Shri Mohan M Meherwade, Hubli V. ITO, Hubli

ITA 895/BANG/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0541 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2009
• Assessment Year: 1997-1998
• Appeal Filed On: 18-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained cash credit; Unexplained expenditure; Gift; Opportunity of being heard; Question of law; Corroborative evidences; Block assessment; Set aside
• Section: 143(3); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCH, BANGALORE BEFORE SHRI K.P.T.THANGAL, VICE PRESIDENT AND SHRI N.L.KALRA, AM ITA NO.895(BNG.)/2008 (ASSESSMENT YEARS : 1997-98) SHRI MOHAN M.MEHARWADE, 14, JAYANAGAR EXTENSION, VIDYANAGAR, HUBLI APPELLANT VS THE INCOME-TAX OFFICER, WARD-1(1), HUBLI RESPONDENT APPELLANT BY : SHRI V.SRINIVASAN REVENUE BY : SMT. V.S.SREELEKHA O R D E R PER N.L.KALRA ; THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF T HE LEARNED CIT(A), HUBLI DATED 18-01-2008. 2. THE FIRST GRIEVANCE OF THE ASSESSEE IS THAT THE LEARN ED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.10.00 LAKHS AS UNEXPLAINED CREDITS . 3. THE ORDER OF THE AO ON THIS ISSUE IS AS UNDER: CREDITS SHOWN IN THE BALANCE SHEET: IN THE BALANCE SHEET FILED AS ON 31-03-1997, THE ASSESSEE HAS SHOWN CA SH CREDITS TO THE TUNE OF RS.22,50,000/-. IN THE ORIGINAL ASSESSMENT ORDER PASSED ON 31-03-200, THE AO OBSERVE D THAT OUT OF RS.22,50,000/- CREDITS TO THE EXTENT OF RS.12,50,000/- WERE FROM ASSESSEES FAMILY MEMBERS WHO ARE ALL ASSESSED TO INCOME-TAX AND THEY HAVE SHOWN TH ESE AMOUNT IN THEIR RETURNS OF INCOME FILED AND HENCE ACCEPTED THEM A GENUINE. AS REGARDS THE BALANCE CREDITS OF RS.10.0 0 LAKHS THE AO RECORDED THE STATEMENTS OF EACH CREDITOR S ON ITA NO.895(B)/08 2 09-12-1999 AND THE FACTS EMERGING FROM THE SAID STATEMENTS ARE AS UNDER :- 1.SRIJAGANNATHSA.V.PAWAR RS.1.00 LAKH BROTHER-IN-LAW HE IS WORKING IN BRANDY SHOP AND HAS GIVEN RS.1.00 LAKH IN PIECE MEAL OF RS.10,000/- TO 20,000/- DURING THE PERIOD 1994-95 TO 1995- 96. HE HAS KEPT NO ACCOUNT. HE IS NOT HAVING BANK ACCOUNT. HIS ANNUAL INCOME WAS STATED TO BE RS.35,000/- 2. SMT.RADHABAI J.PAWAR RS.1.00 LAKH SISTER SHE IS DOING FLOWER WEARING & PICKLE MAKING IN A FACTORY AND HER INCOME IS STATED TO BE RS.10 PER DAY. SHE HAS GIVEN HAND LOAN IN PIECE MEAN FOR 2 TO 3 YEARS. NO BANK ACCOUNT. 3.SMT.SHANTHABAI M.MEHERWADE RS.1.00LAKH MOTHER SHE IS HAVING RENTAL INCOME AND INCOME FROM MONEY LENDING DONE ON SMALL SCALE. SHE DOES NOT KNOW THE DATE OF PAYMENT OF LOAN & FILING OF RETURN U/S 115K. 4.SMT. RAJASHREE G.HABIB RS.1.00 LAKH DAUGHTER SHE IS HAVING INCOME FROM SALE OF SAREES ON SMALL SCALE AND TAILORING. HER INCOME IS STATED TO BE RS.4,000/- TO RS.5.,000/- PER MONTH. SHE IS HAVING BANK ACCOUNT WITH SSK BANK, HUBLI. 5. SRI GANAPATSA L.HABIB RS.1.00 LAKH SON-IN-LAW HE IS A WATCH REPAIRER AND GETTING COMMISSION FROM TIMBER 6. SRI VISHWANATHSA D.HABIB RS.1.00 LAKH DISTANT RELATIVE HE IS HAVING AN ARRAC K SHOP. ANNUAL INCOME IS STATED TO BE RS.40,000/- NO BANK ACCOUNT. THE LOAN AMOUNT IS GIVEN BY HIM IN SPAN OF 4 TO 5 YEARS. 7.SRI PRAKASH LADWA RS.1.00 LAKH MATERNAL UNCLE HE IS HAVING SMALL KIRANA SHOP. ANNUAL INCOME IS STATED TO BE RS.40,000/- BANK ACCOUNT WITH SSK BANK. LOAN ADVANCED IN SPAN OF 4 TO 5 YEARS. ITA NO.895(B)/08 3 8. SRI HANUMANTHAPPA D.MADOLLI RS.1.0 LAKH FAMILY FRIEND HE IS AN AGRICULTURIST OF SHIRUGUPPI VILLAGE. AGRICULTURAL INCOME IS STATED TO BE RS.25,000/- PER ANNUM. LOAN IS ADVANCED IN SPAN OF 4 TO 5 YEARS. HE STATED THAT WHATEVER HE HAD EARNED IN THE LAST 3 YEARS WAS SPENT FOR HIS DAUGHTERS MARRIAGE. NO BANK ACCOUNT. 9. SRI VENKATESH KATHARE RS.1.00 LAKH BROTHER-IN-LA W HE IS AN AGENT FOR FINANCE DEALING AND GETTING COMMISSION. LOAN ADVANCED THREE YEARS BACK IN 3 INSTALMENTS. HIS MONTHLY EXPENDITURE WAS STATED TO BE RS.3,000/- TO RS.4,000/-. BANK ACCOUNT WITH SSK BANK. ON A DETAILED STUDY OF STATEMENTS RECORDED U/S 131(3) OF THE ACT IT IS SEEN THAT THE CREDITORS WERE ALL RELATIVES OF TH E ASSESSEE AND THEY WERE INVOLVED IN PETTY BUSINESS ACTIV ITIES. THEY WERE UNABLE TO SUBSTANTIATE THEIR SOURCES WITH SUPPORTING EVIDENCES AND LIQUIDITY OF FUNDS AVAILABLE WITH THEM AND ALSO THEY WERE NOT HAVING BANK ACCOUNTS WHICH WOULD HAVE SUPPORTED THEIR LIQUIDITY. IT IS ALSO SEEN THAT S OME OF THE CREDITORS WERE UNABLE TO SUBSTANTIATE THEIR BUSINE SS ACTIVITIES. THEY HAVE STATED THAT THE LOAN OF RS.1.00 LAKH WAS GIVEN THREE YEARS BACK THAT TOO IN INSTALMENTS OF RS.10,00 0/- TO RS.30,000/-. THE LOAN WAS TAKEN BY THE ASSESSEE FOR T HE PURPOSE OF CONSTRUCTION OF HIS RESIDENTIAL BUILDING. TO SUPPORT THEIR BUSINESS ACTIVITIES THE CREDITORS HAVE ALSO FILED FORM NO.4A AND TAKEN SHELTER U/S 115K BY PAYING A NOMIN AL TAX. HOWEVER, WHEN THEY WERE CONFRONTED WHILE RECORDING THEIR STATEMENTS U/S 131(30, SOME OF THEM HAVE STATED THAT THEY WERE ASKED TO SIGN ON SOME PAPERS AND THEY DO N OT KNOW ABOUT THEIR REPRESENTATIVE WHO FILED THOSE FORMS. O N A ITA NO.895(B)/08 4 DETAILED STUDY OF THE STATEMENTS AND THE FACTS AND CIRCUMSTANCES UNDER WHICH THE CREDITS WERE SHOWN, THE A O HAS RIGHTLY OBSERVED THAT ALL THE CREDITORS WERE NOT GE NUINE AND THEY WERE ALL ARRANGED TO BRING THE UNACCOUNTED AN D UNDISCLOSED INCOME TO LIGHT THROUGH THIS CHANNEL. LOANS HAV E BEEN OBTAINED FROM PERSONS WHO ARE MUCH BELOW THE STAT US OF THE ASSESSEE, FINANCIAL AS WELL AS SOCIAL. PERSONS WHO HAVE GIVEN LOANS DO NOT HAVE SUFFICIENT SOURCES. WHEN THE Y THEMSELVES WORK WITH OTHERS FOR THEIR LIVELIHOOD HOW CAN TH EY LEND MONEY TO ASSESSEE, THAT TOO WITHOUT INTEREST. IT I S UNBELIEVABLE THAT THE ASSESSEE WHO WANTS TO LIVE IN POSH HOUSE WITH POSH CARS WOULD BUY THESE ASSETS TAKING INTE REST FREE LOANS FROM PERSONS WHOSE FINANCIAL CREDENTIALS ARE NOT ABOVE DOUBT. THEREFORE, THE FACTS OF THIS CASE LEA TO CLE AR CONCLUSION THAT THE ASSESSEE HAS GIVEN A COVER OF LOANS TO HIS UNDISCLOSED INCOME. THE ASSESSEE IN HIS WRITTEN SUBMISSION FILED ON 11-12- 2006 HAS PLEADED THAT SINCE HE HAS PROVED THE IDENTITY OF THE CREDITORS, HE HAS DISCHARGED HIS DUTY AND THE CAPABILITY OF THE CREDITORS FOR GIVING LOANS MUST BE DEALT WITH IN THEIR HANDS AND NOT IN THE ASSESSEES HAND. THE ASSESSEES CONTENTION WERE NOT ACCEPTED. THOUGH, THE ASSESSEE WA S GIVEN SUFFICIENT OPPORTUNITIES TO PROVE THE GENUINENESS AND CREDIT WORTHINESS OF THE CREDITORS, THE ASSESSEE HAS NOT AVAILED THE OPPORTUNITIES TO PROVE THE GENUINENESS OF THE SAID CREDITS. THEREFORE, THE CASH CREDITS OF RS.10,00,000/- HA VE BEEN HELD AS UNEXPLAINED CREDITS AND HAVE BEEN BROUGHT TO TAX U/S 68 OF THE ACT FOR THE ASSESSMENT YEAR 1997-98. 4. THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION AFTER OB SERVING THAT CREDIT WORTHINESS OF THE CREDITORS HAVE NOT BEEN ESTABLIS HED. THE LEARNED ITA NO.895(B)/08 5 CIT(A) HAS DISCUSSED THE FACTS IN RESPECT OF EACH CREDITOR TO SAY THAT THEY WERE NOT MEN OF MEANS AND HENCE CREDITS IN THEIR NAMES CANNOT BE ACCEPTE D. 5. DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LEARN ED AR DREW OUR ATTENTION TO THE FACTS MENTIONED BY THE AO IN HIS ORDER. THE CREDITORS HAVE ADMITTED TO HAVE PAID THE AMOUNTS AND SUCH AMOUNTS WE RE PAID IN EARLIER YEARS. THE PLEA OF THE LEARNED AR WAS THAT SUCH AMOUNT S COULD NOT HAVE BEEN ADDED IN THE YEAR UNDER REFERENCE. ON THE OTHER HAND, LEARNED DR SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES. IN THIS CASE, THE ORIGINAL ASSESS MENT WAS MADE VIDE ORDER DATED 31-03-2000. THE AO AT PAGE -4 OF HIS ORDER OBSERVED AS UNDER IN RESPECT OF ADDITION OF RS.10.00 LAKHS. ON STUDY OF THE RECORDS AND STATEMENTS OF CREDITORS FOLLOWING OBSERVATIONS WERE MADE IN THE COURSE OF PROCEEDINGS. 1. THE CREDITS WERE NOT SHOWN IN THE BALANCE SHEET OF EARLIER YEARS, AND THEY HAVE BEEN SHOWN ONLY IN THE BALA NCE SHEET RELATED TO THE ASSESSMENT YEAR IN QUESTION. THE CREDITORS IN THEIR STATEMENT HAVE STATED THAT THEY HAV E GIVEN LOAN OF RS.10.00 LAKHS EACH ABOUT THREE YEARS BACK. 2. THE CREDITORS IN THEIR STATEMENT HAVE STATED THAT LO ANS WERE GIVEN FOR CONSTRUCTION OF HOUSE BY CASH. 3. THE CREDITORS AS STUDIED FROM THEIR STATEMENT THOUGH THEY STATE THEIR SOURCES FROM SOME BUSINESS ACTIVITIES, WE RE UNABLE TO SUBSTANTIATE THEIR SOURCES WITH SUPPORTING EVIDENCES AND LIQUIDITY OF FUNDS AVAILABLE WITH THEM. IT COULD BE VERY WELL OBSERVED FROM THEIR STATEMENT THAT THEY WE RE NOT THAT CAPABLE OF HAVING LACKS OF RUPEES WITH THEM, AND TH EY WERE NOT HAVING ANY BANK ACCOUNTS. SOME OF THEM WERE E VEN UNABLE TO SUBSTANTIATE THEIR BUSINESS ACTIVITIES. ITA NO.895(B)/08 6 4. MOST OF THEM ARE CLOSE RELATIVE OF THE ASSESSEE. 5. IN SUPPORT OF THEIR STATEMENTS, THAT THEY ARE DOING BUSINESS ACTIVITIES AND HAVE PAID THE INCOME U/S 115K, THE Y HAVE FILED COPIES OF FORMS 4A FOR THE FINANCIAL YEARS 1994- 95,1995-96 AND 1996-97, THE FORMS NO.4A WERE ALL DATED 0 5- 03-1997 BEARING BANK SEAL FOR PAYMENT OF TAX DATED 06- 03- 1997 LEADS TO DOUBT, THAT IT WAS NOT THEIR ACT. THIS IS ALSO EVIDENT FROM THEIR STATEMENT THAT, TO THE QUESTION PUT ABOUT FORM 4, MOST OF THEM HAVE EXPRESSED THEIR IGNORANCE ABOU T 115K AND STATED THAT THEY WERE ASKED TO SIGN ON SOME PAPERS AND THEY DO NOT KNOW ABOUT THEIR REPRESENTATIVE AND W HO FILED THOSE FORMS. FROM ALL THE ABOVE IT COULD BE OBSERVED THAT THE CREDIT S WERE NOT GENUINE AND ARRANGEMENT OF THE ASSESSEE TO S HOW HIS UNACCOUNTED AND UNDISCLOSED MONEY UNDER CAMOUFLAGE OF CASH CREDITS. TO THE OPPORTUNITY GIVEN TO EXPLAIN ABOUT SAID CREDITS T HE ASSESSEES REPRESENTATIVE ONLY REFERRED TO THE STATEM ENTS RECORDED AND DID NOT GIVE ANY SATISFACTORY EXPLANATION. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION ALL CASH CREDITS OF RS.10.00 LAKHS HAVE BEEN OBSERVED AS UNEXPLAINED CREDIT S WITHIN THE MEANING OF SEC.68 AND ASSESSED TO TAX FOR THE YEAR IN QUESTION. 7. THE ISSUE OF ADDITION OF RS.10.00 LAKHS TRAVELED UP TO T HE TRIBUNAL. BEFORE THE TRIBUNAL, THE ASSESSEE RAISED PRELIMINARY OBJECT ION THAT HE WAS NOT GIVEN PROPER OPPORTUNITY OF BEING HEARD. THE TRIBUNAL VID E ORDER DATED 19- 07-2005 IN ITA NO.1445(B)/2002 OBSERVED THAT THE ASSES SEE HAS NOT BEEN GIVEN PROPER OPPORTUNITY. THE ORDER WAS SET ASIDE AND THE MATTER WAS REVERTED BACK TO AO FOR PASSING FRESH ORDER, AFTER GIVING SUFFICIENT OPPORTUNITY ITA NO.895(B)/08 7 OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE WILL BE AT LIBERTY TO PRODUCE EVIDENCE IN SUPPORT OF HIS CLAIM BEFORE THE AO. THAT IS HOW THE MATTER TRAVELED BACK TO THE AO FOR MAK ING FRESH ASSESSMENT. THE AO ACCORDINGLY, ISSUED NOTICE U/S143(2) ON 12-09-2006 AND POSTED THE CASE FOR HEARING ON 18-09-2006. IN RESPECT OF CASH CREDITS, THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF THE C REDITORS. THE ASSESSEE WAS ASKED TO PRODUCE THE INFORMATION ON 03-10-2006. NO INFORMATION WAS PRODUCED ON 03-10-2006. ON 02-10-2006, THE ASSESSEE S REPRESENTATIVE SOUGHT SOME TIME TO FURNISH THE INFORMATION CALLED FOR. THE ASSESSEE WAS GIVEN TIME TO FURNISH THE INFORMATION ON 09-11-2006 AND TH EREFORE, THE AO ISSUED NOTICE U/S143(2)/142(1) ON 10-11-2006 AND THE HEAR ING WAS FIXED ON 17-11-2006. NONE APPEARED FOR HEARING ON 17-11-2006. THE AO PROVIDED ANOTHER OPPORTUNITY ON 29-11-2006 BUT AGAIN THAT OPPO RTUNITY WAS NOT AVAILED. ON 30-11-2006, IT WAS MADE CLEAR TO THE ASSESSE E THAT THE ASSESSMENT IS TIME BARED AND IF THE ASSESSEE DOES NOT C O-OPERATE WITH THE DEPARTMENT BY FURNISHING THE INFORMATION CALLED FOR, IT WOULD BE DIFFICULT TO VERIFY THE GENUINENESS OF THE DETAILS FILED BECAUSE OF PAUC ITY OF TIME WHICH OTHERWISE WOULD DEFEAT THE VERY PURPOSE OF THE TRIBUNAL IN RESTORING THE MATTER TO THE FILE OF THE AO. AT THE REQUEST OF ASSESSE E ONE MORE OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO FURNISH THE DETAILS ON OR B EFORE 10-12-2006. ON 11-12-2006, THE WRITTEN SUBMISSION WERE FILED WITHOUT FURNISH ING ANY DOCUMENTARY EVIDENCES OR OTHER PROOFS IN SUPPORT OF THE IR CONTENTION THAT THE ADDITIONS MADE IN THE ASSESSMENT ORDER PASSED U/S 143(3) WERE EX CESSIVE AND WERE MADE ON MERE SUSPICION. AS PER THE ABOVE DISCUSS ION, IT IS CLEAR THAT THE ASSESSEE RAISED PRELIMINARY OBJECTION BEFORE THE TRIBU NAL THAT HE HAS NOT ITA NO.895(B)/08 8 BEEN GIVEN SUFFICIENT OPPORTUNITY. HOWEVER, THE MATER WAS RESTORED BACK TO THE FILE OF THE AO. THE ASSESSEE HAS FAILED TO PRODUCE A NY FRESH EVIDENCES OR MATERIAL TO SUPPORT HIS CLAIM BEFORE THE AO. MOREOVER, THE ASSESSEE IS RELYING ON THE STATEMENT OF CREDITORS IN RESPECT OF LOANS BEING R ECEIVED IN EARLIER YEARS. 8. WHEN THE STATEMENTS ARE NOT HELD AS RELIABLE IN RESPE CT OF THE CREDIT WORTHINESS, THEN RELIANCE CANNOT BE PLACED ON THE STATE MENT OF CREDITORS IN RESPECT OF THE FACT THAT THE MONIES WERE PAID IN EARLIER Y EARS. NO EVIDENCE HAS BEEN FILED TO SHOW THAT ADVANCES WERE GIVEN IN EARLIER YEA RS. OUR ATTENTION WAS DRAWN TO THE FACT THAT AS PER THE ASSESSMENT ORD ER DATED 31-03-2000 THE CREDITS WERE SHOWN IN THE BALANCE SHEET FOR THE FIRST TIME , SUCH CREDITS WERE NOT SHOWN IN THE BALANCE SHEET OF EARLIER YEARS. HENCE, T HERE IS NO EVIDENCE THAT THE CREDITORS ADVANCED MONEY IN EARLIER YEARS. MO REOVER, THE EXCESS OF ASSETS OVER LIABILITIES EXPLAINED, IN CASE SUCH CREDITS ARE NO T ESTABLISHED, AS GENUINE. 9. WHILE DECIDING THE APPEAL IN THE CASE OF SHRI P.M. ABDULLA, IN ITA NOS.389 & 390(B)/2008, THE TRIBUNAL VIDE ORDER DATED 30-0 6-2009 OBSERVED AS UNDER: 2.33 DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LEARNED AR HAS FILED A COPY OF THE UNREPORTED DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S SOUTHERN INDIA PLYWOOD COMPANY IN ITA NO.180 OF 2002. THE QUESTION OF LAW REFERRED TO THE HONBLE JURISDICTIONAL HIGH COURT WAS AS UNDER: WHETHER THE AUTHORITIES WERE JUSTIFIED IN MAKING AN ADDITION OF RS.13,03,008/- AS UNPROVED CREDITORS WHEN THE SAME HAD BEEN ACCEPTED FOR THE PREVIOUS YEARS? ITA NO.895(B)/08 9 THE HONBLE JURISDICTIONAL HIGH COURT IN RESPECT OF SUCH QUESTION OF LAW OBSERVED AS UNDER: SO FAR AS THE LAST QUESTION OF LAW IS CONCERNED, WE ARE OF THE OPINION THAT THE AO HAS A RIGHT TO INQUIRE ABOUT THE CORRECTNESS OF THE ENTRY SHOWN BY THE ASSESSEE. EVEN IF THE AO HAD ACCEPTED THE CREDIT ENTRIES SHOWN BY THE ASSES SEE FOR THE PREVIOUS ASSESSING YEARS, THERE IS NO PROHIBITION FOR T HE AO TO CALL UPON THE ASSESSEE TO PROVE THE EXISTENCE OF SUCH CREDITS AND TO CONFIRM WHETHER THE CREDIT SHOWN IN THE ENTRIES ARE REALLY IN EXISTENCE OR NOT. WHEN THE AO HAS FOUND THAT SUCH ENTRIES ARE INCORRECT, WHEN AN OPPORTUNITY WA S GIVEN TO THE ASSESSEE TO PROVE SUCH ENTRIES, WHEN THE ASSESSEE HAS FAILED TO PROVE THE SAME INSPITE OF GIVING AN OPPORTUNITY FOR THE AO, WE ARE OF THE OPINION THAT ALL AUTHORITIES WERE JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS.13,03,008/- AS AN UNPROVED CREDIT. IN THE CIRCUMSTANCES, WE HAVE TO ANSWER THE QUESTION NO.3 AGAIN ST THE ASSESSEE. 2.34 MOREOVER, IN THE CASE OF AN INDIVIDUAL DIFFERENCE OF ASSETS AND LIABILITIES (INCLUDING OPENING CAPITAL AND THE AMOUNT WITHDRAWN FOR HOUSEHOLD EXPENSES AND OTHER EXPENSES) WILL REPRESENT THE INCOME OF A PARTICULAR YEAR. IF THE LIABILITY AS SHOWN IN THE BALANCE SHEET AS SUNDRY CREDITORS IS NOT IN EXISTENCE THEN TO THAT EXTENT, LIABILITY CANNOT BE CONSIDERED AND INCOME TO THAT EXTENT STANDS ENHANCED. THE DELHI BENCH IN THE CASE OF KISHAN LAL JEWE LS (P) LTD., VS ACIT IN ITA NO.612(DELHI) OF 2005 HAD AN OCCASION TO CONSIDER THE APPLICATION OF SEC.68. IN THAT CAS E, THE ASSESSEE COMPANY CLAIMED TO HAVE EXPORTED DIAMONDS WHICH WERE SHOWN TO BE PURCHASED FROM TWO PARTIES. TH E AO CARRIED DEEP INVESTIGATION THROUGH SURVEY AND SEARCH ES AT PREMISES OF PARTIES FROM WHERE ASSESSEE HAD CLAIMED T O HAVE PURCHASED DIAMONDS FOR EXPORT AND FOUND THAT ALLEGE D ITA NO.895(B)/08 10 SELLERS WERE RUNNING A RACKET FOR ARRANGING HAWALA ENTRIE S OF IMPORT AND EXPORT AND FOR PROVIDING BOGUS BILLS IN RESPECT OF EXPORTS OF DIAMONDS. THE AO HELD THAT PURCHASES WERE BOGUS AND ACCORDINGLY TREATED SALE RECEIPT/CREDIT ENTR IES APPEARING IN BOOKS OF ACCOUNT OF ASSESSEE AS IN-GENUINE A ND MADE ADDITION U/S 68 OF THE IT ACT. THE ISSUE WAS RESTOR ED BACK ON THE FILE OF THE AO RE-EXAMINATION OF THE CASE. TH E ASSESSEE WAS ALLOWED REASONABLE OPPORTUNITY TO EXPLAIN TH E CREDIT ENTRIES. HOWEVER, IT HAS NOT BEEN HELD SEC.68 WILL N OT BE APPLICABLE. 2.35 HENCE, CONSIDERING THE LEGAL POSITION ON THE ISSUE, WE HOLD THAT SEC.68 READ WITH SEC.69C CAN BE INVOKED IN RESPECT OF SUNDRY CREDITORS, WHICH ARE NOT PROVED BY TH E ASSESSEE BEFORE THE AO. SUCH A CONCLUSION IS SUPPORTED BY THE DECISION O THE JURISDICTIONAL HIGH COURT AS REFEREED TO IN EARLIER PARAS. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS.10.00 LAKHS. 10. THE SECOND GRIEVANCE OF THE ASSESSEE IS THAT THE A UTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING AN ADDITION OF RS.2,35,000/- ON ESTIMATED BASIS AS UNEXPLAINED EXPENDITURE ON MARRIAGE OF ASSESSEES SON . THE ASSESSEE PERFORMED THE MARRIAGE OF HIS SON IN THE FINANCIAL YEAR 19 96-97. THE ASSESSEE DEBITED RS.25,000/- IN HIS CAPITAL ACCOUNT TOWARDS MARRIAG E EXPENSES. A SURVEY ACTION U/S 133A(5) OF THE ACT WAS CONDUCTED. THE AO AFTER CAUSING DETAILED ENQUIRIES HAS ARRIVED AT A FIGURE OF RS.2,60,000/- AS THE AMOUNT SPENT BY THE ASSESSEE FOR HIS SONS MARRIAGE. SINCE HE DEBITED A SUM OF RS.25,000/- AN AMOUNT OF RS.2,35,000/- WAS ADDED TO THE A SSESSEES TOTAL INCOME. THE ASSESSEES FAMILY IS WELL KNOWN AND REPUTED M ONEYLENDERS OF THE PLACE AND NATURALLY THE MARRIAGE MUST HAVE BEEN PERFORM ED ON A GRAND SCALE. ITA NO.895(B)/08 11 THE ASSESSEE IS NOT HAVING ANY SUPPORTING EVIDENCE IN RE SPECT OF MARRIAGE EXPENSES TO THE EXTENT OF RS.25,000/-. THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO SUBSTANTIATE THE ACTUAL MARRIAGE EXPENSE S INCURRED BY HIM BY PRODUCING NECESSARY EVIDENCES TOWARDS THE MARRIAGE HALL CHARGES, GOLD RATE PREVAILING DURING THAT PERIOD, PROBABLE EXPENDITURE TOWARDS TRANSPORTATION, FLOWER DECORATION, TOWARDS PURCHASE OF CLOTHES FOR FRIENDS AND RELATIVES AND MARRIAGE COUPLE AND OTHER MISCELLANEOUS EXPENSES. THE AS SESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENCES IN RESPECT OF THESE EXPENSES. I N THE WRITTEN SUBMISSION DATED 11-12-2006, THE ASSESSEE HAS MERELY S TATED THAT THE ESTIMATES MADE BY THE AO WERE EXCESSIVE. THE AO HAS FAILED TO GIVE CREDIT FOR THE GIFTS RECEIVED DURING THE MARRIAGE. THE AO AFTER CONS IDERING THE CONTENTION OF THE ASSESSEE HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE MARRIAGE EXPENSES. THE AO ALSO REFERRED THE BILL OF RS.11,60 0/- AS EXPENDITURE TOWARDS MEALS AND NOTICED THAT THE BILL WAS ISSUED BY NEW MISHRA PEDHA, TRAFFIC ISLAND, HUBLI FOR HAVING SERVED MEALS FO R 850 PERSONS. HOWEVER, ON AN ENQUIRY CONDUCTED BY THE ADIT(INV.) HUBLI, IT WAS LEARNT THAT THE NEW MISHRA PEDHA WAS PREPARING AND SELLING ONLY PEDH A AND NEVER SUPPLIED MEALS EITHER ON CONTRACT OR ON PLATE SYSTEM. TH US, THE SAID BILL PRODUCED BY THE ASSESSEE WAS NOT GENUINE. THIS WAS PO INTED OUT TO THE ASSESSEE, BUT THE ASSESSEE HAS NO SATISFACTORY EXPLANAT ION. THE AO ACCORDINGLY, MADE AN ADDITION OF RS.2,35,000/-. 11. BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED THAT THE A O HAS MADE THE ADDITION ON SUSPICION. THE LEARNED CIT(A) OBSERVED TH AT THE DETAILS OF EXPENSES WERE COLLECTED DURING THE COURSE OF SURVEY AND INCURRING OF SUCH ITA NO.895(B)/08 12 EXPENSES HAS NOT BEEN CONTRADICTED BY THE SUPPORTING DOCUMENTS BY THE ASSESSEE. HENCE, THE ADDITION OF RS.2,35,000/- WAS CONFIRMED. 12. DURING THE COURSE OF PROCEEDINGS BEFORE US, LEARNED AR STATED THAT THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE IN RESP ECT OF INCURRING EXPENSES TO THE TUNE OF RS,.2,60,000/-. THE AO HAS NOT G IVEN ANY CREDIT FOR THE GIFTS RECEIVED AT THE TIME OF MARRIAGE. 13. WE HAVE HEARD BOTH PARTIES AND NOTED THAT ORIGINALL Y THE ASSESSMENT WAS COMPLETED ON 31-03-2000. THE ADIT(INV.) R ECORDED THE STATEMENT OF ASSESSEE IN WHICH HE STATED THAT HE HAS IN CURRED AN AMOUNT OF RS.40,000/-. THE ASSESSEE HAS ALSO PRODUCED A BILL OF RS.11 ,600/- ISSUED BY NEW PEDHA, TRAFFIC ISLAND, HUBLI AND THAT BILL HAS BEEN HELD A S NON-GENUINE IN THE ORIGINAL ASSESSMENT ORDER ALSO. WHILE MAKING ORIGINAL ASSESSMENT, THE AO MADE THE ADDITION OF RS.2,35,000/- AFTER OBSERVING AS UNDER: THE EXPLANATION OF THE REPRESENTATIVE AND THE STATE MENT OF THE ASSESSEE BEFORE THE ADIT(INV.) HUBLI WERE STUDIED A ND OBSERVED THAT, THERE WERE LOT OF CONTRADICTION AND CHANG E OF VERSIONS BETWEEN THE STATEMENTS GIVEN BEFORE THE ADIT(I NV.) HUBLI AND IN THE COURSE OF ASSESSMENT PROCEEDINGS. TO SUPPORT HIS STATEMENT THAT THE MARRIAGE EXPENDITURE WA S ONLY RS.25,000/-, THE ASSESSEE DOES NOT HAVE ANY SUPPORTING EVIDENCES. THE MARRIAGE EXPENSES IN ANY CASE IN VIEW OF VARIOUS EXPENSES CANNOT BE RS.25,000/- AS STATED BY TH E ASSESSEE. THEREFORE, IN THE ABSENCE OF ASSESSEES INABILITY TO PROVE WITH SUPPORTING EVIDENCES HAVING NO ALTERNATE, I PR OCEED TO ESTIMATE THE EXPENDITURE AS UNDER, KEEPING IN VIEW, MINIMUM REQUIRED EXPENSES IN THE MARRIAGE AND ASSESSEES STATUS IN THE SOCIETY. ITA NO.895(B)/08 13 1. MARRIAGE HALL (AS LEARNT ON MAKING ENQUIRY RS. 10,000 2. INVITATION CARD RS. 5,000 3. TRANSPORTATION FOR RELATIVES, HALL AT GOKUL ROAD IS AWAY FRO M CITY RS. 10,000 4. DECORATION AND FLOWERS ETC. RS. 10,000 5. EXPENDITURE ON CLOTHES RS. 75,000 6. EXPENDITURE ON JEWELLERY RS. 75,000 7. MEALS TO FRIENDS AND RELATIVES RS. 50,000 8. MISCELLANEOUS EXPENDITURE RS .25,000 RS.2,60,000 LESS: DECLARED IN CAPITAL ACCOUNT 25,000 RS.2,35,000 IN VIEW OF THE DISCUSSION MADE AND THE ASSESSEE HAS NO T EXPLAINED, THE EXPENDITURE OF RS.2,35,000/- HAS BEEN ASSESSED TO TAX AS UNEXPLAINED EXPENDITURE U/S 69 OF THE ACT. 14. THE ABOVE OBSERVATION SHOW THAT THE AO CONSIDERED THE STATEMENT OF THE ASSESSEE. NONE OF THE PARTIES APPEARED BEFORE US TO FILE COPY OF THE STATEMENT OF THE ASSESSEE RECORDED BY THE ADIT(INV.) . THE AO ESTIMATED THE EXPENSES ON VARIOUS ITEMS AND NOTHING HAS BEEN PLACED B EFORE US TO SHOW THAT THE SAID EXPENDITURE ESTIMATED BY THE AO IS EXCESS IVE. WE HAD ALREADY POINTED OUT THAT THE ASSESSMENT ORDER WAS EARLIER SET ASIDE BY T HE TRIBUNAL ON THE REQUEST OF ASSESSEE THAT HE HAS NOT BEEN AFFORDED REASONABLE OPPORTUNITY. BUT DURING THE COURSE OF ASSESSMENT MADE AFTER THE SAM E WAS SET ASIDE BY THE TRIBUNAL, THE ASSESSEE HAS NOT PLACED ANY FRESH MATE RIAL. HOWEVER, WHILE RECOGNIZING THE SOCIAL CUSTOM THAT AT THE TIME OF MARRIAG E CERTAIN GIFTS ARE RECEIVED. CERTAIN REBATE IS REQUIRED TO BE GIVEN IN RESPE CT OF THE GIFTS RECEIVED. LOOKING TO THE INITIAL STATEMENT OF THE ASSESSEE BEFORE T HE ADIT(INV.), HUBLI, IN WHICH HE HAS STATED THAT HE HAS SPENT RS.40,000/- OUT OF GIFTS AND PRESENTATION AND THEREFORE, THE QUANTUM OF GIFTS AND PRES ENTATION CANNOT BE CONSIDERED WHICH WERE MORETHAN RS.40,000/-. WE THEREFORE , REDUCE THE ITA NO.895(B)/08 14 ADDITION BY RS.40,000/- AND THE ADDITION TO THE EXTENT O F RS.1,95,000/- IS CONFIRMED. 15. THE THIRD GRIEVANCE OF THE ASSESSEE IS THAT THE LEAR NED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.2.00 LAKHS AS UNDISCLO SED INCOME. THE ASSESSEE HAS SHOWN RS.65,000/- AS INCOME FROM OTHER SOU RCES. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, IT WAS CLAIMED T HAT IT WAS THE COMMISSION EARNED BY THE ASSESSEE FROM HIS FINANCE ACTIVITIE S. THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE OR ANY SATISFACTORY EXPLAN ATION TO SHOW THAT THE CLAIM OF ADDITIONAL INCOME FROM OTHER SOURCES. THE ASSESS EE WAS DOING MONEY LENDING BUSINESS. THE MONEY LENDING BUSINESS HAS BEEN ESTABLISHED IN BLOCK ASSESSMENT ORDER DATED 29-01-2002. THE ASSES SEE AVOIDED TO SHOW THAT IT IS INTEREST INCOME FROM MONEY LENDING BUSINESS OTH ERWISE HE HAS TO ESTABLISH THE CAPITAL INVESTED IN THE MONEY LENDING BUSINESS. THE ABOVE REFERRED ADDITION HAS BEEN CONFIRMED BY THE LEARNED CIT(A). LEARNED CIT(A) OBSERVED THAT IN ABSENCE OF MATERIAL, THE A O LEFT WITH NO ALTERNATIVE TO ESTIMATE THE INCOME. 16. WE HAVE HEARD BOTH PARTIES ON THIS ISSUE. LOOKING TO THE FACTS BY THE LOWER AUTHORITIES, WE CONFIRM THE ADDITION MADE BY THE AO. HOWEVER, THE ADDITION MADE UNDER THE SAID WILL BE TELESCOPED WITH THE EXPENSES ON MARRIAGE. AN ADDITION HAS BEEN CONFIRMED TO THE EXTENT OF RS.1,35,000/- WILL BE AVAILABLE TO THE ASSESSEE TO EXPLAIN THE MARRIAGE EXPE NSES AND NO SEPARATE ADDITION O THAT EXTENT WILL BE MADE IN MARRIAGE EXPENSES. 17. THE FOURTH GRIEVANCE OF THE ASSESSEE IS THAT THE AU THORITIES BELOW HAVE ERRED IN ESTIMATING THE INCOME FROM TV NET WORK AT RS.65,000/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE ITA NO.895(B)/08 15 PROOF FOR RECEIPTS AND PAYMENTS WITH BILLS AND RECEIPTS FOR EACH CABLE CONNECTION. THE ASSESSEE STATED THAT THE RECEIPTS WOULD BE ESTIMATED AT RS.75/- PER CABLE CONNECTION. HOWEVER, IN THE ABSENCE OF BOOKS OF ACCOUNTS, THE AO ESTIMATED THE INCOME AT RS.65,000/-. 18. WE HAVE HEARD BOTH PARTIES. WE HAVE PERUSED THE ORIGINAL ASSESSMENT ORDER. THE AO ESTIMATED THE RECEIPT AT RS .1,44,000/- AS AGAINST RS.96,000/- SHOWN BY THE ASSESSEE. THE AO DISALLOWED SALA RY TO THE EXTENT OF RS.12,000/-AND RS.5,000/- WAS ALLOWED IN RESPECT OF PURCHA SE OF CASSETTES. WHILE ESTIMATING THE RECEIPT, THE AO HAS TAKEN THE RATE A T RS.75/- PER MONTH. THE ASSESSEE HAS SHOWN RECEIPTS FROM 160 MEMBERS AND THE NUMBER OF PERSONS HAVE ALSO BEEN INCREASED. NOW, IT IS ONLY THE Q UESTION OF ESTIMATION. IF THE RECEIPTS AS WELL AS THE NUMBER OF PERSONS ARE TO BE INCREASED AND THERE WILL BE INCREASE IN THE CORRESPONDING EXPENDITURE. AFTER T AKING INTO ACCOUNT ALL THESE FACTS ON RECORD, WE FEEL THAT THE ADDITION OF RS.40,000/- WILL SE RVE THE PURPOSE. HOWEVER, THIS ADDITION WILL AGAIN BE TELESCOPED TO WARDS THE MARRIAGE EXPENSES AND THERE WILL BE NO SEPARATE ADDITION FOR THE M ARRIAGE EXPENSES TO SUCH AN EXTENT. 19. THE FIFTH GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNE D CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.1,70,000/- AS UNEXPLAIN ED CREDITS IN THE BANK ACCOUNT. THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION AS THE CRED ITS WERE NOT EXPLAINED. THIS ADDITION WAS NOT MADE IN THE ASSESSMENT ORDER DATED 31-03- 2000. IT IS MENTIONED IN THE ORDER THAT SUCH ADDITION W AS MADE IN THE ORDER U/S 143(3) DATED 27-03-2003. SINCE WE ARE CONSIDERING TH E APPEAL ARISING AFTER THE ASSESSMENT ORDER WAS SET ASIDE BY THE TRIBUN AL VIDE ORDER DATED 19- ITA NO.895(B)/08 16 7-2005. IN THE ASSESSMENT ORDER WHICH CAME BEFORE THE TRIBUNAL, THIS ADDITION WAS NO THERE. WE ARE NOT AWARE WHETHER THE A SSESSEE HAD FILED AN APPEAL AGAINST THE ORDER DATED 27-3-2003. THE AO HAS MENTIONED THAT AN APPEAL FILED BY THE ASSESSEE AGAINST SUCH ORDER WAS DISMIS SED BY THE CIT(A). HENCE, THIS ADDITION IS NOT ARISING FROM THE ORDER OF THE CI T(A) WHICH IS BEING AGITATED BEFORE US. THE PROPER REMEDY FOR THE ASSESSE E IS TO FILE AN APPEAL AGAINST THE ORDER OF CIT(A) DATED 26-08-2005 VIDE WHICH T HE ADDITION OF RS.1,70,000/- WAS CONFIRMED. WE HOLD THAT THE ISSUE OF ADDIT ION OF RS.1,70,00/-CANNOT BE ADJUDICATED IN THE PRESENT APPEAL, T HEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 20. THE LAST GRIEVANCE OF THE ASSESSEE IS CHARGING OF INT EREST WHICH IS MANDATORY AND THE ASSESSEE WILL GET CONSEQUENTIAL RELIEF. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE (K.P.T.THANGAL) ( N.L.KALRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED: PLACE: AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER AR, ITAT, BANGALORE ITA NO.895(B)/08 17