YASH DEVELOPERS, THANE V. DCIT CIR 3, THANE

ITA 833/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0569 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Business expenditure; Share purchase agreement; Rule of consistency; Onus to prove
• Section: 133A; 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH G, MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.833/MUM/2017 (ASSESSMENT YEAR- 2010-11) M/S YASH DEVELOPERS ROOM NO. 4, AAJI KRUPA BUILDING, HARI NIWAS CIRCLE, NAUPADA, THANE (W), THANE 400 602. PAN: AAAFY4509J VS. DCIT CIRCLE 3, ROOM NO. 2, B WING, 6 TH FLOOR, ASHAR I.T.PARK, ROAD NO. 16-Z, WAGLE INDL. ESTATE, THANE(W), THANE-400604. (APPELLANT) (RESPONDENT) ITA NO.834/MUM/2017 (ASSESSMENT YEAR- 2011-12) M/S YASH DEVELOPERS ROOM NO. 4, AAJI KRUPA BUILDING, HARI NIWAS CIRCLE, NAUPADA, THANE (W), THANE 400 602. PAN: AAAFY4509J VS. DCIT CIRCLE 3, ROOM NO. 2, B WING, 6 TH FLOOR, ASHAR I.T.PARK, ROAD NO. 16-Z, WAGLE INDL. ESTATE, THANE(W), THANE-400604. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI V.VIDHYADHAR (DR) DATE OF HEARING : 26.12.2017 DATE OF PRONOUNCEMENT : 07.02.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THESE TWO APPEAL BY ASSESSEE UNDER SECTION 253 OF I NCOME TAX ACT ARE DIRECTED AGAINST THE COMBINED ORDER OF LD. COMMISSI ONER OF INCOME-TAX (APPEALS)-2, [CIT(A)] THANE DATED 30.11.2016 FOR AS SESSMENT YEAR 2010- 11 & 2011-12. IN BOTH THE APPEALS THE ASSESSEE HAS RAISED IDENTICAL GROUNDS 2 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS OF APPEAL EXCEPT VARIATION OF FIGURES OF PENALTY, T HE LD. CIT(A) PASSES CONSOLIDATED ORDER FOR BOTH THE YEARS. HENCE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE DECIDED BY CONSOLIDATED ORDER. FOR APPRECIATION OF FACT, WE ARE REFERRING THE FACT FOR AY 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1) (C) ON THE UNSECURED LOAN OF RS. 5,73,00,000/- DISBELIEVED AND INCLUDED IN TOTAL INCOME U/S 68 OF THE I.T. ACT AND INTEREST THEREON OF RS. 38,37,603/- THOUGH THER E WAS NO CONCEALMENT AND/OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHIC H HAS BEEN DONE WITHOUT APPROPRIATELY CONSIDERING ALL FACTS, EVIDENCES, EXP LANATION AND SUBMISSIONS. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE-FIRM IS E NGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS, FILED RETURN OF INCOME FOR RELEVANT AY ON 07.09.2010 DECLARING TOTAL INCOME OF RS. 4,29,89,26 0/-. IN THIS CASE A SURVEY UNDER SECTION 133A WAS CARRIED OUT ON 04.03.2010. D URING THE SURVEY ON 04.03.2010 WHEN CONFRONTED INCRIMINATING MATERIAL F OUND DURING THE COURSE OF SURVEY ADMITTED TO HAVE INCURRED EXPENSES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. TO COVER UP THE DISCREPANCY, THE ASSESSEE ADMITTED UNACCOUNTED EXPENDITURE OF RS.2,50,00,000/-. FURTHE R DURING THE ASSESSMENT THE AO HAS FOUND THAT ASSESSEE HAS SHOWN UNSECURED LOAN OF RS. 573 LAKHS FROM VARIOUS COMPANIES BASED IN CALCUTTA, WEST BENG AL. THE PERUSAL OF INCOME-TAX RETURN OF THOSE CREDITOR COMPANIES REVEA LS THAT THEY WERE NOT HAVING ENOUGH INCOME. THE AO MADE THE ADDITION OF R S. 573 LAKHS UNDER SECTION 68 OF THE ACT. THE AO ALSO DISALLOWED THE I NTEREST EXPENSES OF RS.38,73,603/- PAID ON ACCOUNT OF INTEREST ON SUCH UNSECURED LOAN. THE AO 3 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS ALSO DISALLOWED RS. 51,000/- ON ACCOUNT OF DONATION . THE AO INITIATED PENALTY UNDER SECTION 271(1)(C) WHILE PASSING THE A SSESSMENT ORDER. THE AO LEVIED THE PENALTY ON DISALLOWANCE OF LOAN OF RS. 5 1,000/-, ON ADDITION UNDER SECTION 68 OF RS. 573 LAKHS AND ON DISALLOWAN CE OF INTEREST OF RS.38,73,306/-. ON APPEAL BEFORE THE LD. CIT(A), TH E PENALTY ON ACCOUNT OF DISALLOWANCE OF RS. 51,000/- WAS DELETED. HOWEVER, THE PENALTY ON ACCOUNT OF ADDITION UNDER SECTION 68 AND DISALLOWANCE OF IN TEREST EXPENSES OF RS.38,37,603/- WAS UPHELD. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT (A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFO RE US. 3. NONE, APPEARED ON BEHALF OF ASSESSEE DESPITE SERVIC E OF NOTICE. PERUSAL OF RECORD REVEALS THAT THE HEARING OF THIS APPEAL WAS FIXED OUT OF TURN ON THE APPLICATION OF THE ASSESSEE VIDE APPLICATION DATED 15.11.2017. AS NONE APPEARED ON BEHALF OF ASSESSEE, WE LEFT NO OPTION E XCEPT TO HEAR THE LD. DR FOR THE REVENUE TO PROCEED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE LD. DSR OF THE ASSESSEE FAIRLY CONCEDED THAT IN THE APPEAL, ON QUANTUM ASSESSMENT THE CO-ORDINATE BENCH OF THIS TRIBUNAL H AS DELETED THE ADDITION UNDER SECTION 68 OF RS. 573 LAKHS AND INTEREST DISA LLOWANCE OF RS. 38,37,603/- IN ITA NO. 3767/M/2015. 4. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PERUSAL OF RE CORD REVEALS THAT THE COPY OF ORDER OF TRIBUNAL IN ITA NO. 3767, 3768/MUM/2015 FOR AY 2010-11 & 4 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS 2011-12 DATED 26.10.2017 IS FILED ON RECORD BY THE ASSESSEE. WE HAVE SEEN THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS PAS SED THE FOLLOWING ORDER: 8. WE HAVE HEARD THE ARGUMENTS OF THE PARTIES AND P ERUSED THE RECORD. THE ASSESSEE COMPANY TOOK UNSECURED LOAN FROM THE ABOVE MENTIONED 12 COMPANIES TO THE TUNE OF RS. 5.73 CRORES. THE ASSESSING OFFIC ER INITIATED INQUIRY AND IN VIEW OF THE INQUIRY REPORT DATED 25.3.2013, COMPANI ES FROM WHOM ASSESSEE TOOK LOAN WERE REPORTED AS JAMAKHARCHI/PAPER COMPANIES. HENCE, THE M/S . Y ASH DE V E L O P E R S ASSESSING OFFICER TREATED THE ABOVE SAID LOAN AMOUNT AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND ADDE D THE SAME TO THE INCOME OF THE ASSESSEE. BEFORE GOING FURTHER, WE DEEM IT NECE SSARY TO ADVERT REPORT ON THE FILE, WHICH IS HEREBY REPRODUCED BELOW :- 'A COMMISSION U/S 131 (1)(D) IS RECEIVED FROM YOU I N THE CASE OF M/S. YASH DEVELOPERS, THANE TO VERIFY, THE LOAN TRANSACTIONS OF YOUR ASSESSEE WITH KOLKATA BASED 12 COMPANIES, WHO HAVE GIVEN LOAN TO YOUR ASSESSEE COMPANY. IN RESPONSE TO THE COMMISSION SUMMONS WERE ISSUED T O THE COMPANIES IN KOLKATA WHO HAVE GIVEN LOAN TO ASSESSED COMPANIES. AN ITI WAS DEPUTED O SERVE THE SUMMONS BUT ITI IN HIS REPORT SUBMITTED T HAT THERE A NO SUCH COMPANIES AT THE GIVEN ADDRESS AND NO BOOKS OF ACCO UNTS ARE MAINTAINED OVER THERE OF THESE COMPANIES FURTHER FROM THE EARLIER S EARCH AND SURVEY ACTION CONDUCTED BY INVEST/GAT/ON WING, KOLKATA IT IS GATH ERED THAT THE ADDRESSES MENTIONED ARE MOSTLY ESTABLISHED JANAKHARCHI/PAPER COMPANIES ADDRESSES OF KOLKATA WHICH ARE USED FOR PROVIDING ACCOMMODATION ENTRY IN THE FORM OF SHARE CAPITAL AND LOAN IN 11EV OF CASH. SO IT CAN BE CONCLUDED FROM ABOVE FACTS THAT PRIMA FACIE IT APPEARS THAT THE COMPANIES WHO HAVE GIVEN LOAN TO YOUR ASSESSEE COMP ANY ARE JAMAKHARCHI/PAPER/SHAM COMPANIES OF KOLKATA AND NON E OF THEM ARE EXISTING AT THEIR PHYSICAL ADDRESS AS SUBMITTED IN THE REPOR T OF ITI. THE TRANSACTIONS ARE NON-VERIFIABLE IN THIS CASE AND APPEAR TO BE AC COMMODATION ENTRY. THIS IS FOR YOUR KIND PERUSAL AND NECESSARY ACTION.' 9. ON PERUSAL OF THE ABOVE MENTIONED REPORT, WE NOT ICED THAT THE SUMMONS WERE SENT TO THESE COMPANIES AND NO COMPANIES WERE FOUND ON THE GIVEN ADDRESS AND INFORMATION GATHERED BY THE OFFICIAL LEADS TO A CON CLUSION THAT THESE COMPANIES WERE JAMAKHARCHI/PAPER/SHAM COMPANIES. BASED ON THI S REPORT, THE CLAIM OF UNSECURED LOAN OF THE ASSESSEE COMPANY WAS REJECTED AND THE AMOUNT OF RS. 5.73 CRORES WAS ADDED TO THE INCOME OF THE ASSESSEE AS U NEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. NOW, IT IS REQUIRED TO BE SEEN WHAT TYPES OF EVIDENCES WERE GIVEN BY THE ASSESSEE BEFORE THE AUTHORITIES IN ORDER TO DISCHARGE THE INITIAL BURDEN OF PROOF PLACED UPON IT U/S 68 OF THE ACT. THE ASSESSE E HAS PROVIDED COPIES OF LOAN CONFIRMATIONS AS AVAILABLE BOTH IN THE BOOKS OF THE COMPANIES AND IN THE BOOKS 5 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS OF THE ASSESSEE FIRM, WHICH LIE IN M/S . Y AS H D E V E L O P E R S COMPILATION-3 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO PROVIDED C OPIES OF BANK STATEMENT OF THE ASSESSEE FIRM, WHEREIN CHEQUES GIVEN BY THE CRE DITORS WERE DEPOSITED AND FROM WHERE THE REPAYMENTS OF THE SAID LOANS WERE MA DE, WHICH ALSO LIE IN COMPILATION-3 OF THE PAPER BOOK. COPIES OF RETURNS OF INCOME FOR THE AYS. 2010-11 & 2011-12 OF THE LOAN CREDITORS WERE ALSO F ILED WHICH LIE AT PAGE NO. 1497 & 1498 IN CONNECTION WITH ECHOLAC VINIMAY PVT. LTD.; PAGE NO. 190 IN CONNECTION WITH KALIMATA TIMBER PVT. LTD.; PAGE NO. 209 IN CONNECTION WITH LINKPOINT INFRASTRUCTURE PVT. LTD.; PAGE NO. 1501 I N CONNECTION WITH MANGAL MAYEE HIRISE PVT. LTD.; PAGE NO. 362 & 1404 IN CONN ECTION WITH MSV FISCAL SERVICES P. LTD.; PAGE NO. 1510 & 1511 IN CONNECTIO N WITH OLEANDER MANUFACTURES PVT. LTD.; PAGE NO. 1516 & 1517 IN CON NECTION WITH SHUBHREKHA VYAPAAR PVT. LTD.; PAGE NO. 1522 & 1523 IN CONNECTI ON WITH SUBH SUPPLIERS PVT. LTD.; PAGE NO. 1528 & 1529 IN CONNECTION WITH S.K. STOCK DEALERS PVT. LTD.; PAGE NO. 1534 & 1595 IN CONNECTION WITH TRIST AR AGENCIES PVT. LTD.; PAGE NO. 1539 & 1600 IN CONNECTION WITH SLOW & SOUND ELE CTRONICS AND PAGE NO. 1476 IN CONNECTION WITH KLAPP VYAPAAR PVT. LTD. THE ASSESSEE ALSO FILED ACKNOWLEDGMENT OF RETURNS OF INCOME FOR A.Y. 2010-1 1 TO 2015-16 OF THE SAID COMPANIES WHICH LIE IN COMPILATION-2 OF THE PAPER B OOK. THE ASSESSEE ALSO FILED COPIES OF THE BANK STATEMENTS OF 5 PARTIES OUT OF 1 2 PARTIES, WHO ISSUED CHEQUES IN FAVOUR OF THE ASSESSEE AND ALSO RECEIVED REPAYME NT OF LOAN FROM THE ASSESSEE ALONG WITH INTEREST. THE ASSESSEE HAS ALSO FURNISHE D COPIES OF ANNUAL ACCOUNTS CONTAINING FINANCIAL STATEMENTS OF THE LOAN CREDITO RS AND THEY ARE ALSO PLACED IN THE PAPER BOOK. WE NOTICE THAT THESE DOCUMENTS HAVE NOT BEEN CONSIDERED/EXAMINED BY THE ASSESSING OFFICER AS WEL L AS THE LEARNED CIT(A). A PERUSAL OF THESE DOCUMENTS WOULD SHOW THAT THE IDEN TITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTH INESS OF THE CREDITORS HAVE BEEN PROVED BY THE ASSESSEE, I.E., THE ASSESSEE HAS DISCHARGED THE INITIAL BURDEN OF PROOF PLACED UPON IT U/S 68 OF THE ACT. WE ALSO FIND SUPPORT IN LAW SETTLED IN THE CASE OF ROHINI BUILDERS (SUPRA), WHEREIN HON'BL E GUJARAT HIGH COURT HELD AS UNDER :- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO GONE THROUGH THE ORDER PASSED BY THE ASSESSING OFFICER, THE RELEVANT PORTION OF WHICH WE HAVE ALSO EXTRACTED IN PARA 2 ABOVE. THE COMMISSIONER OF INCOME-TAX (APPEALS) MORE OR LESS CONFIRMED THE ADDITION ON THE REASONIN G GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. A PERUSAL OF THE C HART GIVEN BY US IN PARA 3 ABOVE INDICATES THAT OUT OF 21 CREDITORS THE ASSESS ING OFFICER HAS RECORDED THE STATEMENTS OF ONLY SIX CREDITORS, VIZ., CREDITO RS AT SERIAL NOS. 1, 2, 3, 4, 6, AND 7. HOWEVER, IN RESPECT OF ALL THE 21 CREDITORS THE ASSESSEE HAS FURNISHED THEIR COMPLETE ADDRESSES ALONG WITH GIR NUMBERS/PER MANENT ACCOUNT NUMBERS AS WELL AS CONFIRMATIONS ALONG WITH THE COP IES OF ASSESSMENT ORDERS PASSED IN THE CASES OF CREDITORS AT SERIAL NOS. 1, 2, 4, 5, 6, 7, 9, 10, 11, 12 AND 16. IN THE REMAINING CASES WHERE THE ASSESSMENT ORD ERS PASSED WERE NOT READILY AVAILABLE, THE ASSESSEE HAS FURNISHED THE C OPIES OF RETURNS FILED BY THE CREDITORS WITH THE DEPARTMENT ALONG WITH THEIR STAT EMENT OF INCOME. ALL THE LOANS WERE RECEIVED BY THE ASSESSEE BY ACCOUNT PAYE E CHEQUES AND THE REPAYMENTS OF LOANS HAVE ALSO BEEN MADE BY ACCOUNT PAYEE CHEQUES ALONG WITH THE INTEREST IN RELATION TO THOSE LOANS. IT IS RATHER STRANGE THAT ALTHOUGH THE ASSESSING OFFICER HAS TREATED THE CASH CREDITS AS NON- GENUINE, HE HAS NOT 6 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS MADE ANY ADDITION ON ACCOUNT OF INTEREST CLAIMED/PA ID BY THE ASSESSEE IN RELATION TO THOSE CASH CREDITS, WHICH HAS BEEN CLAI MED AS BUSINESS EXPENDITURE AND HAS BEEN ALLOWED BY THE ASSESSING OFFICER. IT I S ALSO PERTINENT TO NOTE THAT IN RESPECT OF SOME OF THE CREDITORS THE INTEREST WA S CREDITED TO THEIR ACCOUNTS/PAID TO THEM AFTER DEDUCTION OF TAX AT SOU RCE AND INFORMATION TO THIS EFFECT WAS GIVEN IN THE LOAN CONFIRMATION STATEMENT S BY THOSE CREDITORS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THUS IT IS CLEAR THAT THE ASSESSEE HAD DISCHARGED THE INITIAL ONUS WHICH LAYS ON IT IN TERMS OF SECTION 68 BY PROVING THE IDENTITY OF THE CREDITORS BY GIVING THE IR COMPLETE ADDRESSES, GIR NUMBERS/PERMANENT ACCOUNTS NUMBERS AND THE COPIES O F ASSESSMENT ORDERS WHEREVER READILY AVAILABLE. IT HAS ALSO PROVED THE CAPACITY OF THE CREDITORS BY SHOWING THAT THE AMOUNTS WERE RECEIVED BY THE ASSES SEE BY ACCOUNT PAYEE CHEQUES DRAWN FROM BANK ACCOUNTS OF THE CREDITORS A ND THE ASSESSEE IS NOT EXPECTED TO PROVE THE GENUINENESS OF THE CASH DEPOS ITED IN THE BANK ACCOUNTS OF THOSE CREDITORS BECAUSE UNDER LAW THE ASSESSEE C AN BE ASKED TO PROVE THE SOURCE OF THE CREDITS IN ITS BOOKS OF ACCOUNT BUT N OT THE SOURCE OF THE SOURCE AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF ORIENT TRADING CO. LTD. V. CIT [1963] 49 ITR 723. THE GENUINENESS OF THE TRANSACT ION IS PROVED BY THE FACT THAT THE PAYMENT TO THE ASSESSEE AS WELL AS RE PAYMENT OF THE LOAN BY THE ASSESSEE TO THE DEPOSITORS IS MADE BY ACCOUNT PAYEE CHEQUES AND THE INTEREST IS ALSO PAID BY THE ASSESSEE TO THE CREDITORS BY AC COUNT PAYEE CHEQUES. MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDITORS COU LD NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER, CANN OT BE A GROUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE -FROM THOSE CREDITORS A S NON-GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN TH E CASE OF ORISSA CORPORATION [1986] 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT M /S . Y AS H D E V E L O P E R S WHE N THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND TH E GIR NUMBERS, THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE RE VENUE'S CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE T HE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON-COMPLIANC E OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131 , BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE. IN THE CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER, THEY HAVE A DMITTED HAVING ADVANCED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPO SITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS, THE PROPER COURSE WOULD HAVE B EEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE CREDITORS BY TREATING THE CAS H DEPOSITS IN THEIR BANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF THOSE CREDIT ORS UNDER SECTION 69 . 8. FURTHER, WE MAY POINT OUT THAT SECTION 68 UNDER WHICH THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER READS AS UNDER : '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATIS FACTORY, THE SUM SO 7 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' 9. THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLATURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE U NEXPLAINED CASH CREDIT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSES SEE OF THAT PREVIOUS YEAR. IN THIS, CASE THE LEGISLATIVE MANDATE IS NOT IN TER MS OF THE WORDS 'SHALL BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING SIMILAR PHRASE OLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING THE LEGAL FICTION THE PHR ASEOLOGY EMPLOYS THE WORD 'MAY' AND NOT 'SHALL'. THUS THE UNSATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING THE AM OUNT CREDITED IN THE BOOKS AS THE INCOME OF THE ASSESSEE AS HELD BY THE SUPREME COURT IN THE CASE OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. 10. THUS TAKING INTO CONSIDERATION THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AND, IN PARTICULAR, THE FACT, THAT THE ASSESSING OFFICER HAS NOT DISALLOWED THE INTEREST CLAIMED/PAID IN RELATION TO THESE CREDITS IN THE ASSESSMENT YEAR UNDER CONSIDERATION OR EVEN IN THE SUBSEQUENT YEARS, AND TAX DEDUCTED AT SOURCE HAS BEEN DEDUCTED OUT OF THE INT EREST PAID/CREDITED TO THE CREDITORS, WE ARE OF THE OPINION THAT THE DEPARTMEN TAL AUTHORITIES WERE NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 12,85,000 W HICH IS DIRECTED TO BE DELETED. 11. IN THE RESULT, THE APPEAL IS ALLOWED.' 10. AS DISCUSSED ABOVE, THE CLAIM OF THE ASSESSEE W AS DECLINED ON ACCOUNT OF NON-FINDING OF THE PARTIES AT THE GIVEN ADDRESS BUT , IN OUR VIEW, IT IS NOT A SUFFICIENT GROUND TO DECLINE THE CLAIM OF THE ASSES SEE, SINCE IT WAS ONLY AN INFERENCE DRAWN BY THE TAX AUTHORITIES AND THE SAID INFERENCE HAS BEEN REBUTTED BY THE ASSESSEE BY WAY OF DOCUMENTS/EVIDEN CE MENTIONED ABOVE. IN THIS REGARD, WE ALSO FIND SUPPORT OF THE LAW SETTLE D BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF ORCHID INDUSTRIES PVT. LTD. (S UPRA), IN WHICH FOLLOWING QUESTIONS WERE CONSIDERED :- 6.3 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, ORDERS OF THE TRIBUNAL WAS PERVERSE IN DELETING THE ADDITI ON OF RS. 95,00,000/- MADE U/S. 68 OF THE ACT, RELYING ONLY ON THE DOCUME NTARY EVIDENCE PRODUCED BY THE RESPONDENT COMPANY WHILE IGNORING T HE KEY FACTOR THAT THESE ENTITIES WERE NOT TRACEABLE AT THEIR GIVEN AD DRESSES. 6.4 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, ORDERS OF THE TRIBUNAL ERRED IN NOT APPRECIATING THE OBSER VATIONS MADE BY THE DELHI HIGH COURT IN NOVA PROMOTERS AND FINLEASE PVT . LTD. 18 TAXAAMNN.COM 217 WHEREIN THE COURT HAS OBSERVED THA T CASES OF THIS TYPE CANNOT BE DECIDED ONLY ON THE BASIS OF DOCUMENTARY EVIDENCES ABOVE AND THERE IS NEED TO TAKE INTO ACCOUNT THE SURROUNDING CIRCUMSTANCES. 8 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS 6.5 THE TRIBUNAL OUGHT TO HAVE TAKEN NOTE OF THE FA CT THATTHE ASSESSEE WAS NOT ABLE TO PRODUCE EVEN A SINGLE PARTY BEFORE THE ASSESSING OFFICER DESPITE AGREEING BEFORE THE LEARNED CIT(A) THAT WIL L PRODUCE ALL PARTIES BEFORE THE ASSESSING OFFICER DURING REMAND PROCEEDI NGS.' 4. WE HAVE CONSIDERED THE SUBMISSIONS. 5. THE ASSESSING OFFICER ADDED RS.95 LAKHS AS INCOM E UNDER SECTION 68 OF THE INCOME TAX ACT ONLY ON THE GROUND THAT THE PART IES TO WHOM THE SHARE CERTIFICATES WERE ISSUED AND WHO HAD PAID THE SHARE MONEY HAD NOT APPEARED BEFORE THE ASSESSING OFFICER AND THE SUMMONS COULD NOT BE SERVED ON THE ADDRESSES GIVEN AS THEY WERE NOT TRACED AND IN RESP ECT OF SOME OF THE PARTIES WHO HAD APPEARED, IT WAS OBSERVED THAT JUST BEFORE ISSUANCE OF CHEQUES, THE AMOUNT WAS DEPOSITED IN THEIR ACCOUNT. 6. THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE HA S PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PARTY SUCH AS PAN OF ALL THE CREDITORS ALONG WITH THE CONFIRMATION, THEIR BANK S TATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MONEY. IT WAS ALSO OBS ERVED BY THE TRIBUNAL THAT THE ASSESSEE HAS ALSO PRODUCED THE ENTIRE RECO RD REGARDING ISSUANCE OF SHARES I.E. ALLOTMENT OF SHARES TO THESE PARTIES, T HEIR SHARE APPLICATION FORMS, ALLOTMENT LETTERS AND SHARE CERTIFICATES, SO ALSO T HE BOOKS OF ACCOUNT. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSONS DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNT S FOR INVESTING IN THE SHARES OF THE ASSESSEE. IN VIEW OF THESE VOLUMINOUS DOCUMENTARY EVIDENCES, ONLY BECAUSE THOSE PERSONS HAD NOT APPEA RED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE. THE JUDGMENT IN CASE OF GAGANDEEP INFRASTRUCTURE (P.) LTD. (SUPR A) WOULD BE APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 7. CONSIDERING THE ABOVE, NO SUBSTANTIAL QUESTION O F LAW ARISES. THE APPEAL STANDS DISMISSED. HOWEVER, THERE IS NO ORDER AS TO COSTS.' 11. TAKING INTO ACCOUNT THE TOTALITY OF FACTS AND C IRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS NOT RIG HT IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT O F ABOVE SAID LOAN CREDITORS. THEREFORE FINDINGS OF THE LEARNED CIT(A) IS HEREBY ORDERED TO BE SET ASIDE AND THE AO IS DIRECTED TO DELETE THE ABOVE SAID ADDITIO N OF RS.573 LAKHS IN VIEW OF THE FOREGOING DISCUSSIONS. 12. THE SECOND ISSUE RELATES TO THE DISALLOWANCE OF INTEREST EXPENDITURE RELATING TO THE ABOVE SAID LOANS. SINCE WE HAVE DELETED THE ADDITION MADE U/S 68 OF THE ACT, CONSEQUENTLY THE INTEREST EXPENDITURE CLAIMED THEREON IS REQUIRED TO BE ALLOWED. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF INT EREST. ACCORDINGLY, WE DECIDE ISSUE NO . 1&2 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REV ENUE. 9 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS 5. CONSIDERING THE FACT THAT DISALLOWANCE/ADDITION ON THE BASIS OF WHICH THE PENALTY WAS LEVIED BY AO AND CONFIRMED BY LD CIT(A) HAS BEEN DELETED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE S OWN CASE. IN OUR VIEW ONCE THE ADDITIONS ON THE BASIS OF WHICH THE PENALT Y WAS LEVIED HAS BEEN DELETED, THE PENALTY ORDER WOULD NOT SURVIVE. THUS, THE CONSEQUENT PENALTY ORDER IS ALSO SET-ASIDE. THE AO IS DIRECTED ACCORDI NGLY. ITA NO. 834/MUM/2017 FOR AY 2011-12 6. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR AY 2010-11. WE HAVE NOTED THAT THE CO-ORDINATE BENC H OF THE TRIBUNAL IN ASSESSEES APPEAL AGAINST THE QUANTUM ASSESSMENT HA S DELETED THE ADDITIONS ON THE BASIS OF WHICH PENALTY WAS LEVIED. WE HAVE A LREADY DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) FOR AY 2010- 11. THE FACT OF THE YEAR UNDER CONSIDERATION IS ALSO IDENTICAL EXCEPT VARIAT ION OF FIGURE. THUS, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE APPEAL FOR AY 2011-12 IS ALSO ALLOWED WITH SIMILAR GROUNDS. IN THE RESULT, BOTH THE APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF FEBRUARY, 2018. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 07/02/2018 S.K.PS 10 ITA NO.833 & 834/M/2017 M/S YASH DEVELOPERS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/