The Dy. Commr. Income Tax, Circle-1 (1), RAJKOT-GUJARAT V. Shri Bhadreshkumar Valjibhai Bambrolia, RAJKOT-GUJARAT

ITA 715/RJT/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6735 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Assessee Lawyers: MJ RANPURA
• Keywords: Unexplained investment; Opportunity of being heard; Source of fund; Deemed to accrue or arise in india
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] THE D CIT, CIRCLE - 1 (1) , RAJKOT ROOM NO. 508, AAYAKAR BHAVAN, RACE COURSE RING ROAD, RAJKOT - 360001 (APPELLANT) VS BHADRESHKUMAR VALJIBHAI BAMBROLIA, M/S. PATEL ENGG. CORPORATION, JIVANDEEP COMPLEX, 80 FEET ROAD, RAJKOT P AN: AELPB6335A (RESPONDENT) REVENUE BY : S H RI C.S. ANJARIA , D . R. ASSESSEE BY: S H RI M.J. RANPURA , A.R. DATE OF HEARING : 17 - 1 1 - 2 016 DATE OF PRONOUNCEMENT : 09 - 01 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 2006 - 07 , AR ISES FROM ORDER OF THE CIT(A), JAMNAGAR DATED 19 - 09 - 2014 IN APPEAL NO. CIT(A) - II / JAM/0315/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 254 OF THE INCOM E TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 715 / RJT /20 14 A SSESSMENT YEAR 200 6 - 07 I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 2 2. THE REVENUE HAS RAISED FOLLOWING GROUND OF APPEAL: - THE LD. C.I.T.(A) HAS ERRED IN DELETING THE ADDITION OF RS. 37,00,000/ - MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED INVESTMENT. 3. THE RETURN OF INCOME DECLARING INCOME OF RS. 1,69,450/ - WAS FILED ON 4 TH SEP, 2006. THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT U/S 143(3) R.W.S.254 OF ACT ON 20.12.2011 AND DETERMINED THE TOTAL IN COME AT RS. 40,43,795/ - . IN THIS CASE AT THE TIME OF ORIGINAL ASSESSMENT T HE AS SESSING OFFICER HA D MADE THE FOLLOWING ADDITIONS : - (I) INVESTMENT MADE IN MUTUAL FUND TO THE TUNE OF RS. 37 LACS TREATED AS DEEMED INCOME OF THE ASSESSEE. (II) SHORT TERM CAPITAL GAIN OF RS. 1 , 74 , 347/ - ON SALE/REDEMPTION OF UNITS OF MUTUAL FUND NOT OFFERED FOR TA XATION. 4. THE HON BLE ITAT VIDE ITS ORDER ITA 788/RJT/2010 DATED 25 TH AUGUST, 2010 RESTORED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE A FRESH AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS A CONTRACTOR, MANUFACTURER AND S UPPLIER OF THERMAL POWER STATION. 5. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING O FFICER FOUND THAT ASSESSEE HA D MADE THE FOLLOWING INVESTMENTS IN THE MUTUAL FUNDS . NAME OF MUTUAL FUND AMOUNT INVESTED (RS.) 1 RELIANCE M UTUAL FUND 900000 I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 3 2 KOTAK MAHINDRA MUTUAL FUND 300000 3 TEMPLETON MUTUAL FUND 1000000 4 HDFC MUTUAL FUND 1600000 5 FIDELITY MUTUAL FUND 200000 6 ABM AMPRO MUTUAL FUND 500000 7 PRUDENCIAL ICICI MUTUAL FUND 400000 4900000 5 . 1 DURING THE COURSE OF ASSESSMENT ON PERUSAL OF THE ACCOUNT, T HE A SSESS ING O F FICER FOUND THAT THE ABOVE MENTIONED INVESTMENT S W AS NEITHER REFL ECTED IN THE A/C FILED ALONG WITH THE RETURN OF INCOME NOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE . THEREAFTER D UR ING THE COURSE OF ASSESSMENT PROCEEDI NGS , THE ASSESSING O FFICER COLLECTED INFORMATION FROM THE FUND MANAG ER OF THE MUTUAL FUND TO VERIFY THE MODE OF PAYMENT MADE BY THE ASSESSEE . ON VERIFICATION OF THE INFORMATION , THE ASSESSING O FFICER HAS FOUND THAT FOL LOWING INVESTMENT IN MUTUAL FUNDS WERE NOT REFLECTED IN THE ACCOUNTS OF THE ASSESSEE . DATE OF INVESTM ENT NAME OF MUTUAL FUND AMOUNT OF PURCHASE DATE OF REDEMPT I ON /SALE AMOUNT OF REDEMPTION / SALE PROFIT FROM REDEMPT IO N / SALE NAME OF HOLDER I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 4 30 - 12 - 05 ICICI PRUDENTIAL 500000 08 - 02 - 06 533972 33972 NIKUNJ BHADRES H (MINOR) 31 - 01 - 06 FIDALITY EQUITY FUND 200000 07 - 03 - 06 208804 8804 - DO - 10 - 02 - 06 HDFC EQUITY FUND 400000 - 0 0 - DO - 17 - 02 - 06 SBI MUTUAL FUND 500000 07 - 03 - 06 519492 19492 - DO - 14 - 03 - 06 KOTAK MUTUAL FUND 300000 - 0 0 - DO - 14 - 03 - 06 ICICI PRUDENTIAL 400000 - 0 0 - DO - 31 - 12 - 05 RELIANCE VISION FUND 500000 08 - 02 - 06 5 26785 26785 PURVIL BHADRES H (MINOR) 31 - 01 - 06 RELIANCE GROWTH FUND 400000 07 - 03 - 06 4201013 21013 - DO - 23 - 02 - 06 HSBC ADVANTAGE FUND 400000 07 - 03 - 06 416022 16022 - DO - 23 - 02 - 06 ABN AMRO EQUITY FUND 500000 07 - 03 - 06 527488 2 7488 - DO - 09 - 03 - ICICI 400000 0 0 - DO - I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 5 06 PRUDENTIAL 28 - 03 - 06 RELIANCE EQUITY FUND 500000 - 0 0 - DO - 28 - 03 - 06 HDFC PREMIER MULTI 700000 - 0 0 - PO - \ 09 - 03 - 06 FRANKLINE INDIA 400000 - 0 0 BHADRES H V. B HAMBHR OLIA 14 - 03 - 06 - DO - 600000 - 0 0 - DO - 30 - 12 - 05 HDFC MUTUAL FUND 500000 10 - 02 - 05 520771 20771 - DO - 7200000 3674347 174347 THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD PURCHASED UNITS OF MUTUAL FUNDS AG GREGATING TO RS. 72 LACS OUT OF WHICH HE RED EEMED THEM TO THE EXTENT OF RS. 35 LACS. THE ASSESSING OFFICER DETERMINED THE TOTAL PURCHASE OF UNITS OF AFORESAID MUTAL FUND AT RS. 37 LACS . T HE ASSESSING O FFICER STATED THAT THE FOLLOWING BANK ACCOUNTS WERE NOT REFLECTED IN THE ACCOUNT FILED WITH THE RETURN OF INCOME THEREFORE HE OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENT IN MUTUAL FUNDS OUT OF THESE UNDISCLOSED BANK ACCOUNTS. SR. NO. NAME OF BANK NAME OF BANK HOLDER A/C. NO I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 6 1 BANK OF BARODA BHADR ESH V. BAMBHROLIA 18700100000873 2 - DO - PURVIL B. BAMBHROLIA 18700100007933 3 - DO - NIKUNJ B. BAMBHROLIA 18700100007931 4 ABN AMOR BANK - DO - 376936 5 - DO - BHADRESH V. BAMBHROLIA 380267 6 - DO - PURVIL B. BAM BHROLIA 380277 7 - DO - - 1184922 8 - DO - - 1184838 9 - DO - - 1185220 10 STANDARD CHARTER BANK PURVIL B. BAMBHROLIA 802 - 1 - 008050 - 5 5 .2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE INVESTMENT IN THE MUTAL FUNDS. THE ASSESSEE EXPLAINED THAT SOURCE OF FUNDS FOR INVESTMENT MADE IN THE MUTUAL FUND WAS FROM B H AD R ESH BRAMBROLIA (HUF ) WHO WAS THE PROPRIETOR OF M/S THERMOSTAT BARODA. THE ASSSESSEE ALSO EXPLAINED THAT THE MATTER WAS NOT PROPERLY EXPLAINED DURING THE COURSE OF SSESSMENT PROCEEDINGS BECAUSE OF NON AVAILABILITY OF THE ACCOUNTANT WHO WAS HAN DLING THE MATTER OF H UF AT BARODA HAD LEFT THE JOB. IN THIS CONNECTION TH E ASSESSING OFFICER FURTHER STATED THA T THE ASSESSEE HAD ALSO MADE REFERENCE U/S. 144A OF THE ACT BEFORE I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 7 THE JCIT. IN VIEW OF THIS , THE FOLLOWING DIRECTIONS WERE GIVEN BY THE J OINT COMMISSIONER OF INCOME TAX TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS: - 1) TO TREAT THE INVESTMENT MADE IN THE VARIOUS MUTUAL FUNDS AS BELONGING TO THE ASSESSEE AND WORK OUT THE PEAK INVESTMENT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AS UNEXPLAINED INVESTMENT. 2) THE ASSESSING OFFICER IS ALSO DI RECTED TO ADD THE SHORT TERM CAPITAL G AIN ON REDUMPTION OF THE MUTUAL FUND UNITS AND AND ADD THE SAME TO THE INCOME OF THE ASSESSEE IN HIS INDIVIDUAL CAPACITY. THEREAFTER, T HE ASSESSING OFFICER STA TED THAT ON PERUSAL OF THE DETAILS SUBMITTED IT WAS CLEAR THAT THE ASSESSEE HAD MADE INVESTMENT IN INDIVIDUAL CAPACITY ONLY. HE FURTHER STATED THAT SOURCE OF M INORS SHOULD HAVE BEEN CLUBBED IN EITHER IN THE RETURN OF HUF OR IN THE INDIVIDUAL STATUS OF THE ASSSESSEE. HE ALSO POINTED OUT THAT UNDER THE HEAD CURRENT ASSET IN THE BALANCE SHEET UNSECURED LOAN OF R S. 35 , 27 , 545.5 WAS SHOWN FROM THE HUF AS ON 31 - 03 - 2006 TO THE ASSESSEE . ON THE OTHER HAND , THE ASSESSEE HAS SHOWN UNSECURED LOAN FROM HUF OF R S 10,98896/ - ON 31 - 03 - 06. THEREAFTER, THE ASSESSING OFFIC ER STATED THAT A FTER CONSIDERING THE DIRECTION OF THE JCIT AND THE FACTS OF THE CASE, INVESTMENT OF RS. 37 LACS IN MUTUAL FUND S WAS TREATED AS UNEXPLAINED INVESTMENT IN THE CASE OF THE ASSESSEE. 6 . AGGR IEVED AGAINST THE IMPUGNED ORDER OF THE ASSESSING O FFICER, THE ASSESSEE PREFERRED A PPEAL BEFORE LD. C OMMISSIONER OF INCOME I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 8 TAX(A). THE CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 6. I HAVE CAREFULLY PERUSED THE ORIGINAL ASSE SSMENT ORDER, ORDER OF THE CIT(A), ORDER OF THE HON. ITAT RAJKOT, WHO HAD SET ASIDE THE ASSESSMENT AND THE DENOVO ASSESSMENT ORDER PASSED BY THE AO, PURPORTEDLY ON THE BASIS OF THE DIRECTIONS ISSUED BY THE HON. ITAT. 6.1 AS MENTIONED SUPRA, THE FACTS OF T HE CASE IS THAT, WHILE FINALIZING THE ORIGINAL ASSESSMENT, THE AO HAD TREATED THE INVESTMENT IN MUTUAL FUNDS TO THE TUNE OF RS 37 LACS AS UNEXPLAINED AND DEEMED INCOME OF THE APPELLANT. HE FURTHER MADE ADDITION OF SHORT TERM CAPITAL GAIN ON THE REDEMPTION OF CERTAIN FUNDS FROM THE ABOVE INVESTMENT, TO THE TUNE OF RS 1,74,347/ - AS INCOME OF THE APPELLANT, BEING INCOME NOT OFFERED TO TAX. THE ISSUES WE RE SUSTAINED IN FIRST APPEAL. I HAVE CAREFULLY PERUSED THE ORDER OF THE CIT(A) AND FOUND THAT, THE ADDITIONS GOT SUSTAINED PRIMARILY BECAUSE THERE WAS NO PROPER EXPLANATION ON THE PART OF THE APPELLANT. AGGRIEVED BY THE ORDER OF THE ID. CIT(A), THE APPELLANT HAD PREFERRED APPEAL BEFORE THE HON. ITAT. THE DECISION OF THE HON. ITAT IS CONTAINED UNDER PARA 5 OF ITS ORDER. THE HON. ITAT, VIDE PARA 5 OF ITS ORDER, HAD SET ASIDE THE ASSESSMENT BACK TO THE FILE OF THE AO. HOWEVER, FOR THE SAKE OF CLARITY, THE EVENTS LEADING TO THE SETTING ASIDE OF THE ASSESSMENT BACK TO THE AO FOR RECONSIDERATION AFRESH, IS DISCUSSED UND ER PARA 4 OF ITS ORDER. THIS IS BEING REPRODUCED HEREUNDER: - 4. THE LEARNED COUNSEL FOR THE ASSESSES DREW OUR ATTENTION TO PAPER BOOK PAGES 2 TO 19 WHERE THE COPIES OF BANK STATEMENTS OF VARIOUS BANKS ARE PLACED. ACCORDING TO THE LEARNED COUNSEL, THESE BA NK STATEMENTS ARE SUFFICIENT TESTIMONY TO HOLD THAT THE INVESTMENTS ARE MADE OUT OF THE EXPLAINED SOURCE OF INCOME. FURTHER ATTENTION WAS CALLED ON TO PAPER BOOK PAGE 20 WHICH IS THE INVESTMENT SUMMARY FROM THE BOOKS OF BHADRESH V BHAMBHAROLIA, THE LEARNED COUNSEL SUBMITTED THAT THE TOTAL INVESTMENTS OF RS 72 LACS ARE DULY RECORDED THEREIN. FURTHER CONTRA ACCOUNT OF BHADRESH BHAMBHAROLIA FROM BOOKS OF BHADRESH BHAMBHAROLIA (HUF) PROP OF THERMOTECH IS PLACED AT PAGES 21 TO 22 WHICH SHOWS THAT A LOAN OF RS 72 ,01,895.17 HAS BEEN RAISED BY THE ASSESSEE I N AGGREGATE; CONTRA ACCOUNT OF BHADRESH BHAMBHAROLIA, HUF, PROP THERMOTECH FROM PERSONAL BOOKS OF BHADRESH BHAMBHROLIA WHICH DEPICTS THE RECEIPT OF LOANS FROM I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 9 THIS PARTY (PAGE 24 OF THE PAPER BOOK), PERSONAL ACCO UNT OF BHADRESH BHAMBHAROLIA FOR FY 2005 - 06 (PAGES 25 TO 36 OF THE PAPER BOOK AND ACKNOWLEDGEMENT OF RETURN, STATEMENT OF INCOME AND AUDITED REPORT OF BHADRESH BHAMBHROLIA HUF PROP (PAGE 55 OF THE PAPER BOOK). WITH THE HELP OF THESE THE LEARNED COUNSEL FOR THE ASSESEE SUBMITTED THAT THE IMPUGNED ADDITION WAS NOT WARRANTED. BECAUSE OF THE HUSHED ADMISSION OF THE PEAK INVESTMENT OF RS 33 LAKHS AND THAT TOO ONLY TO BUY PEACE, NEITHER THE ASSESSING OFFICER NOR THE ASSESSEE HAD FAIR CHANCE OF LOOKING INTO THE CO RRECTNESS OF THEIR RESPECTIVE DECISION. THE LEARNED CUNSEL THEREFORE, PLEADED THAT THE MATTER NEEDS TO BE RELOOKED INTO THE LIGHT OF THE DOCUMENTS AS REFERRED TO ABOVE. HE SUBMITTED THAT THESE DOCUMENTS ARE THE BASIC INGREDIENTS FROM WHICH ANY OPINION COUL D BE FORMED BY AND THAT THE LEARNED CIT(A) CONCLUDED THE MATTER IN THE ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, DID NOT RAISE ANY OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESS ING OFFICER. 6.2 THE CRUX OF THE ABOVE FINDING IS THAT, THE APPELLANT HAD EXPLAINED THE SOURCE OF INVESTMENT AS LOANS TAKEN FROM HIS HUF, WHICH WAS INVESTED IN MUTUAL FUNDS, FOR WHICH THE APPELLANT HAD PRODUCED SUFFICIENT DOCUMENTS IN SUPPORT OF THE SAME, WHICH WAS ALSO SUPPORTED BY THE DEPARTMENTAL REPRESENTATIVE - , DURING THE COURSE OF HEARING ON THIS ISSUE BEFORE THE HON. TRIBUNAL. IT IS IN THIS CONTEXT, THAT THE HON. ITAT HAD SET ASIDE THE MATTER BACK TO THE FILES OF THE AO, WITH THE FOLLOWING DIRECTION : - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. IN OUR CONSIDERED OPINION IN ALL FAIRNESS, THESE DOCUMENTS CORROBORATING THE ENTRIES PERTAINING TO THE SOURCES OF THE FUNDS FOR MAKING THE INVESTMENTS, THE INVESTMEN T DETAILS, CANNOT BE .BRUSHED ASIDE IN A LIGHTER SENSE. WE ARE OF THE HUMBLE OPINION THAT THE MATTER REQUIRES THOROUGH EXAMINATION VIS - A - VIS THE DETAILS THE ASSESSEE HAVE. IN THE CIRCUMSTANCE, WE DEEM IT FIT TO RESTORE THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER WITH A DIRECTION TO SCRUTINIZE THE CASE WITH REFERENCE - TO THE ABOVE DETAILS AND TAKE A DECISION AFRESH AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD.... I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 10 6.3 IN THE DENOVO ASSESSMENT, THE AO AGAIN REITERATED THE SAME STAND THA T, THE INVEST MENTS ARE NOT RECORDED IN THE APPELLANT'S BOOKS OF ACCOUNTS, (PARA 7 OF THE ASSESSMENT ORDER), THAT THE BANK ACCOUNTS FROM WHICH SUCH CHEQUE WERE ISSUED WERE NOT RECORDED IN THE APPELLANT'S BOOKS OF ACCOUNTS (PARA 8.2) OF THE ASSESSMENT ORDER, THAT ALL THE INVESTMENTS IN MUTUAL FUNDS WERE MADE BY THE APPELLANT IN HIS INDIVIDUAL CAPACITY [PARA 13(1) OF THE ASSESSMENT ORDER], THE INVESTMENTS WERE MADE IN THE NAME OF THE APPELLANT'S MINOR CHILDREN THOUGH HOWEVER, THEY WERE NOT CLUBBED WITH THE RETURN OF THE AP PELLANT (PARA 13(11) OF THE ASSESSMENT ORDER), THE INCOME TAX ACT DOES NOT PERMIT ANY INTER STATUS ADJUSTMENT OF FUNDS UNLESS AT THE END OF THE YEAR THE RESULTANT FUND RECEIVABLE OR PAYABLE IS DULY REFLECTED I N THE BALANCE SHEET (PARA 13(III ) OF THE ASSESS MENT ORDER), THAT THERE IS SUBSTANTIAL DIFFERENCE IN THE TWO LOAN BALANCES BETWEEN THE APPELLANT'S BOOKS AND THAT OF HIS HUF (PARA 13(111) OF ASSESSMENT ORDER AND THAT, NO DIVIDEND INCOME HAS BEEN SHOWN BY THE HUF, PURPORTEDLY MAKING ADVANCE TO THE APPELLA NT WHICH WAS INVESTED BY THE APPELLANT (PARA 13VIII) OF THE ASSESSMENT ORDER. ON THE BASIS OF THE ABOVE INFIRMITIES, THE AO, IN THE DENOVO ASSESSMENT MADE THE SIMILAR ADDITION MADE IN THE ORIGINAL ASSESSMENT ORDER. 6.4 ON THE OTHER HAND, IT WAS CONTENTION OF THE APPELLANT BEFORE THE HON. ITAT THAT, THE FUNDS WERE RECEIVED AS LOANS FROM HIS HUF, WHICH WERE INVESTED IN THE NAMES OF HIS MINOR CHILDREN AND THAT, THE SOURCES OF FUNDS IN THE HANDS OF THE HUF ARE EXPLAINED. IN FACT, THE DIRECTION OF THE HON. ITAT ALSO STATES THAT, THE AO IS SUPPOSED TO SCRUTINIZE THE CASE IN LIGHT OF THE DETAILS SUBMITTED AND FURNISHED BY THE APPELLANT BEFORE THE HON. ITAT. 6.5 WHILE FINALIZING THE DENOVO ASSESSMENT, THE AO HAD HELD THAT THE INVESTMENTS IN MUTUAL FUNDS WERE NOT R ECORDED IN THE APPELLANT'S BOOKS OF ACCOUNTS. IN FACT, MOST OF THE INVESTMENTS WERE MADE IN THE NAME OF THE APPELLANT'S TWO MINOR CHILDREN. THE NAMES O N WHICH INVESTMENTS ARE MADE HOL DS NO RELEVANCE AS LONG AS THEIR SOURCES STANDS EXPLAINED. IN THE PRESENT CASE, THE APPELLANT HAS SUBSTANTIVELY EXPLAINED THE SOURCE OF INVESTMENTS, BEING THE FUND TAKEN AS LOAN FROM HIS HUF, WHICH HAS ITS OWN INCOME. THEREFORE, AS LONG AS THE SOURCES OF THE INVESTMENTS ARE PROVED, IT HARDLY MATTERS WHETHER THE SAME IS RECORDED IN THE APPELLANT'S BOOKS OF ACCOUNTS OR NOT. I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 11 6.6 SECONDLY, THE AO HAD HELD THAT, THE BANK ACCOUNTS FROM WHICH SUCH INVESTMENTS WERE MADE, WERE NOT REFLECTED IN THE APPELLANT'S BOOKS. ALTHOUGH THIS IS INCRIMINATING INFORMATION, HOWEVER, IN LIGHT OF THE FA CT THAT THE APPELLANT'S HUF HAD SUFFICIENT FUNDS, AND SUCH FUNDS WERE GIVEN TO THE APPELLANT, WHICH FOUND ITS WAY INTO INVESTMENT IN MUTUAL FUNDS, THERE HARDLY REMAINS ANY ELEMENT OF DRAWING ADVERSE INFERENCE. ON THE OTHER HAND, FROM THE DETAILS FILED BY T HE APPELLANT BEFORE THE HON. ITAT, IT IS VERY CLEAR THAT THE APPELLANT HAD PRODUCED A SUMMARY OF INVESTMENTS MADE INTO MUTUAL FUNDS, WHEREIN SUCH SOURCES ARE EXPLAINED. FURTHER CONTRA ACCOUNT OF THE APPELLANT FROM THE BOOKS OF HIS HUF (PLACED AT PAPER BOOK PAGE NOS 21 AND 22) SHOWS LOAN OF RS 72.01 LACS TAKEN BY THE APPELLANT. THE APPELLANT HAD ALSO FURNISHED A COPY OF ACKNOWLEDGEMENT OF THE RETURN OF HIS HUF BEFORE THE HON. ITAT. THE HON. ITAT AFTER VERIFYING ALL THESE EVIDENCES HAD DIRECTED THE AO TO SCRU TINIZE THE ASSESSMENT IN LIGHT OF THE ABOVE DETAILS. THE ORDER OF THE ITAT CLEARLY SPELLS! OUT THAT THESE DOCUMENTS WERE FURNISHED BEFORE THEM. THE DR ALSO DID NOT RAISE ANY OBJECTION WHEN THE MATTER WAS BEING REST ORED BACK TO THE A.O. THEREFORE THERE IS ELEMENT OF TRUTH IN THE CONTENTION OF THE APPE LLANT AND THE AO OUGHT TO HAVE I NVESTIGATED THIS ASPECT. INSTEAD THE AO MERELY HELD THAT THE, INVESTMENTS AND BANK ACCOUNTS ARE NOT RECORDED IN THE BOOKS. NO EFFORT TO CHECK THE SOURCE OF INVESTMENT, SO CLAIMED BY THE APPELLANT WAS MADE BY THE AO. HENCE, THE ADDITION MADE BY THE AO ON MERE REASON THAT THE BANK ACCOUNTS ARE NOT RECORDED IN THE BOOK, FAILS TO SURVIVE AS LONG AS THE INVESTMENTS ARE EXPLAINED. 6.7 THE AO WHILE FRAMING THE DENOVO ASSESSMENT HAD HELD THAT, THE, INFORMA TION GATHERED U/S. 133(6) FROM THE FUND MANAGERS REVEALED THAT THE INVESTMENTS WERE MADE IN INDIVIDUAL CAPACITY ONLY. HOWEVER, THIS FACT IS NOT DENIED BY THE APPELLANT ALSO. THE CRUX OF THE MATTER IS NOT IN WHOSE NAME THE INVESTMENT IS M ADE. THE CRUX OF THE MATTER IS WHETHER THE SOURCE OF INVESTMENT IS EXPLAINED OR NOT. UNLESS THIS ISSUE IS CONTROVERTED, THERE COULD NOT BE GROUND TO HOLD THAT THE APPELLANT'S SOURCE OF INVESTMENT IS UNEXPLAINED. 6.8 THE AO WHILE FRAMING THE DENOVO ASSESSM ENT HAD HELD THAT, THERE IS DIFFERENCE IN THE BALANCE BETWEEN THE APPELLANT'S BOOKS AND THAT IN THE BOOKS OF HIS HUF UNDER THE HEAD LOANS AND ADVANCES. IN THIS REGARD, THE ID. AR OF THE APPELLANT SUBMITTED A COPY OF THE BALANCE SHEET ALONG WITH ITS ANNEXUR ES IN RESPE CT OF THE APPELLANT I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 12 AND HIS HUF. ON GOING THROUGH THE AUDITED BALANCE SHEET, THERE IS NO DIFFERENCE BETWEEN THE TWO BALANCES. IT IS NOT CLEAR AS TO HOW THE AO DREW THE CONCLUSION THAT THERE IS BALANCE BETWEEN TWO ACCOUNTS, UNDER THE HEAD LOANS ! AND ADVANCES. THEREFORE, THE CONTENTION OF THE AO ON THIS GROUND ALSO FAILS TO SURVIVE. 6.9 BESIDES THESE, THERE ARE OTHER MINOR ISSUES LIKE GENERATION OF INTEREST INCO ME WHEN THE ADVANCE MADE IS MEAGER AND NON - RECORDING OF CAPITAL GAIN ON REDEMPTION OF MUTUAL FUNDS. SINCE THESE ISSUES NOWHERE AFFECTS THE CRUX OF THE MATTER, VIZ., SOURCE OF INVESTMENT IN MUTUAL FUNDS AND AS THE APPELLANT HAS ALREADY ACCEPTED THE ADDITION MADE ON ACCOUNT OF SHORT TERM CAPITAL GAINS, THESE ISSUES NOW MATTERS NO MORE. 7. T HEREFORE, IN LIGHT OF THE ABOVE, IT IS HELD THAT THE FUNDS UTILIZED FOR INVESTMENTS