DCIT, CHENNAI V. Mrs. Vijaya Inbasagaran, CHENNAI

ITA 955/CHNY/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64348 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-09-2012
• Assessment Year: 1993-1994
• Appeal Filed On: 16-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N V BALAJI SENIOR
• Assessee Lawyers: C V RAJAN
• Keywords: Unexplained investment; Depreciation; Opportunity of being heard; Tangible material; Difference of opinion; Deemed dividend; Change of opinion
• Section: 143(3); 147; 69; 263; 63; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NOS. 816, 817 & 818/MDS/2009 (ASSESSMENT YEARS : 1993-94, 1994-95 & 1995-96) SMT. VIJAYA INBASAGARAN, NO.2, 10 TH STREET, T-62,ANNA NAGAR, CHENNAI - 600 040. PAN : AAAPI2437F (APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME TAX, BUSINESS RANGE XIV, CHENNAI - 600 034 . (RESPONDENT) I.T.A. NO. 955/MDS/2009 (ASSESSMENT YEAR : 1993-94) THE DEPUTY COMMISSIONER OF INCOME TAX, BUSINESS RANGE XIV, CHENNAI - 600 034. (APPELLANT) V. SMT. VIJAYA INBASAGARAN, NO.2, 10 TH STREET, T-62,ANNA NAGAR, CHENNAI - 600 040. (RESPONDENT) C.O. NO. 206/MDS/2009 (IN I.T.A. NO. 955/MDS/2009) (ASSESSMENT YEAR : 1993-94) SMT. VIJAYA INBASAGARAN, NO.2, 10 TH STREET, T-62,ANNA NAGAR, CHENNAI - 600 040. (CROSS-OBJECTOR) V. THE DEPUTY COMMISSIONER OF INCOME TAX, BUSINESS RANGE XIV, CHENNAI - 600 034. (RESPONDENT) ASSESSEE BY : SHRI C.V. RAJAN, ADVOCATE REVENUE BY : SHRI N.V. BALAJI, SENIOR STANDING COUNSEL DATE OF HEARING : 13.09.2012 DATE OF PRONOUNCEMENT : 27.09.2012 I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 2 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : OF THE ABOVE APPEALS, I.T.A. NO. 816 IS THE APPEA L OF THE ASSESSEE AGAINST AN ORDER DATED 19.3.2009 OF COMMIS SIONER OF INCOME TAX (APPEALS)-IV, CHENNAI, ARISING OUT OF AN ASSESSMENT DONE ON THE ASSESSEE ON 29.3.1996 UNDER SECTION 143 (3) OF INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT') FOR ASSESSMENT Y EAR 1993-94. I.T.A. NO. 955/MDS/2009 IS AN APPEAL OF THE REVENUE FOR TH E VERY SAME ASSESSMENT YEAR, AND IS AGAIN DIRECTED AGAINST AN O RDER DATED 19.3.2009 OF COMMISSIONER OF INCOME TAX (APPEALS)-I V, CHENNAI. BUT, THE LATTER ORDER OF CIT(APPEALS) IS A DIFFEREN T ONE, ARISING OUT OF A RE-ASSESSMENT DONE ON THE ASSESSEE FOR THE ASSESSME NT YEAR 1993- 94, ON 18.3.2002 UNDER SECTION 143(3) READ WITH SEC TION 147 OF THE ACT. ASSESSEE HAS ALSO FILED A CROSS-OBJECTION, VI Z. C.O. NO. 206/MDS/2009, IN REVENUES APPEAL IN I.T.A. NO. 955 /MDS/2009, THROUGH WHICH SHE ASSAILS THE ORDER OF CIT(APPEALS) INSOFAR AS HE UPHELD THE VALIDITY OF THE REOPENING DONE FOR THAT ASSESSMENT YEAR. APPEALS IN I.T.A. NOS. 817 & 818/MDS/2009 ARE APPEA LS OF THE ASSESSEE FOR ASSESSMENT YEARS 1994-95 AND 1995-96, DIRECTED I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 3 AGAINST ORDERS DATED 23.3.2009 OF CIT(APPEALS) FOR THESE YEARS, WHEREIN CIT(APPEALS) REFUSED TO CONSIDER THE APPEAL S OF THE ASSESSEE FOR A REASON THAT THE ORDERS ON WHICH SUCH APPEALS WERE FILED BEFORE HIM, WERE PASSED UNDER SECTION 143(3) READ WITH SECTION 263 OF THE ACT, AND WERE THEREFORE NOT APPEALABLE. 2. WE ARE TAKING UP APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 1993-94 IN I.T.A. NO. 816/MDS/2009 FIRST FOR DISPOS AL. 3. FACTS APROPOS ARE THAT THERE WAS A SEARCH DONE I N THE PREMISES OF ASSESSEE ON 13 TH AND 14 TH SEPTEMBER, 1993. DURING THE COURSE OF SEARCH, A SUM OF ` 30 LAKHS WAS FOUND BY WAY OF CASH, ALONG WITH SEVEN GOLD BISCUITS. DETAILS OF CERTAIN INVESTMENT S IN A CONCERN, CALLED M/S AVJ MARKETING SERVICES, AND ALSO CERTAIN FIXED DEPOSITS MADE IN VARIOUS NAMES WERE ALSO FOUND. ASSESSEE IN CIDENTALLY IS THE PROPRIETRESS OF CONCERN M/S AVJ MARKETING SERVICES, WHICH IS IN THE BUSINESS OF COMMISSION AGENCY. SHE IS ALSO A DIREC TOR OF TWO COMPANIES CALLED M/S SILVER SHOES PVT. LTD. AND M/S SOUTHERN RIMS PVT. LTD. M/S SILVER SHOES PVT. LTD., WAS MANUFACT URING SHOE UPPERS, WHEREAS, THE COMPANY M/S SOUTHERN RIMS PVT. LTD. WA S MANUFACTURING CYCLE RIMS. ASSESSEE HAD FILED RETUR N FOR THE IMPUGNED ASSESSMENT YEAR ON 22.3.1995, WHEREIN THE PROFIT FROM I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 4 PROPRIETORSHIP CONCERN WAS SHOWN AT ` 1,04,525.69/-. OPENING CREDIT BALANCE IN THE CAPITAL ACCOUNT OF THE ASSESSEE IN T HE PROPRIETORSHIP CONCERN WAS ONLY ` 35,677/- AND THIS WHEN AGGREGATED WITH PROFIT OF ` 1,04,525.69 FOR THE RELEVANT PREVIOUS YEAR, THE TOT AL CAPITAL CAME TO ` 1,40,202.75 ONLY. 4. IT SEEMS ASSESSEE HAD FILED A CASH FLOW STATEMEN T FOR RELEVANT PREVIOUS YEAR, WHICH HAD SHOWN A SUM OF ` 12,60,100/- AS DRAWN FROM THE PROPRIETORSHIP CONCERN. AS PER THE A.O., BALANCE SHEET OF THE SAID PROPRIETORSHIP CONCERN REFLECTED A SUM OF ` 4,70,333.56 AS DUE TO M/S SOUTHERN RIMS PVT. LTD. AND ` 6,87,600/- AS DUE TO M/S SILVER SHOES PVT. LTD. IN OTHER WORDS, FOR JUSTIFY ING THE CASH DRAWINGS OF ` 12,60,100/-, FROM HER PROPRIETORSHIP CONCERN, ONE O F THE SOURCES SHOWN BY THE SAID CONCERN WERE THE CREDITS IN THE N AME OF M/S SOUTHERN RIMS PVT. LTD. AND M/S SILVER SHOES PVT. L TD. ASSESSEE HAD EXPLAINED HER VARIOUS INVESTMENTS AS PARTLY COM ING OUT OF THE DRAWING OF ` 12,60,100/-. THE INVESTMENTS SO EXPLAINED WERE GO LD WORTH ` 3,20,000/-, PAYMENTS TOWARDS MARUTHUPANDY CHITS ` 44,567/- INVESTMENT IN M/S AVJ MARKETING SERVICES ` 3,00,500/-, INVESTMENT IN TNCS ` 97,442/- AND FIXED DEPOSITS OF ` 5 LAKHS. AS PER THE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 5 ASSESSING OFFICER, THE ACTUAL FIXED DEPOSITS WERE N OT ` 5 LAKHS BUT ` 6 LAKHS DURING THE RELEVANT PREVIOUS YEAR. 5. AFTER VERIFICATION OF ACCOUNTS OF THE COMPANY M/ S SILVER SHOES PVT. LTD. AND M/S SOUTHERN RIMS PVT. LTD., WHICH WE RE IN THE CUSTODY OF THE DEPARTMENT, ASSESSING OFFICER CAME TO A CONC LUSION THAT THERE WERE NO SALES WHATSOEVER RECORDED BY THEM TO M/S AV J MARKETING SERVICES AND THEREFORE, THE CREDIT BALANCE IN THE A CCOUNTS OF THE ASSESSEE SHOWN AS DUE TO THE SAID COMPANIES COULD N OT BE BELIEVED. AS PER THE A.O., THESE TWO COMPANIES, THOUGH THEY H AD ADMITTED UNACCOUNTED SALES IN THEIR RESPECTIVE ASSESSMENTS, SUCH CLAIM OF UNACCOUNTED SALES COULD NOT BE BELIEVED. HE, THERE FORE, CONSIDERED THE SUM OF ` 4,70,333.56 SHOWN BY THE ASSESSEE AS DUE TO M/S SOUTHERN RIMS PVT. LTD. AND ` 6,87,600/- SHOWN AS DUE TO M/S SILVER SHOES PVT. LTD., AS NOT PROVED AND CONSIDERED THE I NVESTMENTS MADE BY THE ASSESSEE TO THAT EXTENT AS NOT EXPLAINED AND MADE AN ADDITION UNDER SECTIONS 69 AND 69A OF THE ACT. 6. ASSESSING OFFICER ALSO NOTED FROM THE BOOKS OF M /S SILVER SHOES PVT. LTD. THAT THEY HAD CREDITED ASSESSEES A CCOUNT IN THEIR BOOKS WITH A COMMISSION OF ` 1,43,450/- AND SINCE SUCH AMOUNT WAS I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 6 NOT SHOWN IN THE RETURN OF INCOME FILED BY THE ASSE SSEE, THIS WAS ALSO BROUGHT TO TAX. 7. BOTH THE ADDITIONS, VIZ. FIRST ONE FOR THE CREDI T BALANCE IN THE TWO COMPANIES TOTALLING TO ` 11,57,933/- AND SECOND ONE FOR COMMISSION OF ` 1,43,450/- FROM M/S SILVER SHOES PVT. LTD. NOT ACC OUNTED, WERE CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCE S, WHILE COMPLETING ASSESSMENT. 8. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS), WH ERE HER ARGUMENT WAS THAT THE COMPANIES M/S SILVER SHOES PV T. LTD. AND M/S SOUTHERN RIMS PVT. LTD. HAD RECORDED THE SALES TO H ER PROPRIETORSHIP CONCERN IN THEIR BOOKS. AS PER THE ASSESSEE, SUCH CREDIT BALANCES DID NOT REPRESENT ANY UNEXPLAINED INVESTMENTS, BUT ON THE OTHER HAND, HAD ARISEN OUT OF NORMAL BUSINESS TRANSACTION S THAT ASSESSEES PROPRIETORSHIP CONCERN HAD WITH THE TWO COMPANIES I N WHICH SHE WAS A DIRECTOR. ASSESSEE ALSO RELIED ON THE BALANCE SH EET OF THE SAID COMPANIES IN SUPPORT OF HER CLAIM. 9. CIT(APPEALS) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. IN THE REMAND, ASSESSING OFFICER STATED T HAT THE CREDIT SALES ALLEGED TO HAVE BEEN MADE TO ASSESSEES PROPRIETORS HIP CONCERN, I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 7 WERE NOT BACKED WITH ANY CORROBORATIVE EVIDENCE LIK E SALES INVOICES. AS PER THE A.O., THE CLAIM OF SALES BY THE COMPANIE S WERE UNREALISTIC. A.O. ALSO REITERATED THAT SUCH SALES WERE NOT RECOR DED IN THE BOOKS OF SUCH COMPANIES, WHICH WERE IN THE CUSTODY OF THE DE PARTMENT. 10. CIT(APPEALS), AFTER GOING THROUGH THE SUBMISSIO NS OF THE ASSESSEE AND REMAND REPORT OF THE ASSESSING OFFICER , WAS OF THE OPINION THAT THE AMOUNTS SHOWN AS CREDIT BALANCES I N THE ACCOUNTS OF THE ASSESSEE, DUE TO TWO COMPANIES, COULD BE CONSID ERED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. THIS ASPECT WAS POINTED OUT TO THE ASSESSEE, WHEREUPON, ASSESSEE SU BMITTED THAT SUCH COMPANIES DID NOT HAVE ANY ACCUMULATED PROFITS AND CREDITS HAD COME ONLY THROUGH SALES MADE TO THE ASSESSEES PROPERTORSHIP CONCERN AND NOT THROUGH ANY LOANS AND ADVANCES GIVE N BY THEM TO THE ASSESSEE. 11. CIT(APPEALS) WAS OF THE OPINION THAT THE AMOUNT S SHOWN BY THE ASSESSEE AS DUE TO THE SAID COMPANIES COULD BE CONS IDERED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE SINCE ASSESSEE WAS HAVING MORE THAN 10% SHARES IN THE SAID COMPANIES. AS PER THE CIT(APPEALS), SINCE ASSESSEE HAD SHOWN CREDITS DUE TO THESE TWO COMPANIES AS A SOURCE FOR EXPLAINING HER INVESTMENT S, SUCH CREDITS I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 8 COULD BE DEEMED AS LOANS RECEIVED FROM THE SAID COM PANIES. ACCORDING TO HIM, THESE AMOUNTS WERE SHOWN AS LOANS TO THE ASSESSEE BY THESE COMPANIES ONLY TO AVOID TAX AND H ENCE, SECTION 2(22) (E) WAS ATTRACTED. NOTING THAT THE RESERVES AND SURPLUS IN THE BALANCE SHEET OF M/S SOUTHERN RIMS PVT. LTD., HAD A BALANCE OF ONLY ` 3,77,000/-, HE HELD THAT THE ADDITION FOR DUES TO THE SAID COMPANY HAD TO BE LIMITED TO ` 3,77,777/-. HOWEVER, HE DID NOT MAKE ANY REDUCTION IN THE ADDITION MADE FOR THE AMOUNTS AS S HOWN DUE TO M/S SILVER SHOES PVT. LTD. FOR A REASON THAT THE SAID C OMPANY HAD ACCUMULATED PROFITS EXCEEDING SUCH AMOUNTS. 12. VIS--VIS ADDITION MADE ON ACCOUNT OF COMMISSIO N AMOUNTS APPEARING AS PAYABLE TO THE ASSESSEE IN THE BOOKS O F M/S SILVER SHOES PVT. LTD., ARGUMENT OF THE ASSESSEE BEFORE CI T(APPEALS) WAS THAT SHE WAS FOLLOWING A MIXED METHOD OF ACCOUNTING AND WAS ENTITLED TO ADOPT DIFFERENT METHODS OF ACCOUNT FOR DIFFERENT SOURCE OF INCOME. AS PER ASSESSEE, SHE WAS SHOWING COMMISSIO N EARNINGS ON CASH BASIS, AND THE IMPUGNED COMMISSION WAS NOT REC EIVED. CIT(APPEALS), HOWEVER, WAS NOT APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, ONCE PAYER HAD CREDITED THE AMOUN T, IT BECAME RECEIVABLE IN THE HANDS OF PAYEE AND PAYEE WAS LEFT WITH NO CHOICE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 9 BUT TO OFFER IT AS INCOME. FURTHER, ACCORDING TO H IM, THOUGH ASSESSEE WAS FOLLOWING MIXED SYSTEM OF ACCOUNTING, SHE WAS B OUND TO OFFER THE INCOME SINCE THE COMPANIES HAD CREDITED SUCH SU M IN THEIR ACCOUNTS IN HER NAME. THUS, EFFECTIVELY HE SUSTAIN ED THE TWO ADDITIONS MADE BY THE A.O. BUT FOR THE REDUCTION MA DE IN THE AMOUNT SHOWN AS DUE TO M/S SOUTHERN RIMS PVT. LTD. 13. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT THE BALANCES DUE TO TH E TWO COMPANIES IN THE ACCOUNTS OF THE PROPRIETORSHIP CONCERN WERE NOTHING BUT CREDIT BALANCE ARISING OUT OF TRADING TRANSACTIONS. IT WA S NOT DENIED BY ANY OF THE LOWER AUTHORITIES THAT THE SAID COMPANIES HA D EFFECTED SALES TO ASSESSEE. LEARNED A.R. POINTED OUT THAT THESE TWO COMPANIES HAD SHOWN SUCH SALES IN THEIR RESPECTIVE RETURNS OF INC OME AS A PART OF THEIR TURNOVER AND THIS WAS ACCEPTED IN THE ASSESSM ENTS OF THE SAID COMPANIES THOUGH UNDER A DIFFERENT HEAD OF INCOME. LEARNED A.R. SUBMITTED THAT THE SAID COMPANIES HAD SHOWN THE AMO UNTS AS PART OF THEIR SALES, BUT THE ASSESSING OFFICER HAD CONSIDER ED THE AMOUNTS AS INCOME FROM OTHER SOURCES IN THE ASSESSMENTS OF T HE SAID TWO COMPANIES. ACCORDING TO HIM, THE CIT(APPEALS) IN T HE APPEALS OF THESE TWO COMPANIES HAD SUSTAINED SUCH ADDITIONS. THEREFORE, IF THE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 10 SAID ADDITION WAS AGAIN MADE IN THE ASSESSEES HAND S, THIS WOULD RESULT IN DOUBLE ADDITION. IN ANY CASE, ACCORDING TO HIM, THE ASSESSING OFFICER DID NOT MAKE THE ADDITION UNDER S ECTION 2(22)(E) OF THE ACT. LD. CIT(APPEALS) INDIRECTLY ADMITTED THAT THE AMOUNTS WERE DUE TO THE TWO COMPANIES, BUT HE WAS OF THE OPINION THAT SUCH DUES HAD TO BE TREATED ONLY AS LOANS COMING WITHIN THE P URVIEW OF SECTION 2(22)(E) OF THE ACT. ONCE THE CREDITS FROM THE TWO COMPANIES ARE NOT DISPUTED, THE INVESTMENTS MADE BY THE ASSESSEE, WHI CH WERE CONSIDERED UNEXPLAINED BY THE A.O. FOR MAKING ADDIT IONS UNDER SECTIONS 69 AND 69A OF THE ACT, STOOD EXPLAINED. I NSOFAR AS FINDING OF THE CIT(APPEALS) THAT THESE TWO COMPANIES HAD ACCUM ULATED PROFITS FOR MAKING AN ADDITION UNDER SECTION 2(22)(E) OF TH E ACT, LEARNED A.R. PLACING A COPY OF BALANCE SHEET OF THE TWO COMPANIE S BEFORE US, AND SUBMITTED THAT THE FINDING OF THE CIT(APPEALS) WAS NOT CORRECT. ACCORDING TO HIM, THE BALANCE SHEET AS ON 31.3.93 O F M/S SOUTHERN RIMS PVT. LTD. PLACED AT PAPER-BOOK PAGE 1, WOULD C LEARLY SHOW IT HAD PROFIT & LOSS ACCOUNT DEBIT BALANCE OF ` 32,07,826/- ON THE ASSET SIDE AGAINST RESERVES AND SURPLUS ` 3,77,000/- SHOWN IN THE LIABILITY SIDE. ONCE THE LOSS WAS SET OFF, THERE WERE NO SURPLUS WHATSOEVER. PLACING RELIANCE ON THE BALANCE SHEET AS ON 31.3.1993, OF M/S SILVER SHOES PVT. LTD., PLACED AT PAPER-BOOK 8, LEARNED A.R. I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 11 SUBMITTED THAT IT WAS ALSO HAVING A LOSS OF ` 7,12,068.20 STILL TO BE ABSORBED. DEPRECIATION RESERVE SHOWN WAS NOT A SUR PLUS. ACCORDING TO LEARNED A.R., DEPRECIATION RESERVE OF ` 24,84,717.76 WAS CREDITED AS A CHARGE ON THE ASSETS FOR DEPRECIATION AND WAS NOT A RESERVE CREATED OUT OF PROFITS, TO BE CONSIDERED AS ACCUMUL ATED PROFIT. THEREFORE, IT WAS ARGUED THAT THERE WERE NO ACCUMUL ATED PROFITS AT ALL FOR APPLICATION OF SECTION 2(22)(E) OF THE ACT. 14. ON THE ADDITION MADE FOR COMMISSION, SHOWN AS P AYABLE BY M/S SILVER SHOES PVT. LTD. TO THE ASSESSEE, ARGUMEN T OF THE LEARNED A.R. WAS THAT ASSESSEE WAS FOLLOWING MIXED SYSTEM O F ACCOUNTING AND BY VIRTUE OF DECISION OF HONBLE APEX COURT IN THE CASE OF UCO BANK V. CIT (237 ITR 889), IT WAS WELL WITHIN HER R IGHT TO FOLLOW A DIFFERENT SYSTEM OF ACCOUNTING FOR DIFFERENT SOURCE S. AS PER THE LEARNED A.R., THE ASSESSING OFFICER HIMSELF HAD ACC EPTED THE METHOD FOLLOWED BY THE ASSESSEE. THIS WAS SPECIFICALLY ME NTIONED IN THE ASSESSMENT ORDER. ONCE MIXED METHOD OF ACCOUNTING IS ACCEPTED, ASSESSEE COULD NOT BE DEPRIVED OF HER RIGHT TO ACCO UNT FOR COMMISSION ON RECEIPT BASIS. HENCE, THIS ADDITION WAS ALSO UNJUSTLY MADE. I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 12 15. PER CONTRA, LEARNED D.R. SUBMITTED THAT INSOFAR AS ADDITION OF COMMISSION OF ` 1,43,450/- WAS CONCERNED, ASSESSEES PROPRIETARY CONCERN M/S AVJ MARKETING SERVICES WAS ITSELF DOING ONLY A COMMISSION BUSINESS. ADMITTEDLY, M/S AVJ MARKETING SERVICES, WAS ACCOUNTING COMMISSION ON MERCANTILE BASIS. ACCORDI NG TO HIM, ASSESSEE HAD THE RIGHT TO FOLLOW A MIXED SYSTEM, BU T, FOR THE SAME SOURCE OF INCOME, IT COULD NOT BE ALLOWED TO FOLLOW DIFFERENT SYSTEM OF ACCOUNTING. ASSESSEE COULD NOT SAY THAT FOR SOME P ART OF COMMISSION, IT SHOULD BE ALLOWED TO FOLLOW MERCANTI LE SYSTEM, WHEREAS, FOR OTHER PART, IT SHOULD BE ALLOWED CASH SYSTEM. IN ANY CASE, ACCORDING TO HIM, ASSESSEES CLAIM THAT SUCH AMOUNT WAS SHOWN AS PART OF THE INCOME FOR PREVIOUS YEAR RELEV ANT TO ASSESSMENT YEAR 2010-11, ITSELF SHOWED THE FALLACY OF HER CLAI M. ASSESSEE WOULD NOT HAVE WAITED SUCH A LONG PERIOD OF TIME, HAD THE COMMISSION BEEN NOT ACTUALLY RECEIVED EARLIER. 16. INSOFAR AS THE ADDITIONS MADE FOR THE AMOUNTS D UE TO TWO COMPANIES, M/S SILVER SHOES PVT. LTD. AND M/S SOUTH ERN RIMS PVT. LTD., LEARNED D.R. RELIED ON THE ORDER OF CIT(APPEA LS). 17. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. FIRST ADDITION MADE BY THE ASSESSING OFFICER WAS WI TH REGARD TO I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 13 AMOUNTS SHOWN BY THE ASSESSEE IN HER PROPRIETARY CO NCERN, AS DUE TO TWO COMPANIES IN WHICH ASSESSEE WAS A DIRECTOR, NAM ELY, M/S SILVER SHOES PVT. LTD. AND M/S SOUTHERN RIMS PVT. LTD. TH E TOTAL THEREOF CAME TO ` 11,57,933/-. THIS WAS SHOWN AS A PART OF CASH IN- FLOW FOR EXPLAINING VARIOUS INVESTMENTS MADE BY HER. AS PER THE ASSESSEE, THE CREDIT BALANCE AROSE ON ACCOUNT OF SALES EFFECT ED BY THE SAID TWO COMPANIES TO HER PROPRIETARY CONCERN. ASSESSING OF FICER WAS OF THE OPINION THAT THE SAID TWO COMPANIES COULD HAVE NEVE R EFFECTED SUCH SALES TO THE ASSESSEE. HOWEVER, ASSERTION OF THE A SSESSEE THAT THESE AMOUNTS WERE CONSIDERED IN THE ASSESSMENTS OF RESPECTIVE COMPANIES FOR THE SAME ASSESSMENT YEAR, HAS NOT BEE N REFUTED BY THE DEPARTMENT. IT MAY BE TRUE THAT THESE AMOUNTS WERE CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE A SSESSMENTS OF THE SAID TWO COMPANIES. BUT, NEVERTHELESS, IT MEAN T THAT THESE AMOUNTS WERE CONSIDERED AS PART OF THEIR INCOME IN THEIR RESPECTIVE ASSESSMENTS. A LOOK AT THE ORDER OF CIT(APPEALS) SHOWS THAT HE HAD APPLIED SECTION 2(22) (E) FOR CONSIDERING THE A MOUNTS SHOWN AS DUE FROM THE ASSESSEE TO THESE TWO COMPANIES, AS DE EMED DIVIDENDS. WHAT CAN BE CLEARLY DISCERNED FROM THESE IS THAT THE AUTHORITIES BELOW HAD ACCEPTED THE FACTUM OF THE AM OUNTS SHOWN AS DUE BY THE ASSESSEE TO THESE TWO COMPANIES. IN O UR OPINION, THE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 14 QUESTION WHETHER THE CREDITS CAME ABOUT THROUGH SAL ES TRANSACTION OR THROUGH LOANS, IS IRRELEVANT AS LONG AS THE CREDITS BY ITSELF WERE NOT DOUBTED. HAVING MADE AN ADDITION IN THE HANDS OF T HE TWO COMPANIES, SAME AMOUNTS COULD NOT HAVE BEEN CONSIDE RED IN THE HANDS OF THE ASSESSEE ALSO. IF THE TWO COMPANIES H AD NOT RECORDED THE SALES ALLEGED TO HAVE BEEN MADE BY THEM TO THE ASSESSEES PROPRIETARY CONCERN, IN THEIR BOOKS, THEN THE ASSES SING OFFICER OUGHT NOT HAVE MADE AN ADDITION UNDER THE HEAD INCOME FR OM OTHER SOURCES IN THE ASSESSMENTS OF THE SAID COMPANIES. ADMITTEDLY, APPEALS OF THE SAID COMPANIES FOR SUCH ASSESSMENT Y EARS BEFORE THE CIT(APPEALS) HAD NOT MET WITH ANY SUCCESS. THE ONL Y QUESTION THEREFORE THAT REMAINS TO BE ANSWERED IS WHETHER AP PLICATION OF SECTION 2(22)(E) WAS WARRANTED. FOR APPLICATION OF SAID SECTION, IT IS NECESSARY THAT THE COMPANIES CONCERNED SHOULD HAVE ACCUMULATED PROFITS AT LEAST TO THE EXTENT OF THE LOANS GIVEN. A LOOK AT THE BALANCE SHEET OF M/S SOUTHERN RIMS PVT. LTD. PLACED AT PAGE 1, SHOWS THAT IT HAD NO ACCUMULATIVE RESERVE WHATSOEVER. DEBIT BALA NCE IN PROFIT & LOSS ACCOUNT WAS ` 32,07,826.91, AGAINST WHICH RESERVES AND SURPLUS STOOD AT ` 3,77,000/- THEREBY EFFECTIVELY EFFACING ANY SURPLU S WHATSOEVER. SIMILARLY, THE BALANCE SHEET OF M/S SI LVER SHOES PVT. LTD. PLACED AT PAPER-BOOK PAGE 8, SHOWS THAT IT HAD UNABSORBED LOSS I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 15 OF ` 7,12,068.20 AGAINST WHICH THE GENERAL RESERVE WAS ` 1,01,113/-. EVEN IF WE CONSIDER THE INVESTMENT ALLOWANCE RESERV E OF ` 2,71,724.31 ALSO, THERE STILL REMAINS NO ACCUMULATE D PROFITS WHATEVER LEFT. AS FOR THE DEPRECIATION RESERVE ` 24,84,717.76, LEARNED D.R. HIMSELF ADMITTED THAT IT COULD NOT BE CONSIDERED AS A PART OF ACCUMULATED PROFIT. THEREFORE, WHAT COMES OUT IS T HAT THERE WERE NO ACCUMULATED PROFITS WITH THESE TWO COMPANIES FOR AP PLICATION OF SECTION 2(22)(E) OF THE ACT. WE ARE, THEREFORE, OF THE OPINION THAT AUTHORITIES BELOW FELL IN ERROR IN MAKING ADDITION OF ` 11,57,933/- IN THE HANDS OF THE ASSESSEE. SUCH ADDITION STANDS CANCEL LED. 18. COMING TO THE ASPECT OF COMMISSION, WHICH M/S S ILVER SHOES PVT. LTD. HAD SHOWN AS PAYABLE IN THEIR ACCOUNT TO THE ASSESSEE AND WHICH ASSESSEE HAD NOT SHOWN AS PART OF ITS INCOME, WE FIND GREAT STRENGTH IN THE ARGUMENT OF THE LEARNED D.R. THAT T HE PROPRIETARY CONCERN OF THE ASSESSEE WAS ENGAGED IN NOTHING BUT COMMISSION BUSINESS. ATLEAST A PART OF THE RECEIPTS OF THE PR OPRIETARY CONCERN, NAMELY, M/S AVJ MARKETING SERVICES, WAS NOTHING BUT COMMISSION AND SUCH COMMISSION HAD BEEN ACCOUNTED ON MERCANTIL E BASIS. THE COMPANY WAS ALSO FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING. NO DOUBT, THE ASSESSMENT ORDER HAS MENTIONED THE SYSTE M OF ACCOUNTING I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 16 FOLLOWED BY THE ASSESSEE AS MIXED. HOWEVER, AS S TATED BY LEARNED D.R., FOR THE SAME SOURCE OF INCOME, ASSESSEE CANNO T FOLLOW DIFFERENT METHOD OF ACCOUNTING. ASSESSEES CONTENTION THAT T HE SAID AMOUNT WAS SHOWN ON RECEIPT BASIS IN THE PREVIOUS YEAR END ED 31.3.2010 RELEVANT TO ASSESSMENT YEAR 2010-11 IS, IN OUR OPIN ION, ONLY AN ACTION IN AFTERTHOUGHT. HAD THE MONEY BEEN NOT RECEIVED I N THE RELEVANT PREVIOUS YEAR, ASSESSEE AS A PRUDENT BUSINESSMAN WO ULD HAVE INSISTED ON RECOVERY MUCH EARLIER AND NOT WAITED FO R A PERIOD OF MORE THAN 17 YEARS. WE ARE, THEREFORE, OF THE OPINION T HAT VERSION OF THE ASSESSEE CANNOT BE BELIEVED. THE ADDITION WAS RIGH TLY DONE BY THE A.O. AND SUSTAINED BY THE CIT(APPEALS). 19. FOR REASONS MENTIONED ABOVE WE DELETE ADDITION OF ` 11,57,933/- MADE FOR BALANCES DUE TO M/S SOUTHERN R IMS PVT. LTD. AND M/S SILVER SHOES PVT. LTD., WHILE CONFIRMING TH E ADDITION OF ` 1,43,450/-. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 21. NOW WE TAKE UP THE APPEAL OF THE REVENUE IN I.T .A. NO. 955/MDS/2009 FOR ASSESSMENT YEAR 1993-94, WHICH IS DIRECTED AGAINST AN ORDER OF CIT(APPEALS) ARISING OUT OF A R E-ASSESSMENT DONE ON THE ASSESSEE FOR IMPUGNED ASSESSMENT YEAR. ASSE SSEE HAS ALSO I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 17 FILED CROSS-OBJECTION, VIZ. C.O. NO. 206/MDS/2009, AGAINST THE ORDER OF CIT(APPEALS), WHERE HE CONFIRMED THE VALIDITY OF RE -ASSESSMENT PROCEEDINGS. 22. THE C.O. HAS BEEN FILED WITH A DELAY OF 160 DAY S. APPLICATION FOR CONDONATION HAS BEEN FILED BY THE ASSESSEE. NO SERIOUS OBJECTION WAS TAKEN BY THE LEARNED D.R. IN CONDONING THE DELA Y. REASONS SHOWN BY THE ASSESSEE WERE FOUND TO BE JUSTIFIED. HENCE, THE DELAY IS CONDONED AND C.O. ADMITTED. SINCE CROSS-OBJECTI ON OF THE ASSESSEE GOES TO THE ROOT OF THE MATTER, IT IS TAKE N UP FIRST FOR DISPOSAL. 23. ASSESSEE IN ITS C.O. STATES THAT THE ORIGINAL A SSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 29.3.1 996 AND THE REOPENING DONE AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, WAS INVALID BY VIRTUE OF FIRST PRO VISO TO SECTION 147 OF THE ACT. AS PER THE ASSESSEE, THERE WAS NO FAIL URE ON HER PART IN PROVIDING FULLY AND TRULY ALL MATERIAL FACTS THAT W ERE NECESSARY FOR THE ASSESSMENT. 24. FACTS APROPOS ARE THAT ORIGINAL ASSESSMENT OF T HE ASSESSEE, BASED ON RETURN FILED ON 22.3.95, FOR IMPUGNED ASSE SSMENT YEAR, WAS I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 18 COMPLETED ON 29.3.96. THEREAFTER, NOTICE UNDER SEC TION 147 WAS ISSUED FOR A REASON THAT IN THE ORIGINAL ASSESSMENT , ONLY A SUM OF ` 1 LAKH WAS INCLUDED AS UNEXPLAINED INVESTMENTS IN FIX ED DEPOSIT MADE BY THE ASSESSEE, AGAINST ACTUAL SUM OF ` 7 LAKHS. AS PER THE A.O., ASSESSEE IN HER SWORN STATEMENT DURING THE SEARCH I N HER PREMISES ON 13/14 SEPTEMBER, 1993, HAD OWNED UP ALL UNEXPLAI NED INVESTMENTS IN FIXED DEPOSITS AS OUT OF HER OWN INC OME. BUT, NEVERTHELESS, WHEN ASSESSMENT WAS ORIGINALLY COMPLE TED ONLY A SUM OF ` 1 LAKH WAS CONSIDERED. THE RE-ASSESSMENT WAS THER EAFTER COMPLETED MAKING A FURTHER ADDITION OF ` 7 LAKHS TO THE INCOME OF ` 15,11,310/- CONSIDERED ORIGINALLY. 25. IN ITS APPEAL BEFORE CIT(APPEALS), ONE OF THE G ROUNDS TAKEN BY THE ASSESSEE WAS THAT THE REOPENING WAS INVALID. A CCORDING TO ASSESSEE, THE REOPENING WAS RESORTED THROUGH A NOTI CE ISSUED ON 15.11.2000 AND WAS WELL AFTER FOUR YEARS AFTER THE IMPUGNED ASSESSMENT YEAR. SUCH A NOTICE, ACCORDING TO ASSES SEE, COULD BE ISSUED ONLY IF THERE WAS ANY FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY F OR HER ASSESSMENT. THERE WAS NO SUCH FAILURE AND ASSESSING OFFICER HAD CONSIDERED ALL THE ASPECTS OF THE INVESTMENTS MADE BY THE ASSESSEE WHILE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 19 CONCLUDING THE ORIGINAL ASSESSMENT. THEREFORE, AS PER THE ASSESSEE, THE REOPENING WAS NOT VALID. 26. HOWEVER, CIT(APPEALS) WAS NOT IMPRESSED. ACCOR DING TO HIM, SINCE THE REOPENING WAS DONE FOR CONSIDERING THE FI XED DEPOSITS PROTECTIVELY IN THE HANDS OF THE ASSESSEE, SUCH REO PENING DONE WAS FAIR. 27. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT THE ORIGINAL ASSESSMEN T WAS COMPLETED AFTER VERIFYING ALL THE DETAILS GATHERED DURING THE SEARCH AND AFTER CONSIDERING EXPLANATION OF THE ASSESSEE OF VARIOUS INVESTMENTS, INCLUDING THE FIXED DEPOSITS. CREDITS IN THE NAME OF TWO COMPANIES IN WHICH ASSESSEE WAS A DIRECTOR, WERE NOT BELIEVED IN SUCH ASSESSMENT AND ADDITIONS WERE ALSO MADE. HAVING DO NE SO, THE REOPENING WAS BASED ON A CHANGE OF OPINION AND THER E WAS NO NEW TANGIBLE MATERIAL IN THE HANDS OF THE REVENUE. REL IANCE WAS PLACED ON THE DECISION OF HONBLE APEX COURT IN THE CASE O F KELVINATOR INDIA LTD. (SUPRA). 28. PER CONTRA, LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF CIT(APPEALS). I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 20 29. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. A LOOK AT RE-ASSESSMENT ORDER CLEARLY SHOW THAT REO PENING WAS DONE FOR A REASON THAT IN THE ORIGINAL ASSESSMENT, ONLY ` 1 LAKHS WAS CONSIDERED AS UNEXPLAINED INVESTMENT IN FIXED DEPOS ITS. AS PER THE A.O., THE CORRECT AMOUNT THAT SHOULD HAVE BEEN CONS IDERED WAS ` 7 LAKHS. A LOOK AT THE ORIGINAL ASSESSMENT ORDER DAT ED 29.3.96, SHOWS THAT WITH REGARD TO FIXED DEPOSIT AND INVESTMENTS, ASSESSING OFFICER HAD MADE THE FOLLOWING OBSERVATIONS:- THERE WAS A SEARCH U/S 132 OF THE INCOME-TAX ACT, 1 961 AT THE ASSESSEES PREMISES ON 13/14.9.93. DURING T HE COURSE OF THE SEARCH ` 30 LAKHS BY WAY OF CASH, SEVEN GOLD BISCUITS, DETA ILS OF INVESTMENTS IN THE CURRENT ACCOUNT OF M/S AVJ MA RKETING SERVICES AT BANGALORE AND ALSO IN FIXED DEPOSITS MA DE IN THE NAMES OF FRIENDS AND RELATIVES OF THE ASSESSEE WERE FOUND. SMT. VIJAYA INBASAGARAN IS A DIRECTOR IN M/S SILVER SHOES (P) LTD., AND M/S SOUTHERN RIMS (P) LTD., WHICH HAV E GOT THEIR OFFICES AT T-62, ANNA NAGAR, MADRAS-40. SMT. VIJAYA INBASAGARAN HAS PUT FORWARD A CLAIM THA T PART OF THE ASSETS SEIZED AND THE INVESTMENTS MADE IN TH E NAMES OF DIFFERENT PERSONS BY WAY OF FIXED DEPOSITS AT BANGA LORE ARE FROM THE CASH BELONGING TO M/S SILVER SHOES (P) LTD . AND M/S SOUTHERN RIMS (P) LTD. SMT. VIJAYA INBASAGARAN IN HER RETURN FOR THE ASST. YEAR 93-94 HAS SHOWN DRAWINGS OF ` 12,60,000/- WHILE THE PROFIT GENERATED BY HER PROPRIETORY CONCERN WAS ONLY ` 1,04,525.69. I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 21 THE OPENING BALANCE IN CAPITAL ACCOUNT WAS ` 35,677/-. WHEN THE CAPITAL ACCOUNT HAD ONLY A CREDIT BALANCE OF ` 35,677/- AS OPENING BALANCE AND THE YEARS PROFIT ADDED TO TH AT AMOUNTING TO ` 1,04,525.69 MAKES OUT A TOTAL OF ` 1,00,202.75 ONLY. SHE HAS ARGUED THAT A SUM OF ` 4,70,333.56 TOWARDS M/S SOUTHERN RIMS (P) LTD., AND ` 6,87,600/- TOWARDS M/S SILVER SHOES (P) LTD. ARE PAYABLE BY HER. THE NAMES OF THESE TWO COMPANIES ARE REFLECTED IN T HE BALANCE SHEETS FOR THE ASST. YEARS 93-94 AND 94-95 OF SMT. VIJAYA INBASAGARAN AS SUNDRY CREDITORS. SMT. VIJAY A INBASAGARAN HAS BEEN WORKING AS A SALES AGENT OF THESE TWO COMP ANIES THROUGH HER PROPRIETORY CONCERN M/S AVJ MARKETING S ERVICES. SHE HAS ARGUED THAT IT IS THIS LIABILITY TOWARDS TH E TWO COMPANIES WHICH HAS BEEN PARTIALLY USED BY HER TO M EET THE DRAWINGS TOWARDS GOLD AMOUNTING TO ` 3,20,000/-, PAYMENTS TOWARDS MARUTHUPANDY CHITS ` 44,567/-, TNCS ` 97,442/-, INVESTMENT IN CURRENT ACCOUNT OF M/S AVJ MARKETING SERVICES ` 3,00,500/- AND FIXED DEPOSITS TO THE TUNE OF ` 5 LAKHS. IN FACT THE FIXED DEPOSITS MADE DURING THE FINANCIAL YEAR 9 2-93 ARE WORTH ` 6 LAKHS. 30. IT CAN BE SEEN FROM THE ORDER OF CIT(APPEALS) T HAT REOPENING UNDER SECTION 147 WAS DONE BY A NOTICE ISSUED ON 15 .11.2000. THUS WITHOUT DOUBT, FOUR YEARS HAD ELAPSED FROM THE END OF THE IMPUGNED ASSESSMENT YEAR. WHEN THE ORIGINAL ASSESSMENT WAS COMPLETED AFTER SCRUTINY PROCEEDINGS AND WHEN ALL THE INVESTM ENTS, INCLUDING FIXED DEPOSITS FOUND, AT THE TIME OF SEARCH, WERE C ONSIDERED BY THE ASSESSING OFFICER AND WHEN NO FURTHER NEW TANGIBLE MATERIAL HAD COME INTO THE HANDS OF THE ASSESSING OFFICER, WE AR E OF THE OPINION I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 22 THAT THE RE-ASSESSMENT PROCEEDING INITIATED WAS BAS ED MERELY ON A CHANGE OF OPINION. 31. WITH REGARD TO THE FIXED DEPOSITS FOUND AT THE TIME OF SEARCH, THERE IS FURTHER REFERENCE IN THE ORIGINAL ASSESSME NT ORDER DATED 29.3.96, WHICH IS REPRODUCED HEREUNDER:- DURING THE FINANCIAL YEAR 92-93 FIXED DEPOSITS TO T HE TUNE OF ` 6 LAKHS WERE TAKEN ON 13.3.93 IN THE NAME OF SHRI I. VIJAYANAND, MS. I. JAYANTHI AND M/S AVJ MARKETING S ERVICES. RUPEES 3 LAKHS WORTH OF THESE FIXED DEPOSITS STAND IN THE NAME OF M/S AVJ MARKETING SERVICES, ` 2 LAKHS WORTH OF DEPOSITS IN THE NAME OF SHRI I. VIJAYANAND AND FIXED DEPOSIT WO RTH ` 1 LAKH IN THE NAME OF MS. I. JAYANTHI. SHRI I. VIJAYANAND AND MS. I. JAYANTHI ARE THE CHILDREN OF SHRI K. INBASAGARAN. M/S AVJ MARKETING SERVICES IS THE PROPRIETORY CONCERN OF SM T. VIJAYA INBASAGARAN. IT IS CLEAR FROM THE ABOVE THAT EVERY FIXED DEPOSIT IN THE NAME OF ASSESSEE OR OTHERWISE, WERE ALL CONSIDERED BY THE A SSESSING OFFICER AND THEREAFTER THE ADDITIONS WERE MADE. WITHOUT DO UBT, IN THE COMPUTATION GIVEN IN THE ORIGINAL ASSESSMENT ORDER, THE ADDITION MADE FOR FIXED DEPOSITS, WAS ` 1 LAKH ONLY. BUT A SUM OF ` 11,57,933/- SHOWN AS CREDIT BALANCE SHOWN AS PAYABL E TO M/S SILVER SHOES PVT. LTD. AND M/S SOUTHERN RIMS PVT. LTD. WHI CH, INTER ALIA, WAS CONSIDERED AS A SOURCE FOR EXPLAINING THE FIXED DEPOSITS, WAS ALSO TAKEN AS INCOME FROM OTHER SOURCES. IN THE CI RCUMSTANCES, WE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 23 ARE OF THE OPINION THAT THE REOPENING WAS WITHOUT A NY TANGIBLE MATERIAL COMING INTO THE HANDS OF A.O. OTHER THAN T HOSE WHICH WERE AVAILABLE TO HIM AT THE TIME OF ORIGINAL ASSESSMENT . IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V . KELVINATOR INDIA LTD. (320 ITR 561), THE RE-ASSESSMENT PROCEEDINGS W ERE NOT VALID. WE, THEREFORE, QUASH THE RE-ASSESSMENT PROCEEDINGS INITIATED ON THE ASSESSEE. 32. C.O. FILED BY THE ASSESSEE IS ALLOWED. 33. SINCE WE HAVE QUASHED THE RE-ASSESSMENT ORDER I N ASSESSEES CROSS-OBJECTION, THE APPEAL OF REVENUE IN I.T.A. NO . 955/MDS/2009 HAS BECOME INFRUCTUOUS. SUCH APPEAL IS, THEREFORE, DISMISSED. 34. THIS LEAVES WITH US, TWO APPEALS OF THE ASSESSE E, ONE FOR ASSESSMENT YEARS 1994-95 NUMBERED AS I.T.A. NOS. 81 7/MDS/2009 AND THE OTHER FOR ASSESSMENT YEAR 1995-96 NUMBERED AS I.T.A. NO. 818/MDS/2009. IN BOTH THESE, GRIEVANCE OF THE ASSE SSEE IS THAT THE CIT(APPEALS) REFUSED TO CONSIDER HER APPEALS FOR A REASON THAT ASSESSMENTS ON WHICH APPEALS WERE FILED, WERE DONE BASED ON DIRECTIONS OF CIT UNDER SECTION 263 OF THE ACT. I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 24 35. WHEN THE MATTER CAME UP BEFORE US, LEARNED A.R. SUBMITTED THAT ON A SIMILAR ISSUE, IN THE CASE OF ASSESSEES HUSBAND, NAMELY, SHRI K. INBASAGARAN, THIS TRIBUNAL HAD HELD THAT TH E CIT(APPEALS) WAS OBLIGED TO CONSIDER THE APPEAL OF THE ASSESSEE AND DISPOSE IT IN ACCORDANCE WITH LAW. 36. WE FIND THAT THE FACT SITUATION FOR BOTH THE AS SESSEE AS WELL AS HER HUSBAND, WHO WERE SUBJECTED TO SEARCH ON 13 TH AND 14 TH SEPTEMBER, 1993, ARE SAME. SEARCH PROCEEDINGS HAD CULMINATED THE ASSESSMENTS FOR THESE YEARS. ASSESSMENTS WERE THER E AFTER REDONE BASED ON ORDERS OF CIT UNDER SECTION 263 OF THE ACT . 37. CIT(APPEALS) ON APPEAL OF SHRI K. INBASAGARAN, FOR ASSESSMENT YEAR 1995-96, WHERE SUCH APPEAL EMANATED OUT OF THE ORDER OF ASSESSING OFFICER, PURSUANT TO DIRECTIONS OF CIT UN DER SECTION 263 OF THE ACT, HAD REFUSED TO ENTERTAIN THE APPEAL FOR A REASON THAT THE ORDER OF THE A.O. WAS NOT APPEALABLE. RELEVANT FIN DING OF THE TRIBUNAL APPEARING FROM PARAS 27 TO 32 OF ITS ORDER DATED 31 ST MAY, 2012 IN I.T.A. NO. 815/MDS/2009, IS REPRODUCED HERE UNDER:- 27. NOW COMING TO LAST OF THE APPEAL WHICH IS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 1995-96, ITS GRIEVANCE IS THAT CIT(APPEALS) HELD THE ASSESSMENT TO BE NOT APPEALAB LE SINCE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 25 SUCH ASSESSMENT WAS DONE IN PURSUANCE OF THE DIRECT ION OF CIT UNDER SECTION 263 OF THE ACT. 28. SHORT FACTS ARE THAT THE ORIGINAL ASSESSMENT WA S SET ASIDE BY CIT VIDE HIS ORDER DATED 26.3.98 UNDER SECTION 2 63 OF THE ACT, FOR A REASON THAT CERTAIN DEPOSITS MADE IN SAV INGS BANK ACCOUNT IN ANDHRA BANK, CHETPET BRANCH, BY THE ASSE SSEE, IN THE NAME OF SMT. USHA RAGHAVAN, THOUGH FOUND AT THE TIM E OF SEARCH, WAS NOT CONSIDERED BY THE A.O. THEREFORE, ACCORDING TO THE CIT, THE ASSESSMENT WAS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF REVENUE. PURSUANT TO ORDER UNDER SECT ION 263 OF THE ACT, PROCEEDINGS WERE INITIATED AGAINST ASSESSE E FOR A FRESH ASSESSMENT AND IN SUCH ASSESSMENT, AN ADDITION OF ` 4,77,500/- WAS MADE CONSIDERING THESE TO BE DEPOSITS HELD IN B ENAMI BY THE ASSESSEE AND A FURTHER ADDITION OF ` 1,90,000/- WAS ALSO MADE FOR INTEREST ACCRUED ON SUCH DEPOSITS. 29. APPEAL WAS FILED BY THE ASSESSEE BEFORE CIT(APP EALS) AGAINST SUCH AN ASSESSMENT. ARGUMENT OF THE ASSESS EE WAS THAT HONBLE JURISDICTIONAL HIGH COURT IN ITS JUDGMENT D ATED 11.7.2001 IN CRIMINAL APPEAL (NO. 231 OF 2000) FILED BY THE A SSESSEE HAD HELD THAT ASSESSEE HAD NO CONNECTION WITH THE FIXED DEPOSITS. AS PER THE ASSESSEE, IT WAS OBSERVED BY HONBLE JURISD ICTIONAL HIGH COURT THAT THE PERSONS, IN WHOSE NAME THE DEPOSIT S TOOD, MIGHT HAVE BEEN BENAMI OF THE COMPANY OR THE ASSESSEES W IFE, BUT CERTAINLY NOT BENAMI OF THE ASSESSEE. HOWEVER, CIT (APPEALS) REFUSED TO CONSIDER THE APPEAL OF THE ASSESSEE ON M ERITS AND THE REASONS GIVEN BY HIM WERE AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. THE ASSESSING OFFICER HAS PASSE D THE IMPUGNED ASSESSMENT ORDER AS PER THE DIRECTIONS GIV EN BY THE COMMISSIONER OF INCOME TAX U/S. 263 OF THE I.T. AC T DATED 20.06.2000. SINCE THE DIRECTIONS U/S. 263 OF THE I.T. ACT IS A CLEAR BINDING ON THE ASSESSING OFFICER, I HOLD THE VIEW THAT THE BEST FORUM TO HEAR TO THE APPEAL IS THE HONBLE ITA T. AS PER SEC. 246A, THE APPEALABLE ORDERS BEFORE THE CIT(APP EALS) DOES NOT FIND A PLACE IN THE ORDER PASSED U/S. 263. HEN CE, THE APPEAL FILED BEFORE THE CIT(APPEALS) IS FOUND TO BE INFRUC TUOUS AND FOR I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 26 ALL STATISTICAL PURPOSES THE APPEAL IS DISMISSED. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 30. NOW BEFORE US, ASSESSEE APPEARING IN PERSON, ST RONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT CIT(APPEALS) DID NOT CONSIDER HIS APPEAL DESPITE JURISDICTIONAL HIGH COURTS JUDGMENT IN HIS FAVOUR. ACCORDING TO ASSESSEE, JUS T BECAUSE HE HAD NOT FILED APPEAL AGAINST THE REVISIONARY ORDER OF CIT, IT WAS NOT CORRECT TO SAY THAT AN APPEAL WOULD NOT LIE AGA INST THE PURSUANT ASSESSMENT DONE. 31. PER CONTRA, LEARNED D.R. SUBMITTED THAT ISSUES WHICH HAD OBTAINED FINALITY IN A REVISIONARY PROCEEDING, COUL D NOT BE RE- AGITATED BY WAY OF AN APPEAL AGAINST THE ASSESSMENT . FOR THIS, RELIANCE WAS PLACED ON THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF HERDILLIA CHEMICALS LTD. VS. CIT ( 221 ITR 194). 32. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE HAD NOT FILED AN APPEAL AGAINST REVISIONARY ORDER UNDER SECTION 263 OF THE ACT. THERE IS ALSO NO DISPUTE THAT THE APPEAL FILED BY T HE ASSESSEE BEFORE CIT(APPEALS) WAS AGAINST THE ASSESSMENT DONE UNDER SECTION 143(3) READ WITH SECTION 263 OF THE ACT OR IN OTHER WORDS, AGAINST THE ASSESSMENT PURSUANT TO REVISIONA RY PROCEEDINGS. CIT(APPEALS) REFUSED TO CONSIDER THE APPEAL ON MERITS FOR A REASON THAT THE ORDER OF THE A.O. WAS PURSUANT TO DIRECTIONS OF CIT UNDER SECTION 263 OF THE ACT. NO DOUBT, HONBLE BOMBAY HIGH COURT IN THE CASE OF HERDILLIA CHEMICALS LTD. (SUPRA) HAD HELD THAT IN AN APPEAL AGAINST A FRESH ORDER PASSED BY ITO FOR GIVING EFFECT TO A REVISIONARY ORDER OR APP ELLATE ORDER, ONLY SUCH ISSUES COULD BE AGITATED WHICH HAD NOT OB TAINED FINALITY BY VIRTUE OF EARLIER ORDERS IN REVISION OR APPEAL. BUT, HERE, IF WE HAVE A LOOK AT THE ORDER DATED 20.3.2000 OF CIT UND ER SECTION 263 OF THE ACT, FINDING APPEARING AT PARA 5 OF THE SAID ORDER, READS AS UNDER:- 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND FOR THE SUBSTANTIAL REASONS SET OUT IN MY ORDER U/S 263 DATED 26.3.1998 EXTRACTED ABOVE, I INVOKE THE I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 27 PROVISIONS OF SECTION 263 AND SET ASIDE THE ASSESSM ENT ORDER DATED 202.1998 FOR 1995-96 AND DIRECT THE ASSESSING OFFICER TO FRAME A FRESH ASSESSMENT ORDER AFTER DULY CONSIDERING THE CASH REMITTANCES OF ` 1,27000, ` 1,35,000 AND ` 2,15,000 MADE ON 11.8.1994, 17.8.1994 AND 12.9.1994 RESPECTIVELY INTO SAVINGS BANK ACCOUNT NO .108 WITH ANDHRA BANK, CHETPET BRANCH IN THE NAME OF SMT . USHA RAGHAVAN. THE ASSESSEE WILL BE FREE TO FURNIS H BEFORE THE ASSESSING OFFICER HIS EXPLANATION AND AN Y EVIDENCE HE WOULD LIKE TO RELY ON IN THIS REGARD. THE ASSESSING OFFICER SHALL MAKE A FRESH ASSESSMENT IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE REASO NABLE OPPORTUNITY OF BEING HEARD. ASSESSMENT FOR 1995-96 IS SET ASIDE. THE CIT HAS REQUESTED THE A.O. TO MAKE A FRESH ASSE SSMENT IN ACCORDANCE WITH LAW. ASSESSING OFFICER WAS DIRECTE D TO FRAME A FRESH ASSESSMENT AFTER DULY CONSIDERING EXPLANATION OF THE ASSESSEE. THUS, IT CANNOT BE SAID THAT ANY FINALIT Y HAS BEEN REACHED BY VIRTUE OF THE ORDER OF THE CIT WITH REGA RD TO THE ITEMS MENTIONED BY HIM IN THE SAID ORDER. HE HAD S IMPLY REQUESTED THE ASSESSING OFFICER TO PASS A FRESH ASS ESSMENT ORDER. WHEN IN A REVISIONARY ORDER UNDER SECTION 2 63 OF THE ACT, CIT DID NOT SET ASIDE THE ASSESSMENT AS SUCH, BUT MERELY OBSERVED THAT THE AMOUNTS SHOULD BE CONSIDERED BY H IM AFTER TAKING AN EVIDENCE FROM THE ASSESSEE, WE CANNOT SAY THAT FRESH ORDER PASSED BY THE ASSESSING AUTHORITY PURSUANT TO REVISIONARY PROCEEDINGS, WAS AN ORDER PASSED FOR GIVING EFFECT TO THE DIRECTIONS OF THE REVISIONING AUTHORITY PER SE. IT WAS ONLY AN ORDER PASSED IN COMPLIANCE OF THE DIRECTIONS OF CIT AND IN OUR OPINION, AGAINST SUCH AN ORDER, APPEAL WAS MAINTAIN ABLE BEFORE CIT(APPEALS). FOR TAKING THIS VIEW, WE ARE FORTIFI ED BY THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CA SE OF SADHURAM PATEL & SONS V. ITO (120 ITD 291). WE ARE , THEREFORE, OF THE OPINION THAT CIT(APPEALS) FELL IN ERROR IN NOT CONSIDERING THE APPEAL ON MERITS. WE, THEREFORE, S ET ASIDE THE ORDER OF CIT(APPEALS) AND REMIT THE APPEAL BACK TO HIM FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW AND ALS O DIRECT HIM I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 28 TO DULY CONSIDER THE DECISIONS OF HONBLE JURISDICT IONAL HIGH COURT AND HONBLE APEX COURT IN ASSESSEE'S OWN CASE . 38. FOR THE SAME REASONS AS MENTIONED ABOVE, WE ARE OF THE OPINION THAT ASSESSEES APPEALS FOR THESE TWO YEARS HAVE TO BE HEARD BY CIT(APPEALS) AND ADJUDICATED IN ACCORDANCE WITH LAW. WE, THEREFORE, SET ASIDE THE ORDERS OF CIT(APPEALS) AND REMIT THE MATTER BACK TO HIM FOR CONSIDERATION AFRESH ON MERITS. 39. TO SUMMARIZE THE RESULTS, APPEAL OF THE ASSESSE E IN I.T.A. NO. 817 & 818/MDS.2009 ARE ALLOWED FOR STATISTICAL PURP OSES, APPEAL OF THE ASSESSEE IN I.T.A. NO. 816/MDS/2009 IS PARTLY A LLOWED, CROSS OBJECTION OF THE ASSESSEE IN C.O. NO. 206/MDS/2009 IS ALLOWED AND APPEAL OF THE REVENUE IN I.T.A. NO. 955/MDS/2009 IS DISMISSED AS INFRUCTUOUS. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 27 TH OF SEPTEMBER, 2012, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 27 TH OCTOBER, 2012. KRI. I.T.A. NOS. 816 TO 818/MDS/09 I.T.A. NO. 955/MDS/09 C.O. NO. 206/MDS/09 29 COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-IV, CHENNAI-34 (4) CIT (CENTRAL CIRCLE-I), CHENNAI (5) D.R. (6) GUARD FILE