SHRI MAHENDRA KUMAR AGRAWAL, Indore V. THE ACIT-1(1), Indore

ITA 742/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5914 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MOURYA
• Assessee Lawyers: S N AGRAWAL; PANKAJ MONGRACA
• Keywords: Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T.GARASIA, HON'BLE JUDICIAL MEMBER AN D SHRI N.S. SAINI, HONBLE ACCOUNTANT MEMBER ITA NO. 742/IND/2015 (ASST. YEAR : 2011-12) SHRI MAHENDRA KUMAR AGRAWAL, PROP.BALAJI BOREWELL, INDORE. VS. ACIT, 1(1), UJJAIN PAN NO. ABNPA3673R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N.AGRAWAL AND SH PANKAJ MONGRA,CA DEPARTMENT BY : SHRI R.P.MOURYA, DR DATE OF HEARING : 05/07/2016. DATE OF PRONOUNCEMENT : 05/07/2016. O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), UJJAIN, DATED 26.10.2015. 2. GROUND NO. 1 OF THE APPEAL IS OF GENERAL NATURE AND HENCE REQUIRES NO SEPARATE ADJUDICATION BY US. 3. IN GROUND NO.2 OF THE ASSESSEE, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION MA DE BY THE AO ON ACCOUNT OF INTEREST PAID ON EMI FOR PURCHASE OF VEH ICLES OF RS. -: 2:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 39,47,854/- BY INVOKING PROVISIONS OF SECTION 40(A) (IA) OF THE INCOME- TAX ACT, 1961, FOR NON-DEDUCTION OF TDS. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE AO OBSE RVED THAT THE ASSESSEE HAS MADE PAYMENT OF EMI FOR PURCHASE OF VE HICLES TO THE FOLLOWING PARTIES :- S.NO. NAME OF THE FINANCE COMPANY AMOUNT (RS.) 1. CITICORP FINANCE P. LIMITED 6,05,675 2. SERI FINANCE 13,95,596 3. L & T FINANCE 7,60,284 4. MAGNA FINANCE 5,08,035 5. RELIGARE FINVEST LIMITED 6,78,264 TOTAL RS. 39,47,854 5. SINCE THE ASSESSEE FAILED TO DEDUCT TDS FROM THE PAYMENTS MADE TO THE ABOVE PARTIES ON ACCOUNT OF INTEREST PAYMENT , THE AO MADE DISALLOWANCE OF RS. 39,47,854/- BY INVOKING PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS FROM THE PAYMENT OF INTEREST MADE BY THE ASSESSEE. 6. BEING NOT SATISFIED WITH THE ORDER OF THE AO, THE A SSESSEE FILED THE APPEAL BEFORE THE CIT(A). THE ASSESSEE CONTENDED TH AT SINCE NO AMOUNT WAS OUTSTANDING PAYABLE TO THE ABOVE PARTIES AS AT THE END OF THE YEAR ON 31 ST MARCH, 2011, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS FROM THE PAYMENTS MADE TO THE FIVE PARTIES DURING THE YE AR UNDER CONSIDERATION. 7. THE ASSESSEE RELIED ON THE DECISION OF HON'BLE A LLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVIC E (P) LIMITED, (2013) 38 TAXMANN.COM 77 (ALL), WHERE THE HON'BLE ALLAHABA D HIGH COURT AFFIRMING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF -: 3:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 MERILYN SHIPPING HELD THAT DISALLOWANCE U/S 40(A)(I A) OF THE ACT, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAI D DURING THE YEAR. 8. THE LD. CIT(A) RELYING ON THE DECISION OF HON'BL E KOLKATA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORTS SYNDI CATE, (2013) 33 TAXMANN.COM 250 (KOL) AND ALSO THE C.B.D.T. CIRCULA R NO. 10/DV/2013 DATED 16.12.2013 CONFIRMED THE ORDER OF THE AO HOLD ING THAT THE TERM PAYABLE WOULD INCLUDE AMOUNTS WHICH ARE PAID DUR ING THE PREVIOUS YEAR. 9. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE CIT(A) AN D FURTHER SUBMITTED THAT ALL THE FINANCE COMPANIES ARE LIMITED LISTED C OMPANIES AND THE AMOUNT OF INTEREST INCLUDED IN THE FIGURE OF THEIR EMI WAS DULY OFFERED FOR TAX BY ALL THESE COMPANIES. HENCE, AS PER SECON D PROVISO TO SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT AND THE DATE OF FILING OF RETURN OF INCOME BY THE PAYEE COMPANIES HAS BEEN TREATED AS THE DATE OF PAYMENT OF TDS BY THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE HAS TAKEN THIS PLEA BEFORE THE CIT(A) AND IT WAS FURTHER SUBMITTED THAT COPY OF CERTIFICATE OF CHARTERED ACCOUNTANTS OF THE COMPANIES WAS OBTAINED BY THE ASSESSEE AND THE SAME WERE ALSO FILED BEFORE THE CIT(A), EVI DENCING THAT THE INTEREST INCOME EMBEDDED IN THE EMI PAID TO THE COM PANIES WAS OFFERED TO TAX BY THE COMPANIES. IT WAS ARGUED THAT THE CI T(A) HAS NOT WHISPERED IN HIS ORDER ABOUT THE EVIDENCES AND ARGU MENTS OF THE ASSESSEE WHILE DISMISSING THE GROUND OF APPEAL OF T HE ASSESSEE. -: 4:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 10. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE ORDERS OF THE LOWER AUTHORITIES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE AO OBSERVED FROM T HE RETURN OF INCOME FILED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE PA YMENT OF INTEREST OF RS.39,47,854/- TO FIVE FINANCE COMPANIES WITHOUT DE DUCTING TDS THEREON AND ,SO, HE , BY INVOKING PROVISIONS OF SEC TION 40(A)(IA) OF THE ACT DISALLOWED THE DEDUCTION OF RS. 39,47,854/- AND MADE ADDITION OF THE SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF HON'BLE KOLKATA HIGH COUR T IN THE CASE OF CIT VS. CRESCENT EXPORTS SYNDICATE, (2013) 33 TAXMANN.C OM 250 (KOL) AND THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF CIT VS. SIKANDARKHAN N.TUNVAR, (2013) 33 TAXMANN.COM 133 (GUJ) AND THE CBDT CIRCULAR NO. 10/DV/2013 DATED 16.12.2013 CONFI RMED THE ADDITION MADE BY THE AO HOLDING THAT THE TERM PAYA BLE WOULD INCLUDE AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR. TH E LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS CONTENDED THAT T HE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICE (P) LIMITED, (2013) 38 TAXMANN.COM 77 (ALL) IS IN FAVOUR OF THE ASSESSEE WHERE THE HON'BLE HIGH COURT HAS HELD THAT FOR DISALLOWANCE U/S 40(A)(IA) OF THE ACT, THE AMOUNT SHOULD BE PAYA BLE AND NOT WHICH HAS BEEN PAID DURING THE YEAR. IT IS CONTENDED BY T HE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT WHEN THERE ARE TWO CONTRARY -: 5:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 DECISIONS OF THE HIGH COURT, NONE OF WHICH IS OF JU RISDICTIONAL HIGH COURT, THEN THE ESTABLISHED POSITION OF LAW IS THAT THE DECISION OF THE HON'BLE HIGH COURT WHICH IS IN FAVOUR OF THE ASSESS EE SHOULD BE FOLLOWED. THE LD. CIT(A) BY NOT DOING SO HAS VIOLAT ED THIS SETTLED POSITION OF LAW. 12. WE FIND THAT RECENTLY, THE RAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF R.K.P.COMPANY VS. ITO, IN I.T.A.NO. 106/RPR/2016 FOR ASSESSMENT YEAR 2010-11 ORDER DATED 24 TH JUNE, 2016, IS IN FAVOUR OF THE ASSESSEE, WHEREIN IT WAS HELD AS UNDER :- THE DIFFICULTY ARISES AS TO WHICH OF THE HONBLE N ON JURISDICTIONAL HIGH COURT IS TO BE FOLLOWED BY US IN THE PRESENT SITUATION. IT WILL BE WHOLLY INAPPROPRIATE FOR US TO CHOOSE VIEWS OF ONE OF THE HIGH COURTS BASED ON OUR PERCEPTIONS ABOUT REASONABLENESS OF THE RESPECTIVE VIEW POINTS , AS SUCH AN EXERCISE WILL DE FACTO AMOUNT TO SITTING IN JUDGMENT OVER THE VIEWS OF THE HIGH COURTS SOMETHING DIAMETRICALLY OPPOSED TO THE VERY BASIC PRINCIPLES OF HIERARCHICAL JUDICIAL SYSTEM. WE HAVE TO, WITH OUR HIGHEST RESPECT OF BOTH THE HO NBLE HIGH COURTS, ADOPT AN OBJECTIVE CRITERION FOR DECIDING AS TO WHICH OF THE HONBLE HIGH COURT SHOULD BE FOLLOWED BY US. WE FIND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. [(1972) 88 ITR 192 (SC)] . HONBLE SUPREME COURT HAS LAID DOWN A PRINCIPLE THA T 'IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED'. THIS PRINCIPLE HAS B EEN CONSISTENTLY FOLLOWED BY THE VARIOUS AUTHORITIES AS ALSO BY THE HONBLE SUPREME COURT ITSELF. IN ANOTHER SUPREME COURT JUDGMENT, PETRON ENGG. CONSTRUCTION (P) LTD. & ANR. VS. CBDT & ORS.(1988) 75 CTR (SC) 20 : (1989) 175 ITR 523 (S C), IT HAS BEEN REITERATED THAT THE ABOVE PRINCIPLE OF LAW IS WELL ESTABLISHED AND THERE IS NO DOUBT ABOUT THAT. 13. STILL FURTHER, THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICE (P) LIMITED, DISMISSED THE SPECIAL LEAVE -: 6:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 PETITION FILED BY THE DEPARTMENT AGAINST THE ORDER OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING LIMITED I N C. C. NO.8068/2014 ORDER DATED 02.07.2014. THEREFORE, THE LD. CIT(A) W AS NOT JUSTIFIED IN DISMISSING THE GROUND OF APPEAL ON THIS COUNT. 14. FURTHER, THE SECOND PROVISO APPENDED TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2012, W.E.F. 01.04.2013, PROVIDES THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVIIB, ON ANY SUCH SUM, BUT I S NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO S UB SECTION (1) OF SECTION 201, THEN FOR THE PURPOSE OF THIS SUB SECTI ON (1) SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY TH E RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. WE FIND THAT THE A SSESSEE FILED CERTIFICATES FROM THE CHARTERED ACCOUNTANTS OF THE FIVE PAYEE COMPANIES BEFORE THE LD. CIT(A) TO CONTEND THAT AS THE PAYEE COMPANIES HAVE SHOWN THE AMOUNT OF INTEREST IN THE RETURN OF INCOM E FILED AND PAID DUE TAXES THEREON, THEREFORE, IN VIEW OF THE SECOND PRO VISO TO SECTION 40(A)(IA) OF THE ACT, NO DISALLOWANCE WAS EXIGIBLE IN THE CASE OF THE ASSESSEE U/S 40(A)(IA) OF THE ACT. THE LD. CIT(A) H AS NOT ADJUDICATED ON THIS PLEA OF THE ASSESSEE WHILE CONFIRMING THE DISA LLOWANCE MADE BY THE AO. WE FIND THAT THE HON'BLE DELHI HIGH COURT IN TH E CASE OF CIT VS. ANSAL LAND MARKET TOWNSHIP PRIVATE LIMITED, I.T.A.N O. 160/2015 ORDER DATED 26.08.2015 HAS HELD THAT SECOND PROVISO TO SE CTION 40(A)(IA) OF THE ACT IS DECLARATORY AND CURATIVE AND HAS RETROSP ECTIVE EFFECT. -: 7:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF H ON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LANDMARK TOWNSHI PS PVT.LTD., (2015) 377 ITR 635 (DEL), WE HOLD THAT THE DISALLOWANCE CA NNOT BE MADE U/S 40(A)(IA) OF THE ACT ON THIS COUNT ALSO. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 15. IN GROUND NO. 3 OF THE APPEAL, THE GROUND OF TH E ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MAD E BY THE AO UNDER THE HEAD UNSECURED LOAN OF RS. 35 LAKHS AND INTER EST PAID THEREON OF RS. 3,80,921/-. 16. THE BRIEF FACTS OF THE CASE ARE THAT THE AO OBS ERVED THAT THE ASSESSEE HAS TAKEN LOAN OF RS. 35 LAKHS FROM M/S. E AST WEST FINVEST INDIA LIMITED AND HAS PAID INTEREST OF RS. 3,80,921 /- THEREON. THE AO OBSERVED THAT THE DDIT MADE AN ENQUIRY IN THE CASE OF SHRI SHAILENDRA BIYANI AND FOUND THAT THE SAID COMPANY WAS A PAPER COMPANY AND HAD NO REAL WORTH TO GIVE LOAN. THE AO FURTHER OBSERVED THAT IN THE COURSE OF ENQUIRY, IT WAS FOUND THAT THE FINANCIAL STATUS OF THE COMPANY WAS VERY WEAK. HE ALSO OBSERVED THAT IN THE COURSE OF E NQUIRY NONE OF THE DIRECTORS OF THE SAID COMPANY APPEARED. IT WAS, THE REFORE, HELD THAT THE ASSESSEE FAILED TO ESTABLISH THE CREDITWORTHINESS O F THE COMPANY. THE AO FURTHER OBSERVED THAT GENUINENESS OF THE TRANSAC TION WITH THE SAID COMPANY CANNOT BE ESTABLISHED BY THE ASSESSEE MEREL Y FROM THE FACT THAT TRANSACTIONS WERE DONE THROUGH CHEQUES. THE AO OBSERVED THAT WHERE THE ASSESSEE OFFERS NO EXPLANATION REGARDING THE NATURE AND SOURCE THEREOF OR SUCH EXPLANATION IS UNSATISFACTOR Y, SUCH CREDITS WOULD -: 8:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 BE CHARGED TO TAX AS INCOME OF THE ASSESSEE. HE, TH EREFORE, ADDED RS. 35,00,000/- TO THE INCOME OF THE ASSESSEE UNDER SEC TION 68 OF THE ACT AND ALSO MADE ADDITION OF INTEREST PAYMENT THEREON ,OF RS. 3,80,921/-. 17. ON APPEAL, THE LD. CIT(A) HELD THAT IT IS SETTL ED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEGED LOAN T AKEN BY THE ASSESSEE WAS GENUINE, THE ONUS LIES ON THE ASSESSEE AND IF NO EXPLANATION IS GIVEN OR THE EXPLANATION GIVEN BY TH E ASSESSEE IS NOT SATISFACTORY, THE AO CAN DISBELIEVE THE ALLEGED TRA NSACTION OF LOAN. ONCE THE ASSESSEE PRODUCES SUFFICIENT MATERIAL IN SUPPOR T OF THE LOAN TRANSACTION, ONUS SHIFTS UPON THE AO AND AFTER VERI FICATION, HE CAN CALL FOR FURTHER EXPLANATION FROM THE ASSESSEE AND IN TH E PROCESS ONUS MAY AGAIN SHIFT FROM THE AO TO THE ASSESSEE. THEREFORE, HE HELD THAT THE ASSESSEE FAILED TO DISCHARGE THE BURDEN OF PROOF BY NOT ESTABLISHING THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. HE, THEREFORE, CONFIRMED THE ACTION OF THE AO. 18. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE VEHEMENTLY ARGUED AND CONTENDED THAT BEFORE THE AO, THE ASSESSEE FILED CONFIRMATION OF THE UNSECURED LOAN CREDITORS WITH PAN NUMBERS. HE SUBMITTED THAT THIS IS NOT THE CASE WHERE THE LOAN CREDITOR HAD REFUSED TO HAVING ADVANCED THE AMOUNT TO THE ASSESSEE. THE AO FAILED TO BRING ON RECORD THAT THE AMOUNT AS SHOWN RECEIVED FROM TH E LOAN CREDITOR WAS NOT ACTUALLY RECEIVED FROM THAT CREDITOR. IT WA S SUBMITTED THAT THE AO MERELY ON THE BASIS OF FINDINGS RECORDED IN THE CASE OF SHRI SHAILENDRA BIYANI ADDED THE ENTIRE AMOUNT OF LOAN T AKEN TO THE INCOME -: 9:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 OF THE ASSESSEE. IT WAS ARGUED THAT THE ASSESSEE HA S DEDUCTED TDS FROM THE INTEREST PAYMENT MADE TO THE LOAN CREDITOR AND DEPOSITED THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT WITHIN DUE DATE. FROM THE DOCUMENTS AS FILED BEFORE THE AO, IT WAS AMPLY CLEA R THAT THE CREDITOR WAS DULY ASSESSED TO TAX AND THAT HE HAS ADVANCED S OME OF MONEY TO THE ASSESSEE AS LOAN AND THE PAYMENT OF LOAN AMOUNT WAS MADE THROUGH BANKING CHANNEL. THEREFORE, WITHOUT BRINGIN G ANY MATERIAL ON RECORD TO CONTROVERT THE EVIDENCES FILED BY THE ASS ESSEE THAT DISALLOWANCE MADE WAS NOT PROPER AND JUSTIFIED. 19. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO OBSERVED THAT THE ASSESSEE HAS RECEIVED UNSE CURED LOAN OF RS. 35 LAKHS FROM M/S. EAST WEST FINVEST INDIA LIMITED AND PAID INTEREST OF RS. 3,80,921/- THEREON. THE AO MADE DISALLOWANCE OF THE ENTIRE AMOUNT OF RS. 38,80,921/- ON THE GROUND THAT ON ENQUIRY BY THE DDIT IN THE CASE OF SHRI SHAILENDRA BIYANI FOUND THAT THE SAID LOAN CREDITOR WAS A PAPER COMPANY HAVING NO REAL WORTH TO ADVANCE THE L OAN TO THE ASSESSEE AND THAT DURING THE COURSE OF ENQUIRY NONE OF THE DIRECTORS OF THE SAID COMPANY APPEARED. 21. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE ACT ION OF THE AO FOR THE VERY SAME REASONS. -: 10:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 22. WE FIND THAT IT IS A SETTLED PROPOSITION OF LA W THAT BEFORE USING ANY MATERIAL RECEIVED OR STATEMENT RECORDED BEHIND THE BACK OF THE ASSESSEE OF A THIRD PARTY, THE SAME SHOULD BE CONFR ONTED TO THE ASSESSEE, OTHERWISE THE SAME MATERIAL CANNOT BE USE D OR READ AGAINST THE ASSESSEE. IN THE INSTANT CASE, THERE WAS SOME E NQUIRY MADE BY THE DDIT IN THE CASE OF SHRI SHAILENDRA BIYANI, WHERE I T WAS FOUND THAT THE COMPANY DID NOT HAVE THE CREDITWORTHINESS TO ADVANC E LOAN AND THAT THE DIRECTORS OF THE COMPANY DID NOT APPEAR BEFORE THE DDIT. THIS INFORMATION AND MATERIAL WAS NOT CONFRONTED TO THE ASSESSEE BY THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS OR EVEN DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS. THEREFORE, THE SAID MATERIAL CANNOT BE USED OR READ AGAINST THE ASSESSEE, AS THE SAME HAS NOT BEEN CONTROVERTED TO THE ASSESSEE. IN SUPPORT OF THIS, W E RELY ON A VERY RECENT DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF H. R. MEHTA VS. ACIT, IN I.T.A.NO. 58 OF 2001 ORDER DATED 30 TH JUNE,2016, WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT ON A VERY FUND AMENTAL ASPECT, THE REVENUE WAS NOT JUSTIFIED IN MAKING ADDITION AT THE TIME OF RE- ASSESSMENT WITHOUT HAVING FIRST GIVEN THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE THE DEPONENT ON THE STATEMENT RELIED UPON BY THE ACIT. QUITE APART DENIAL OF AN AMOUNT OF CROSS EXAMINATIO N, THE REVENUE DID NOT EVEN PROVIDE THE MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT SOUGHT TO CONCLUDE THAT THE LOAN WAS BOGUS TRANSACT ION. THIS IS NOT HAVING BEEN DONE, THE DENIAL OF SUCH OPPORTUNITY GO ES TO THE ROOT OF THE MATTER AND STRIKES AT THE VERY FOUNDATION OF THE RE ASSESSMENT AND, -: 11:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 THEREFORE, RENDERS THE ORDERS PASSED BY THE CIT(A) AND THE TRIBUNAL VULNERABLE. RESPECTFULLY FOLLOWING THE ABOVE CITED DECISION OF HON'BLE BOMBAY HIGH COURT, WE HOLD THAT THE ADDITION OF UNS ECURED LOAN OF RS. 35 LAKHS AND INTEREST PAID THEREON OF RS. 3,80,921/ - WAS NOT JUSTIFIED IN THE PRESENT CASE AS THE MATERIAL COLLECTED IN THE C ASE OF SHRI SHAILENDRA BIYANI IN THE CASE OF THE M/S. EAST WEST FINVEST IN DIA LIMITED WAS NEITHER CONFRONTED TO THE ASSESSEE NOR THE ASSESSEE WAS ALLOWED ANY OPPORTUNITY OF CROSS-EXAMINATION OF THE GIVER OF TH E STATEMENT. WE, THEREFORE, DELETE THE ADDITION OF RS. 38,80,921/- A ND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE ALSO. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING ON 5 TH DAY OF JULY, 2016 AT INDORE. SD/- SD/- (D.T.GARASIA) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 5 TH JULY, 2016. CPU COPY TO: 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., INDORE -: 12:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015 -: 13:- SHRI MAHENDRA KUMAR AGRAWAL, INDORE VS. ACIT, 1(1), UJJAIN I.T.A.NO. 742/IND/2015