DCIT, Kanpur V. Smt. Sneh Lata Gupta, Kanpur

ITA 735/LKW/2010

• Counselvise Citation: 73523714 RSA 2010
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-04-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 13-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDHINDRA JAIN
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Income from undisclosed sources; Search and seizure; Additional evidence
• Section: 143(3); 153A; 133(6); 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO.735/LKW/2010 ASSESSMENT YEAR:1999-2000 DCIT CENTRAL CIRCLE 1, KANPUR V. SMT. SNEH LATA GUPTA KANPUR PAN:AARPG1916E (APPELLANT) (RESPONDENT) C.O. NO.11/LKW/2011 [ARISING OUT OF ITA NO.735/LKW/2010] ASSESSMENT YEAR:1999-2000 SMT. SNEH LATA GUPTA KANPUR V. DCIT CENTRAL CIRCLE 1, KANPUR (APPLICANT) (RESPONDENT) DEPARTMENT BY: SHRI. PRAVEEN KUMAR, D.R. ASSESSEE BY: SHRI. SUDHINDRA JAIN, C.A. DATE OF HEARING: 26.08.2011 DATE OF PRONOUNCEMENT: 26.08.2011 O R D E R PER N.K. SAINI: THE APPEAL FILED BY THE DEPARTMENT AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 5.10.2010 OF THE LD. CIT(A)-I, KANPUR. :-2-: 2. FIRSTLY WE WILL DEAL WITH THE APPEAL OF THE DEPARTMENT IN ITA NO. 735/LKW/2010. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 3. THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.42,200/- AS UNEXPLAINED CREDIT WITH ANZ GRINDLAYS BANK ON 28/08/1998 IGNORING THE FACT THAT THE ASSESSEE HAS FAILED TO OFFER ANY EXPLANATION BEFORE THE ASSESSING OFFICER DESPITE THE SPECIFIC OPPORTUNITIES GIVEN AND HAS ALSO NOT DISCHARGED HIS ONUS AS PROVIDED U/S.68 OF THE I.T. ACT. 4. THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.10,00,000/- AS UNEXPLAINED ADVANCE TO M/S. M. KUMAR UDYOG IGNORING THE FACT THAT THE ASSESSEE FAILED TO OFFER ANY EXPLANATION BEFORE THE ASSESSING OFFICER DESPITE THE SPECIFIC OPPORTUNITIES GIVEN AND HAS ALSO NOT DISCHARGED HIS ONUS AS PROVIDED U/S.68 OF THE I.T. ACT. 5. THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.40,00,000/- AS UNEXPLAINED GIFT WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE FAILED TO FILE ANY EVIDENCE WITH REGARD TO THE GENUINENESS, AND CREDITWORTHINESS OF THE DONOR BEFORE ASSESSING OFFICER DESPITE THE SPECIFIC OPPORTUNITIES GIVEN. 6. IN DOING SO, THE CIT (A) IGNORED THE DECISION IN THE CASE OF RAJIV TANDON VS. CIT 294 ITR 219 WHICH CLEARLY LAYS THAT THE CONCEPT OF GENUINENESS OF GIFT ALSO INCLUDES THE OCCASION AND HUMAN PROBABILITIES IN PARTING WITH A SUM AS GIFT IN FAVOUR OF ANOTHER. CIT (A) FAILED TO CONSIDER THESE FACTORS WHILE GIVING RELIEF TO THE APPELLANT ON ACCOUNT OF THIS ALLEGED GIFT. 7. THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.2,00,000/- AS BUSINESS IN SHARES IN THE NAME OF M/S. SHAREWALA & COMPANY IGNORING THE FACT THAT THE ASSESSEE HAS :-3-: FAILED TO OFFER ANY EXPLANATION BEFORE THE ASSESSING OFFICER DESPITE THE SPECIFIC OPPORTUNITIES GIVEN. 8. THE CIT (A) ERRED IN ALLOWING THE DISALLOWANCE OF RS.87,681/- AS INTEREST DEDUCTED FROM RENTAL INCOME IGNORING THE FACT THAT THE ASSESSEE HAS FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE OF LOAN TAKEN OR REPAYMENT OF INTEREST BEFORE THE ASSESSING OFFICER DESPITE THE SPECIFIC OPPORTUNITIES GIVEN. 9. IN DOING SO THE CIT (A) HAS ACCEPTED ADDITIONAL EVIDENCES WITHOUT RECORDING PROPER REASONS IN VIOLATION OF RULE 46A OF THE I.T. RULES, 1962. 10. THAT THE ORDER OF THE LD. CIT (A) BEING ERRONEOUS IN LAW AND ON FACTS BE VACATED AND THE ORDER OF THE AO BE RESTORED. 11. THAT THE APPELLANT CRAVES LEAVE TO AMEND ANY ONE OR MORE OF THE GROUNDS OF THE APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOING SO MAY ARISE. 3. GROUND NO. 1 RELATES TO THE DELETION OF ADDITION OF ` 42,200 MADE BY THE ASSESSING OFFICER. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT A SEARCH AND SEIZURE OPERATION UNDER SECTION 132(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) WAS CONDUCTED ON 1.12.2004 AT THE BUSINESS PREMISES OF SHRI. AMAR NATH GUPTA GROUP CASES TO WHICH ASSESSEE BELONGS. THE FOLLOWING ASSETS WERE FOUND AND SEIZED IN RESPECT OF THE ASSESSEE:- CASH (RS.) JEWELLERY ( RS. ) SI. NO. NAME & ADDRESS OF THE PERSONS FROM WHOM SEIZED FOUND SEIZED FOUND SEIZED 1 SHRI AMAR NATH GUPTA & SMT. SNEH LATA GUPTA 203, RATAN APARTMENT, SWAROOP NAGAR, KANPUR 1014220 944900 1968562 (REVALUED) 1346974 (REVALUED ) :-4-: 2 LOCKER NO. 233, WITH PUNJAB & SIND BANK, GUMTI NO.05 KANPUR 200000 200000 1048898 885652 4. THE ASSESSING OFFICER PROVIDED THE SEIZED RECORDS TO THE ASSESSEE AND ISSUED NOTICE UNDER SECTION 153A OF THE ACT CALLING UPON THE ASSESSEE TO FILE THE RETURN OF INCOME. IN RESPONSE TO THAT, THE ASSESSEE FILED RETURN OF INCOME UNDER SECTION 153A OF THE ACT ON 16.6.2006 DECLARING AN INCOME OF ` 1,26,760. IN THE AUDITED PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAD SHOWN SALE AND BROKERAGE AMOUNTING TO ` 2,41,85,739 AND ` 4,55,331 RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE AUDITOR IN HIS REPORT UNDER SECTION 142(2A) HAS STATED THAT THE ASSESSEE HAD NOT PROVIDED DETAILS IN RESPECT OF CREDIT OF ` 42,200 ON 28.8.1998 IN ANZ GRINDLAYS BANK. THE ASSESSING OFFICER ALSO MENTIONED THAT THE ASSESSEE HAD FILED REPLY WITH REFERENCE TO THE DISCREPANCIES POINTED OUT BY THE AUDITOR BUT HAD NOT PROVED THE SAID CREDIT OF ` 42,200 FROM VIKAS GUPTA. HE, THEREFORE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER:- 'THE APPELLANT RECEIVED GIFT OF 1000 USD FROM HER NEPHEW SHRI VIKAS GUPTA, PERMANENTLY SETTLED IN U.S.A. AND BY PROFESSION SOFTWARE ENGINEER. SHRI VIKAS GUPTA OUT OF NATURAL LOVE AND AFFECTION SENT A GIFT OF 1000 USD TO HIS AUNT SMT. SNEH LATA GUPTA, WHICH WAS COLLECTED IN THE SAVING BANK ACCOUNT WITH ANZ GRINDLAYS BANK KANPUR, ON 31.07.98, IN INDIAN CURRENCY EQUIVALENT TO RS.42,200.' :-5-: 6. THE ASSESSEE ALSO FILED COPY OF PAY-IN SLIP CONFIRMING THE GIFT OF 1000 USD AND HER BANK STATEMENT AS ADDITIONAL EVIDENCE VIDE APPLICATION DATED 20.11.2007. THE LD. CIT(A) ASKED REMAND REPORT FROM THE ASSESSING OFFICER WHO FORWARDED THE REPORT IN RESPECT OF THE ADDITION OF ` 42,200 IN WHICH HE HIMSELF SAID THAT THE ABOVE ENTRY IS VERIFIABLE FROM THE DOCUMENTS SUBMITTED IN THIS REGARD. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER DELETED THE ADDITION. 7. NOW THE DEPARTMENT IS IN APPEAL. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT THE ASSESSING OFFICER IN PARA 4 OF THE REMAND REPORT DATED 5.2.2010, WHICH IS PLACED AT PAGES 1 TO 3 OF THE ASSESSEES COMPILATION, STATED AS UNDER:- 4. AS REGARDS ADDITION OF RS.42,200/- BEING CREDIT ENTRY IN THE BANK ACCOUNT ON 28.08.1998 IN THE ANZ GRINDLAYS BANK, ASSESSEE HAS FILED COPY OF CHEQUE DEPOSIT SLIP AND COPY OF BANK ACCOUNT AS 'ADDITIONAL EVIDENCE'. ON PERUSAL OF THESE DOCUMENTS, IT IS NOTICED THAT CHEQUE/DRAFT OF 1000 US DOLLAR FROM SHRI VIKAS GUPTA AND SMT. SAMTA GUPTA WAS DEPOSITED AND THE SAME WAS REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE IN TERM OF INDIAN RUPEES AMOUNTING TO RS.42,200/-. 9. SINCE THE ASSESSING OFFICER HIMSELF HAD STATED IN THE REMAND REPORT THAT THE AMOUNT WAS REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE AND HAD NOT GIVEN ANY ADVERSE COMMENT, THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 10. VIDE GROUND NO. 2, THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF ` 10 LAKHS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED ADVANCE TO M/S M. KUMAR UDYOG. THE FACTS RELATED TO THIS :-6-: ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER MADE THIS ADDITION BY OBSERVING AT PAGES 3 AND 4 OF THE ASSESSMENT ORDER DATED 24.8.2007 AS UNDER:- THE ASSESSEE HAS FILED COPY OF CONFIRMATION A/C WHICH EXPLAINS THAT A SUM OF RS.10 LACS WAS GIVEN BY THE ASSESSEE TO M.K. UDYOG ON 08.01.1999. THE ASSESSEE WAS REQUIRED TO FILE DETAILS OF LOANS AND ADVANCES GIVEN AND TAKEN. AS PER PARA 5 OF REPLY OF 25.11.06 THE COPIES OF SUCH A/C HAVE BEEN ENCLOSED AS ANNEXURE'. THE ANNEXURE CONTAINS THE COPIES OF A/C WITH SHALINI AGARWAL, KESHAV FINCON AND NIDHI AGARWAL. COPY OF A/C M.K. UDYOG HAS NOT BEEN FILED. THIS HAS NOT BEEN REFLECTED BY SPECIAL AUDITOR IN HIS REPORT. THERE IS NO EXPLANATION FOR THE SOURCE OF LOANS ADVANCED. AS SUCH THE SAME WILL BE ADDED AS INCOME FROM UNDISCLOSED SOURCES. 11. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM IS INCORPORATED IN PARA 21 OF THE IMPUGNED ORDER WHICH READS AS UNDER:- 'THE APPELLANT GIVEN A LOAN OF RS.10 LAC TO M.KUMAR UDYOG LTD., KANPUR THROUGH CHEQUE NO. 516536 DATED 23.1.99 DRAWN ON ANZ BANK ON 23.01.99. APPELLANT HAS FILED COPY OF BANK ACCOUNT OF M. KUMAR UDYOG WITH P.N.B. RAIL BAZAR, KANPUR ALONGWITH THE CONFIRMATION AS ADDITIONAL EVIDENCE VIDE SEPARATE APPLICATION DATED 20.11.2007. 12. THE LD. CIT(A) ASKED REMAND REPORT FROM THE ASSESSING OFFICER. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER, DELETED THE ADDITION BY OBSERVING IN PARA 23 OF THE IMPUGNED ORDER AS UNDER:- 23. THE AO HAS CONDUCTED INDEPENDENT ENQUIRY U/S 133(6) OF THE ACT, IN COMPLIANCE OF THAT M/S M. KUMAR UDYOG HAS FILED CONFIRMATORY LETTER AND BANK ACCOUNT, COPY OF LEDGER OF :-7-: APPELLANT IN THEIR BOOKS OF ACCOUNT, BALANCE SHEET AND AUDITED PROFIT AND LOSS ACCOUNT, IN WHICH HE HIMSELF SAID THAT THE ABOVE ENTRY IS VERIFIABLE FROM THE DOCUMENTS SUBMITTED IN THIS REGARD. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.10,00,000/-. THUS, GROUND NO. I)(C) OF APPEAL IS ALLOWED. 13. NOW THE DEPARTMENT IS IN APPEAL. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT THE ASSESSING OFFICER VIDE PARA 3 OF THE REMAND REPORT DATED 5.2.2010 SUBMITTED TO THE LD. CIT(A) AS UNDER:- 3. INDEPENDENT INQUIRIES U/S 133(6) OF INCOME TAX ACT, 1961 WAS MADE VIDE THIS OFFICE LETTER DATED 15.09.2008 DIRECTLY FROM THE PARTY. IN COMPLIANCE TO NOTICE U/S 133(6) OF INCOME TAX ACT, 1961, M/S M. KUMAR UDYOG, KANPUR HAS FILED COPY OF CONFIRMATORY LETTER WITH COPIES OF BANK ACCOUNTS, COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT, COPY OF INTIMATION U/S 143(1) OF INCOME TAX ACT, 1961 & COPY OF ACKNOWLEDGEMENT OF INCOME TAX RETURN, COPY OF AUDIT REPORT WITH BALANCE-SHEET & PROFIT & LOSS ACCOUNT AND THE SAME IS VERIFIABLE. 15. FROM THE AFORESAID PARA 3 OF THE REMAND REPORT OF THE ASSESSING OFFICER, IT WOULD BE CLEAR THAT HE MADE INDEPENDENT ENQUIRIES UNDER SECTION 133(6) OF THE ACT AND FOUND THE AMOUNT IN QUESTION AS VERIFIABLE. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE IMPUGNED ADDITION. WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 16. NEXT ISSUE VIDE GROUNDS NO.3 AND 4 RELATES TO THE DELETION OF ADDITION OF ` 40 LAKHS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED GIFT. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER MADE :-8-: THE IMPUGNED ADDITION BY OBSERVING AT PAGE 4 OF THE ASSESSMENT ORDER DATED 24.8.2007 AS UNDER:- AS PER ANNEXURE LP-3 (PAGE 33 & 34) SEIZED FROM PREMISES NO.123/21F KALPI ROAD, KANPUR IT IS REVEALED THAT ASSESSEE HAS RECEIVED A SUM OF RS.40,00,000 AS GIFT FROM SHRI PRAKASH NARAIN AGARWAL. WHEN REQUIRED TO EXPLAIN, THE ASSESSEE HAS FILED WRITTEN REPLY IN THE FORM OF 'ANALYSIS OF SEIZED MATERIAL' STATING THAT THE SAID GIFT IS MADE BY THE DONOR OUT OF HIS PERSONAL SOURCES AND INCOME DESPITE SUFFICIENT OPPORTUNITY AFFORDED, THE ASSESSEE HAS NOT FILED ANY EVIDENCE WITH REGARD TO THE GENUINENESS OF TRANSACTION, IDENTITY AND CREDITWORTHINESS OF THE DONOR. AS SUCH, THE SAME WILL BE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 17. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM AS INCORPORATED IN PARA 26 OF THE IMPUGNED ORDER READS AS UNDER:- 'THE APPELLANT HAS RECEIVED GIFT OF RS.40 LAC FROM SHRI PRAKASH NARAIN AGARWAL. WITH REGARD TO THIS APPELLANT HAS SUBMITTED THE FOLLOWING DOCUMENTS IN THE COURSE OF ASSESSMENT PROCEEDING BEFORE THE LD. AO : A) GIFT LETTER (MEMORANDUM OF GIFT) DATED 05.02.1999. B) COPY OF ASSESSMENT ORDER IN THE CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 1999-2000 PASSED U/S 143(3)/148 OF THE INCOME TAX ACT,1961 DATED 07.06.2002, WHEREIN THE LD. AO HAS HIMSELF ACCEPTED THE GIFT OF RS.40,00,000/- RECEIVED FROM SHRI PRAKASH NARAIN AGARWAL (QUOTE). :-9-: '......DETAILS OF GIFTS RECEIVED FROM SHRI PRAKASH NARAIN AGARWAL, PUKHRAYAN, KANPUR DEHAT ALONG WITH VDIS CERTIFICATE AND RELEVANT BANK ACCOUNT WERE PRODUCED BEFORE ME AND THEY WERE OPEN TO VERIFICATION. THERE BEING NO INFIRMITY IN THE RECEIPTS OF GIFT, THE SAME IS ACCEPTED.....' C) COPY OF ACKNOWLEDGEMENT RECEIPT OF INCOME TAX RETURN FOR THE ASSESSMENT YEAR 1999-2000 FILED BY DONOR SHRI PRAKASH NARAIN AGARWAL ON 29.09.99 IN WARD 1(2) KANPUR. D) COPY OF BALANCE SHEET OF SHRI PRAKASH NARAIN AGARWAL AS ON 31.03.1998. E) COPY OF BANK ACCOUNT OF THE DONOR SHRI PRAKASH NARAIN AGARWAL WITH STATE BANK OF INDIA WHERE FROM THE GIFT WAS GIVEN. IT IS ALSO RELEVANT TO NOTE THAT EVEN THE EARLIER ASSESSMENT DATED 07.06.2002, WAS AFTER REOPENING OF ASSESSMENT UNDER SECTION 148 OF THE I.T. ACT, 1961. IT GOES WITHOUT SAYING THAT ALL THE FACTS AND MATERIAL WERE THOROUGHLY EXAMINED AND AFTER DETAILED SCRUTINY ONLY THE GIFT OF RS.40,00,000/- FROM SHRI PRAKASH NARAIN AGARWAL WAS ACCEPTED. IT IS HUMBLY SUBMITTED THAT ONCE A ISSUE IS CONCLUDED AFTER PROPER ANALYSIS OF FACTS AND APPRECIATION OF EVIDENCE ON RECORD THE SAME CAN NOT BE AGAIN SUBJECTED TO DISBELIEF WITHOUT FRESH OR NEW EVIDENCE OR INFORMATION. RELIANCE IN THIS REGARD IS PLACED ON C.I.T. V. SUN ENGINEERING WORKS (P) LTD. 198ITR 297 (SC). :-10-: 18. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY OBSERVING IN PARA 27 OF THE IMPUGNED ORDER AS UNDER:- 27. SINCE THE APPELLANT HAS FILED ALL THE RELEVANT DOCUMENTS REGARDING THE GIFT OF RS.40 LACS ALONGWITH THE EARLIER ASSESSMENT ORDER, AO HAS MADE THE ADDITION WITHOUT ANY BASIS OR IN ABSENCE OF ANY CLINCHING EVIDENCE AND AO HAS ALSO NOT MADE ANY ADVERSE REMARK IN THE REPORT, IN THE LIGHT OF ABOVE DECISION OF HON'BLE SUPREME COURT GIVEN BY THE APPELLANT IS APPLICABLE AND AO IS DIRECTED TO DELETE THE ADDITION OF RS.40,00,000/-. THUS, GROUND NO. I)(D) OF APPEAL IS ALLOWED. 19. NOW THE DEPARTMENT IS IN APPEAL. 20. THE LD. D.R. SUBMITTED THAT THE ASSESSEE DID NOT FURNISH DOCUMENTARY EVIDENCE BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS, THEREFORE, THE ADDITION WAS RIGHTLY MADE AND THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 21. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO PAGE 5 OF THE ASSESSEES COMPILATION WHICH IS A COPY OF THE ORDER SHEET OF THE ASSESSING OFFICER DATED 10.8.2007 AND STATED THAT THE ASSESSING OFFICER HIMSELF HAD ADMITTED THAT THIS ISSUE WAS CONSIDERED IN THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED 7.6.2002, THEREFORE, THERE WAS NO OCCASION TO MAKE THE ADDITION. HE ALSO REFERRED TO PAGE 8 OF THE ASSESSEES COMPILATION WHICH IS COPY OF THE ASSESSMENT ORDER DATED 7.6.2002 FOR ASSESSMENT YEAR 1999-2000 PASSED UNDER SECTION 143(3)/148 OF THE ACT AND SUBMITTED THAT THIS ISSUE WAS EXAMINED BY THE ASSESSING OFFICER AND GIFT WAS CONSIDERED AS GENUINE. HE, THEREFORE, SUBMITTED THAT :-11-: THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ARBITRARY ADDITION MADE BY THE ASSESSING OFFICER. 22. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT THE THEN ASSESSING OFFICER WHILE FRAMING THE ORIGINAL ASSESSMENT UNDER SECTION 143(3)/148 OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ACCEPTED THE GIFTS RECEIVED FROM SHRI PRAKASH NARAIN AGARWAL, PUKHRAYAN, KANPUR DEHAT AS GENUINE AND NO ADDITION WAS MADE. THE RELEVANT FINDINGS GIVEN IN PARA 3 PAGE 1 OF THE ASSESSMENT ORDER DATED 7.6.2002 READ AS UNDER:- DETAILS OF GIFTS RECEIVED FROM SHRI. PRAKASH NARAIN AGARWAL, PUKHRAYAN, KANPUR DEHAT ALONG WITH VDIS CERTIFICATE AND RELEVANT BANK ACCOUNT WERE PRODUCED BEFORE ME AND THEY WERE OPEN TO VERIFICATION. THERE BEING NO INFIRMITY IN THE RECEIPTS OF GIFT, THE SAME IS ACCEPTED. 23. THE PRESENT ASSESSING OFFICER ALSO IN THE ORDER SHEET DATED 10.8.2007 AND 20.8.2007 MENTIONED AS UNDER:- 7.6.2007: SHRI. ANURAG GUPTA, FCA APPEARED. FILES, COPIES OF ACCOUNT, CASH FLOW STATEMENT, EVIDENCE IN SUPPORT OF GIFT OF ` 40,00,000 FROM SHRI. PRAKASH NARAIN AGRAWAL I.E. MEMORANDUM OF GIFT AND ASSESSMENT ORDER UNDER SECTION 143(3) OF INCOME-TAX ACT, 1961 DATED 7.6.2002 OF THE ASSESSING OFFICER WHO HAD ACCEPTED THE GIFT. SHRI. ANURAG GUPTA ALSO FILED EXPLANATION AND COMMENTS ON THE SPECIAL AUDIT REPORT. HE IS REQUIRED TO MAKE FULL COMPLIANCE ON THE NEXT DATE OF HEARING WHICH IS FIXED ON 20.8.07. 20.8.07: SHRI. ANURAG GUPTA, FCA APPEARED. CASE WAS DISCUSSED. :-12-: 24. FROM THE ABOVE NOTED FACTS, IT IS CLEAR THAT THE ASSESSEE FURNISHED ALL THE RELEVANT DOCUMENTS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE THEN ASSESSING OFFICER ACCEPTED THE GIFTS RECEIVED BY THE ASSESSEE AMOUNTING TO ` 40 LAKHS FROM SHRI. PRAKASH NARAIN AGARWAL AS GENUINE GIFT AND THE PRESENT ASSESSING OFFICER ALSO IN THE ORDER SHEET MENTIONED THIS FACT THAT THOSE GIFTS AMOUNTING TO ` 40 LAKHS FROM SHRI. PRAKASH NARAIN AGARWAL WERE ACCEPTED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 7.6.2002. SINCE THE ASSESSEE FURNISHED ALL THE NECESSARY DOCUMENTS IN SUPPORT OF HER CLAIM IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEE WHILE FRAMING ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 7.6.2002, THERE WAS NO OCCASION FOR THE PRESENT ASSESSING OFFICER TO CONSIDER THE SAME GIFT AS NON-GENUINE WHICH WAS EARLIER CONSIDERED AS GENUINE AFTER PROPER VERIFICATION. WE, THEREFORE, ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 25. THE NEXT ISSUE VIDE GROUND NO. 5 RELATES TO THE DELETION OF ADDITION OF ` 2 LAKHS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BUSINESS IN SHARES IN THE NAME OF M/S SHAREWALA & COMPANY. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER WHILE MAKING THIS ADDITION OBSERVED THAT THE ASSESSEE WAS DOING BUSINESS IN SHARES IN THE NAME OF M/S SHAREWALA & COMPANY FROM WHICH THE INCOME FOR BUSINESS HAS BEEN SHOWN AT ` 86,277. HE FURTHER OBSERVED THAT THE AUDITOR WHILE SUBMITTING THE REPORT UNDER SECTION 142(2A) HAS STATED THAT DUE TO NON-AVAILABILITY OF DOCUMENTS AND RELEVANT RECORDS, REPORT HAS BEEN PREPARED ON THE BASIS OF INFORMATION PROVIDED IN THESE FACTS AND THE INCOME HAS TO BE ESTIMATED. THE ASSESSING OFFICER ESTIMATED THE INCOME AT ` 2 LAKHS FROM M/S SHAREWALA & COMPANY IN THE HANDS OF THE ASSESSEE. :-13-: 26. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE, AS INCORPORATED IN PARA 30 OF THE IMPUGNED ORDER ARE AS UNDER:- 'DURING THE FINANCIAL 1998-99 THE APPELLANT WAS THE PROPRIETOR OF M/S SHAREWALA & CO. AND WAS DOING BUSINESS IN U.P. STOCK EXCHANGE (U.P.S.E.A. LTD.). THE APPELLANT HAD MAINTAINED PROPER BOOKS OF ACCOUNT AND FILED AUDITED ACCOUNTS OF THE SAID CONCERN ALONG WITH THE RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000. THE A. O. WITHOUT FINDING ANY MISTAKE OR DEFECT IN BOOKS OF ACCOUNT, REJECTED THE TRADING RESULT WITHOUT INVOKING THE PROVISIONS OF SECTION 145 AND ESTIMATED NET PROFIT FROM THE BUSINESS AT RS.200000/- AS AGAINST RS.86277.42 SHOWN BY APPELLANT. THERE IS ABSOLUTELY NO BASIS FOR ASSESSMENT OF PROFIT WITHOUT PROPER MATERIAL, EVIDENCE OR BASIS, HENCE THE ADDITION OF RS.113723.00 IS UNWARRANTED AND DESERVES TO BE DELETED. ' 27. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT IN THE ABSENCE OF ANY DISCRIMINATING DOCUMENTS OR EVIDENCE MERELY ON THE BASIS OF SUSPICION, THE TRADING RESULTS OF BUSINESS COULD NOT BE DISTURBED AS THE ASSESSEE HAD SUBMITTED THE AUDITED BALANCE SHEET, THEN ESTIMATION OF PROFIT WAS NOT JUSTIFIED. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 2 LAKHS. 28. NOW THE DEPARTMENT IS IN APPEAL. 29. THE LD. D.R. SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE AT PAGE 3 OF THE ASSESSMENT ORDER DATED 24.8.2007. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). :-14-: 30. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE ASSESSEE WAS MAINTAINING THE BOOKS OF ACCOUNT AND AUDITED ACCOUNTS OF THE SAID FIRM WERE FURNISHED BEFORE THE ASSESSING OFFICER. THIS FACT IS CLEAR FROM THE OBSERVATIONS OF THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER DATED 24.8.2007 WHEREIN THE ASSESSING OFFICER NOTED AS UNDER:- THE ASSESSEE FILED HER RETURN OF TOTAL INCOME U/S 153-A OF INCOME TAX ACT, 1961 DISCLOSING TOTAL INCOME OF RS.1,26,760/- ON 16.06.2006. THE ASSESSEE IS ENGAGED IN BUSINESS OF SHARES UNDER NAME & STYLE OF M/S SHAREWALA & COMPANY APART FROM INCOME UNDER THE HEAD HOUSE PROPERTY & DIVIDEND & INTEREST. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED COPIES OF AUDITED PROFIT & LOSS ACCOUNT & BALANCE SHEET. IN THE AUDITED PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS SHOWN SALE AND BROKERAGE AMOUNTING TO RS.2,41,85,739/- AND RS.4,55,331/- RESPECTIVELY. 31. FROM THE ABOVE OBSERVATIONS, IT IS CRYSTAL CLEAR THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FILED COPIES OF AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF M/S SHAREWALA & COMPANY AND NO DISCREPANCY HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN THOSE BOOKS OF ACCOUNT. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER WAS MERELY ON SURMISES AND CONJECTURES WHICH IS NOT TENABLE BECAUSE THE TRADING RESULTS OF BUSINESS CAN ONLY BE DISTURBED WHEN SOME DISCREPANCY OR FLAW IS POINTED OUT AND SINCE THE ASSESSING OFFICER HAD POINTED OUT NO DISCREPANCY IN THE AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE, THE ADDITION WAS NOT JUSTIFIED. THEREFORE, THE LD. CIT(A) RIGHTLY DELETED THE SAME, AS SUCH WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. :-15-: 32. THE NEXT ISSUE VIDE GROUND NO. 6 RELATES TO THE DELETION OF ADDITION OF ` 86,681 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST DEDUCTED FROM RENTAL INCOME. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER MADE THIS ADDITION BY OBSERVING AT PAGE 4 OF THE ASSESSMENT ORDER DATED 24.8.2007 AS UNDER:- THE ASSESSEE HAS CLAIMED A SUM OF RS.87,681/- AS INTEREST PAID OUT OF THE RENTAL INCOME OF RS.70,151/- WORKED OUT AFTER WATER TAX AND ONE FOURTH FOR REPAIR ETC. THE ASSESSEE HAS NOT GIVEN ANY DETAILS OF LOANS TAKEN NOR THE INTEREST PAID. IN FACT, THE ASSESSEE HAS NOT DISCUSSED ANYWHERE WHILE GIVING THE DETAILS, THE DETAILS OF LOANS TAKEN FOR THE PROPRIETARY BUSINESS AS ALSO INDIVIDUAL CAPACITY. THE ASSESSEE, IN FACT, HAS NOT CLAIMED IT IN THE SUBSEQUENT YEAR I.E. A.Y. 2000-01. THERE ARE NO DETAILS OF REPAYMENT OF LOANS ALSO SHOWN IN THE YEAR. IN THE ABSENCE OF THE EVIDENCE OF TAKING LOAN, FOR USE IN ACQUIRING THE RELATED PROPERTY AND IN THE ABSENCE OF EVIDENCE OF PAYMENT OF INTEREST THE SAME WILL BE DISALLOWED. 33. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM AS INCORPORATED IN PARA 34 OF THE IMPUGNED ORDER READS AS UNDER:- 'THE APPELLANT HAS TAKEN VARIOUS LOANS FOR THE PURPOSE OF CONSTRUCTION OF PROPERTY SITUATED AT 123/1-F KALPI ROAD, KANPUR. SAID PROPERTY IS LET OUT AND INCOME DERIVED FROM THERE HAS BEEN SHOWN AS INCOME FROM HOUSE PROPERTY AND OFFERED FOR TAX. APPELLANT CLAIMED THE INTEREST PAID OF RS.87681/- AGAINST THE GROSS TOTAL INCOME U/S 24(B) OF THE INCOME TAX ACT, 1961, AGAINST THE GROSS RENTAL INCOME. THE ID. AO DISCUSSED THE FACTS ON PAGE 4 OF THE ORDER AND ALLEGEDLY IN THE :-16-: ABSENCE OF EVIDENCE TO SHOW THAT THE BORROWED FUNDS WERE USED FOR THE PURPOSE OF CONSTRUCTION OF PROPERTY, DISALLOWED THE CLAIM OF APPELLANT. IN EARLIER YEARS ALSO THE INTEREST PAID ON BORROWED FUNDS WAS CLAIMED AND ALLOWED U/S 24(B) OF THE I.T. ACT, 1961. COPIES OF LOAN A/C SHOWING OPENING BALANCE AND PAYMENT OF INTEREST AS WELL AS PRINCIPAL AMOUNT DURING THE F. Y. 1998-99 ARE ATTACHED MARKED AS ANNEXURE 4 FOR YOUR HONOURS READY REFERENCE. IN THE LIGHT OF ABOVE FACTS AND THE PROVISIONS OF LAW, YOUR HONOUR MAY BE PLEASED TO DELETE THE DISALLOWANCE MADE BY THE ID. AO. ' 34. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT AFTER VERIFYING THE DOCUMENTS SUBMITTED BY THE ASSESSEE, THE CONTENTION WAS FOUND TO BE CORRECT. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 35. NOW THE DEPARTMENT IS IN APPEAL. 36. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES. IT SEEMS THAT THE CLAIM OF THE ASSESSEE ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS USED FOR THE PURPOSES OF CONSTRUCTION OF PROPERTY WAS ALLOWED IN THE PRECEDING YEAR. THE ASSESSEE FURNISHED COPIES OF LOAN ACCOUNT SHOWING OPENING BALANCE AND PAYMENT OF INTEREST FOR THE YEAR UNDER CONSIDERATION BEFORE THE LD. CIT(A) WHO VERIFIED FROM THE DOCUMENTS THAT THE CLAIM OF THE ASSESSEE WAS JUSTIFIED. IN OUR OPINION, WHEN THE ASSESSEE UTILIZED THE BORROWED FUNDS FOR THE PURPOSE OF CONSTRUCTION OF PROPERTY AND CLAIM FOR PAYMENT OF INTEREST WAS ACCEPTED IN THE EARLIER YEAR UNDER SECTION 24(B) OF THE ACT, THERE WAS NO OCCASION TO MAKE DISALLOWANCE FOR THE YEAR UNDER :-17-: CONSIDERATION. WE, THEREFORE, DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 37. VIDE GROUND NO. 7, THE GRIEVANCE OF THE DEPARTMENT IS THAT THE LD. CIT(A) HAD ACCEPTED ADDITIONAL EVIDENCE WITHOUT RECORDING PROPER REASONS. IT IS NOTICED THAT THE LD. CIT(A) ASKED REMAND REPORT FROM THE ASSESSING OFFICER WHEN NEW EVIDENCES WERE FURNISHED BY THE ASSESSEE AND THE ASSESSING OFFICER GAVE HIS COMMENTS VIDE REMAND REPORT DATED 5.2.2010 WHICH IS PLACED AT PAGES 1 TO 3 OF THE ASSESSEES COMPILATION. THEREFORE, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 38. GROUNDS NO.8 AND 9 ARE GENERAL IN NATURE, SO DO NOT REQUIRE ANY SPECIFIC COMMENTS ON OUR PART. 39. AS REGARDS, CROSS OBJECTION NO.11/LKW/2011 FILED BY THE ASSESSEE IS CONCERNED, DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE CROSS OBJECTION AND GAVE IN WRITING AS UNDER:- CO NOT PRESSED. SUDHINDRA JAIN (COUNSEL) 40. IN VIEW OF THE ABOVE, CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 41. IN THE RESULT, APPEAL OF THE DEPARTMENT AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 26.08.2011) SD/- SD/- [H. L. KARWA] [ N. K. SAINI] VICE PRESIDENT ACCOUNTANT MEMBER DATED:26.8.2011 JJ:2608 :-18-: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR