BELA UMESH RASTOGI, MUMBAI V. DCIT CIR 12(2), MUMBAI

ITA 885/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88008 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Additional evidence
• Section: 131; 68; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, M UMBAI BEFORE S/SHRI D. KARUNAKAR RAO, (AM) AND AMIT SHUKLA, (JM) . , , ./I.T.A. NO885/MUM/2013 ( ! / ASSESSMENT YEAR :2007-08) MRS.BELA UMESH RASTOGI, 102, MEHR NAZ, CUFFE PARADE COLABA, MUMBAI-400005 / VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 12(2), ROOM NO.134, AYAKAR BHAVAN, M K ROAD, MUMBAI. ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ./I.T.A. NO1570/MUM/2013 ( ! / ASSESSMENT YEAR :2007-08) DY. COMMISSIONER OF INCOME TAX,CIRCLE 12(2), ROOM NO.134, AYAKAR BHAVAN, M K ROAD, MUMBAI. / VS. MRS.BELA UMESH RASTOGI, 102, MEHR NAZ, CUFFE PARADE COLABA, MUMBAI-400005 ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ' ./ &' ./PAN/GIR NO. :AAWPR4305D '# ( / ASSESSEES BY SHRI HARI S RAHEJA $%'# ) ( /REVENUE BY SHRI AKHILENDRA YADAV * ) + / DATE OF HEARING : 27.11.2014 ,-! ) + /DATE OF PRONOUNCEMENT : 14.01.2015 / O R D E R PER AMIT SHUKLA, (JM) THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND T HE REVENUE AGAINST THE IMPUGNED ORDER DATED 19.11.2012 , PASSED BY I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 2 THE LD. CIT(A)-24, MUMBAI FOR THE QUANTUM OF ASSESS MENT U/S 144 OF THE INCOME TAX ACT, 1961(THE ACT) FOR THE ASSESSM ENT YEAR 2007- 08. THE COMMON ISSUE INVOLVED IN BOTH THE APPEALS IS IN RESPECT OF ADDITION ON ACCOUNT OF LOAN CREDITORS MADE U/S 68 OF THE ACT. IN REVENUES APPEAL FOLLOWING GROUND HAVE BEEN TAKEN: 1. WHETHER SINCE ASSESSEE DID NOT REPLY TO OPPORTUN ITIES OFFERED BY AO FOR EXPLAINING DETAILS AND SUBMISSION OF EVIDENCES WITHOUT ANY REASONABLE GROUND SO THAT IT COULD BE EXAMINED BEFORE ASSESSMENT ORDER WAS PASSED, CIT(A) OUGHT TO HAVE STRICTLY FOLLOWED RULE 46A WHILE ADMITTIN G ADDITIONAL EVIDENCE ADVANCED BY ASSESSEE? 2. WHETHER SINCE CIT(A) HAD NOT DONE SO AND HAD NOT RECORDED REASONS FOR ADMISSION OF ADDITIONAL EVIDEN CE COULD BE SAID TO HAVE VITIATED HIS ORDER ENTIRELY. 3. WHETHER IN VIEW OF THE DECISION OF ITAT 'G' BENCH. MURNBAI IN THE CASE OF ITO, WD-4(3), THANE VS RAJAN MANHAZI AYNOORKANOT (2011) 15 TAXMAN.CORN 297 (MUM), CIT(A) WAS CORRECT IN NOT STRICTLY FOLLOWING RULE 46A WHEN ASS ESSEE NEGLECTED OPPORTUNITY PROVIDED BY AO DURING ASSESSM ENT PROCEEDINGS. 4. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITIO N UNDER SECTION 68 ONLY RELATED TO THREE NEW DEPOSITORS WIT HOUT APPRECIATING THE FACT THAT IN THE REMAND REPORT AO HAS NOT COMMENTED UPON THE OTHER CREDITORS. THUS, THE ADDIT ION IN RESPECT OF OTHER CREDITORS SHOULD ALSO HAVE OUGHT TO BE CONFIRMED. WHEREAS IN THE ASSESSEES APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING TH E ADDITION FOR THE LOANS TAKEN DURING COURSE OF BUSINESS AMOUNTING TO I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 3 RS.2,50,000/- REJECTING THE CLAIM OF THE APPELLANT AS GENUINE LOANS. A) LOAN FROM MR. MAHADEVLAL MAHATTO RS.50,000/- B) LOAN FROM MR. PRAKASH BUTANI RS.50,0 00/- C) LOAN FROM MR. BABULAL L SHAH RS.1,50,000 /- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A), WAS NOT JUSTIFIED IN CONFIRMING T HE DISALLOWANCE OF INTEREST @ 8% ON THE ADDITION FOR THE LOANS OF R S.2,50,000/- CONFIRMED BY HIM. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS..1,08,028/- ON LOANS OF RS.38,53,285/- 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A PROPRIETOR OF M/S COMMODITY TRADE INTERNATIONAL, ENGAGED IN THE BUSINESS OF MANUFACTURING OF LIP STICKS, NAIL POLISH, EYE BRO W PENCILS ETC. WHICH WAS SOLD TO SHINGAR COMPANY AND COLOUR PLUS (USA ). IN THIS YEAR, THE ASSESSEE HAS ONLY CARRIED OUT TRADING ACTIVITIE S OF CHEMICALS AND COSMETIC GOLD JEWELLERY INSTEAD OF MANUFACTURING. THE RETURN OF INCOME WAS FILED ON 31.10.2007 AT A LOSS OF RS.10,3 1,062/-. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN THA T VARIOUS OPPORTUNITIES WERE GIVEN TO THE ASSESSEE, HOWEVER, NO PROPER RESPONSE OR REPRESENTATION WAS MADE ON BEHALF OF TH E ASSESSEE. ACCORDINGLY, THE AO HAD NO OPTION BUT TO COMPLETE T HE ASSESSMENT U/S 144 OF THE ACT. THE AO NOTED THAT THE ASSESSEE HAS RECEIVED A LOAN OF RS.96,30,000/- FROM VARIOUS PERSONS. SIN CE THE ASSESSEE I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 4 COULD NOT FURNISH ANY CONFIRMATION LETTER, ACCORDIN GLY, HE ADDED THE SAID LOAN TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED LOAN CREDITS U/S 68. FURTHER, IN ABSENCE OF ANY SUPPOR TING EVIDENCE, WITH REGARD TO PURCHASE AND SALES EXPENDITURE, BUSINESS LOSS OF RS.10,31,062/- AS CLAIMED BY THE ASSESSEE WAS DISAL LOWED. NOT ONLY THAT THE INTEREST CLAIM ON SUCH LOANS WAS ALSO DISA LLOWED. THE INTEREST AT THE RATE OF 18% WAS WORKED OUT TO RS.1 7,33,400/-. ACCORDINGLY, THE INCOME OF THE ASSESSEE WAS ASSESSE D AT RS.1,13,63,400/-. 3. BEFORE, THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT SINCE HE WAS REQUIRED TO FILE LARGE NUMBER OF CONFIRMATION OF THE CREDITORS AND ALSO DETAILS, THE SAME COULD NOT BE PROCURED DURING THE COURSE OF ASSESSMENT PROCEEDING. IT WAS FURTHER EXPLAINED B Y THE ASSESSEE LARGE NUMBER OF PAPERS WERE MISSING BECAUSE OF SHI FTING OF HIS OFFICE WAS CARRIED OUT DURING THAT PERIOD AND THEREFORE N O PROPER COMPLIANCE COULD BE MADE. HENCE, THE ASSESSEE FI LED ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION LETTERS AND C ONFIRMATION COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF CRED ITORS. TO PROVE THE GENUINENESS OF THE LOAN ALONG WITH THE CONFIRMA TION LETTERS, THE ASSESSEE ALSO FURNISHED THE DETAILS OF PURCHASE AND SALES AND EXPENSES WHICH WERE INCURRED DURING THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE LD.CIT(A) FORWAR DED THE ENTIRE I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 5 ADDITIONAL EVIDENCES AND INFORMATION TO THE AO TO S UBMIT HIS REMAND REPORT NOT ONLY ON THE ADMISSIBILITY OF ADDITIONAL EVIDENCE BUT ALSO TO EXAMINE THE DETAILS/ADDITIONAL EVIDENCE FILED BY TH E ASSESSEE, THROUGH HIS LETTER DATED 14.7.2010. IN RESPONSE, T HE AO SUBMITTED HIS REMAND REPORT DATED 30.4.2012, THE COPY OF WHICH HA VE BEEN PLACED IN THE PAPER BOOK AT PAGES 83 TO 87. THE RELEVANT CONTENTS OF THE REMAND REPORT HAVE ALSO BEEN INCORPORATED BY THE L D. CIT(A) AT PAGES 4 AND 5 OF THE APPELLATE ORDER. IN THE REMAND PROCEEDINGS, THE AO EXAMINED THE CONFIRMATION LETTERS AND THE COPY OF ACCOUNTS OF ALL THE 34 CREDITORS AND ALSO BOOKS OF ACCOUNT, BILLS AND VOUCHERS. THE AO AFTER EXAMINATION OF THE EVIDENCES FURNISHED, AC CEPTED THE LOAN S IN RESPECTS OF 31 CREDITORS AND ONLY IN RESPECT OF 3 CREDITORS HE GAVE HIS ADVERSE COMMENTS, WHICH WERE IN THE FOLLOWING M ANNER: 8. LOAN CREDITS TREATED AS INCOME ULS.68 OF THE I.T.AC T - RS.96,30,000/- THE ASSESSEE HAS NOW FLIED LOAN CONFIRMATIONS OF RS.96,30,000/- BEFORE YOUR GOOD SELF FOR THE NEW LO ANS/ ADDITIONS TO LOANS TAKEN DURING THE DURING THE YEAR UNDER CONSIDERATION. SOME OF THE LOANS WERE RANDOMLY VERI FIED. THE PARTY-WISE DISCREPANCIES OBSERVED ARE NARRATED BELO W (A) SHRI MAHADEVLAL MAHATTO - RS.5O,OOO ,7 (INTEREST - RS.4,500). THE LOAN CONFIRMATION OF ABOVE PARTY IS FILED WITHO UT ANY PAN DETAILS, ADDRESS OR EVIDENCE OF IDENTITY AND BANK S TATEMENT. THEREFORE, THE CREDIT WORTHINESS/ CAPACITY OF THE L ENDER TO ADVANCE THE LOAN CANNOT BE VERIFIED FOR ITS .GENUIN ENESS. I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 6 (B) SHRI PRAKASH KISHINCHAND BUTANEY LOAN RS.50,000/- (INTEREST- RS.4,575). THE SUMMONS UJS.131 OF THE I.T.ACT, 1961 WAS ISSUED TO THE SAID PARTY TO VERIFY THE LOAN TRA NSACTION. AS PER LETTER DATED 07.03.2011 FROM ONE MR.G.H.NAWANI, IT IS INTIMATED THAT THE SAID SHRI PRAKASH KISHINCHAND BU TANEY HAS EXPIRED 4 YEARS AGO, I.E. ON 03.04.2007, THE COPY O F DEATH CERTIFICATE HAS BEEN ENCLOSED AND IT IS FURTHER INT IMATED THAT SINCE HE WAS BACHELOR, NO RECORDS ARE AVAILABLE. IT IS NOT KNOWN IN WHAT CAPACITY THE SAID MR. G.H.NAWANI HAS FILED THE SAID LETTER DATED 07.03.2011 OR CONFIRMATION IN APPEAL P ROCEEDINGS. IN VIEW OF THIS, THE LOAN TRANSACTION IS NOT VERIFI ABLE. (C) SHRI BABULAL L. SHAH - LOAN RS.1,50,000/- (INTERES T - RS.9,000). IN COMPLIANCE TO SUMMONS U/S.131, A LETTER DATED 23 RD FEBRUARY, 2011 HAS BEEN RECEIVED FROM SHRI SHAILESH B. SHAH (SON) STATING THAT HIS FATHER LATE BABULAL L. SHAH HAS EXPIRED ON 23.04.2006, THE LATE SHRI BABULAL L. SHAH WAS ASSES SED TO TAX ONLY UP TO A.Y.2006-07 BY THE ITO, WARD 24(3)(4), M UMBAI UNDER PAN NO.AAIPS0626G. HE HAS ALSO FILED COPY OF ACKNOWLEDGEMENT OF LAST RETURN FLIED FOR A.Y.2006- 07, COPY OF BANK ACCOUNT AND COPY OF PAN CARD. HAVING REGARD TO THE ABOVE, THE CIT(A) IS REQUESTED TO TAKE THE DECISION AS PER LAW IN RESPECT OF LOAN CREDIT OF AB OVE 3 PARTIES. REGARDING DISALLOWANCE OF INTEREST AND BUSINESS LOS S, HE ALSO GAVE HIS DETAILED COMMENTS AND REQUESTED THE LD.CIT(A) T O TAKE DECISION IN ACCORDANCE WITH LAW. THE COPY OF THE SAID REMAND RE PORT WAS ALSO FORWARDED TO THE ASSESSEE TO SUBMIT HIS REJOINDER, WHICH TOO HAS BEEN INCORPORATED BY THE LD. CIT(A) FROM PAGES 5 TO 7 OF APPELLATE ORDER. THE LD. CIT(A), ON THE BASIS OF REMAND REP ORT, HELD THAT OUT OF LOAN CREDITORS OF RS.96,30,000/-, THE LOAN ACCOUNT OF THREE CREDITORS HAVE NOT BEEN SATISFACTORILY EXPLAINED AND ACCORDIN GLY HE CONFIRMED THE LOAN CREDITS AGGREGATING OF RS.3,50,000/- AS RECEIVED FROM I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 7 THREE PERSONS. REGARDING INTEREST ALSO, AFTER CONSI DERING THE REMAND REPORT OF THE AO AND THE SUBMISSIONS OF THE ASSESS EE, HE DIRECTED THE AO TO CHARGE 8% OF INTEREST ON THE AMOUNT ADVAN CED AND ALSO ON THE AMOUNT OF LOAN CONFIRMED IN RESPECT OF ALL THE CREDITORS. REGARDING DISALLOWANCE OF LOSS, THE LD. CIT(A) ACC EPTED THE LOSS ON THE BASIS OF REMAND REPORT AND ALSO SUBMISSIONS MAD E BY THE ASSESSEE. AGAINST THIS, THE DEPARTMENT HAS NOT RAI SED ANY GROUND. 4. BEFORE US, THE LD. DR SUBMITTED THAT, ONCE THE ASSESSEE WAS GIVEN AMPLE OPPORTUNITY BY THE AO, THEN THE LD. CI T(A) SHOULD NOT HAVE ACCEPTED THE ADDITIONAL EVIDENCE WITHOUT ASSI GNING ANY REASON OR ADMITTING THE ADDITIONAL EVIDENCE. EVEN, IN THE REMAND REPORT, THE AO HAS NOT GIVEN ANY SPECIFIC FINDING FOR EACH AND EVERY CREDITOR EXCEPT IN THE CASE OF THREE CREDITORS FOR WHICH HE HAS GIVEN HIS ADVERSE COMMENTS. THE LD. CIT(A) WAS REQUIRED TO GI VE PROPER FINDINGS WITH REGARD TO EACH AND EVERY OTHER CREDI TORS AND SHOULD HAVE COME TO HIS DEFINITE CONCLUSION. HE HAS RELIE D UPON THE ADVERSE FINDINGS OF THE AO GIVEN IN THE REMAND REPORT FOR CONFIRMING THE ADDITIONS AND FOR THE RELIEF GIVEN IN RESPECT OF OT HER CREDITORS, HE HAS NOT GIVEN ANY INDEPENDENT FINDING. THUS, SUCH AN ORDER CANNOT BE SUSTAINED AND THE MATTER SHOULD GO BACK TO THE FIL E OF THE AO TO DECIDE THIS ISSUE AFRESH. IN SUPPORT OF THIS CONTEN TION, HE RELIED UPON THE DECISION OF ITAT 'G' BENCH MUMBAI IN THE CASE OF ITO VS I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 8 RAJAN MANHAZI AYNOORKANOT (2011) 15 TAXMAN.CORN 297 , WHEREIN THE TRIBUNAL HAS HELD THAT WHILE ADMITTING THE ADDITION AL EVIDENCE, THE LD. CIT(A) HAS TO RECORD HIS REASONS FOR ADMISSION OF A DDITIONAL EVIDENCE IN WRITING AND IF IT IS NOT SO, THEN THE ENTIRE ADM ISSION GET VITIATED. 5. ON THE OTHER HAND, THE LD. COUNSEL, SHRI HARI S RAHEJA SUBMITTED THAT THE ADDITIONAL EVIDENCE COULD NOT BE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS THERE WAS SHIF TING OF OFFICE OF THE ASSESSEE AND THE ENTIRE MATERIAL AND EVIDENC E COULD NOT BE COLLECTED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THIS FACT WAS ALSO MENTIONED BEFORE THE AO. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE ASSESSEE WAS ABLE TO PROCURE THE CONFIRMATION LETTERS FROM ALL THE 34 CREDITORS ALONG WITH CONFI RMED COPY OF ACCOUNT, WHICH WAS FILED. AT THE TIME OF THE FILING OF THE ADDITIONAL EVIDENCES, THE ASSESSEE HAS GIVEN HER DETAILED REASONS AS TO W HY SUCH ADDITIONAL EVIDENCES COULD NOT BE FILED BEFORE THE AO. AFTER THE ADDITIONAL EVIDENCES WERE FILED, THE LD. CIT(A) HA S FORWARDED ALL THE ADDITIONAL EVIDENCES TO THE AO, NOT ONLY TO SUBMIT HIS REPORT ON MERITS OF THE ISSUES INVOLVED, BUT ALSO ON THE ADMI SSIBILITY OF ADDITIONAL EVIDENCE. THE SAID REMAND LETTER WAS SE NT TO THE AO WAY BACK IN JULY, 2010. DURING THE COURSE OF PROLONGED REMAND PROCEEDINGS, THE ASSESSEE NOT ONLY APPEARED FROM TI ME TO TIME, BUT ALSO FURNISHED ENTIRE EVIDENCES, WHICH WERE EXAMIN ED BY THE AO IN I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 9 DETAIL AFTER RAISING QUERY FROM TIME TO TIME. THE R EMAND REPORT WAS SUBMITTED ONLY ON 15.5.2012 I.E.AFTER A GAP OF NEA RLY TWO YEARS BEFORE THE LD. CIT(A). IN THE SAID REMAND REPORT, T HE AO HAS NOT GIVEN ANY ADVERSE COMMENTS WITH REGARD TO ADMISSION OF AD DITIONAL EVIDENCES ON THE CONTRARY HE HAS EXAMINED THE SAME ON MERITS AND ALSO CARRIED OUT DETAILED INQUIRY. THE DETAILS OF S UCH INQUIRY HAS BEEN MENTIONED AT PARAS 4 TO 7 OF THE REMAND REPORT. IT IS AFTER DUE EXAMINATION, HE HAS GIVEN HIS ADVERSE COMMENTS IN R ESPECT OF THREE CREDITORS ONLY. THIS DOES NOT LEAD TO ANY INFERENC E THAT THE AO HAS NOT EXAMINED OTHER CREDITORS. OTHERWISE ALSO, ALL T HE CREDITORS HAVE CONFIRMED THAT THEY HAVE PAID THE LOAN AMOUNT THRO UGH ACCOUNT PAYEE CHEQUES DRAWN FROM THEIR BANK ACCOUNT AND HAV E ALSO CONFIRMED THE COPY OF THE LEDGER ACCOUNT. ALL THESE DETAILS ARE APPEARING FROM PAGES 1 TO 68 OF THE PAPER BOOK. THUS, MERE FACT THAT THE AO IN THE REMAND REPORT HAS NOT MENTIONED ABOUT ALL THE CREDITORS AFTER DETAILED EXAMINATION, IT CANNOT LEA D TO ANY ADVERSE INFERENCE WITH REGARD TO THE CREDITORS WHICH HAS BE EN ACCEPTED BY HIM. THE LD.CIT(A), ON THE BASIS OF REPORT AND ALSO ON THE EXAMINATION OF THE RECORD FILED BEFORE HIM, HAS ACC EPTED THE MAJORITY OF CREDITORS AND IN RESPECT OF ONLY THREE CREDITORS UPHELD THE OBSERVATION AND FINDING OF THE AO GIVEN IN THE REM AND REPORT. THE LD. CIT(A) HAS STRICTLY FOLLOWED THE PROVISIONS OF RULE 46A, BY NOT I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 10 ONLY FORWARDING THE ENTIRE EVIDENCE TO THE AO TO SUBMIT THE REMAND REPORT BUT ALSO, REQUIRED THE AO TO GIVE HIS COMME NTS WITH REGARD TO ADMISSIBILITY OF SUCH EVIDENCES. ONCE THE AO HAS AD MITTED THE ADDITIONAL EVIDENCE AND HAS NOT OBJECTED TO THEN IT CANNOT BE HELD THAT THERE IS ANY VIOLATION OF RULE 46A. THEREFOR E, THE DECISION RELIED UPON BY THE LD.DR WILL NOT BE APPLICABLE TO THE FAC TS OF THE PRESENT CASE. ON THE QUERY RAISED BY THE BENCH AT THE TIME OF HEARING, WHETHER ALL THE LOAN HAVE BEEN REPAID, THE LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS REPAID ALL THE LOAN IN THE SUBSEQUENT YEARS AND, MOSTLY IN THE ASSESSMENT YEA R 2009-10. THE DETAILS OF SUCH REPAYMENT HAVE ALSO BEEN FILED BEFO RE US. THUS, HE SUBMITTED THAT NO ADDITION U/S 68 IS WARRANTED. 6. REGARDING THREE CREDITORS, VIZ (I) SHRI MAHADE VLAL MAHATTO - RS.5O,OOO (II) SHRI BABULAL L. SHAH - LOAN RS.1,50, 000/- AND (III) SHRI BABULAL L.SHAH- LOAN RS.1,50,000, LD. COUNSEL, SUBMITTED THAT, CONFIRMATION LETTER COULD BE FILED ONLY IN THE CASE OF SHRI MAHADEVLAL MAHATTO WHO HAS GIVEN THE LOAN OF RS.50,000/- THRO UGH ACCOUNT PAYEE CHEQUES. IN OTHER CASES, THE ASSESSEE COULD N OT FILE ANY INFORMATION AS BOTH THE LENDERS HAD DIED AND THEY H AD FILED THEIR INCOME TAX RETURN ONLY UP TO AY 2006-07. THEREFOR E, NO FURTHER EVIDENCE COULD BE FILED. HOWEVER, OTHER DETAILS WE RE GIVEN BEFORE THE AO AS WELL AS BEFORE THE LD.CIT(A) AND THE ADDITIO N HAS BEEN MADE I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 11 ONLY ON THE GROUND THAT CREDITWORTHINESS OF THE CRE DITOR COULD NOT BE PROVED. NOW THE FACT THAT LOAN HAS BEEN REPAID, TH E SAID ADDITION COULD NOT BE SUSTAINED. REGARDING DISALLOWANCE OF INTEREST AT THE RATE OF 8% ON THE ADDITION FOR THE LOANS THAT OTHE R LOANS FROM WHOM INTEREST WERE NOT CHARGED, HE SUBMITTED THAT THE AS SESSEE HAS GIVEN ALL THE PARTICULARS OF THE INTEREST WHICH HAS BEEN CHARGED AND ALSO AS TO WHY ON CERTAIN LOANS THE ASSESSEE HAS NOT PAID I NTEREST. NO ADVERSE INFERENCE SHOULD BE DRAWN ON THIS ACCOUNT. 7. ON THE OTHER HAND, THE LD. DR STRONGLY RELIED U PON THE ORDER OF LD. CIT(A) WITH REGARD TO THE GROUND RAISED BY THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT RECORD AND THE RELEVANT FINDINGS GIVEN IN THE IMPUG NED ORDER. THE ASSESSEE HAS RECEIVED LOAN FROM 34 PERSONS AGGREGA TING TO RS.96,30,000/-. DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE AND THE DETAILS AND ACCORDINGLY THE AO HAD NO OPTION BUT TO DRAW ADVERS E INFERENCE AGAINST THE ASSESSEE. DURING THE COURSE OF THE APPE LLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE EVIDE NCES AND DETAILS COULD NOT BE FILED, BECAUSE OF LARGE NUMBER OF PAP ERS WERE MISPLACED DURING THE SHIFTING OF OFFICE PREMISES F ROM VADALA TO AMBARNATH AND ALSO THE EMPLOYEES OF THE ASSESSEE H AVE LEFT THEIR I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 12 JOB WITHOUT ANY NOTICE. THEREFORE, THE ASSESSEE CO ULD NOT COMPLY WITH THE NOTICES ISSUED BY THE REVENUE AND COULD NO T FURNISH DETAILS AND EVIDENCES BEFORE THE AO. THE REASONS STATED BY THE ASSESSEE BEFORE THE LD. CIT(A) WAS ACCEPTED BY HIM AND HE S ENT ALL THE ADDITIONAL EVIDENCES IN THE FORM OF CONFIRMATION LE TTERS, CONFIRMED COPY OF ACCOUNT AND ENTIRE DETAILS OF PURCHASE AND SALES TO THE AO TO GIVE HIS COMMENTS, NOT ONLY ON THE ADDITIONAL EVIDE NCES AND ADMISSIBILITY OF ADDITIONAL EVIDENCES, BUT ALSO TO CARRY OUT THE PROPER EXAMINATION AND INQUIRIES OF ADDITIONAL EVIDENCES. IT APPEARS THAT THE AO TOOK ALMOST TWO YEARS FOR SUBMITTING HIS REMAND REPORT. FROM THE PERUSAL OF THE REMAND REPORT, AS APPEARING IN THE P APER BOOK, IT IS SEEN THAT THE AO HAS NOTED THE FACTS AS TO WHY TH E ASSESSEE COULD NOT FURNISH THE CONFIRMATION AND OTHER DETAILS DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. THIS, ITSELF GOES TO SHOW THAT HE HAS NO OBJECTION ON THE REASONS STATED BY THE ASSESSEE. IN THE REMAND PROCEEDINGS THE AO HAD CALLED FOR ENTIRE DETAILS, E XPLANATION OF THE ASSESSEE AND ALSO SENT SUMMONS U/S 131 TO THE LOAN CREDITORS. HE EVEN NOTED THAT, 16 LOAN CREDITORS COULD NOT RESPON SE TO THE SUMMONS ISSUED. THIS FACT WAS CONFRONTED TO THE AS SESSEE DURING THE COURSE OF THE REMAND PROCEEDINGS. THE ASSESSEE IN RESPONSE HAD FILED FURTHER DETAILS, BOOKS OF ACCOUNT AND OT HER CONFIRMATIONS TO CORROBORATE THE GENUINENESS OF THE LOAN CREDITORS. IT WAS AFTER I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 13 SCRUTINIZING THE ENTIRE DETAILS, THE AO HAS GIVEN H IS COMMENTS AND HAS SUBMITTED THAT, IN RESPECT OF 3 LOAN CREDITORS, CREDITWORTHINESS COULD NOT BE PROVED BY THE ASSESSEE. ON THE ISSUE O F INTEREST ALSO, HE HAS GIVEN HIS DETAILED COMMENTS. THUS, WHEN THE ASSESSEE HAS GIVEN REASONS AND CIRCUMSTANCES, AS TO WHY THE EVID ENCE COULD NOT BE PRODUCED DURING THE COURSE OF ASSESSMENT PROC EEDINGS AND THE SAID REASONS HAVE BEEN ACCEPTED BY THE AO AS WE LL AS BY THE LD. CIT(A), THEN IT CANNOT BE HELD THAT THERE IS ANY V IOLATION OF RULE 46A. THE LD. AO IN THE REMAND REPORT HAS ACCEPTED THE AD DITIONAL EVIDENCES AND HAS RAISED NO OBJECTIONS, WHICH HE W AS GIVEN CHANCE IN TERMS OF LETTER WRITTEN BY THE LD.CIT(A) TO THE AO. THUS, THERE IS NO PROCEDURAL DEFAULT ON THE PART OF THE LD.CIT(A() IN TERMS OF RULE 46A AND CONSEQUENTLY THERE IS NO MERITS IN THE GROUNDS RAISED BY REVENUE REGARDING VIOLATION OF RULE 46A. FURTHER, ONCE T HE AO HAS HIMSELF ADMITTED THE GENUINENESS OF LOAN IN RESPECT OF ALL THE THE CREDITORS, AND SAME HAS BEEN ACCEPTED BY THE LD. CIT(A) AFTER CALLING FOR THE REJOINDER SUBMISSIONS AND ON PERUSAL OF RECORDS, TH EN WE DO NOT FIND ANY REASON TO REVERSE THE DELETION OF ADDITION OF L OAN AMOUNTS IN RESPECT OF 31 CREDITORS, MERELY ON THE GROUND THAT THERE IS NO ELABORATE DISCUSSION IN THE APPELLATE ORDER. ONCE T HE FACT HAS BEEN ADMITTED AFTER DETAILED INQUIRY AND EXAMINATION WHI CH IS EVIDENT FROM THE MATERIAL PLACED ON RECORD, THEN THERE NEED NOT BE ANY DETAILED I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 14 DISCUSSION ABOUT ACCEPTANCE OF THE LOAN.. MOREOVER , AS SUBMITTED BY THE LD. COUNSEL, THESE LOANS HAVE BEEN REPAID TO T HE CREDITORS IN THE SUBSEQUENT YEARS, WHICH FACT, CAN BE VERY WELL BE V ERIFIED BY THE AO. THUS, WE DO NOT FIND ANY MERITS IN THE GROUNDS RAIS ED BY THE REVENUE AND ACCORDINGLY THE SAME ARE DISMISSED. 9. NOW COMING TO THE GROUNDS RAISED BY THE ASSESSEE IN RESPECT OF THREE CREDITORS, WE FIND THAT THERE IS A CATEGOR ICAL FINDING BY THE AO AS WELL AS THE LD. CIT(A), THAT CREDITWORTHINESS O F THE SAID PERSONS HAVE NOT BEEN PROVED BY THE ASSESSEE. EVEN BEFORE U S, NO DOCUMENTARY EVIDENCE HAS BEEN FILED TO REBUT THE FI NDINGS OF THE LD. CIT(A), WHICH ARE AS UNDER : 1. SHRI MAHADEVLAL MAHATTO - RS.50,000/- THE A.O. MENTIONED THAT THE ASSESSEE FILED ONLY CON FIRMATION LETTER. NO OTHER DETAILS FURNISHED. ONLY REPLY THE ASSESSEE SUBMITTED IS THAT, THE LENDER IS AN EMPLOYEE AND HE HAS PAID BY CHEQUE. IT IS ESTABLISHED LAW THAT MERELY BECAUSE T HE PAYMENT IS MADE BY CHEQUE DOES NOT SATISFY ALL THE CONDITIO NS TO BE OUT OF THE PURVIEW OF THE PROVISIONS OF SECTION 68 OF T HE I.T.ACT. AS THE ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS O F THE LENDER, THE CREDIT CAN NOT BE ACCEPTED AS GENUINE. THUS, TH E AO'S ACTION IS JUSTIFIED IN ADDING RS.50,000/- U/S.68 AC CORDINGLY THE ADDITION IS UPHELD. 2. SHRI BABULAL L SHAH - RS.1,50,000 IN THIS CASE, THE AO REPORTED THAT THAT NO INFORMAT ION WAS FURNISHED EXCEPT COPY OF THE DEATH CERTIFICATE OF T HE LENDER WHO EXPIRED IN APRIL 2007. IN THIS CASE ALSO AS NO EVI DENCE HAS BEEN PRODUCED BY THE ASSESSEE, THE SAME CANNOT BE T REATED AS GENUINE LOAN. FURTHER, THE ASSESSEE COULD NOT ESTAB LISH THE CREDITWORTHINESS OF THE LENDER AND GENUINENESS OF T HE TRANSACTION. THE AMOUNT OF RS.50,000/- HAS BEEN RIG HTLY ADDED BY THE AO. I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 15 3. SHRI BABULAL L SHAH - RS.1,50,000 IN THIS CASE ALSO THE LENDER STATED TO HAVE EXPIRED AND HE DISCONTINUED FILING THE RETURN FROM THE A.Y.2006-07 ONWARDS. AS THERE IS NO INFORMATION FURNISHED REGARDING A,Y.200 7-08 OF THE LENDER BEFORE THE A.O. FOR PROVING THE TRANSACTION, THE AO IS JUSTIFIED IN MAKING ADDITION U/S.68. MERE SUBMISSIO N OF PAN DOES NOT ABSOLVE THE ASSESSEE FROM THE RESPONSIBILI TY. THEREFORE, RS.1,50,000 HAS BEEN RIGHTLY ADDED U/S.6 8 BY A.O. THIS ADDITION IS CONFIRMED. THUS, WE DO NOT FIND ANY REASONS TO DEVIATE FROM SU CH FINDINGS RECORDED BY THE LD. CIT(A), WHICH IS BASED ON REMAN D REPORT OF THE AO. ACCORDINGLY, GROUND NO.1 RAISED BY THE ASSESSE E IS DISMISSED. 10. REGARDING DISALLOWANCE OF INTEREST, BRIEF FACTS OF THE ISSUE ARE THAT, THE ASSESSEE HAS CLAIMED INTEREST PAYMENT OF RS.26,70,011/-. SINCE THE ASSESSEE COULD NOT GIVE BREAK-UP OF THE I NTEREST PAID, THE AO DISALLOWED THE INTEREST AT THE RATE OF 18% ON TH E NEW LOANS AND THEREFORE, THE ADDITION OF RS.17,33,400/- WAS MAD E DURING THE COURSE OF ASSESSMENT PROCEEDINGS. DURING THE COURSE OF REMAND, THE AO NOTICED THAT THE ASSESSEE HAS PAID INTEREST OF RS.26,70,011/- TO THE PERSONS FROM WHOM THE LOAN WERE TAKEN AND HA S ALSO MADE ADVANCES OF LOAN TO THE TUNE OF RS.38,53,285/- DUR ING THE YEAR FROM WHOM INTEREST HAS BEEN RECEIVED AND HAS DECLARED IN COME OF RS.1,99,972/- IN THE PROFIT AND LOSS ACCOUNT. SINCE THE ASSESSEE HAS TAKEN SUBSTANTIAL LOAN ON HIGHER RATE OF INTEREST THAN ON THE LOANS ADVANCED ON WHICH INTEREST WAS LOWER, THEREFORE, HE HELD THAT I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 16 DIFFERENCE OF RATE BETWEEN INTEREST PAID ON LOANS T AKEN AND INTEREST CHARGED ON LOAN ADVANCED NEEDS TO BE CONSIDERED FO R THE PURPOSES OF ADDITION. THE LD. CIT(A) AFTER CONSIDERING THE REJOINDER SUBMITTED BY THE ASSESSEE HAS GIVEN PART RELIEF IN THE FOLLOW ING MANNER: I HAVE EXAMINED THE CONTENTS OF THE REMAND REPORT OF THE AO. AND THE REJOINDER FILED BY THE ASSESSEE AND ALSO CO NSIDERED OTHER FACTS OF THE CASE. THE AO. IN HIS REMAND REPO RT MENTIONED THAT THE ASSESSEE PAID RS.7,31,717/- AS INTEREST ON THE LOAN OF RS.96,30,000/- WHICH WAS THE SUBJECT MATTER OF REMA ND PROCEEDINGS ON THOROUGH VERIFICATION BY THE A.O., S UBSTANTIAL AMOUNT FOUND TO BE IN ORDER AND HENCE, THE INTEREST DISALLOWANCE MADE ON THE SAID LOANS AT RS.17,33,400 /- NEEDS TO BE DELETED SUBJECT TO THE DECISION GIVEN BY ME I N THE PREPARES WHILE DEALING WITH GROUND NO.2. AS MENTION ED ABOVE, THE INTEREST PAID BY THE ASSESSEE WAS @ 8%. ON THE OTHER HAND, THE ASSESSEE ADVANCED LOAN OF RS.38,53,285/- AS PER THE BALANCE SHEET OF THE ASSESSEE AND COLLECTED INTERES T OF RS.1,99,972/- WHICH WORKS OUT TO 5.1%. IT IS TO BE MENTIONED THAT IT DID NOT PROVE THAT THE AMOUNT OF RS.38.53 L AKHS WAS ADVANCED FOR BUSINESS PURPOSES, TO BE REASONABLE, T HE ASSESSEE SHOULD ALSO HAVE COLLECTED 8% INTEREST ON RS.38,53,285/- WHICH COMES TO RS.3,08,000/-. SECOND LY, THE ASSESSEE'S WITHOUT PREJUDICE SUBMISSION THAT THE IS SUE OF CHARGING INTEREST ON LOAN ADVANCED WAS NOT THE CASE OF THE ASSESSING OFFICER IS MISPLACED, FOR THE REASON WHEN , IN THE ASSESSMENT PROCEEDINGS WHILE CHARGING INTEREST @ 18 % ON THE LOANS OF RS.96,30,000/- THE ISSUE OF CHARGING DIFFE RENCE IN THE INTEREST RATE DID NOT ARISE. THE VERIFICATION OF TH E DETAILS DURING REMAND PROCEEDINGS REVEALS THAT MAJORITY OF LOANS R ECEIVED ARE IN ORDER. THEREFORE, ISSUE OF CHARGING INTEREST AND PAYMENT OF INTEREST COMES TO THE FORE. THIS ISSUE HAS BECOME R ELEVANT AND THE SAME HAS TO BE ADJUDICATED. ACCORDINGLY, I DIRE CT THE AO TO CHARGE INTEREST @8% ON RS.38,53,285/- ON THE AMOUNT S ADVANCED - THE DIFFERENCE OF WHICH WORKS OUT TO. RS .1,08,028/- (RS.3,08,000 - 1,99,972) AS INCOME OF THE ASSESSEE. THE A.O. IS FURTHER DIRECTED TO CALCULATE INTEREST @ 8% ON RS.2,50,000/- WHICH HAS BEEN CONFIRMED IN GROUND NO.2 ABOVE, ACCO RDINGLY, THIS GROUND IS PARTLY ALLOWED. I.T.A. NO.885/MUM/2013 & 1570/MUM/2013 17 11. AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH E REASONS GIVEN BY THE LD. CIT(A), FOR GIVING PART RELIEF ON THIS S CORE APPEARS TO BE FACTUALLY CORRECT AND REASONABLE, THEREFORE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE SUCH A FINDING. ACCORDI NGLY, THE SAME IS AFFIRMED. T HE ASSESSEES GROUND ON THIS ISSUE IS DISMISSED. 12. IN THE RESULT, REVENUES APPEAL AS WELL AS ASSE SSEES APPEAL ARE TREATED AS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14TH JAN, 2015. ,-! . /014TH JAN, 2015 - ) 5* 6 SD SD ( . / D. KARUNAKAR RAO) ( / AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER * MUMBAI:14TH JAN,2015. . . ./ SRL , SR. PS ' # $%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. 895 $: , + : , * / DR, ITAT, MUMBAI CONCERNED 6. 5 ;* / GUARD FILE. / BY ORDER, TRUE COPY < & (ASSTT. REGISTRAR) + : , * /ITAT, MUMBAI