MADE BY THE APPELLANT IN THE MUTUAL FUNDS PREDOMINANTLY IN THE NAME OF HIS TWO MINOR CHILDREN, BELONGS TO THE HUF OF THE APPELLANT, FOR WHICH THE APPELLANT HAD SUBMITTED SU FFICIENT DETAILS TO EXPLAIN THE SAME IN THE HANDS OF HIS HUF, BOTH BEFORE THE HON. ITAT, WHO AFTER VERIFYING THE SAME, HAD SET ASIDE THE MATTER AND ALSO BEFORE ME. THEREFORE, THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. SO FAR AS THE ADDITION ON ACCOUNT OF SHORT TERM CAPITAL IS CONCERNED, SINCE THE APPELLANT HAS ACCEP TED THIS ADDITION, THE ADDITION IS SUSTAINED . 7 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER O N THE OTHER HAND, THE LD. COUNSEL RELIED ON THE ORDER OF THE CIT(A). 8 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAD MADE ADDITION STATING THAT THE INVESTMENT WAS MADE IN THE INDIVIDUAL CAPACITY WITHOUT CLUBBING TH E INCOME OF THE MINORS IN ANY OF THE STATUS AND TREATED THE INVESTMENT MADE IN THE MUTUAL FUND AS UNEXPLAINED. IN THIS CONNECTION, WE HAVE GONE THROUGH THE FINDINGS OF THE LD. CIT(A) .IN I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 13 HIS FINDINGS THE LD. COMMISSIONER OF INCOME TAX(A) STATED THAT THE ASSESSEE HAD EXPLAINED THAT INVESTMENT OF RS. 37 LACS (NET INVESTMENT AFTER REDEMPTION) IN VARIOUS MUTUAL FUND WAS MADE OUT OF THE FUND OF THERMOTECH PROP - BHADRESH BHAMBROLIA - HUF AND ALSO EARNED CAPITAL GAIN TO THE AMOUNT OF RS. 1,74,347/ - . IT WAS F U RTHER STATED THAT THE SAME COULD NOT BE EXPLAINED BEFORE THE ASSESSING OFFICER AT THE FIRST TIME AS A RESULT THE ASSESSING OFFICER HAD MADE PEAK ADDITION OF INVESTMENT MADE IN THE MUTUAL FUNDS. THE LD CIT(A) ALSO STATED THAT THE ASSESSEE HAD SUBSTANTIVEL Y EXPLAINED THE SOURCE OF INVESTMENT BEING THE FUNDS TAKEN FROM HUF WHICH HAD ITS OWN INCOME AND PRODUCED SUFFICIENT DOCUMENTS IN SUPPORT OF THE SAME.. HE FURTHER ADDED IN HIS FINDINGS THAT AS LONG AS THE SOURCES OF THE INVESTMENTS WERE PROVED, IT HARDLY M ATTER WHETHER THE SAME WAS RECORDED IN THE ASSESSEE'BOOKS OF ACCOUNTS OR NOT. IT WAS FURTHER STATED THAT THE FUNDS WERE RECEIVED AS LOANS FROM HIS HUF, WHICH WERE INVESTED IN THE NAMES OF HIS MINOR CHILDREN. THE REVENUE HAS NOT DISPROVED THESE FACTS AND FINDINGS OF THE LD. CIT(A) THAT SOURCE OF INVESTMENT ARE MADE OUT OF THE FUNDS BELONGING TO THE HUF OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A). 9. IN THE RESULT , THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 09 - 01 - 201 7 SD/ - SD/ - (RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 09 /01/2017 I.T.A NO. 7 15 /RJT /20 14 A.Y. 2006 - 07 PAGE NO D CI T VS. BHADRESHKUMAR VALJIBHAI BAMBROLIA 14 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT