Suresh Babulal Chouhan, V. ITO,Ward 1(1), Kolhapur,

ITA 921/PUN/2008

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1802 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 23-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Proportionate interest
• Section: 143(3); 133A; 147; 68; 69; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 921 /PN/20 08 / ASSESSMENT YEAR : 20 03 - 04 SHRI SURESH BABULAL CHOUHAN, PLOT NO.34, MIDC, SHIROLI, KOLHAPUR . / APPELLANT PAN: A DVPC3018J VS. THE INCOME TAX OFFICER , WARD - 1(1), KOLHAPUR . / RESPONDENT . / ITA NO. 1056 /PN/20 08 . / ITA NO. 1056 /PN/20 08 / ASSESSMENT YEAR : 20 03 - 04 THE INCOME TAX OFFICER , WARD - 1(1), KOLHAPUR . / APPELLANT VS. SHRI SURESH BABULAL CHOUHAN, PLOT NO.34, MIDC, SHIROLI, KOLHAPUR . / RESPONDENT PAN: A DVPC3018J ASSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 29 . 0 3 .201 6 / DATE OF PRONOUNCEMENT: 27 .0 5 .201 6 ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 2 / ORDER PER SUSHMA CHOWLA, J M : THE PRESENT CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE ARE ARIS ING OUT OF ORDER PASSED BY THE TRIBUNAL IN MISCELLANEOUS APPLICATION MOVED BY THE REVENUE IN MA NO.12/PN/2014 RELATING TO ASSESSMENT YEAR 2003 - 04. 2 . THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WERE HEARD 2 . THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WERE HEARD ALONG WITH BUNCH OF APPEALS WHERE THE ISSUE WAS AGAINST REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND ALL THE APPEALS WERE DISMISSED FOR WANT OF JURIS DICTION BY THE ASSESSING OFFICER WHILE INVOKING HIS POWER UNDER SECTION 147 / 148 OF THE ACT. HOWEVER, THE REVENUE MOVED MISCELLANEOUS APPLICATION BEFORE THE TRIBUNAL TO POINT OUT THAT THE ASSESSMENT IN THE CASE OF ASSESSEE RELATING TO ASSESSMENT YEAR THAT THE ASSESSMENT IN THE CASE OF ASSESSEE RELATING TO ASSESSMENT YEAR 200 3 - 04 WAS NOT COMPLETED AFTER INVOKING JURISDICTION UNDER SECTION 147 OF THE ACT OR ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT BUT WAS ASSESSMENT COMPLETED UNDER SECTION 144 OF THE ACT. THE TRIBUNAL VIDE ORDER DATED 04.12.2015 ALLOWED THE CLAIM OF REVENU E IN THIS REGARD AND BOTH THESE APPEALS ARE SLATED FOR HEARING BEFORE THE TRIBUNAL. 3. THE ASSESSEE IN ITA NO. 921 /PN/20 08 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LEARNED COMMISSIONER OF IN COME TAX (APPEALS) KOLHAPUR ERRED IN REJECTING THE CONTENTION OF THE APPELLANT REGARDING RE - ASSESSMENT PROCEEDING U/S.147 AND 148 OF THE I.T. ACT AND WHICH IS WITHOUT JURISDICTION AS SUCH PROCEEDING INITIATED U/S.147 AND 148 IS INVALID AND ILLEGAL BE ANNUL LED. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LEARNED COMMISSIONER OF INCOME TAX (APPEALS) KOLHAPUR ERRED IN CONFIRMING THE COMMISSIONER OF INCOME TAX (APPEALS) KOLHAPUR ERRED IN CONFIRMING THE ADDITION OF RS.8,55,185/ - WHICH IS TRADE CREDITOR. THE SAID AMOUNT OF RS.8,55,185/ - BE DELETED. ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 3 3 . LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) KOLHAPUR ERRED IN CONFIRMING IN THE ADDITION OF RS.1,75,000/ - U/S.68 OUT OF THE LOAN. ON THE FACTS AND IN THE CIRCUMSTANCES IN THE CASE THE SAME PLEASE BE DELETED. 4 . LEARNED COMMISSIONER OF INCOME TAX (APPEALS) KOLHAPUR ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST TO THE EXTENT OF INTEREST ON DEBIT BALANCE OF M.M.CHOUHAN STEELS AND ASHOK STEELS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE INTEREST CLAIMED BY THE APPELLANT BE ALLOWED IN FULL. 5 . THE APPELLANT CRAVES LE AVE TO ADD, ALTER, AMEND OR MODIFY OR TO TAKE ANY ADDITIONAL GROUNDS OF APPEAL IF NECESSARY 4 . THE REVENUE IN ITA NO. 1056 /PN/20 08 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE L EARNED C IT(A) ER RED IN GRANTING RELI EF OF RS.96,44,365/ - AND RS.11,68,000/ - OUT OF AMOUNT OF ADDITION MADE U/S68 FOR UNEXPLAINED TRADE CREDITORS AND UNEXPLAINED CREDITORS ON A/C OF UNSECURED LOANS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION OF RS.3,35,000/ - MADE TO GROSS PROFIT HOLDING THAT THERE ARE NO UNRECORDED SALES DURING THE YEAR. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN GRANTING RELIEF OF RS.52,077/ - OUT O F DISALLOWANCE OF INTEREST FOR NON BUSINESS PURPOSE. 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY ANY OF THE GROUNDS OR RAI SE AND OTHE R GROUNDS AT THE TIME OF PROCEEDINGS BEFORE THE HONBLE TRIBUNAL WHICH MAY PLEASE BE GRANTED. 5 . THE FIRST ISSUE RAISED BY THE ASSESSEE WAS AGAINST REOPENING OF ASSESSMENT WHICH HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN MISCELLANEOUS APPLICATION P ROC EEDINGS AND THE SAME DOES NOT SURVIVE IN THE ABSENCE OF ANY NOTICE ISSUED FOR REOPENING OF ASSESSMENT UNDER SECTION 148 OF THE ACT. HENCE, GROUND OF APPEAL NO.1 IS DISMISSED. 6. THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS AGAINST THE ADD ITION OF RS.8,55,185/ - ON ACCOUNT OF TRADE CREDITOR . 7. THE REVENUE ON THE OTHER HAND, HAS RAI SED GROUND OF APPEAL NO.1 AGAINST THE ORDER OF CIT(A) IN GRANTING RELIEF OF RS.96,44,265/ - AND ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 4 RS.11,68,000/ - ON ACCOUNT OF ADDITION MADE UNDER SECTION 68 OF THE ACT FOR UNEXPLAINED TRADE CREDITOR AND UNEXPLAINED CREDITORS ON ACCOUNT OF UNSECURED LOANS. 8. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A TRADER IN IRON AND STEEL ON HIS OWN ACCOUNT AND ALSO ON ASSIGNMENT BA SIS UNDER THE NAME AND STYLE M/S. S. B. CHOUHAN STEELS . FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2,79,152/ - . SURVEY OPERATIONS UNDER SECTION 133A OF THE ACT WERE CARRIED OUT AT THE BUSINESS PREMISES OF ASSESSEE ON 13.01.2004 . DURING THE COURSE OF SURVEY, VARIOUS DEFECTS IN BOOKS OF ACCOUNT IN THE FORM OF NON - GENUINE CREDITORS / DEBTORS AND EXCESS STOCK OF RS.38,69,327/ - IN THE CASE OF S.B. CHOUHAN STEELS AND S.64,00,166/ - IN THE CASE OF ASHOK STEELS AND SHORTAGE OF STOCK OF R S.50,62,774/ - IN THE CASE OF M.M. CHAUHAN STEELS WAS NOTED. THE ASSESSEE ALONG WITH HIS BROTHERS WERE RUNNING THESE CONCERNS UNDER SOLE ASSESSEE ALONG WITH HIS BROTHERS WERE RUNNING THESE CONCERNS UNDER SOLE PROPRIETOR. CONSEQUENT TO SURVEY, THE ASSESSEE ALONG WITH HIS TWO BROTHERS FILED A COMMON LETTER DATED 21.01.2004 DECL ARING ADDITIONAL INCOME OF RS.1 CRORE TO BE ASSESSED IN THEIR HANDS IN THE FORM OF UNEXPLAINED CREDITORS UNDER SECTION 68 OF THE ACT FOR THE ASSESSMENT YEAR 2004 - 05. IN THE SAID LETTER ITSELF, IT WAS ADMITTED THAT THE CREDITORS WHICH WERE RUNNING FOR THE LAST SEVERAL YEARS, WERE OFFERED FOR TAXATION IN THE CURRENT YEAR. THE ASSESSEE IN THIS REGARD, OFFERED RS.1 CRORE TO BE ASSESSED IN THEIR HANDS IN THE FORM OF CREDITORS UNDER SECTION 68 OF THE ACT AND T HE SAID INCOME WAS VOLUNTARILY DISCLOSED FOR ASSESSM ENT YEAR 2004 - 05 . IT WAS POINTED OUT THAT THE SAID CREDITORS WERE RUNNING FOR THE LAST SEVERAL YEARS BUT WERE OFFERED FOR TAXATION IN ASSESSMENT YEAR 2004 - 05 AND NONE OF THESE HAD TO BE TAKEN IN ANY EARLIER YEAR S. THE ASSESSING OFFICER NOTED THAT WHERE T HE ASSESSEE HIMSELF HAD ADMITTED THAT THE ABOVE SAID CREDITORS OFFERED FOR TAXATION WERE RUNNING FOR SEVERAL YEARS, AS PER ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 5 LAW, THEY HAD TO BE BROUGHT TO TAX IN THE RESPECTIVE ASSESSMENT YEARS. THE ASSESSEE WAS THUS, ASKED TO GIVE THE NAMES, ADDRESSES AND PERMANENT ACCOUNT NUMBERS OF SUNDRY CREDITORS AND DEBTORS AND ALSO BIFURCATION OF DECLARATION OF ADDITIONAL INCOME AMONGST THE THREE BROTHERS. FURTHER, THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNT, WHICH WERE NOT PRODUCED AT THE TIME OF SURVEY. THE ASSESSING OFFICER ON 25.02.2004 RECORDED THE STATEMENT OF ASSESSEE ON OATH AND VIDE QUESTION NO.1, THE ASSESSEE WAS SPECIFICALLY ASKED TO FILE THE NAMES, ADDRESSES AND AMOUNT IN RESPECT OF CREDITORS WHICH WERE OFFERED TO TAX BY WAY OF DECLARATION OF ADDITIONAL INCOME OF RS.1 CRORE FOR ASSESSMENT YEAR 2004 - 05 . IN REPLY, THE ASSESSEE STATED THAT THE SAID CREDITORS PERTAINED TO LAST 6 - 7 YEARS AND RECONCILIATION WAS IN PROGRESS AND HE ALSO EXPRESSED HIS INABILITY TO IDENTIFY THE CREDITORS. THE ASSESSEE WAS GIVEN TIME TO FILE THE REQUISITE INFORMATION WHICH WAS NOT FURNISHED BY THE ASSESSEE. FURTHER, THE ASSESSEE WAS ASKED TO EXPLAIN THE SAID POSITION OF SUPPRESSED TURNOVER, IN RESPONSE TO WHICH, NO DETAILS WERE FILED. THE ASSESSEE WAS AGAIN ASKED TO CL ARIFY THE POSITION ABOUT THE NON - GENUINE CREDITORS RELATING TO DIFFERENT YEARS. THE ASSESSEE FAILED TO FURNISH EXPLANATION AND IN THE ABSENCE OF THE SAME, THE ASSESSING OFFICER NOTED THAT THE ISSUE OF SUPPRESSED TURNOVER REMAINS UNEXPLAINED ON THE PART OF ASSESSEE. 9. ANOTHER POINT NOTED BY THE ASSESSING OFFICER WAS DEFICIENCIES AND SHORTCOMINGS IN THE MAINTENANCE OF BOOKS OF ACCOUNT AND OTHER RECORDS AND THE REPORT OF AUDITOR ON THIS ACCOUNT AND OBSERVED THAT THE INCOME WORKED OUT BY THE ASSESSEE ON THE BASIS OF SUCH DEFECTIVE BOOKS OF ACCOUNT COULD NOT BE RELIED UPON. DURING THE COURSE OF SURVEY AND ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THERE WERE MANY DEFECTS IN THE ACCOUNTS WHICH WERE COMMUNICATED TO THE ASSESSEE FROM TIME TO TIME. FURTHER, TH ERE WERE VARIOUS ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 6 DISCREPANCIES IN DEBTORS AND CREDITORS ACCOUNT AND THE SAME WERE NOT RECONCILED AND EVEN CROSS - VERIFICATION OF DEBTORS AND CREDITORS REVEALED THE DEFICIENCIES. THE ASSESSING OFFICER FURTHER NOTED THE DISCREPANCIES IN THE PURCHASES AND SAL ES ACCOUNT. IN THIS REGARD, THE EXPLANATION OF ASSESSEE FROM THE DAY OF DECLARATION WAS THAT THE NATURE AND COMPLEXITY OF ACCOUNTS WERE SUCH THAT THESE WERE UN - RECONCILED AND CONSEQUENTLY, OFFER OF INCOME. THE ASSESSING OFFICER HOWEVER, MADE A REFERENCE FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT AND WITH THE PREVIOUS APPROVAL OF COMMISSIONER OF INCOME TAX I, KOLHAPUR , THE ASSESSEE WAS ASKED TO GET THE ACCOUNTS AUDITED AND FURNISH THE AUDIT REPORT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE I NSTEAD OF COMPLYING WITH THE DIRECTIONS, HAD RAISED SEVERAL OBJECTIONS AND THE TIME FOR COMPLYING WITH THE DIRECTIONS UNDER SECTION 142(2A) OF THE ACT HAD EXPIRED AND CONSEQUENTLY, NO SPECIAL AUDIT COULD BE COMPLETED IN THE HANDS OF ASSESSEE. THE ASSESSIN G OFFICER, IN VIEW OF DELAYING TACTICS OF THE ASSESSEE SEEKING ADJOURNMENTS ON FLIMSY GROUNDS AND NOT FURNISHING INFORMATION CALLED FOR, WAS COMPELLED TO COMPLETE THE ASSESSEE EX - PARTE UNDER SECTION 144 OF THE ACT. AT THE LAST JUNCTURE, THE ASSESSEE SOUGH T AN ADJOURNMENT FOR 30 DAYS, WHICH WAS REFUSED BECAUSE OF UN - COOPERATIVE ATTITUDE OF THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT GROSS PROFIT DECLINED FROM ASSESSMENT YEARS 1998 - 99 TO 2003 - 04 , FOR WHICH THE ASSESSEE HAD FAILED TO FURNISH ANY EXPLANATI ON AND THEREFORE, ADDITION ON ACCOUNT OF SUPPRESSED GROSS PROFIT WAS TO BE MADE. HOWEVER, NO SEPARATE ADDITION WAS MADE AS THE ASSESSING OFFICER WAS MAKING ADDITION UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CREDITORS. THE ASSESSING OFFICER WA S OF THE VIEW THAT WHERE THE ASSESSEE HAD SHOWN AMOUNT RECEIPTS STANDING IN THE NAME OF VARIOUS PARTIES I.E. CREDITORS AGAINST WHOM THERE WAS NO DEBIT ENTRY ON ACCOUNT OF SALES FOR THE PAST SEVERAL YEARS, THE SAID CREDITORS WERE NOT GENUINE. SIMILAR REMAR KS WERE MADE IN RESPECT OF SUNDRY DEBTORS, ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 7 WHERE THE AMOUNTS WERE OUTSTANDING FOR THE SEVERAL YEARS, BUT THERE WAS NO CREDIT ENTRY ON ACCOUNT OF PURCHASES . T HE ASSESSING OFFICER THUS, REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. THE ASS ESSEE HAD POINTED OUT IN THE PARAS THAT THE ASSESSING OFFICER HAD MADE CROSS VERIFICATION WITH SUNDRY CREDITORS AND DEBTORS AND THE RESULTS OF ENQUIRY REVEALED THAT THE ASSESSEE HAD MADE UNRECORDED TURNOVER THROUGH CREDITORS / DEBTORS ACCOUNT AND IMPERSONI NG THE REAL DEBTORS AND CREDITORS. SEVERAL DISCREPANCIES WERE NOTED IN THE ACCOUNTS OF SUNDRY DEBTORS AND CREDITORS. HOWEVER, NO SEPARATE ADDITION WAS MADE ON THIS ACCOUNT, IN VIEW OF ADDITION BEING MADE UNDER SECTION 68, 69 OF THE ACT AND GROSS PROFIT O N UNRECORDED SALES. THE ASSESSING OFFICER AFTER ELABORATELY CONSIDERING THE DISCREPANCIES IN THE ACCOUNTS OF SUNDRY DEBTORS IN PARA 9 AT PAGES 22 TO 28 OF THE ASSESSMENT ORDER AND ALSO TAKING INTO CONSIDERATION THE UNRECORDED SALES BILLS AS REFERRED TO IN PAGES 28 TO 30 OF THE ASSESSMENT ORDER, NOTED DIFFERENCE BETWEEN RECORDED BALANCE SHEET AS ON 31.03.2003 AND THE LIST OF CREDITORS OTHERWISE FOUND AND RECASTED TRADING ACCOUNT FOR SEVERAL YEARS AND MADE THE FOLLOWING ADDITIONS IN THE HANDS OF ASSESSEE : - A) UNEXPLAINED TRADE CREDITORS UNDER SECTION 68 OF THE ACT AT RS. 1,05,00,000/ - ; B) GROSS PROFIT ON UNRECORDED SALES @ 5% AT RS. 3,35,000/ - ; C) UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT AT NIL; D) UNEXPLAINED CREDITORS UNDER SECTION 6 8 OF THE ACT ON ACCOUNT OF UNSECURED LOAN AT RS. 13,43,000/ - ; AND D) DISALLOWANCE OF INTEREST FOR NON - BUSINESS PURPOSES AT RS.4,75,975/ - . 10. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE FIRST ISSUE ADJUDICATED BY THE CIT(A) WAS THE INVOKING OF JURISDICTI ON UNDER SECTION 147 / 148 OF THE ACT . IT MAY BE POINTED OUT THAT SIMILAR ADDITION WAS MADE IN SEVERAL YEAR S BY THE ASSESSING OFFICER IN THE CASE OF ASSESSEE AND ALL THE ABOVE SAID ADDITIONS WERE MADE BY PASSING AN ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. THE ASSESSMENT YEARS FOR THE EARLIER AND LATER YEARS HAVE BEEN HELD ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 8 TO BE INVALID ON THE JURISDICTIONAL ISSUE OF REOPENING THE ASSESSMENT UNDER SECTION 147 / 148 OF THE ACT. THE ORDERS FOR ALL THE YEARS WERE DECIDED SIMULTANEOUSLY BY THE CIT(A) AND ALSO BY THE TRIBUNAL AND CONSEQUENTLY AN ERROR HAD CREPT IN THE ORDER OF TRIBUNAL TO THE EFFECT THAT IN DISMISSING THE APPEAL OF ASSESSEE ON JURISDICTIONAL ISSUE ITSELF. HOWEVER, PURSUANT TO MISCELLANEOUS APPLICATION FILED BY THE REVENUE, THE ORDER O F TRIBUNAL WAS RECALLED IN MA NO.12/PN/2014 IN WHICH, IT WAS HELD THAT FOR THE YEAR UNDER APPEAL, NO NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE. CONSEQUENTLY, IT WAS HELD THAT THE PROCEEDINGS UNDER WHICH THE ASSESSING OFFICER HAD PASSE D THE ASSESSMENT ORDER S WERE UNDER SECTION 144 OF THE ACT AND NOT UNDER SECTION 147 / 148 OF THE ACT. CONSEQUENTLY, THE ORDER OF CIT(A) IN THIS REGARD ON T HIS ISSUE IS NOT BEING REFERRED, IN VIEW OF ORDER OF TRIBUNAL IN MISCELLANEOUS APPLICATION IN DECIDI NG THE ISSUE AGAINST THE ASSESSEE. 11. THE SECOND ISSUE CONSIDERED BY THE CIT(A) WAS THE ADDITION OF 11. THE SECOND ISSUE CONSIDERED BY THE CIT(A) WAS THE ADDITION OF RS. 1,05,00,000/ - UNDER SECTION 68 OF THE ACT ON ACCOUNT OF TRADE CREDITORS. BEFORE THE CIT(A), THE ASSESSEE PRODUCED CONFIRMATION FROM CREDITORS, COPIE S OF BILLS, ACCOUNTS EXTRACTS OF CREDITORS, ETC. FURTHER, EXPLANATION OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT CERTAIN DISCREPANCIES HAD ARIS EN AS A RESULT OF WRONG POSTING OF PAYMENTS IN THE ACCOUNTS , W HERE THE PAYMENTS WERE WRONGLY CREDITED BY THE ACC OUNTANT TO THE JOURNAL (SUNDRY CREDITORS ACCOUNT), WHICH WAS MORE OR LESS SUSPENSE ACCOUNT. THE ASSESSEE FURTHER CLAIMED THAT THE AMOUNTS WERE RECONCILED IN ASSESSMENT YEAR 2004 - 05 AND WHATEVER AMOUNT WAS NOT RECONCILED, WAS OFFERED TO TAX. DURING THE YE AR, THE CREDITORS IN WHOSE ACCOUNT THERE WAS NO TRANSACTION TOTALED TO RS. 1,81,46,854/ - , THE CREDIT BALANCES WRITTEN OFF IN ASSESSMENT YEAR 2004 - 05 TOTALED TO RS. 13,78,436/ - OUT OF UN - RECONCILED AMOUNT OF RS. 1 ,2 2,2 4 , 0 48/ - , T HE BALANCES WHICH WERE CONFIRMED BY THE CREDITORS WERE NIL. FURTHER, LIST OF PAYMENTS ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 9 CREDITED TO SUNDRY CREDITORS ACCOUNT WHICH WAS TRANSFERRED TO UN - RECONCILED ACCOUNT TOTALED TO RS. 3,74,762/ - AS AGAINST AMOUNT DUE OF RS. 3,31,556/ - AND RS. 3,04,978/ - . THE CIT(A) VIDE PARA 23 NOTED THA T INCREMENTAL CREDITORS DURING THE YEAR, EXCLUDING OPENING BALANCES CARRIED DOWN WAS DETERMINED BY THE ASSESSING OFFICER AT RS. 1,05,00,000/ - , OUT OF WHICH SUM OF RS. 17,53,198/ - WAS EXPLAINED BY THE ASSESSEE AS PER THE TABULATED DETAILS UNDER PARA 22 AT PAG E 8 OF THE APPELLATE ORDER. FURTHER, VERIFICATION OF MAJOR CREDITORS WAS CARRIED OUT BY THE CIT(A), WHICH IS REFERRED TO AS REPRODUCED AT PAGES 9 TO 12 OF THE APPELLATE ORDER, WHEREIN VERIFICATION EXERCISE WAS CARRIED OUT BY THE ASSESSING OFFICER AND REMA ND REPORT IN THIS REGARD WAS GIVEN. AFTER RECONCILIATION, THE CIT(A) UPHELD THE ADDITION OF RS.8,55,185/ - UNDER SECTION 68 OF THE ACT AND DELETED SUM OF RS. 96,44,365/ - . 12. BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL AGAINST THE AFORESAID ORDER OF CI T(A). ORDER OF CI T(A). 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US POINTED OUT THAT ADMITTEDLY CREDIT ENTRIES WERE MADE IN THE SUNDRY CREDITORS ACCOUNT. SINCE THERE WAS DIFFERENCE IN CREDITORS AND DEBTORS ACCOUNT , ADDITIONAL INCOME OF RS.1 CRORE WAS DECLARED IN ASSESSMENT YEAR 2004 - 05 . THIS DECLARATION WAS MADE IN THE CASE OF THREE DIFFERENT CONCERNS. HOWEVER, THE ASSESSING OFFICER CALLED FOR DETAILS FROM THE PARTIES AND BANKS AND AS THE ASSESSEE DID NOT RECONCILE THE SAME, THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR SIX YEARS AND ADDED THE AMOUNT. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SPECIAL AUDIT IN THE HANDS OF ASSESSEE COULD NOT BE COMPLETED. THE ASSESSING OFFICER HAD TREATED TH E DIFFERENCE IN SUNDRY DEBTORS AND CREDITORS AS INCOME FOR THE RESPECTIVE YEARS. FURTHER , WHERE THE PURCHASES AND SALES WERE NOT CLEAR AND ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 10 WERE ENTERED IN THE SUSPENSE ACCOUNT, WERE ADDED AS UNRECORDED SALES AND GP WAS APPLIED THEREON. IN ALL THREE CONCE RNS, WHERE THE FUNDS WERE USED INTERSE FOR DIFFERENTIAL PAYMENT, INTEREST WAS DISALLOWED UNDER SECTION 36(1)(III) OF THE ACT. HE FURTHER POINTED OUT THAT THE CIT(A) ASKED FOR REMAND REPORT, WHEREIN THE ASSESSING OFFICER VERIFIED AND REPORTED THAT CREDITOR S WERE GENUINE AND THERE WERE MISTAKES IN ACCOUNTS AND SOME ACCOUNTS WERE RECONCILED. WITH REGARD TO THE GROUND OF APPEAL NO.1, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE SAME DOES NOT SURVIVE BECAUSE OF THE ORDER O F TRIBUNAL IN MISCELLANEOUS APPLICATION. IN RESPECT OF GROUND OF APPEAL NO.2, WHERE THERE WAS DIFFERENCE IN THE ACCOUNT OF GOA ISPAT LTD. TO THE TUNE OF RS. 8,55,185/ - , THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT NO RECON CILIATION WAS FILED BEFORE THE ASSESSING OFFICER OR THE CIT(A) OR EVEN BEFORE THE TRIBUNAL . HOWEVER, A REQUEST WAS MADE TO SEND BACK THE MATTER FOR RECONCILIATION. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACING RELIANCE ON THE ORDE R OF ASSESSING OFFICER POINTED OUT THAT THERE WAS NO MERIT IN DELETION OF ADDITION BY THE CIT(A). 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ADDITION IN THE HANDS OF ASSESSEE WAS MADE ON ACCOUNT OF NON - RECONCILIATION OF AMOUNTS I N THE SUNDRY CREDITORS ACCOUNT, DESPITE SEVERAL OPPORTUNITIES BEING GIVEN TO THE ASSESSEE, THE SAID RECONCILIATION WAS NOT CARRIED OUT BY THE ASSESSEE. THE ASSESSING OFFICER HAD REFERRED THE MATTER FOR SPECIAL AUDIT, BUT THE ASSESSEE DID NOT COOPERATE IN THIS REGARD AND NO SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT COULD BE CARRIED OUT IN THE CASE OF ASSESSEE FOR THE RESPECTIVE YEARS. IN THE ABSENCE OF ANY RECONCILIATION FILED BY THE ASSESSEE , THE ASSESSING OFFICER MADE ADDITION IN THE HANDS OF ASSESS EE ON ACCOUNT OF ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 11 UN - RECONCILED SUNDRY CREDITORS UNDER SECTION 68 OF THE ACT. FURTHER, THERE WAS UN DER - REPORTING OF INCOME ON ACCOUNT OF PROFIT FROM BUSINESS IN THE HANDS OF ASSESSEE, BUT NO SEPARATE ADDITION ON THIS ACCOUNT WAS MADE AS THE ADDITION WAS BE ING MADE UNDER SECTION 68 OF THE ACT FOR NON - REPORTING OF PROFITS. BEFORE THE CIT(A), THE ASSESSEE MADE AN ENDEAVOUR TO RECONCILE THE SUNDRY CREDITORS ACCOUNT, WHICH WERE DEEPLY SCRUTINIZED BY THE CIT(A) AND THE SAID RECONCILIATION WAS FORWARDED TO THE AS SESSING OFFICER, WHO IN TURN, FURNISHED THE REMAND REPORT. ON VERIFICATION, THE ASSESSING OFFICER FILED REPLY, CONSEQUENT TO WHICH , THE ADDITION ON ACCOUNT OF SUNDRY CREDITORS WAS REDUCED TO RS.8,55,185/ - . THE RESULT OF VERIFICATION OF MAJOR CREDITORS BY THE ASSESSING OFFICER IS NOTED BY THE CIT(A) AT PAGES 9 TO 12 OF THE APPELLATE ORDER AND ONLY IN RESPECT OF GOA ISPAT LTD., CERTAIN DISCREPANCIES WERE NOTED AND ADDITION WAS CONFIRMED TO THE EXTENT OF RS.8,55,185/ - . THE ASSESSEE BEFORE US HAS FAILED TO R ECONCILE THE SAID DISCREPANC Y AND IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IN THIS REGARD. SIMULT A NEOUSLY, WE ALSO FIND NO MERIT IN THE GROUND OF APPEAL NO.1 (FIRST PART), RAISED BY THE REVENUE AGAIN ST THE DELETION OF ADDITION MADE ON ACCOUNT OF SUNDRY CREDITORS . W HERE THE AMOUNTS HAVE BEEN RECONCILED BY THE ASSESSEE AND VERIFICATION EXERCISE HAS BEEN CARRIED OUT BY THE ASSESSING OFFICER, WHICH HAS BEEN TAKEN NOTE OF BY THE CIT(A), WE FIND NO MERIT I N THE GROUND OF APPEAL NO.1 (FIRST PART) RAISED BY THE REVENUE AGAINST DELETION OF ADDITION MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT OF SUNDRY CREDITORS. HENCE, GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE AND GROUND OF APPEAL NO.1 (FIRST PART) RAISED BY THE REVENUE IS DISMISSED. 16. THE ISSUE IN GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS ON ACCOUNT OF ADDITION OF RS.1,75,000/ - UNDER SECTION 68 OF THE ACT OUT OF LOAN. THE ASSESSING OFFICER IN THIS REGARD HAD MADE AN ADDITION TOTALING ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 12 RS.13,43,000 / - ON ACCOUNT OF UNSECURED LOANS. THE AFORESAID ADDITION WAS MADE BY THE ASSESSING OFFICER IN THE ABSENCE OF ANY CONFIRMATION BEING FILED BY THE ASSESSEE. HOWEVER, BEFORE THE CIT(A), THE ASSESSEE FURNISHED THE CONFIRMATION AND IT WAS NOTED THAT THE AMOUN TS WERE RECEIVED BY THE ASSESSEE THROUGH CHEQUES. FURTHER, CONFIRMATION LETTERS WERE ALSO FILED BY THE ASSESSEE AND THE ASSESSING OFFICER VERIFIED THE INFORMATION AND ALSO RECORDED THE STATEMENTS OF P ERSONS IN THIS REGARD. IT WAS FURTHER NOTED THAT THE A MOUNTS HAVE BEEN REPAID IN THE LATER YEARS ON ACCOUNT OF RS.5 LAKHS RECEIVED FROM SHRI C.V. GANDHI , RS.75,000/ - FROM SMT. PUSHPA JAIN AND RS. 6,50,000/ - FROM SHRI SUJIT OSWAL. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY CONFIRMATION WITH REGARD TO THE LOAN S RECEIVED FROM SHRI SANJAY OSWAL OF RS.1,75,000/ - , WHICH WAS CONFIRMED BY THE CIT(A). 17. THE REVENUE IS IN APPEAL AGAINST THE RELIEF GRANTED ON ACCOUNT OF DELETION OF ADDITION MADE ON ACCOUNT OF UNSECURED LOANS BY WAY OF SECOND DELETION OF ADDITION MADE ON ACCOUNT OF UNSECURED LOANS BY WAY OF SECOND PART OF GROUND OF APPEAL NO.1 . WHERE THE ASSESSEE HAS FURNISHED THE CONFIRMATIONS IN RESPECT OF LOANS ALONG WITH EVIDENCES AND STATEMENTS OF ONE OF THE CREDITORS WAS ALSO RECORDED, WE FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS REGARD AND THE SECOND PART O F GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS ALSO DISMISSED. 18. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED ON THE REMAND REPORT TO THE EXTENT THAT THE CONFIRMATION WAS FILED. HOWEVER, WHEN THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS ASKED TO FILE THE CONFIRMATION BEFORE US, S HE REPLIED THAT THE SAME WAS NOT AVAILABLE. THE CIT(A) HAS ALSO GIVEN A FINDING AT PAGE 17 OF THE APPELLATE ORDER THAT NO CONFIRMATION WAS FILED BY THE ASSESSEE. IN THE ABSENCE OF ANY CONFIRMAT ION BEING FILED BY THE ASSESSEE, WE FIND NO MERIT IN THE STAND OF ASSESSEE IN THIS ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 13 REGARD AND THE ADDITION OF RS.1,75,000/ - IS CONFIRMED. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, DISMISSED. 1 9 . THE NEXT GROUND OF APPEAL NO.4 RAISED BY TH E ASSESSEE IS AGAINST THE DISALLOWANCE OF INTEREST ON DEBIT BALANCES OF OTHER TWO CONCERNS. 20 . THE REVENUE HAS ALSO RAISED GROUND OF APPEAL NO.3 AGAINST THE RELIEF GRANTED BY THE CIT(A) TO THE TUNE OF RS. 52,077/ - . 2 1 . BRIEFLY, IN THE FACTS RELATING TO THE ISSUE, THE ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE DIVERTED BORROWED FUNDS TO ITS SISTER CONCERNS AND WHERE THE ASSESSEE HAD FAILED TO ESTABLISH THAT THE FUNDS WERE UTILIZED EXCLUSIVELY FOR THE BUSINESS PURPOSES, THE ENTIRE INTEREST DEBITED TO PR OFIT & LOSS ACCOUNT WAS HELD TO BE NOT ALLOWABLE. BEFORE THE CIT(A), THE ASSESSEE EXPLAINED THAT THE AUDITORS HAD OBSERVED THAT INTEREST WAS NEITHER PAID NOR RECOVERED ON FUNDS TAKEN / GIVEN FROM / TO SISTER CONCERNS. FURTHER, THE EXPLANATION OF THE ASSE SSEE WAS THAT WHERE THE ASSESSING OFFICER HAS NOT QUANTIFIED THE AMOUNT ADVANCED AND THE PROPORTIONATE INTEREST ON THE SAME, THERE WAS NO MERIT IN THE DISALLOWANCE OF ENTIRE INTEREST PAID. THE CIT(A) HELD THAT THE TRANSACTIONS IN THE ACCOUNT WERE IN THE N ORMAL COURSE OF TRADING AND WERE NOT IN THE NATURE OF ADVANCES OR LOANS. IT WAS FURTHER NOTED BY THE CIT(A) IN PARA 40 AT PAGE 15 OF THE APPELLATE ORDER THAT ON SEVERAL OCCASIONS DUES PAYABLE BY THE ASSESSEE WERE PAID BY THE OTHER CONCERNS ON ASSESSEES B EHALF . FURTHER, THE BALANCE IN THE ACCOUNTS VARIED FROM CREDIT TO DEBIT OR DEBIT TO CREDIT THROUGHOUT THE YEAR AND IT WAS NOT THE CASE OF DEBIT BALANCE UNIFORMLY THROUGHOUT THE YEAR. ANOTHER POINT NOTED BY THE CIT(A) WAS THAT THE CAPITAL OF ASSESSEE WAS FROM LOAN AND IN SUCH SITUATION, THERE WAS NO JUSTIFICATION FOR ACCOMMODATING THE SISTER CONCERNS TO A LARGE EXTENT. THE CIT(A) THUS, CONFIRMED THE DISALLOWANCE ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 14 OF INTEREST PAID TO THE EXTENT OF INTEREST ON DEBIT BALANCES IN THE ACCOUNT OF MM CHOUHAN STEE LS AND ASHOK STEELS, COMPUTED AT THE AVERAGE RATE ON WHICH INTEREST WAS PAID DURING THE YEAR LIMITED TO THE AMOUNT OF INTEREST ACTUALLY PAID. 2 2 . BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL AGAINST THE SAID ORDER OF CIT(A). 2 3 . WE FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE ASSESSEE AND THE GROUND OF APPEAL RAISED BY THE REVENUE , IN VIEW OF THE FINDINGS OF CIT(A) IN THIS REGARD, WHICH HAVE NOT BEEN CONTROVERTED BY EITHER OF THE PARTIES. CONSEQUENTLY, GROUND OF APPEAL NO.4 RAISED BY THE ASSE SSEE AND THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE ARE DISMISSED. 24. NOW, COMING TO THE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE AGAINST THE DELETION OF ADDITION OF RS.3,35,000/ - MADE TO GROSS PROFIT HOLDING THAT THERE WAS NO UNRECORDED SALES DU RING THE YEAR. THE SAID ADDITION WAS MADE BY THE ASSESSING OFFICER BY ASSUMING THAT THE DEBTORS WITH CREDIT BALANCES REPRESENTED UNRECORDED SALES BY SIMILAR EXERCISE. FURTHER, UNRECORDED PURCHASES AND UNEXPLAINED INVESTMENT IN PURCHASES WAS ALSO WORKED O UT BY THE ASSESSING OFFICER, WHICH TOTALED TO RS.99 LAKHS. SINCE THE UNRECORDED BUSINESS HAD RESULTED IN LOSSES FOR THE YEAR, NO ADDITION WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT UNDER SECTION 68 OF THE ACT AS WAS DONE IN SOME OF EARLIER YEARS. THE CIT(A) HELD THAT SINCE THERE WAS NO ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE YEAR AND THE UNACCOUNTED BUSINESS RESULTING IN HIGHER VALUE OF PURCHASES THAN SALES, REASON FOR MAKING AN ADDITION TO THE GROSS PROFIT ON UNACCOUNTED SALES WAS NOT WAR RANTED. RELIANCE IN THIS REGARD WAS MADE TO THE OBSERVATIONS IN PARA RELATING TO ASSESSMENT YEAR 2000 - 01, EXTRACT OF WHICH IS REPRODUCED AT PAGES ITA NO. 921 /PN/20 08 ITA NO. 1056 /PN/20 08 SURESH BABULAL CHOUHAN 15 13 AND 14 OF THE APPELLATE ORDER AND THE ADDITION MADE ON ACCOUNT OF GROSS PROFIT OF RS.3,35,000/ - WAS DELETE D. THE RELEVANT PORTIONS OF THE CIT(A) ARE NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. WE FIND NO MERIT IN THE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE IN THIS REGARD, IN VIEW OF ELABORATE FINDINGS OF CIT(A). UPHOLDING THE SAME, WE DISMISS THE GROU ND OF APPEAL NO.2 RAISED BY THE REVENUE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND THE REVENUE ARE THUS, DISMISSED. 25 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE AND THE REVENUE ARE DISMISSED. ORDER P RONOUNCED ON THIS THE 27 TH DAY OF MAY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 27 TH MAY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), KOLHAPUR ; 4. / THE CIT - I /II , KOLHAPUR / CIT (CENTRAL), PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE