Shri Kamal V. Jadhav, Aurangabad V. ITO (Central), Aurangabad

ITA 878/PUN/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1077 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-05-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 20-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D SINGH
• Assessee Lawyers: V L JAIN
• Keywords: Unexplained cash credit; Search and seizure; Source of fund; Question of law; Corroborative evidences; Deemed dividend; Documents seized
• Section: 143(3); 153A; 68; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'#$ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NOS. 877 TO 883/PN/2011 #% & '& / ASSESSMENT YEARS : 2002-03 TO 2008-09 SMT. KAMAL VISHWANATH JADHAV, 10, SHRINIKETAN COLONY, JALNA ROAD, NEAR COSMOS BANK, AURANGABAD . / APPELLANT PAN : AAVPJ5275H (% V/S. INCOME TAX OFFICER, (CENTRAL), AURANGABAD . / RESPONDENT / APPELLANT BY : SHRI V.L. JAIN / DEPARTMENT BY : SHRI B.D. SINGH ) DATE OF HEARING :01-06-2015 / DATE OF PRONOUNCEMENT :24-07-2015 *) ORDER PER VIKAS AWASTHY, JM : THESE SET OF SEVEN APPEALS HAVE BEEN FILED BY THE ASSES SEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), AURANG ABAD DATED 07-04-2011. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED ALL THE SEVEN APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2002-03 TO 2008-09 VIDE SINGLE ORDER. 2 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFA CTURING OF PSC POLES AND ALLIED PRODUCTS. A SEARCH AND SEIZURE ACTIO N WAS CONDUCTED ON 21-02-2008 IN THE CASE OF YOG GROUP, AURA NGABAD. CONSEQUENTLY, NOTICE U/S. 153A WAS ISSUED TO THE ASSESS EE ON 24-02-2009. ASSESSMENT ORDERS FOR THE ASSESSMENT YE ARS 2002-03 TO 2007-08 WERE PASSED U/S. 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). FOR THE ASSESSM ENT YEAR 2008-09, THE ASSESSMENT WAS MADE UNDER REGULAR PROVISIONS I.E. U/ S. 143(3) OF THE ACT. WHILE FRAMING ASSESSMENT, THE ASSESSING OFFICER MADE ADDITIONS/DISALLOWANCES IN THE INCOME RETURNED BY THE ASSE SSEE ON FOLLOWING GROUNDS: I. AGRICULTURAL INCOME TREATED AS INCOME FROM OTHER SOURCES. II. DISALLOWANCE OF INTEREST ON BORROWED FUNDS CLAIMED U/S. 36(1)(III). III. DISALLOWANCE U/S. 2(22)(E) BY TREATING LOANS AND ADVANCES FRO M COMPANIES WHEREIN THE ASSESSEE IS HAVING SUBSTANTIAL INTER EST AS DEEMED DIVIDEND. IV. UNEXPLAINED CASH CREDIT U/S. 68. AGGRIEVED BY THE ASSESSMENT ORDER FOR THE RESPECTIVE IM PUGNED ASSESSMENT YEARS, THE ASSESSEE PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). DURING THE FIRST APP ELLATE PROCEEDINGS, THE ASSESSEE FURNISHED CERTAIN INFORMATION/DOC UMENTS ON WHICH REMAND REPORT WAS SOUGHT. ON THE BASIS OF REMAND REPORT AND THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE COMMISSIONE R OF INCOME TAX (APPEALS) PARTLY DELETED THE ADDITIONS/DISALLOWANCES. ST ILL AGGRIEVED, THE ASSESSEE HAS ASSAILED THE ORDER OF COMMISSIONER OF I NCOME TAX (APPEALS) COMMON FOR ALL THE IMPUGNED ASSESSMENT YEARS BEFO RE THE 3 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 TRIBUNAL. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN APP EALS FOR THE IMPUGNED ASSESSMENT YEARS: ASSESSMENT YEAR 2002-03: 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TREATMENT OF AGRICULTURAL INCOME TO THE EXTENT OF R S.1,49,320/- AS INCOME FROM OTHER SOURCES. 2. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.85,228/- U/S. 36(1 )(III) TOWARDS INTEREST ON BORROWED FUNDS. ASSESSMENT YEAR 2003-04: 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TREATMENT OF AGRICULTURAL INCOME TO THE EXTENT OF R S.1,25,320/- AS INCOME FROM OTHER SOURCES. 2. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION U/S. 2(22)(E) TOWARDS DEEMED DIVIDEND TO T HE EXTENT OF RS.14,10,000/-. ASSESSMENT YEAR 2004-05: 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TREATMENT OF AGRICULTURAL INCOME TO THE EXTENT OF R S.90,780/- AS INCOME FROM OTHER SOURCES. 2. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.3,87,109/- U/S. 36 (1)(III) TOWARDS INTEREST ON BORROWED FUNDS. 3. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION U/S. 2(22)(E) TOWARDS DEEMED DIVIDEND TO T HE EXTENT OF RS.1,85,000/-. ASSESSMENT YEAR 2005-06: 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TREATMENT OF AGRICULTURAL INCOME TO THE EXTENT OF R S.70,320/- AS INCOME FROM OTHER SOURCES. 4 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 2. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.2,41,589/- U/S. 36 (1)(III) TOWARDS INTEREST ON BORROWED FUNDS. 3. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION U/S. 2(22)(E) TOWARDS DEEMED DIVIDEND TO T HE EXTENT OF RS.5,25,000/-. ASSESSMENT YEAR 2006-07: 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TREATMENT OF AGRICULTURAL INCOME TO THE EXTENT OF R S.85,300/- AS INCOME FROM OTHER SOURCES. 2. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.2,08,830/- U/S. 36 (1)(III) TOWARDS INTEREST ON BORROWED FUNDS. 3. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION U/S. 2(22)(E) TOWARDS DEEMED DIVIDEND TO T HE EXTENT OF RS.2,26,138/-. 4. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING AN ADDITION TO THE EXTENT OF RS.5,00,000/- ON ACCOUNT OF CASH DEPOSIT U/S. 68 OF THE INCOME TAX ACT, 1961. ASSESSMENT YEAR 2007-08: 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TREATMENT OF AGRICULTURAL INCOME TO THE EXTENT OF R S.90,750/- AS INCOME FROM OTHER SOURCES. 2. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.1,61,604/- U/S. 36 (1)(III) TOWARDS INTEREST ON BORROWED FUNDS. 3. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING AN ADDITION TO THE EXTENT OF RS.5,70,000/- ON ACCOUNT OF CASH CREDITS/DEPOSITS AS UNEXPLAINED CREDITS BY APPLYING PROVISION OF SEC TION 68 OF THE INCOME TAX ACT, 1961. 5 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 ASSESSMENT YEAR 2008-09: 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TREATMENT OF AGRICULTURAL INCOME TO THE EXTENT OF R S.60,500/- AS INCOME FROM OTHER SOURCES. 2. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.1,16,680/- U/S. 36 (1)(III) TOWARDS INTEREST ON BORROWED FUNDS. 3. THE LEARNED CIT (A) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING AN ADDITION OF RS.4,14,660/- ON ACCOUNT OF CASH CREDIT S/DEPOSITS AS UNEXPLAINED CREDITS BY APPLYING PROVISION OF SECTIO N 68 OF THE INCOME TAX ACT, 1961. APART FROM THE ABOVE EFFECTIVE GROUNDS IN APPEALS, THE AS SESSEE HAS RAISED FOLLOWING ADDITIONAL GROUND FOR THE ASSESSMENT YEAR 2 002-03 TO ASSESSMENT YEAR 2006-07. THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN COMPLETING THE ASSESSMENTS U/S. 153A OF FOR THE A.Y. 2002-03 TO A. Y. 2006-07 AS IT IS VITIATED FOR THE LACK OF JURISDICTION, AS THE ADDIT IONS ARE NOT BASED ON ANY INCRIMINATING MATERIALS FOUND IN THE COURSE OF SEARC H. 3. SHRI V.L. JAIN APPEARING ON BEHALF OF THE ASSESSEE SUBMITT ED THAT THE ADDITIONS MADE BY THE AUTHORITIES BELOW U/S. 153A PRO CEEDINGS ARE NOT SUSTAINABLE AS NO INCRIMINATING EVIDENCE WAS FOUND DURI NG THE COURSE OF SEARCH AND SURVEY AGAINST THE ASSESSEE. THE LD. AR C ONTENDED THAT BEFORE THE FIRST APPELLATE AUTHORITY THE ISSUE OF JURISDICTIO N U/S. 153A WAS NOT RAISED. IT IS A LEGAL ISSUE, THE LEGAL ISSUES CAN BE RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME. IN SUPPORT OF HIS SUBMISS IONS, THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. VS. CIT REPOR TED AS 229 ITR 383. THE LD. AR ASSERTED THAT ADDITIONS HAVE BEEN MADE ONLY ON THE 6 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 BASIS OF REVIEW OF BALANCE SHEET AND BOOKS OF ACCOUNT. NO T A SINGLE DOCUMENT HAS BEEN REFERRED EITHER DURING THE ASSESSMEN T PROCEEDINGS OR DURING THE FIRST APPELLATE PROCEEDINGS TO SHOW THAT THE ADDITIONS HAVE BEEN MADE FROM THE DOCUMENTS SEIZED DURING THE SEARCH AND SURVEY. THE LD. AR ARGUED THAT ASSESSMENT UNDER THE PROVISIONS OF SE CTION 153A CANNOT BE MADE IN A ROUTINE MANNER UNLESS SOME INCRIMINA TING MATERIALS ARE SEIZED AND THE ADDITION IS MADE ON THE BASIS OF SUCH SEIZED INCRIMINATING MATERIALS. TO BUTTRESS HIS SUBMISSIONS, THE LD.AR PLACED RELIANCE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION LTD. REPORTED AS 374 ITR 645 (BOM). CONTROVERTING THE SUBMISSIONS MADE ON BEHALF OF THE ASSES SEE, SHRI B.D. SINGH APPEARING FOR THE DEPARTMENT SUBMITTED THAT AD DITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE SHOULD NOT BE A DMITTED AS THE ISSUE WAS NOT RAISED BEFORE THE LOWER AUTHORITIES. THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF MATERIALS SEIZED DURING THE SEA RCH AND INFORMATION GATHERED THEREAFTER. THE LD. DR STRONGLY DEFEN DED THE JURISDICTION ASSUMED BY ASSESSING OFFICER IN MAKING ASSESSM ENT U/S. 153A R.W.S. 143(3) OF THE ACT. IN SUPPORT OF HIS SUBMISSIONS , THE LD. DR PLACED RELIANCE ON THE ORDER OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MANGE RAM MITTAL VS. ACIT REPORTED AS 103 ITD 389 (SB) (DELHI). 4. ON MERITS THE LD. AR OF THE ASSESSEE SUBMITTED THAT IN THE IMPUGNED ASSESSMENT YEARS, ADDITIONS HAVE BEEN MADE PRIM ARILY ON FOUR GROUNDS. THE ISSUE-WISE SUBMISSIONS OF THE LD. AR ARE AS FOLLOWS: 7 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 4.1 AGRICULTURAL INCOME TREATED AS INCOME FROM OTHER SOURC ES : THE ASSESSEE IS HAVING AGRICULTURAL LAND ADMEASURING 6 ACRES A T GUT NO. 56 AT VILLAGE WALADGAON. THE ASSESSEE IS CULTIVATING CASH CROPS LIKE SUGARCANE AND COTTON. THE DOCUMENTS WERE PLACED ON RECORD BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS) TO SHOW CULTIVATION OF CROPS AND THE INCOME THERE FROM. THE COMMISSIONER OF INCOME TAX (A PPEALS) IN AN ARBITRARY AND UNJUSTIFIED MANNER ESTIMATED THE AGRICULTURE INCOME OF THE ASSESSEE AS RS.90,000/- PER ANNUM @ RS.15,000/- PER ACR E FOR ALL THE ASSESSMENT YEARS. THE AUTHORITIES BELOW HAVE NOT DISPUT ED THE OWNERSHIP OF THE ASSESSEE OVER THE AGRICULTURAL LAND AND THE FACT THE ASSESSEE IS CULTIVATING THE SAID LAND. HOWEVER, NO REASONS HAVE BEEN GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN ESTIMAT ING THE SAME AGRICULTURAL INCOME FOR ALL THE IMPUGNED ASSESSMENT YEARS. 4.2 INTEREST ON BORROWED FUNDS : THE LD. AR ARGUED THAT NO NEXUS HAS BEEN ESTABLISHED BY THE AUTHORITIES BELOW TO SHOW THAT INTEREST BEARING FUNDS WERE DIVERTED BY THE ASSESSEE FOR NON-BUSINESS PU RPOSES. THE ASSESSEE HAD MADE INVESTMENT IN SHARES OF SISTER CONCER NS. NO PART OF BORROWED FUNDS WERE UTILIZED FOR MAKING SUCH INVESTMENTS. THE SHARES WERE PURCHASED BY THE ASSESSEE PURELY OUT OF BUSINESS EXPEDIENCY. THIS ISSUE WAS NOT PROPERLY APPRECIATED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT O F HON'BLE SUPREME COURT OF INDIA IN THE CASE OF S.A. BUILDERS VS. CIT REPORTED AS 288 ITR 1 (SC). 4.3 DEEMED DIVIDEND : THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN TREATING THE ADVANCE AS DEEMED DIVIDEND. THE COMPANY IN WHICH THE ASSESSEE HELD SUBSTANTIAL SHAR ES HAD 8 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 ADVANCED LOAN TO THE ASSESSEE. HOWEVER, THE LOAN HAS B EEN PROVIDED IN LIEU OF ASSESSEE MORTGAGING HER PROPERTY TO ENABLE THE C OMPANY TO TAKE CREDIT FACILITIES FROM BANK. IN SUCH CIRCUMSTANCES, THE LOAN ADVANCED BY THE COMPANY IS NOT A LOAN SIMPLICITOR. TO SUPPORT HIS SUBM ISSIONS THE LD. AR PLACED RELIANCE ON THE ORDER OF HON'BLE CALCUTTA HIGH C OURT IN THE CASE OF PRADIP KUMAR MALHOTRA VS. CIT REPORTED AS 338 ITR 538. 4.4 UNEXPLAINED CASH CREDIT U/S. 68 : THE LD. AR SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN COMING TO THE CONCLUSION T HAT THE AMOUNTS DEPOSITED WERE NOT EXPLAINED. THE AMOUNTS WERE INTRODUCED BY THE ASSESSEE AS CAPITAL IN THE IMPUGNED ASSESSMENT YEA RS. THE AMOUNTS WERE WITHDRAWN FROM THE BANK ACCOUNT OF THE ASSESSEE A ND WERE SHOWN IN CAPITAL ACCOUNT OF THE FIRM. THE LD. AR REFERRED TO THE S UMMARY OF BANK ACCOUNTS AT PAGE 22 TO 26 OF THE PAPER BOOK. TH E ASSESSEE HAD PROVIDED DETAILS OF THE AMOUNTS TRANSFERRED AND THE SOUR CE OF FUNDS BEFORE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONE R OF INCOME TAX (APPEALS) HAS REPRODUCED THE SAME IN PARA NO . 8.1 OF HIS ORDER. DESPITE THE FACT THAT EXPLANATION OF FUNDS AND THE IR SOURCE WERE FURNISHED, THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINE D PARTIAL ADDITION U/S. 68 OF THE ACT. THE COMMISSIONER OF INCOME T AX (APPEALS) OUGHT TO HAVE DELETED THE ENTIRE ADDITION IN THE LIGHT OF D ETAILS SUBMITTED BY THE ASSESSEE. THE LD. AR ALSO REFERRED TO PAGES 710- 711 OF THE PAPER BOOK TO SHOW THE DETAILS OF FUNDS AND THEIR SOURCE. 5. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE IS HAVING AGRICULTURAL LAND ADMEASURING 6 ACRES. HOWEVER, THE ASSESSEE HAS NOT PLACED ON RECORD ANY COGENT 9 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 EVIDENCE TO SHOW THE AGRICULTURE ACTIVITY BEING CARRIED OU T BY THE ASSESSEE AND THE QUANTUM OF AGRICULTURAL INCOME FROM THE SAID LAND. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO T HE ASSESSEE BY ESTIMATING AGRICULTURAL INCOME ON THE BASIS OF DOCUMENTS PLACED BY THE ASSESSEE ON RECORD. IN RESPECT OF DISALLOWANCE OF INT EREST U/S. 36(1)(III), THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A CATEGORIC FINDING THAT AT THE END OF T HE YEAR INTEREST FREE FUNDS OF THE ASSESSEE WERE LESS THAN THE INVESTMENT S MADE AND THE LOANS ADVANCED TO SISTER CONCERNS BY THE ASSESSEE. TH E COMMISSIONER OF INCOME TAX (APPEALS) HAS SUSTAINED ADDITION ONLY TO THE E XTENT THE INTEREST BEARING FUNDS WERE UTILIZED FOR NON-BUSINESS PURPO SES. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAS ADMITTED TH E FACT THAT LOAN HAS BEEN TAKEN FROM COMPANIES WHEREIN SUBSTANTIAL SHARE HOLDING IS HELD BY THE ASSESSEE. IT IS ALSO NOT DISPUTED THAT THE SAID COMPANIES ARE HAVE SUFFICIENT RESERVE AND SURPLUS AT THE TIME WHEN THE ASSES SEE HAS TAKEN LOANS/ADVANCES. IN SUCH CIRCUMSTANCES, THE PROVISIONS OF SECTION 2(22)(E) ARE ATTRACTED AND THE COMMISSIONER OF INCOME TAX (APPEA LS) HAS RIGHTLY SUSTAINED THE ADDITION. IN RESPECT OF UNEXPLAINED CASH C REDITS THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLA IN THE SOURCE OF CASH DEPOSITED IN THE BANK. WHEREVER THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE SOURCE OF FUND, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE. THE LD. DR PRAYED FOR CON FIRMING THE IMPUGNED ORDERS. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF BOTH SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORIT IES BELOW. THE APPEALS BEFORE US FOR THE ASSESSMENT YEARS 2002-03 TO 2007-08 ARE ARISING OUT OF SEARCH AND SEIZURE ACTION. ADDITIONS WERE M ADE IN THE 10 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 HANDS OF THE ASSESSEE IN ASSESSMENT PROCEEDINGS U/S. 15 3A OF THE ACT IN THE AFORESAID ASSESSMENT YEARS. AS FAR AS ASSESSMENT Y EAR 2008-09 IS CONCERNED THE SCRUTINY ASSESSMENT WAS MADE UNDER REG ULAR PROVISIONS OF THE ACT. AGAINST THE ASSESSMENT ORDERS FOR THE RESPEC TIVE ASSESSMENT YEARS, THE ASSESSEE FILED APPEALS BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) GRANTED PARTIAL RELIEF TO THE ASSESSEE. NOW, THE ASSESSEE HAS COME IN SE COND APPEAL BEFORE THE TRIBUNAL. THE ADDITIONS ASSAILED BY THE ASSESS EE IN THE ASSESSMENT YEARS UNDER APPEAL ARE TABULATED AS UNDER: ASSESSMENT YEARS AGRICULTURAL INCOME TREATED AS INCOME FROM OTHER SOURCES INTEREST ON BORROWED FUNDS U/S. 36(1)(III) DEEMED DIVIDEND ADDITIONS U/S. 2(22)(E) UNEXPLAINED CASH CREDIT U/S. 68 2002-03 RS.1,49,320/- RS.85,228/- XXXX XXXX 2003-04 RS.1,25,320/- XXXX RS.14,10,000/- XXXX 2004-05 RS.90,780/- RS.3,87,109/- RS.1,85,000/- XXX X 2005-06 RS.70,320/- RS.2,41,589/- RS.5,25,000/- XXX X 2006-07 RS.85,300/- RS.2,08,830/- RS.2,61,138/- RS. 5,00,000/- 2007-08 RS.90,750/- RS.1,61,604/- XXXX RS.5,70,000/ - 2008-09 RS.60,500/- RS.1,16,680/- XXXX RS.4,14,660/ - 7. APART FROM CHALLENGING THE ADDITIONS ON MERITS, THE ASSE SSEE HAS CHALLENGED THE ASSESSMENT ORDERS PASSED U/S. 153A FOR A SSESSMENT YEARS 2002-03 TO 2006-07 ON ACCOUNT OF LACK OF JURISDICTION. T HE ASSESSEE HAS CHALLENGED THE JURISDICTION OF SECTION 153A PROCEEDINGS FOR THE FIRST TIME BEFORE THE TRIBUNAL. THE REVENUE HAS TAKEN OBJECTION T O THE ADDITIONAL AGROUND TAKEN BY THE ASSESSEE. WE FIND THAT THE ISSUE OF JURISDICTION GOES TO THE ROOT O F THE ASSESSMENTS AND THE ADDITIONS MADE THEREIN. UNDISPUTEDL Y, THE ASSESSEE HAS NOT TAKEN THIS GROUND BEFORE THE FIRST APPELLATE AUT HORITY. THE 11 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 ADDITIONAL GROUND RAISED IS A LEGAL GROUND WHICH ARISES FROM THE FACTS OF THE CASE AND HAS IMPLICATIONS ON THE TAX LIABILITY OF THE ASS ESSEE. THE POWERS OF TRIBUNAL ARE NOT IMPINGED TO ADMIT THIS LEGAL GROU ND RAISED BY THE ASSESSEE. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. VS. CIT (SUPRA) HAS HELD THAT THE TRIBUNAL HAS JURISDICTION TO EXAMINE THE QUESTION OF LAW WHICH AROSE FROM THE FACTS AS FOUND BY THE INCOME TAX AUTHORITY AND HAVING A BEAR ING ON THE TAX LIABILITY OF THE ASSESSEE. ACCORDINGLY, WE ADMIT THE ADDITIONA L GROUND RAISED BY THE ASSESSEE. 8. THE LD. AR HAS SUBMITTED THAT THE ADDITIONS HAVE BEE N MADE BY THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS U/S. 153A ON THE BASIS OF REVIEW OF BOOKS OF ACCOUNT. NO INCRIMINATING MATERIAL WAS S EIZED DURING THE SEARCH OPERATIONS IN RESPECT OF ADDITIONS MADE. IT IS A WELL SETTLED LAW THAT ADDITIONS MADE IN ASSESSMENT PROCEEDINGS ARISING OUT OF SEARCH CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND AN D SEIZED DURING SEARCH OPERATIONS. THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT REPORTED AS 137 IT D 287 (MUM)(SB) HAS HELD THAT IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT U/S. 153A WILL BE MADE ON THE B ASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTEXT OF RELEVANT PROVI SIONS MEANS BOOKS OF ACCOUNT, OTHER DOCUMENTS FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF REGULAR ASSESSMENT, AND U NDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. THE DECISION OF SPECIAL BENCH OF TRIBUNAL HAS BEEN UPHELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ALL CARGO GLOBAL LOGISTICS LTD . REPORTED AS 374 ITR 645 (BOM). THE HON'BLE HIGH COURT HELD THAT IF T HERE IS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH THEN THE TRIB UNAL WAS 12 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 RIGHT IN HOLDING THAT THE POWER U/S. 153A BEING NOT EXPE CTED TO BE EXERCISED ROUTINELY, SHOULD BE EXERCISED IF THE SEARCH REV EALED ANY INCRIMINATING MATERIAL. IF THAT WAS NOT FOUND, THEN THERE WAS NO WARRANT FOR MAKING AN ORDER WITHIN THE MEANING OF THIS PROVISION (SECTION 153A). 9. IN THE PRESENT CASE, A PERUSAL OF THE ASSESSMENT OR DERS AND THE IMPUGNED ORDER PASSED BY THE FIRST APPELLATE AUTHORITY S HOWS THAT NOWHERE IT HAS BEEN STATED THAT THE BOOKS OF ACCOUNT WERE NOT PRODUCED BY THE ASSESSEE IN THE COURSE OF ORIGINAL ASSESSMENT. THERE IS NO MENTION OF ANY INCRIMINATING MATERIAL SEIZED DURING THE SEARC H PROCEEDINGS IN THE ORDERS OF THE AUTHORITIES BELOW. A PERU SAL OF THE ASSESSMENT ORDER SHOWS THAT ADDITION WITH RESPECT TO D EEMED DIVIDEND U/S. 2(22)(E) IS BASED ON VERIFICATION OF THE BALANCE SHEET AN D THE SUBMISSIONS OF THE ASSESSEE, ADDITIONS IN RESPECT OF INVEST MENT AND LOANS AND ADVANCES IS MADE ON THE BASIS OF VERIFICATION OF THE BALANCE SHEET FILED ALONG WITH RETURN OF INCOME, ADDITION IN RESPECT OF AGRICULTURAL INCOME IS BASED ON QUESTIONNAIRE GIVEN TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND ADDITION ON ACCOUNT OF UNEX PLAINED CASH CREDIT U/S. 68 IS MADE ON THE BASIS OF VERIFICATION OF CAPIT AL ACCOUNT ENCLOSED WITH THE RETURN OF INCOME. THUS, IN RESPECT OF A NY OF THE ADDITIONS MADE U/S. 153A NO INCRIMINATING MATERIAL WAS AVAILA BLE OR RELIED UPON BY THE DEPARTMENT. IT IS A WELL SETTLED LAW T HAT POWERS U/S. 153A OF THE ACT ARE NOT TO BE EXERCISED IN A ROUTINE MA NNER. THE PROVISIONS OF SECTION 153A ARE SPECIAL AND ARE TO BE INVOK ED ONLY WHEN ADDITIONS ARE TO BE MADE ON THE BASIS OF INCRIMINATING MATE RIAL SEIZED DURING SEARCH AND SEIZURE ACTION. ADDITION/DISALLOWANCE CA NNOT BE MADE IN ASSESSMENT PROCEEDINGS U/S. 153A ON THE BASIS OF REV IEW OF BOOKS OF ACCOUNTS OR OTHER RELEVANT DOCUMENTS WHICH WERE ALREAD Y BEFORE THE DEPARTMENT IN REGULAR ASSESSMENT PROCEEDINGS. 13 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 IN VIEW OF THE LAW LAID DOWN BY THE HON'BLE BOMBAY HIGH CO URT IN THE CASE OF CIT VS. ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA) A ND THE FACTS OF THE CASE, ADDITIONS MADE IN THE ASSESSMENT YEAR 2002-03 TO 2007-08 ARE NOT SUSTAINABLE. THE ASSESSMENT ORDERS U/S. 153A FOR AS SESSMENT YEAR 2002-03 TO ASSESSMENT YEAR 2007-08 ARE BAD IN LAW. ACCORDINGLY, THE IMPUGNED ORDERS ARISING OUT OF SUCH ASSESSMENT PROCEED INGS ARE SET ASIDE. SINCE, THE IMPUGNED ORDERS FOR ASSESSMENT YEAR 2002-03 TO ASSESSMENT YEAR 2007-08 HAVE BEEN SET ASIDE ON THE G ROUND OF JURISDICTION, THE ARGUMENTS RAISED BY THE LD. AR FOR THE AB OVE IMPUGNED ASSESSMENT YEARS ON MERIT HAVE BECOME ACADEMIC AND AR E THUS NOT TAKEN UP FOR ADJUDICATION. 10. IN SO FAR AS ASSESSMENT YEAR 2008-09 IS CONCERNED THE ASSESSMENT ORDER HAS BEEN PASSED U/S. 143(3) OF THE ACT. THE ADDITIO NS HAVE BEEN MADE ON ACCOUNT OF AGRICULTURAL INCOME RS.60,500/- BEING TR EATED AS INCOME FROM OTHER SOURCES, DISALLOWANCE OF RS.1,16,680/- TOWA RDS INTEREST ON BORROWED FUNDS CLAIMED U/S. 36(1)(III) AND UNEXPLAINE D CASH CREDITS RS.4,14,660/- U/S. 68 OF THE ACT. 11. THE ASSESSEE HAD CLAIMED AGRICULTURAL INCOME OF RS.1,5 0,500/- IN ASSESSMENT YEAR 2008-09. THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT. THE COMMISSIONER OF INCOME TAX (APPEALS) GRANTED RELIEF TO THE ASSESSEE TO THE EXTENT OF RS.90,000/- BY ESTIMATING AGRIC ULTURAL INCOME AT RS.15,000/- PER ACRE. IT IS AN UNDISPUTED FACT THE ASSES SEE IS HAVING AGRICULTURAL LAND ADMEASURING 6 ACRES. THE ASSESSEE HAD FILED RELEVANT EXTRACTS OF 7/12 TO SHOW THAT CROPS LIKE SUGARCANE AN D COTTON WERE 14 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 CULTIVATED ON THE SAID LAND. THE COMMISSIONER OF INCOME TA X (APPEALS) ESTIMATED AGRICULTURAL INCOME FROM THE SAID LAND @ RS.15,000/ - PER ACRE I.E. RS.90,000/- PER ANNUM FOR 6 ACRES FOR ALL THE IMPUGNED A SSESSMENT YEARS BEFORE HIM I.E. ASSESSMENT YEAR 2002-03 TO ASSESSM ENT YEAR 2008- 09. IN ESTIMATING THE AFORESAID AGRICULTURE INCOME THE COM MISSIONER OF INCOME TAX (APPEALS) HAS NOT TAKEN INTO CONSIDERATION THE FACT THAT OVER THE PERIOD OF TIME THERE WOULD BE INCREASE IN THE PRICES O F THE CASH CROPS CULTIVATED BY THE ASSESSEE. MOREOVER, THE COMMISSIONER O F INCOME TAX (APPEALS) HAS ESTIMATED THE YIELD WITHOUT ANY BASIS. ACCORD INGLY, WE DELETE THE ADDITION SUSTAINED BY THE COMMISSIONER OF INCO ME TAX (APPEALS) BY TREATING AGRICULTURAL INCOME AS INCOME FROM OTHER SOURC ES. 12. THE SECOND GROUND RAISED IN THE APPEAL IS WITH REGA RD TO DISALLOWANCE TO THE EXTENT OF RS.1,16,680/- U/S. 36(1)(III) TOWARD S INTEREST ON BORROWED FUNDS. THE CONTENTION OF THE ASSESSEE IS TH AT THE ASSESSEE HAD PURCHASED SHARES ONE OF THE GROUP COMPANIES ON ACCOUNT OF BU SINESS EXPEDIENCY. MOREOVER, THE LOANS ADVANCED AND THE INVEST MENT MADE IN GROUP COMPANIES WERE OUT OF INTEREST FREE FUNDS. WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER HAS TABULA TED THE INVESTMENTS MADE AND THE LOANS ADVANCED BY THE ASSESS EE TO SISTER CONCERNS. THE RELEVANT EXTRACT IS REPRODUCED HERE-IN-UNDER: A.Y. CAPITAL INVESTMENT ALLOWANCE RESERVE AND STATE CAPITAL INCENTIVE TOTAL OF THE INVESTMENT IN AND LOANS AND ADVANCES TO SISTER CONCERNS EXCESS OF INVESTMENT AND LOANS TO SISTER CONCERNS OVER INTEREST FREE FUNDS DISALLOWANCE OF INTEREST @ 12% 2008-09 68,20,620/- 83,36,046/- 15,15,426/- 1,81,85 1/- * *THOUGH THE INTEREST @ 12% IS WORKED OUT AT RS.1,81 ,851/-, THE DISALLOWANCE U/S. 36(1)(III) FOR A.Y. 2008-09 IS TO BE RESTRICTED TO THE AMOUNT OF INTEREST ACTUALLY DEBITED BY THE APPELLANT TO PROFIT & LOSS ACCOUNT A T RS.1,16,680/-. 15 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS MADE DISALLOWAN CE ONLY TO THE EXTENT OF EXCESS OF INVESTMENT/LOANS OVER INTEREST FREE FUNDS. THE LD. AR HAS NOT BEEN ABLE TO SHOW FROM DOCUMENTS ON RECORD THAT IN THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD INTERES T FREE FUNDS TO MEET THE INVESTMENTS AND LOANS ADVANCED TO SISTER CONC ERNS. FURTHER, THE LD. AR HAS NOT BEEN ABLE TO SHOW FROM RECORDS THE A LLEGED BUSINESS EXPEDIENCY FOR MAKING INVESTMENT AND ADVANCING LOANS TO T HE SISTER CONCERNS OUT OF INTEREST BEARING FUNDS. THE LD. AR HAS N OT BEEN ABLE TO CONTROVERT THE FINDINGS OF COMMISSIONER OF INCOME TAX (APP EALS) ON THE ISSUE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 13. THE THIRD AND LAST ISSUE RAISED IN THE APPEAL FOR ASS ESSMENT YEAR 2008-09 IS UNEXPLAINED CASH CREDITS U/S. 68. THE COMMISSIO NER OF INCOME TAX (APPEALS) HAS CONFIRMED THE ADDITION MADE U/S. 6 8 FOR THE IMPUGNED ASSESSMENT YEAR AS NO EVIDENCE WAS FILED BY THE ASSESSEE IN SUPPORT OF HIS SUBMISSIONS. DURING THE COURSE OF ARGUMENT S THE LD. AR REFERRED TO PAGES 22 TO 26 OF THE PAPER BOOK WHEREIN T HE BANK STATEMENT OF THE ASSESSEE IS PLACED ON RECORD. WE FIND THAT THE B ANK STATEMENT IS FOR THE PERIOD STARTING FROM 01-04-2006 TO 31-03-2007 AND NOT FOR THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERA TION. THE LD. AR HAS ALSO REFERRED TO REPLY TO REMAND REPORT DATED 23- 03-2011 AT PAGES 708 TO 714 OF THE PAPER BOOK. AT PAGES 710 AND 711 T HE ASSESSEE HAS GIVEN DETAILS FOR INTRODUCTION OF RS.4,14,660/-. HOWEVER, THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE DETAILS GIVEN IN LETTER DATED 23-03-2011 WITH COGENT EVIDENCE. THE BALD SUBMISSIONS OF THE ASSESSE E CANNOT BE ACCEPTED IN THE ABSENCE OF SUPPORTING EVIDENCE. WE DO N OT FIND ANY INFIRMITY IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 16 ITA NOS. 877 TO 883/PN/2011, A.YS. 2002-03 TO 2008 -09 14. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR ASSES SMENT YEARS 2002-03 TO 2007-08 ARE ALLOWED AND THE APPEAL OF THE AS SESSEE IN ITA NO. 883/PN/2011 FOR ASSESSMENT YEAR 2008-09 IS PARTLY ACCEPTED. ORDER PRONOUNCED ON FRIDAY, THE 24 TH DAY OF JULY, 2015 AT PUNE SD/- SD/- ( / R.K. PANDA) ( ! ' / VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER # PUNE; $% /DATED : 24 TH JULY, 2015 RK/PS *+,#-. / '- # COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & ' ( / THE CIT(A), AURANGABAD 4. & /THE CIT(CENTRAL), NASHIK 5. !)* ++,- , ,- , . / 0 123 , # DR, ITAT, A BENCH, PUNE 6. * 4 5 # GUARD FILE. // ! + //TRUE COPY// *% / BY ORDER, #%0 1) PRIVATE SECRETARY, ' /ITAT, PUNE