AS THE REASONS SUPPLIED TO THE PETITIONER WERE NOT THE SAME WHICH WERE RECORDED B Y THE ASSESSING OFFICER AND THEREFORE, NO ACTION U/S 147 WOULD BE TAKEN BEYOND THE PERIOD OF LIMITATION. 8 IN THE CASE IN HAND, WHEN THE REASONS WERE DULY R ECORDED AND ALSO DISCLOSED TO THE ASSESSEE AND THE ASSESSEE HAS NOT INTENDED TO FILE RETURN OF INCOME IN RESPONSE TO THE NOTICE U/S 148; THEN THE PERIOD OF LIMITATION WOULD NOT APPLY. 9 IN THE CASE OF SHRI KAILASHPATI GUPTA (SUPRA), THE TRIBUNAL HAS DEALT WITH AN IDENTICAL ISSUE AND HELD IN PARA 12 AS UNDER: 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE A RE OF THE VIEW THAT BOTH ON THE ISSUE OF VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS AS WELL AS THE GENUINENESS OF THE GIFTS THE ORDERS OF THE CIT(A) HAVE TO BE SET ASIDE AND THE CASE REMANDED T O THE AO FOR 10 DILIP M KEJRIWAL FRESH CONSIDERATION. ADMITTEDLY THE BASIS ON WHICH THE REASSESSMENT PROCEEDING WERE INITIATED IS THE INFORMATION WHICH THE REVENUE OBTAINED FROM SINGAPORE TAX AUTHORITIES. IT HAS BEE N THE PLEA OF THE ASSESSEE THAT THE DONOR WAS NOT A TAX RESIDENT OF S INGAPORE AND THAT ENQUIRIES HAVE BEEN MADE WITH A WRONG COUNTRY. THIS OBJECTION HAS NOT BEEN MADE BY THE AO OR THE CIT(A). MOREOVER THE CORRESPONDENCE BASED ON WHICH REASSESSMENT PROCEEDI NGS WERE INITIATED HAS NOT BEEN CONFRONTED TO THE ASSESSEE. THE LAW IS WELL SETTLED THAT THE REVENUE CANNOT USE ANY ADVERSE MAT ERIAL AGAINST THE ASSESSEE UNLESS THE SAME IS CONFRONTED TO THE ASSES SEE AND OPPORTUNITY AFFORDED TO THE ASSESSEE TO EXPLAIN THE ADVERSE MATERIAL AGAINST IT. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE CIT(A) AND DIRECT THE AO TO EXAMINE THE VALIDITY OF INITIA TION OF REASSESSMENT PROCEEDINGS AS WELL AS GENUINENESS OF THE GIFTS AFRESH. THE AO WILL PROVIDE A COPY OF THE CORRESPONDENCE RE CEIVED FROM SINGAPORE TAX AUTHORITIES. THE ASSESSEE WILL BE GIV EN AN OPPORTUNITY OF BEING HEARD BEFORE DECIDING THE ISSUE. THE GENUI NENESS OF THE GIFTS WILL ALSO BE EXAMINED AFRESH BY THE AO. FOR S TATISTICAL PURPOSES BOTH THE APPEALS ARE TREATED AS ALLOWED. 9.1 SINCE THE REASONS FOR REOPENING IS KNOW AND THE MATERIAL GATHERED BY THE ASSESSING OFFICER DURING ENQUIRY AND VERIFICATION O F THE ASSESSMENT PROCEEDINGS FOR THE AY 2005-06, THEN IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MULTISCREEN MEDIA PRIVATE LIMI TED V. UNION OF INDIA REPORTED IN 324 ITR 54, CONSTITUTE A TANGIBLE MATERIAL FOR C OMING TO THE CONCLUSION THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. 9.2 THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF MULTISCREEN MEDIA PRIVATE LIMITED HAS HELD AS UNDER: WHAT IS MATERIAL IS THAT ON THE BASIS OF A DETAILE D INQUIRY WHICH TOOK PLACE DURING THE COURSE OF THE ASSESSMEN T YEAR 2005-06, THE CLAIM OF THE ASSESSEE OF DEDUCTION OF THE ENTIRE EXPENSES WAS NOT ACCEPTED AND DISALLOWANCE W AS MADE TO THE EXTENT OF EXPENDITURE INCURRED OVER AND ABOVE 18.75 PER CENT. THE ASSESSING OFFICER DID SO ON THE BASIS OF FRESH MATERIAL WHICH CAME BEFORE HIM IN V IEW OF THE NOTICE DATED NOVEMBER 26, 2008 IN PURSUANCE OF WHICH THE ASSESSEE FILED A DETAILED REPRESENTATION ELUCIDATING THE RELEVANT PARTICULARS OF THE BUSINE SS OF THE ASSESSEE AND THE REASONS FOR THE EXPENDITURE. WHETH ER THE ASSESSING OFFICER WAS JUSTIFIED IN THE DECISION WHI CH HE TOOK FOR THE ASSESSMENT YEAR 2005-06 IS AGAIN NOT A MATTER TO BE CONSIDERED AT THIS STAGE OF THE PROCEE DINGS. 11 DILIP M KEJRIWAL THE POINT IS THAT ON THE BASIS OF THE ADDITIONAL MA TERIAL WHICH WAS AVAILABLE ON RECORD, THE ASSESSING OFFICE R ISSUED A NOTICE FOR REOPENING THE ASSESSMENT FOR THE ASSES SMENT YEAR 2004-05. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER DID HAVE TANGIBLE MATERIAL TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND TO FORM A REASON TO BELI EVE THAT INCOME HAD ESCAPED ASSESSMENT. CLAUSE (C)(IV) OF EXPLANATION 2 TO SECTION 147 CREATES A DEEMING FIC TION WHERE THOUGH THE ASSESSMENT HAS BEEN MADE, INCOME CHARGEABLE TO TAX IS UNDER ASSESSED. IN SUCH A CASE , LAW DEEMS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. FOR THESE REASONS, WE ARE OF THE VIEW T HAT RECOURSE TO THE PROVISIONS OF SECTION 147 CANNOT BE FAULTED. 9.3 THE HONBLE HIGH COURT HAS GIVEN THE ABOVE FIND INGS AFTER CONSIDERING VARIOUS DECISIONS OF THE HONBLE SUPREME COURT AND EARLIER DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT ITSELF. IT IS O BSERVED BY THE HIGH COURT THAT THE ASSESSING OFFICER WHILE SEEKING TO REOPEN AN ASSESS MENT U/S 147 IS NOT PRECLUDED FROM RELYING ON AN ORDER OF ASSESSMENT IN THE SUBSEQUENT YEAR WHERE ADDITIONAL MATERIAL HAS EMERGED BEFORE THE ASSESSIN G OFFICER TO LEAD TO THE FORMATION OF A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. WHILE OBSERVING SO, THE HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SRI KRISHNA PVT LTD VS ITO REPORTED IN 221 ITR 538 AND NOTED THAT THE HONBLE SUPREME COURT HAS HELD THAT AT THAT STAGE IT WAS ONLY A REOPENING OF ASSESSME NT AND WHILE IT WAS TRUE THAT THE ASSESSING OFFICER COULD HAVE INVESTIGATED THE TRUTH OF THE ASSERTION OF THE ASSESSEE, WHICH HE ACTUALLY DID IN SUBSEQUENT ASSES SMENT YEAR, THE QUESTION AS TO WHETHER THE LOAN ALLEGED TO HAVE BEEN TAKEN BY THE ASSESSEE WAS TRUE OR FALSE, WAS A MATERIAL FACT AND NOT A MERE INFERENCE TO BE DRAWN FROM THE GIVEN FACTS. 9.4 THE HONBLE JURISDICTIONAL HIGH COURT ALSO DISC USSED THE CASE OF SUPREME COURT IN THE CASE OF ESS ESS KAY ENGINEERING CO PVT LTD REPORTED IN 247 ITR 818 AND NOTED THAT THE SUPREME COURT HAS HELD THAT IT W OULD BE OPEN TO THE 12 DILIP M KEJRIWAL ASSESSING OFFICER TO REOPEN THE ASSESSMENT, BASED O N THE FINDING OF FACT MADE ON THE BASIS OF FRESH MATERIAL GATHERED IN THE COUR SE OF ASSESSMENT PROCEEDINGS FOR A SUBSEQUENT YEAR. 9.5 THE HONBLE HIGH COURT HAS ALSO DISCUSSED A DEC ISION IN THE CASE OF ANUSANDHAN INVESTMENTS LTD VS DCIT REPORTED IN 287 ITR 482 AND NOTED THAT IN THE SAID DECISION A DIVISION BENCH HAS HELD THAT IT IS A WELL ESTABLISHED POSITION OF LAW THAT AN ASSESSMENT CAN BE REOPENED ON THE BASIS OF INFORMATION CONTAINED IN AN ASSESSMENT OF A SUBSEQUENT YEAR. THE HONBLE JUR ISDICTIONAL HIGH COURT, WHILE DECIDING THE ISSUE ALSO CONSIDERED THE DECISION OF THE SUPREME COURT IN THE CASE OF KELVINATOR REPORTED IN 320 ITR 561. 10 IN VIEW OF THE ABOVE DISCUSSION AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE INF ORMATION AND THE MATERIAL GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDING S AND ASSESSMENT OF INCOME UNDER THE HEAD OTHER SOURCES FOR THE AY 2005 -06 CONSTITUTE A TANGIBLE MATERIAL FOR COMING TO THE CONCLUSION THAT THE INCO ME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HENCE, THE REOPENING FOR THE A YS UNDER CONSIDERATION ARE VALID AND AS PER LAW. 11 GROUND 2 & 3 IS REGARDING DISALLOWANCE OF EXPEND ITURE AND INTEREST. 11.1 THE LOWER AUTHORITIES HAVE DISALLOWED THE CLAI M OF EXPENDITURE AS WELL AS INTEREST ON THE GROUND THAT THE ASSESSEE HAS NOT CA RRIED OUT ANY BUSINESS ACTIVITY DURING THE YEARS UNDER CONSIDERATION; THE REFORE, THE INTEREST PAID ON THE BORROWED FUNDS WAS NOT UTILISED FOR THE INCOME SHOW N BY THE ASSESSEE DURING THE YEAR, WHICH HAS INTEREST ON FDS AND RENT. THERE FORE, THE SAID CLAIM OF THE ASSESSEE OF EXPENDITURE AS WELL AS INTEREST, IN VIE W OF THE LOWER AUTHORITIES, IS NOT ALLOWABLE. 13 DILIP M KEJRIWAL 12 BEFORE US, THE LD AR HAS SUBMITTED THAT EARLIER THE ASSESSEE WAS RUNNING THE BUSINESS IN THE NAME OF MIS. PRIYA INTERNATIONA L AND IN THE NAME OF M/S. VIVEK INTERNATIONAL AND HAVE CLOSED AND ALL TRANSAC TION OUTSTANDING MERGED IN THE NAME OF THE ASSESSEE. THE ASSESSEE WAS HAVING B USINESS AS IMPORTER OF NON- FERROUS METALS THROUGH LONDON METAL EXCHANGE ON THE BASIS OF ORDER BOOKED FROM THE LOCAL MANUFACTURER AND LOCAL DEALER. THE A SSESSEE WAS SELLING THE MATERIAL ON THE BASIS OF HIGH SEA SALES AND HE GET S PROFIT IN PURCHASE AND SALES ON FIXED PERCENTAGE BASIS DEPENDING UPON FINANCIAL STAKE IN THE TRANSACTION. THE ASSESSEE IS TRADING LOCALLY ALSO IN NON-FERROUS METAL. IN THE BUSINESS, IF THE ASSESSEE GETS MORE CREDIT THEN GIVE MORE PROFIT HE EARNS, HENCE AS PER FINANCE AVAILABLE WITH THE ASSESSEE OR THE FINANCE HE CAN A RRANGE FROM THE MARKET AND USED TO TRADE. IN MARKET THERE ARE SYSTEM OF DOING BUSINESS IN JOINT VENTURE BASIS WITH MARKET PARTY WHERE PARTY TO I.E. JOINT V ENTURE (SYNDICATION) ARRANGE FIANCE AS PER HIS CAPACITY AND ON HIS INVESTMENTS HE EARN INTEREST PLUS SHARE IN PROFIT AS PER RISK IN TRANSACTION. THE LD AR SUBMIT TED THAT THE MARKET RATE OF COMMODITY ARE AS PER DEMAND & SUPPLY AND AS PER RAT E DISPLAYED ON REUTERS I.E. (AS PER LONDON METAL EXCHANGE RATE). THE GOOD MARGIN OF PROFIT IS IN SUPPLY OF MATERIAL ON CREDIT AS PER THE NEED OF CUSTOMER. THE ASSESSEE USED TO BORROW MONEY FROM MARKET FOR HIS BUSINESS AND FOR BUSINESS IN JOINT VENTURE AS PER NEED OF BUSINESS AND RETURN THE MONEY TO BORROWER IN TIM E WITH INTEREST, HENCE HE HAD A GOOD REPUTATION IN MARKET AND COULD GET THE MONEY AS PER NEED. HE HAD GOOD CONTACT AND REPUTATION WITH MIS. SHALIMAR WIRE MD. LTD. HENCE REASONABLE BUSINESS WAS POSSIBLE FROM THEM. THE LD AR SUBMITT ED THAT THE ASSESSEE HAD GOOD REPUTATION WITH MARKET PARTIES DUE TO FAIR DEA LING WITH THEM. THE MARKET PARTIES WERE READY TO FINANCE TO THE ASSESSEE AND T O DO BUSINESS WITH SWIL (SHALIMAR WIRE MD. LTD) FOR SUPPLYING NON-FERROUS M ETAL TO THEM. 14 DILIP M KEJRIWAL 12.1 THE LD AR FURTHER SUBMITTED THAT THE GROUP CAL LED AMBALAL & SONS HAVE INVITED THE ASSESSEE FOR WORKING IN JOINT VENTURE I .E. IN SYNDICATION, WHERE HE HAS TO ARRANGE FINANCE AND MATERIAL WAS TO BE SUPPLIED IN THEIR NAME TO SWIL MIS. AMBALAL & SONS GROUP HAVE AGREED TO PAY INTEREST O N INVOLVEMENT OF FINANCE @12% AND SHARE IN PROFIT @5O IN JOINT BUSINESS. TO FINANCE THIS BUSINESS THE ASSESSEE HAD TAKEN LOANS FROM MEHROTRA GROUP WHICH INCLUDE MIS. CHEREE EXPORT PVT. LTD. (THE COMPANY BELONG TO MEHROTRA GR OUP) ON INTEREST AND OTHER PARTIES FOR GIVING FINANCE TO THE ASSESSEE. OUT OF FINANCE RAISED THE ASSESEEDE HAS GIVEN MONEY TO MIS. AMBALAL & SON GROUP. 12.2 THE LD AR HAS FURTHER SUBMITTED THAT THIS IS N OT A DISCONTINUANCE OF THE BUSINESS OF THE ASSESSEE; BUT ONLY A TEMPORARY LULL AND BREAK IN THE BUSINESS ACTIVITY. HE HAS FURTHER SUBMITTED THAT THE ASSESSE E HAS EARNED AND SHOWN THE INCOME FROM COMMISSION AND BROKERAGE AS WELL AS SER VICE CHARGES FOR THE ASSESSMENT YEAR 2003-04 TO 2007-08. HE HAS REFERRED PAGE 1 OF THE PAPER BOOK AND SUBMITTED THAT WHEN THE ASSESSEE HAS BUSINESS INCOME IN THE SUBSEQUENT YEARS; THEREFORE, IT CANNOT BE SAID THAT THE ASSESS EE HAS DISCONTINUED ITS BUSINESS. 12.3 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THA T DURING THE YEARS UNDER CONSIDERATION, ADMITTEDLY, THE ASSESSEE HAS NO BUSI NESS ACTIVITY AND THEREFORE, THE CLAIM OF THE ASSESSEE REGARDING THE EXPENDITURE AS WELL AS INTEREST PAID ON THE BORROWED FUNDS HAS NOT ALLOWED. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 15 DILIP M KEJRIWAL 13 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THOUGH THE A SSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY DURING THE AYS 2001-01 & 2002-03 HOWEVER, FROM THE DETAILS GIVEN AT PAGE 1 OF THE PAPER BOOK, IT IS CLEAR THA T IN THE SUBSEQUENT YEAR, THE ASSESSEE HAS BUSINESS INCOME. THE LOWER AUTHORITIE S HAVE ALSO MENTIONED THIS FACTS THAT THE ASSESSEE HAS BUSINESS ACTIVITY UPTO 1998-99. THEREFORE, IT IS CLEAR THAT THERE WAS A TEMPORARY BREAK IN THE BUSINESS AC TIVITY DUE TO SOME CIRCUMSTANCES. HOWEVER, WHEN THE BUSINESS ACTIVITY REVIVED, THEN IT CANNOT BE HELD THAT THE ASSESSEE HAS COMPLETELY CLOSED DOWN O R DISCONTINUED ITS BUSINESS. THE DETAILS OF THE INCOME SHOWN BY THE ASSESSEE FOR THE VARIOUS ASSESSMENT YEARS ARE IN PAGE 1 OF THE PAPER BOOK AS UNDER: SR ACCOUNTING ASSESSMENT BUSI NESS NATURE OF BUSINESS NO YEAR ENDING YEAR INCOME 1 31.03.2000 2000.01 LOSS RS.11,40,209/- EARNING I NTEREST, RENT 2 31.03.2001 2001.02 LOSS RS.11,69,805/- EARNING I NTEREST, RENT 3 31.03.2002 2002.03 LOSS RS.18,18,268/- EARNING INTEREST, RENT 4 31.03.2003 2003.04 PROFIT 48,258/- COMMISSION & BROKERAGE IN COPPER & NICLEAND SERVICE CHARGES IN ARRANGING PURCHASES OF COPPER FOR CUSTOMER 5 31.03.2004 2004.05 LOSS RS .4,28,818/- COMMISSION IN NON-FERROUS METAL AND TRADING BUSINESS IN ANIMAL FEED SUPPLEMENTS 6 31.03.2005 2005.06 PROFIT 11,45, 478/- COMMISSION IN SUPPLY OF EQUIPMENT TO IRAN AND DIRECTOR IN TRADING COMPANY 7 31.03.2006 2006.07 PROFIT 7,66,195/- COMMISSION IN NON-FERROUS METAL AND TRADI NG BUSINESS IN JAIPUR GEMS 8 31.03.2007 2007.08 PROFIT 9,05,186/ - COMMISSION IN NON-FERROUS METAL FROM JAGD IA COPPER LTD FOR ALL INDIA COMMISSION AGENT & OTHERS COMMISSION ON SUPPLY OF NON-FERROUS METAL. 16 DILIP M KEJRIWAL 14 FROM THE ABOVE DETAILS, IT IS CLEAR THAT FROM AS SESSMENT YEAR 2003-04 ONWARDS THE ASSESSEE IS HAVING REGULAR BUSINESS INC OME. THEREFORE, THE CLAIM OF THE ASSESSEE HAS TO BE CONSIDERED AND DECIDED IN TH E LIGHT OF THE FACT THAT IN THE SUBSEQUENT YEARS THE ASSESSEE HAS SHOWN BUSINESS I NCOME. ACCORDINGLY, WE SET ASIDE THIS ISSUE INVOLVED IN GROUND NO.2 & 3 OF THE APPEALS OF THE ASSESSEE TO THE RECORDS OF THE ASSESSING OFFICER FOR RECONSIDER ATION AND DECIDE THE SAME AS PER LAW AFTER TAKING INTO ACCOUNT THE ABOVE OBSERV ATIONS. 15 GROUND NO.4 IS REGARDING DISALLOWANCE MADE U/S 4 1(1) OF THE I T ACT. 15.1 THE ASSESSING OFFICER HAS DEEMED AS SUM OF `. 16,76,476/- AS PROFIT U/S 41(1) OF THE ACT. THE ASSESSEE SUBMITTED BEFORE TH E LOWER AUTHORITIES THAT THE OTHER PARTY HAD FILED A LEGAL CASE OF RECOVERY AND OBTAINED A DECREE FOR ATTACHMENT AGAINST THE ASSESSEE. THE ASSESSEE HAS ALSO FILED A CASE IN THE HONBLE HIGH COURT. THE LOWER AUTHORITIES DID NOT A CCEPT THE EXPLANATION OF THE ASSESSEE AND TREATED THE SAID SUM AS HAVING CEASED AND ADDED TO THE INCOME OF THE ASSESSEE. 16 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. BEFORE US, THE LD AR OF THE ASSESSEE HAS FILED AN ADDITIONAL EVIDENCE IN THE SHAPE OF DO CUMENTS, DECREE AND OTHER MATERIAL REGARDING THE SAID ISSUE AT PAGES 160 TO 3 60 OF THE PAPER BOOK AND SUBMITTED THAT THE SAID ADDITIONAL EVIDENCES MAY BE ADMITTED IN SUPPORT OF THE CLAIM OF THE ASSESSEE. 16.1 SINCE THE ADDITIONAL EVIDENCES FILED BY THE AS SESSEE IS RELEVANT MATERIAL FOR DECIDING THE ISSUE; THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR RECONSID ERATION OF THE SAME AFTER 17 DILIP M KEJRIWAL EXAMINING THE ADDITIONAL EVIDENCES FILED BY THE ASS ESSEE. NEEDLESS TO SAY, THE ASSESSING OFFICER SHOULD GIVE REASONABLE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 17 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 30 TH , DAY OF DEC 2011. SD/ SD/ ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:30 TH , DEC 2011 RAJ* RAJ* RAJ* RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI