Kalinga Institute of Industrial Technology (KIIT), Bhubaneswar V. ACIT, Bhubaneswar

ITSSA 141/CTK/2013

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1083 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 19-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASIT KUMAR MOHAPATRA
• Assessee Lawyers: S K AGARWA L LA
• Keywords: Unexplained expenditure; Document seized; Charitable institution; Principle of natural justice; Opportunity of cross examination; Third party statement; Cancellation of registration; Documents seized; Capital expenditure
• Section: 12A; 131; 68; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . , & , BEFORE S/SHRI B. RAMAKOTAIAH, ACCOUNTANT ME MBER & PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ! ./ IT(SS)A NO.141/CTK/2013 ( ' ' ' ' #$ #$ #$ #$ / ASSESSMENT YEAR :2003-04) KALINGA INSTITUTE OF INDUSTRIAL TECHNOLOGY (KIIT), BHUBANESWAR. VS. ACIT, CIRCLE - 2(2), BHUBANESWAR. ! ./ %& ! ./PAN/GIR NO. AAATK 3103 C ( ' /APPELLANT ) .. ( ()' / RESPONDENT ) '+ - - - - /ASSESSEE BY : SHRI S.K.AGARWALLA %# - - - - /REVENUE BY : SHRI ASIT KUMAR MOHAPATRA '#. + / DATE OF HEARING : 4 TH NOV. 2015 /$ + /DATE OF PRONOUNCEMENT 6 TH NOV. 2015 0 0 0 0 / O R D E R PER B.RAMAKOTAIAH, AM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A), BHUBANESWAR DTD 3.6.2013 FOR ASSESSMENT YEAR 2003-0 4. EVEN THOUGH THE ORDER OF LD CIT(A) IS COMMON FOR A.Y. 2003-04 T O 2005-06, THE OTHER TWO YEARS ARE NOT BEFORE US. ASSESSEE FILED A PAPE R BOOK CONTAINING 206 PAGES. PAGES 1 TO 198 ARE THE ORDER OF ITAT IN ASSE SSEES CASE IN THE EARLIER ROUND AND ORDERS OF HONBLE HIGH COURT OF O RISSA FROM PAGES 199 TO 202. PAGES 203 TO 206 ARE THE STATEMENT OF SHRI H.K.PANIGRAHI RECORDED U/S.131 ON 20.10.2010. 2 2. ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. FOR THAT, ON THE FACTS AND CIRCUMSTANCES OF TH E CASE THE ORDER OF THE LD. CIT (A) IS NOT SUSTAINABLE IN LAW. 2. FOR THAT, FORUMS BELLOW HAD COMMITTED AN ERROR OF L AW IN NOT CONSIDERING THE STATEMENT GIVEN BY SRI, HAREKRUSHNA PANIGRAHI DATED 20.12.2010 WHEREIN, SRI PANIGRAHI HAD CLEARLY ADMITTED THAT, THE TRANSACTION IN QUESTION HAD BEEN DULY ACC OUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. 3. FOR THAT, SINCE SRI PANIGRAHI HAD CATEGORICALLY ADM ITTED BEFORE THE LD. AO IN RESPONSE TO SUMMON ISSUED U/S 131 THA T, THE SAID AMOUNT OF 50.00 LAC WAS HAD BEEN DULY ACCOUN TED FOR, SO THE QUESTION OF FURTHER CROSS EXAMINATION OF SIR , PANIGRAHI DOES NOT ARISE. 4. FOR THAT, IN THE INSTANT CASE THE LD. AO HIMSELF IS SUED SUMMON U/S 131 TO SRI, PANIGRAHI AND SIR, PANIGRAHI HAD AP PEARED AND STATED THE AMOUNT OF ? 50.00 LAC HAD BEEN ACCOUNTED FOR. AS THE STATEMENT OF SRI, PANIGRAHI HAD NOT CAUSED ANY PREJUDICE TO THE APPELLANT, THE A/R OF THE APPELLANT DID NOT'CRO SS EXAMINE THE DEPONENT. THEREFORE THE ORDER OF THE HON'BLE IT AT HAD BEEN COMPLIED WITH. 5. FOR THAT, THE LD. AUTHORITIES BELOW ARE WRONG IN NO T ALLOWING OF REPAYMENT OF LOAN OF ? 1,47,41,035 AS APPLICATION O F INCOME WITHIN THE MEANING OF SECTION 11 OF THE ACT WHICH I S TO BE ALLOWED. 3. BRIEFLY STATED THE FACTS ARE THAT IN THIS CASE T HE ASSESSMENT WAS ORIGINALLY COMPLETED U/S. L53A(B) ON 31.12.2007 ON A TOTAL INCOME OF RS.4,09,11,550/-. IN THE ASSESSMENT THE BENEFIT OF SECTION 11 OF THE ACT WAS DENIED AND WAS MADE SEVERAL OTHER ADDITIONS. BE ING AGGRIEVED THE ASSESSEE TRUST PREFERRED APPEAL BEFORE THE CIT(A)-I I, BHUBANESWAR, THE 3 LD.CIT(A) ALLOWED THE BENEFIT OF SECTION-11 TO THE ASSESSEE AND DIRECTED TO DELETE THE ADDITION ON-ACCOUNT OF UNEXPLAINED INVES TMENT IN BUILDING, DIVERSIFICATION OF CASH, AND DONATION AND CHARITY. THE DEPARTMENT AND ASSESSEE PREFERRED APPEAL BEFORE THE ITAT. THE LTAT , CUTTACK BENCH, CUTTACK PASSED AN ORDER IN IT (S.S.) A NO.84/CTK/20Q9 DT.26 .02.2010. THE ITAT, CUTTACK IN PARA 32.3, 37 & 56.2 OF ITS ORDER DT.26. 02.2010 FOR THE A/Y 2003- 04, 2004-05 & 2005-06 RESPECTIVELY HAS SET-ASIDE TO THE A.O. FOR FRESH ADJUDICATION FOR THE ADDITION MADE ON THE POINT OF DIVERSION OF FUNDS TO AN EXTENT OF RS.50,000/-. 4. WHILE PASSING THE IMPUGNED ORDER DATED, 25.10.20 11 AS PER DIRECTION OF THE ITAT, THE AO HAD SUMMONED SHRI H. K. PANIGRAHI, THE ERSTWHILE FINANCIAL ADVISOR AND HAD RECORDED A FRES H STATEMENT FROM HIM ON 20.12.2010 IN PRESENCE OF A/R OF THE APPELLANT. THE A/R DECLINED TO CROSS EXAMINE SHRI PANIGRAHI. SECONDLY, SINCE THE I TAT HAD OBSERVED THAT M/S DILIP CONSTRUCTION PRIVATE LIMITED HAD NOT BEEN ALLOWED TO BE CROSS EXAMINED BY THE A/R OF THE APPELLANT, DURING THE IM PUGNED PROCEEDINGS, THE AO WANTED TO KNOW WHETHER THE A/R WOULD BE INTE REST TO HAVE THE OPPORTUNITY TO CROSS EXAMINE. THROUGH A COMMUNICATI ON DATED, 11.04.2011 THE ASSESEE DECLINED TO CROSS EXAMINE SH RI DILIP KUMAR KHATEI OF M/S DILLIP CONSTRUCTION. SINCE THE A/R OF THE AS SESSEE WAS GIVEN THE OPPORTUNITY OF CROSS EXAMINING SHRI DILIP KUMAR KHA TEI AND SHRI H. K. PANIGRAHI AND FACTUALLY THERE WAS NO CHANGE FROM WH AT WAS BEFORE THE AO AS WELL AS ITAT, THE AO SUSTAINED THE ADDITION O F RS.50,00,000/-. 4 5. LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY STATING AS UNDER: BEFORE ME, THE LD A.R. OF THE APPELLANT HAS FILED A WRITTEN SUBMISSION OF 7 PAGES SUBMITTING HIS OBJECTION AGAI NST THE ADDITION OF RS.50,00,000/- I HAVE CAREFULLY APPLIED MY MIND TO THE FACTS OF TH E CASE. SINCE THE ORDER DATED 25.10.2011 HAS BEEN PASSED BY THE AO GIVING EFFECT TO THE ORDER TO THE ITAT AND THE AO H AS GIVEN THE OPPORTUNITIES AS PRESCRIBED BY ITAT AND STILL T HE FACTS DID NOT CHANGE, THE CONCLUSION OF THE AO IS CONSIDERED PROPER. HOWEVER, SINCE THE AO HAS NOT DISTURBED THE BENEFIT U/S.11, HE IS DIRECTED TO EXAMINE WHETHER ALL CONDITIONS OF THIS SECTION REMAIN COMPLIED WITH EVEN AFTER ADDITION OF THIS AMOUNT AND ACCORDINGLY DECIDE THE TAXABILITY. 6. LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSI ONS MADE BEFORE LD CIT(A AND FILED WRITTEN SUBMISSIONS ON TH E GROUNDS RAISED WHICH ARE AS UNDER: GROUND NO.2,3&4 THAT IN THE IMPUGNED ASSESSMENT YEAR, WHILE PASSIN G THE ASSESSMENT ORDER U/S 153A, THE LD. AO DISALLOWED TH E EXPENDITURE OF RS. 50.00 LAC, NAMELY THE PAYMENT MADE TO M/S. D ILLIP CONSTRUCTIONS (P) LTD., WITH AN OBSERVATION THAT, S RI, DILLIP KUMAR KHATEI, THE MD OF THE COMPANY HAD DENIED THE TRANSA CTION. BUT AS A MATTER OF FACT THAT, MR. KHATAI NEVER DENIED THE TRANSACTION RATHER HE HAD SUBMITTED THE LEDGER COPIES OF THE AP PELLANT IN THE BOOKS OF ACCOUNT OF DILLIP CONSTRUCTIONS (P) LTD. T HEREAFTER WHILE DECIDING THE APPEAL BY THE LD. CIT(A) IT WAS HELD T HAT, MR. H. K. PANIGRAHY, THE THEN FINANCIAL ADVISOR OF THE APPELL ANT HAD STATED THAT, THE PAYMENTS WERE MADE OUT OF THE UNDISCLOSED INCOME OF THE APPPELANT AND THEREFORE HE CONFIRMED THE ADDITI ON. 5 THAT, IN THE SECOND APPEAL, THE HON'BLE ITAT VIDE I T PARA NO. 32.1 & 32.2 PAPER BOOK PAGE NO. 153-155 HELD THAT, '32.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, FACTS, CI RCUMSTANCES OF THE CASE, ASSESSEES WRITTEN SUBMISSIONS MADE BEFORE THE AO AS WELL AS CIT (A) AND LAW RELATING TO EVIDENTIARY VAL UE OF STATEMENT OF THE ASSESSEE AS WELL AS OF THIRD PARTY AND HAVE GONE THROUGH THE ORDER OF THE CIT (A) WITH UTMOST CARE AND ARE O F OPINION THAT SO FAR AS EVIDENTIARY VALUE OF STATEMENT OF THE ASS ESSEE IS CONCERNED, THERE IS NO DOUBT THAT SUCH A STATEMENT, IF NOT REBUTTED CAN BE USED AGAINST THE ASSESSEE BUT IT IS ALSO TRI TE LAW THAT ANY STATEMENT RECORDED UNDER SECTION 131 OR 132(4) OF T HE ACT IS REBUTTABLE AND IF ASSESSEE SUCCEEDS TO JUSTIFY THE REBUTTAL, THE STATEMENT SO REBUTTED, LOSES ' ITS EVIDENTIARY VALU E. SO FAR AS PRESENT CASE IS CONCERNED, IT IS AN ADMITTED FACT T HAT THE REVENUE AUTHORITIES HAVE RELIED ON STATEMENT OF SHRI PANIGR AHI, WHO WAS WORKING AS FINANCIAL ADVISOR TO THE ASSESSEE RECORD ED UNDER SECTION 132(4) ON 9.8.2005 AND UNDER SECTION 131 RE CORDED ON 28.12.2007 WHEREIN HE IS SAID TO HAVE STATED THAT T HE TRANSACTION REFLECTED IN THE LEDGER ACCOUNT OF D. KHATEI (CONST RUCTIONS) REPRESENTED THE EXPENDITURE OUT OF UNDISCLOSED INCO ME OF KIIT, BUT THERE IS NOTHING ON RECORD AS TO THE CONSIDERAT ION OF THE ASSESSEE'S REPLIES DATED 23.7.2008 FURNISHED BEFORE THE CIT(A). 32.2. IT IS ALSO EVIDENT FROM THE ORDERS OF BOTH TH E REVENUE AUTHORITIES THAT SO FAR AS ADDITION OF RS.50 LAKHS IS CONCERNED, THE ASSESSEE WAS NEVER ALLOWED AN OPPORTUNITY TO CROSS EXAMINE SAID SHRI PANIGRAHI. IN VIEW OF THESE ADMITTED FACTS ON RECORD, WE ARE OF THE OPINION THAT THE STATEMENT OF SHRI PANIGRAHI HAS BEEN RELIED UPON BY THE REVENUE AUTHORITIES IN VIOLATION OF PRI NCIPLES OF NATURAL JUSTICE AS ASSESSEE HAD NOT BEEN ALLOWED AN OPPORTU NITY TO CROSS EXAMINE OF CONTROVERSY THE STATEMENT OF SHRI PANIGR AHI. THE SECOND EVIDENCE RELIED UPON BY THE REVENUE AUTHORIT IES FOR THIS PURPOSE IS THE ALLEGED WRITTEN SUBMISSION OF SHRI D ILLIP KUMAR KHATEI FILED ON 10.09.2007 WHEREIN HE IS SAID TO HA VE STATED THAT THE AMOUNT OF RS.50 LAKHS WAS NOT RECEIVED BY HIM E ITHER IN HIS INDIVIDUAL CAPACITY OR BY M/S DILLIP CONSTRUCTIONS (P) LTD. HERE AGAIN, IT IS OBSERVED FORM THE FACTS ON RECORD THAT THOUGH THE ASSESSEE WAS CONFRONTED WITH THE STAND TAKEN BY SHR I DILLIP KUMAR KHATEI, BUT ASSESSEE WAS NEVER ALLOWED TO CROSS EXA MINE MR. DILLIP KUMAR KHATEI AND SINCE IT IS TRITE LAW THAT STATEME NT OF THIRD PARTY 6 HAS NO EVIDENTIARY VALUE UNLESS AND UNTIL THE AFFEC TED PARTY IS ALLOWED TO CROSS EXAMINE SUCH THIRD PARTY. CONSEQU ENTLY, WE ARE OF THE OPINION THAT RELIANCE BY THE REVENUE ON THE WRITTEN STATEMENTS OF SHRI DILLIP KUMAR KHATEI WITHOUT HAVI NG BROUGHT ANY EVIDENCE AGAINST THE ASSESSEE'S CLAIM THAT THIS AMO UNT HAD BEEN ACCOUNTED FOR IN THE CONSTRUCTION ACCOUNT (AS A RES ULT OF PAYMENTS TO MR. DILLIP . KUMAR KHATEI) AND ALSO AS TO WHETHE R MR. KHATEI HAD DECLARED THIS AMOUNT IN HIS BOOKS OF ACCOUNT OR NOT , THE CONCLUSION ARRIVED AT BY THE REVENUE AUTHORITIES IS NOT SUSTAINABLE IN LAW'. HERE THE HON'BLE ITAT HAD CLEARLY STATED THAT IF TH E STATEMENT GIVEN BY MR. PANIGRAHI IS REBUTTED IT LOSES ITS EVI DENTIARY VALUE. THAT DURING THE SET ASIDE ASSESSMENT PROCEEDINGS TH E LD. AO ISSUED THE SUMMON U/S 131 TO MR. PANIGRAHI TO WHICH HE ATTAINED AND A STATEMENT U/S 131 WAS RECORDED ON 20.12.2010. COPY OF THE SAID STATEMENT IS ENCLOSED IN OUR PAPER BOOK VIDE PAGE NO.203-206. WHILE ANSWERING TO THE QUESTION NO.6 TO 8, IN THE STATEMENT RECORDED ON 20.12.2010, MR. PANIGRAHI CLE ARLY STATED THAT ALL THE INCOME AND EXPENDITURE OF THE APPELLAN T DULY ACCOUNTED FOR. FOR BETTER APPRECIATION OF THE FACTS RELEVANT QUESTIONS AND ANSWERS ARE REPRODUCED BELOW; Q-6. YOU SAID IN YOUR DEPOSITION ON 28.12.2007 WHIC H THE AO HAD QUOTED IN HIS ASSESSMENT ORDERS THAT YOU HAVE DEPOS ED BEFORE HIM THAT REGARDING ENTRIES IN THE SEIZED BOOKS HKP- 6 FOR AY 03-04, HKP-4 FOR AY 04-05 & AKCM-11 FOR 05-06 WHERE SUMS A RE DEBITED AND CREDITED TO D.KHATEI ACCOUNT THAT SUCH AMOUNT R EPRESENTS EXPENDITURE OUT OF UNDISCLOSED INCOME OF THE ASSESS EE SOCIETY. ANS. I DO NOT RECOLLECT WHAT I EXACTLY DEPOSED BEFO RE THE AO, BUT AS FAR AS I RECOLLECT THE INCOME & EXPENDITURE OF K IIT HAVE BEEN DULY ACCOUNTED. Q-7. WHY DO YOU DEPOSE THAT THEY PRESENT UNDISCLOSE D INCOME? : ANS. AS STATED ABOVE, I EXACTLY DO NOT REMEMBER WHA T I SAID BUT THIS WAS NOT MY INTENTION TO SAY SO. 7 Q-8. DURING THE DEPOSITION AT THE TIME OF SEARCH YO UR STAND WAS SIMILAR WHAT YOU DEPOSED BEFORE THE AO DURING ASSES SMENT. ANS. I WAS ONLY SUPERVISING THE DAY TO DAY ACTIVITY . AT THE TIME OF SEARCH I ONLY SAID THAT I HAVE NO EXPLANATION REGAR DING THE DEBITS IN NAME OF D.KHATEI AND WOULD BE EXPLAINED LATER ON . FROM THE ABOVE IT IS CLEAR THAT, MR. PANIGRAHI REBU TTED TO THE STATEMENT GIVEN EARLIER. SO IT LOST IT'S EVIDENTIAR Y VALUE. THEREAFTER THE LD. AO HAS ASKED THE AR OF THE APPELLANT TO CRO SS EXAMINE. BUT SINCE MR. PANIGRAHI HAD REBUTTED HIS STATEMENT AND THE APPELLANT WAS NOT PREJUDICE WITH THE PRESENT STATEM ENT IT WAS NOT NECESSARY TO CROSS EXAMINE HIM, THEREFORE HE DENIED TO CROSS EXAMINE. HOWEVER WHILE DOING THE ASSESSMENT, THE LD . AO AS WELL AS IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) WAS AT OPINION THAT, SINCE THE APPELLANT HAD REFUSED TO CROSS EXAMINE TH E THIRD PARTY THE ADDITIONS IS SUSTAINED. FOR THIS OBSERVATION OF THE LD. AUTHORITIES BELOW IT IS SUBMITTED THAT, THE ADDITIO NS MADE SIMPLY ON THE BASIS OF THIRD PARTY STATEMENT WHICH WAS REB UTTED BY THEM IS NOT SUSTAINABLE. FURTHER THE HON'BLE ITAT HAD AL SO IN PARA NO. 32.1 HAS EXPRESSED THE SIMILAR VIEW. ON THE ABOVE GROUND WE PRAY YOUR HONOUR TO DELETE T HE ADDITIONS OF RS.50.00 LAC. GROUND NO.5 THAT, THE LD. AUTHORITIES BELOW ARE WRONG IN NOT AL LOWING OF REPAYMENT OF LOAN OF RS. 1,47,41,035 AS APPLICATION OF INCOME WITHIN THE MEANING OF SECTION 11 OF THE ACT WHICH I S TO BE ALLOWED. THIS GROUND OF APPEAL IS CONTESTED AS FOLLOWS; THAT, THE APPELLANT IS A CHARITABLE TRUST REGISTERE D U/S 12A OF THE ACT. THAT, AS PER THE PROVISIONS OF THE ACT, THE RE PAYMENT OF DEBT IS AN APPLICATION OF INCOME. FURTHER IT IS SUBMITTE D THAT THE CBDT HAS ISSUED A CIRCULAR VIDE NO. 100 DATED 24.01.1973 WHERE IN IS STATED THAT, THE REPAYMENT OF DEBT IS AN APPLICATIO N OF INCOME. A COPY OF THE CIRCULAR IS ENCLOSED FOR YOUR KIND PERU SAL. 8 FURTHER WHILE DECIDING THE ASSESSEE'S OWN CASE FOR THE IMPUGNED ASSESSMENT YEAR THE HON'BLE ITAT HAD HELD IN THE PA RA NO. 11.2(C) & 11.3 VIDE PAPER BOOK PAGE NO. 107 & 108 THAT THE CAPITAL EXPENDITURE INCLUDING REPAYMENT OF LOAN AS APPLICAT ION OF INCOME. SIMILAR VIEW WAS ALSO EXPRESSED BY THE HON'BLE KARN ATAKA HIGH COURT IN THE CASE OF CIT VS. JANMABHOOMI PRESS TRUS T, 242 ITR 703 (KARNATAKA). FURTHER IT IS SUBMITTED THAT ON BEING AGGRIEVED WIT H THE ORDER OF THE HON'BLE ITAT REVENUE PREFERRED THE APPEAL BEFOR E THE HON'BLE HIGH COURT OF ORISSA AND THE HON'BLE HIGH COURT HAD DISMISSED THE APPEAL OF THE REVENUE. COPY OF THE HON'BLE HIGH COU RT ORDER IS ENCLOSED IN OUR PAPER BOOK PAGE NO. 199-202. THEREF ORE THE ISSUE WITH REGARD TO THE REPAYMENT OF LOAN AS APPLICATION OF INCOME IS ALREADY SETTLED BY THE HON'BLE HIGH COURT OF ORISSA IN FAVOUR OF THE ASSESSEE AND NO CONTRARY VIEW SHOULD BE DRAWN. FURTHER IT IS SUBMITTED THAT WHILE DOING THE ASSESS MENT FOR THE ASSESSMENT YEAR 2009-10 THE VERY SAME LD. AO ALLOWE D THE REPAYMENT OF LOAN AS APPLICATION OF INCOME. ON THE ABOVE GROUND IT PRAYED BEFORE HON'BLE BENCH TO ALLOW THE RELIEF OF ? 1,47,41,035. IN VIEW OF THE FOREGOING SUBMISSION MADE BY THE APP ELLANT, IT IS HUMBLY PRAYED THAT THE RETURN FIGURE AS SUBMITTED B Y THE APPELLANT SHOULD BE ACCEPTED IN THE INTEREST OF EQU ITY AND JUSTICE FOR WHICH THE APPELLANT SHALL REMAIN EVER PRAY. 7. LD D.R. REFERRED TO THE FACTS OF THE CASE AND RE LIED ON THE ORDER OF THE AO AS WELL AS LD CIT(A). 8. ON A SPECIFIC QUERY BY THE BENCH, LD COUNSEL SUB MITTED THAT THEY DID NOT INSIST ON CROSS EXAMINATION OF SHRI DILIP K KHATEI. WITH REFERENCE TO THE CROSS EXAMINATION OF SHRI H.K.PANIGRAHI, LD COUNSEL COULD NOT POINT OUT WHY THE CROSS EXAMINATION WAS DECLINED; AS RECO RDED BY AO IN THE 9 STATEMENT, ON THE REASON THAT SRI PANIGRAHI WAS NOT AN EMPLOYEE OF KIIT, BUT AS STATED IN SUBMISSION THAT SHRI PANIGRAHI RET RACTED. HE ALSO ADMITTED THAT THE ACCOUNT COPIES OF SRI DILIP CONST RUCTION WERE NOT RECONCILED WITH THE ENTRIES OF ASSESSEE. AS STATED EARLIER, EXCEPT THE STATEMENT OF SRI H.K.PANIGRAHI, THE PAPER BOOK DOES NOT CONTAIN ANY OTHER DOCUMENTS OTHER THAN THE ORDER OF ITAT (198 PAGES) AND ORDER OF HONBLE HIGH COURT OF ORISSA. 9. IN ORDER TO APPRECIATE THE ISSUE, IT IS APPROPRI ATE TO EXTRACT THE FACTS AS RECORDED BY THE ITAT IN THE ORDER DATED 26 .2.2010 ON THE ISSUE OF RS.50,00,000/-, WHICH IS SUBJECT MATTER OF PRESE NT PROCEEDINGS: 30.1 THE BRIEF FACTS RELATING TO THIS ISSUE AND AS HAVE BEEN REVEALED FROM THE RECORDS ARC THAT DURING THE COURS E OF SEARCH ACTION VARIOUS DOCUMENTS WERE SEIZE, ONE OF WHICH H AS BEEN MARKED AS TIKP-6'. FROM PAGE 63 OF THIS DOCUMENT, THE AC) NOTICED THAT THIS PAGE HAS ENTRIE S RELATING TO PAYMENT OF CASH TO DILLIP CONSTRUCTION (P.) LTD. DATE AMOUNT 9.12.2002 RS.20,00,000 10.12.2002 RS.3 0,00,000 RS.50,00,000 ACCORDING TO THE AO, SHRI DILLIP KUMAR KHATEI, WHO WAS DIRECTOR OF M/S. DILLIP CONSTRUCTION (P.) LTD. HAD DENIED THE-R ECEIPT OF AFORESAID AMOUNTS EITHER IN HIS INDIVIDUAL CAPACITY OR BY M/S. DILLIP CONSTRUCTION (P.) LTD. AS PER HIS WRITTEN SUBMISSIO N FURNISHED ON 10.9.2007 AND WHEN THE ASSESSEE WAS CONFRONTED WITH THIS INFORMATION, THE ASSESSEE, ACCORDING TO THE AO FAIL ED TO FURNISH ANY EXPLANATION, LIE, THEREFORE, CONSIDERED THE AMOUNT OF RS.50 LAKHS SHOWN IN THE AFORESAID DOCUMENT AS PAYMENT TO M/S. DILLIP CONSTRUCTION (P.) LTD. ON THE BASIS OF STATEMENT OF ONE 10 MR.PANIGARHI WHO WAS WORKING AS ASSCSSCC'S FINANCIA L ADVISOR FOR CONSTRUCTION OF THE BUILDINGS, AS DIVERSION OF ASSE SSEE'S FUNDS FOR PERSONAL BENEFIT OF ITS FUNCTIONARIES, WHICH WAS NO T CHARITABLE. THE AO, THEREFORE, TAXED THE AMOUNT OF RS.50,00,000. 30.2 THE ASSESSEE WENT IN APPEAL BEFORE THE CTT(A) AND PLEADED THAT THE AO HAS CONSIDERED THE PAYMENTS OF RS.50 LAKHS AS DIVERSIFICATION OF CASH FOR THE BENEFITS OF ASSE SSEES BENEFICIARIES WITHOUT ANY EVIDENCE ON RECORD AND ON SUSPICION. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT ALL OWED AN OPPORTUNITY TO CONTROVERT THE STATEMENT OF DILLIP K UMAR KHATEI RECORDED BY THE AO AND, THEREFORE, THE AOS ORDER W AS ARBITRARY AND CONTRARY TO EVIDENCE ON RECORD. THE ASSESSEE H AD FURTHER SUBMITTED THAT: (I) THE STATEMENT OF SRI DILLIP KUMAR KHATEI HAS NO BEA RING ON THE ASSESSMENT BUT IT IS NOT KNOWN WITHOUT ASKING T HE APPELLANT IN RESPECT OF THESE ENTRIES IN THE BOOKS OF ACCOUNT, WHY THE AO STRAIGHT PROCEEDED TO SRI DILLI P KUMAR KHATEI. (II) THE HAS RECORDED THE STATEMENT U/S.131 OF THE ACT O N 28.12.2007 OF SRI H.K.PANIGRAHI, FINANCIAL ADVISOR OF THE ASSESSEE SOCIETY WITHOUT CONFRONTING THE SAME TO APPELLANT AND MR. PANIGRAHI NEVER TOLD THAT THIS AM OUNT REPRESENT THE UNDISCLOSED INCOME. IN THIS REGARD, I T HAS BEEN REQUESTED TO VERIFY THE STATEMENT ON OATH RECO RDED OF THE FINANCIAL ADVISOR ON 28.12.2007. (III) DURING THE COURSE ASSESSMENT PROCEEDINGS, THE APPELLANT SUBMITTED THE FUND-FLOW STATEMENT IN WHICH THE TRANSACTION WAS REFLECTED HUT THE AO DID NOT DERIVE ANY ADVERSE CONCLUSION TO THAT EFFECT. HOWEVER, AT THE TIME OF PASSING THE ASSESSMENT ORDER THE AO ADDED THE AFORE SAID AMOUNT ON THE GROUND THAT THE FUND WAS DIVERTED FOR THE PERSONAL BENEFIT OF THE FUNCTIONARIES OF THE ASSESS EE SOCIETY. 11 (IV) THE ASSESSMENT MADE IN THE CASE OF DIILIP CONS TRUCTION PVT. LTD. AND SRI DIILIP KUMAR KHATEI U/S 153C OF THE AC T HAS BEEN COMPLETED BY THE AO BUT DOES NOT POINT OUT THE SAME. ONLY ON MERE SUSPICION AND CONJECTURE IN THE NATURE ADDED SAME TO THE INCOME OF THE APPELLANT WH ICH IS NOT SUSTAINABLE IN THE EYES OF LAW. (V) THE ALLEGATION LEVELED THAT THE FUNDS WERE NOT ACTUALLY APPLIED FOR CHARITABLE PURPOSES BUT WERE DIVERTED FOR THE PERSO NAL, BENEFIT OF THE FUNCTIONARIES OF THE SOCIETY IS WRONG STATEMENT OF FACT. NOWHERE THE LD. AO HAS DISPROVED SUBMISSION AND OBSERVATION MADE, P URELY ON SURMISE AND CONJECTURE ARID, DESERVE TO BE DELETED. THE MOST OF THE FUNCTIONARIES OF THE APPELLANT SOCI ETY'S ASSESSMENTS ARE MADE UJS.L53A OR 153C OF THE ACT AND ALL ARE ASSESS ED AT THE RETURNED INCOME. THEREFORE, THERE IS NO ROOM TO CONCLUDE IT OTHERWISE AS THE LD. AO HAS STATED IN THE ASSESSMENT ORDER. WITHOUT PREJUDICE TO THE SUBMISSION MADE ON THE FOR EGOING PARAGRAPHS, THE PROVISIONS OF SECTION 68 TO 69D ARE NOT APPLICABLE TO THE APPELLANT AS MENTIONED IN THE EARLIER GROUN DS. (VIII) MR. AGRA WALLA HAS CITED CBDT'S CIRCULAR NO. 5P(LXX-6) DID. J 9.6.1968. (IX) IT IS FURTHER STATED THAT AS PER THE PROVISION S OF SECTION 11 OF THE ACT, INCOME MUST I BE UNDERSTOOD IN COMMERCIAL SENSE AND NOT AS A TOTAL INCOME AS ASSESSED. IN THIS I CONNECTION HE HAS REL IED COUPLE OF COURT'S DECISION VIZ. CIT VS. RS.G. & SONS CHARITIES (1996) TAX LR 477 (MAD) AND CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION 228 ITR 620 (KER) AND ARGUED THAT THE ADDITION CANNOT BE MADE UNDER A NY OF THE PROVISION OF THE ACT EXCEPT SECTION 60 TO 63 OF THE ACT. ' 30.3 THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO ON THE BASIS OF AFORESAID- SUBMISSIONS OF THE ASSESSCE AND THE AO/S REMAND REPORT WAS RECEIVED BY THE CIT(A) AS PER FORWARDING LETTER OF ADDL.CIT NO.R- 2/REPO-8/2008-09/0932 DATED 23 RD DECEMBER, 2008 WHEREIN THE AO SUBMITTED AS UNDER: 'IN THE SEIZED BOOKS OF ACCOUNT UNDER MARKS OF IDEN TIFICATION AKCM-L, SOME ENTRIES AMOUNTING TO RS.3,55,644/- WERE MADE, FOR WHICH SRI II. K. PANIGRAHI, FINANCIAL ADVISOR OF THE ASSESSEE SOCIET Y COULD NOT OFFER ANY EXPLANATION. IT B ALREADY STATED IN THE EARLIER PAR AS THAT SRI PANIGRAHI LOOKED AFTER ACCOUNTING WORKS OF THE SOCIETY AND FI NALIZED THE ACCOUNTS. HENCE, HIS INABILITY CONFIRMED THAT THE AMOUNT WAS NOT APPLIED FOR THE OBJECT OF THE TRUST. MOROEVER, SRI DILLIP KR. KHAT EI VIDE HIS STATEMENT, DENIED TO HAVE RECEIVED THESE AMOUNTS FROM THE ASSE SSEE. MOROEVER, THE ACTUAL RECIPIENT IS NOT IDENTIFIED BY THE ASSES SEE AND THE ACTUAL DESTINATION OF THIS MONEY WAS ALSO NOT CLAIMED BY T HE ASSESSEE. THE ONUS LIES ON THE ASSESSEE TO EXPLAIN IT PROPERLY. THIS IS ACTUALLY NOTHING BUT MISUTILISATION OF FUND BY THE TRUST. AS THE PA YMENT WAS NOT CONFIRMED, THERE IS NO QUESTION OF APPLICATION OF T HIS MONEY FOR CHARITABLE PURPOSES, AS CLAIMED BY THE ASSESSEE SOC IETY. 30.4 IT WAS IN VIEW OF THE ABOVE FACTS THAT TH E C1T(A) PROCEEDED TO DECIDE THE ISSUE AND FIRST OF ALL CONSIDERED THE ST ATEMENT OF MR. PANIGARAHI, WHO WAS WORKING AS FINANCIAL ADVISOR TO THE ASSESSE E. THE CIT(A) ALSO CONSIDERED THE PROCEEDINGS CONDUCTED BY T HE CIT, BHUBANESWAR FOR CANCELLATION OF ASSESSEE'S REGISTRATION UNDER SECTION 12AA(3)OF THE ACT WHEREIN SIMILAR OUTGOINGS DURING THE FINANCIAL Y EARS 2004-05 AND 2005-06 WERE CONSIDERED. THE ASSESSEE'S CASE FOR THOSE AS SESSMENT YEAS WAS THAT THOUGH THE PAYMENTS WERE BOOKED IN THE NAME OF M/S. DILLIP CONSTRUCTION (P.) LTD. BUT THE AMOUNTS WERE PAID -THR OUGH SHRI R.K.MISHRA RS.23,35,644 ), DR. CHITARANJAN MISHRA (RS.5,35,0000) AND SHRI SUDARSHAN DAS (RS.4,30,000). 30.5 SIMILAR WAS THE STAND OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO BUT SINCE NONE OF THESE THREE PERSONS HAD RESPONDED TO THE ITO'S LETTER, THE ASSE SSEE WAS CALLED UPON TO PRODUCE THE SAME BEFORE THE AO AND SINCE THE ASSESS EE DID NOT PRODUCE THEM INSTEAD PREFERRED-TO FILE A WRITTEN REPLY, THE AO CONSIDERED THE PAYMENTS IN THOSE ASSESSMENT YEARS ALSO AS DIVERS ION OF ASSESSEE'S FUNDS FOR THE BENEFITS OF ASSESSEE'S FUNCTIONARIES AND TA X THE SAME. THE RELEVANT PART OF ASSESSEE'S SUBMISSION AT THAT TIME BEFORE T HE AO WAS AS UNDER : MR. CHITARANJAN MISHRA, PRASANT KUMAR MISHRA AND S UDARSHAN DAS WERE HEADED DIFFERENT DEPARTMENT/WINGS OF THE ASSES SEE. IN THE USUAL COURSE OF ITS ACTIVITIES AND MAINTENANCE OF MORE TR ANSPARENCY THE DEPARTMENT HEAD ARE WRING HEAD USED TO TAKE THE C ASH FROM THE ITA NO. 36/CTK/2015 ASSESSMENT YEAR :2010-2011 13 ASSESSEE SOCIETY AND MEET AND MANAGED THE EXPENDITU RE OF THE RESPECTIVE DEPARTMENT OR WINGS OUT OF THIS CASH. AN D AT THE END OF THE YEAR OR PERIOD, THEY SUBMIT THE DETAILS OF THE. EX PENDITURE ALONG WITH THE VOUCHERS AT SOCIETY'S OFFICE. SO, THE CASH WAS PAID TO THEM FOR MANAGING OR MEETING THE EXPENDITURE OF RESPECTIVE D EPARTMENT OR WING. ALL THESE PAYMENTS WERE DULY ACCOUNTED FOR IN THE A CCOUNTS OF THE KIIT. SO THE PAYMENTS MADE TO THOSE PERSONS ARE NOT TO BE ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE. ' 30.6 THE CIT(A) CONFIRMED THE ADDITION OF RS.50 LAC S IN ASSESSMENT YEAR 2003-04, ADDITION OF RS. 1,06,02,880 AND ADDITION O F RS. 1,29,98,700 IN ASSESSMENT YEAR 2005-06 IN CONSEQUENCE UPON HIS COM MON FINDINGS IN PARAS 8.2., 8.3 AND 8.4 OF HIS ORDER, WHICH READ AS UNDER : - ' 8.2 I HAVE CONSIDERED THE SUBMISSION OF MR. AGRAWAL LA, ASSESSMENT ORDER AND THE REPORT OF THE AO CAREFULLY. DURING TH E COURSE OF SEARCH, LEDGER ACCOUNT FOR THE A,Y. 200304, 2004-05 , 2005-06 AND 2006- 07 (NOT DEALT IN THIS ORDER) IDENTIFIED AS II KP-6, HKP-4, AKCM-LL ANDAKCM-2 AND THE CASH BOOK FOR THE A.Y. 2005-06 AN D 2006-07 IDENTIFIED AS AKCM-10 AND AKCM-L, MANUALLY WRITTEN WERE FOUND AND SEIZED. AT THE TIME OF SEARCH ON 09.08.2005, A STAT EMENT OF MR. II. PANIGRAHI WAS RECORDED U/S.132 OF THE ACT. FROM THE STATEMENT IT APPEARS THAT THE AUTHORIZED OFFICER FOUND THE ENTRY IN THE SAID BOOKS IN THE NAME OF D. KHATEI (CONST.). THE RELEVANT QUE STIONS AND THE REPLY OF MR. PANIGRAHI ON THE SAID ACCOUNT ARE REPR ODUCED AS BELOW:- Q.1 WHAT ARE YOUR RESPONSIBILITY AS F.A. OF KIIT, BBSR ? ANS. MY PRIMARY RESPONSIBILITY IS SUPERVISE, PROPER MAINTENANCE OF THE ACCOUNTS OF KIIT INCLUDING ALL IT'S WINGS. IN ADDIT ION TO THIS RESPONSIBILITY, I LOOK AFTER THE LOAN/FINANCE ACTIVITIES OF KIIT Q.4. WHO IS DILLIP KHATEI? ANS. HE IS A CONSTRUCTION CONTRACTOR. Q.5. IT IS NOTICED, THAT TIME AND AGAIN LOAN FRO M SRI D. KHATEI HAS ALSO BEEN DECLARED. WHY? ITA NO. 36/CTK/2015 ASSESSMENT YEAR :2010-2011 14 ANS. THESE ARE NOTHING BUT THE ADJUSTMENT ENTRI ES WITH HIM ON CONSIDERATION OF THE PROGRESS OF THE WORKS ALLOTTED TO HIM AND ON OTHER CONSIDERATIONS. Q.6 INVARIABLY ON EACH OCCASIONS PAYMENTS TO SRI D. KHATEI HAS BEEN BIFURCATED INTO SMALLER AMOUNTS AND HAVE BEEN NOTED IN 'PENCIL'. ON VERIFICATION OF THE VOUCHERS EVIDE NCING SUCH PAYMENTS/SOME VOUCHERS OF CONSIDERABLE AMOUNT HAVE BEEN SIGNED BY SOMEBODY ELSE AND THE DESCRIPTION IS PAI D THROUGH. PLEASE EXPLAIN SUCH SPECIAL TYPE ARRANGEMENT OR ENT RY. ANS. I SHALL CONSULT MY STAFF AND SHALL ANSWER LA TER. MR. PANIGRAHI HAS NOT GIVEN ANY REPLY TO THE AFORES AID QUESTION AFTER CONSULTING HIS STAFF ON THE SAID DATE. HIS STATEMEN T WAS AGAIN RECORDED ON 28.12.2007 AND A QUESTION WAS ASKED REGARDING TH E SAID ENTRY AS BELOW:- 'Q. I AM CONFRONTING YOU . THE WRITTEN SUBMISSION DID. 10.12.2007 OF SRI DILLIPKUNIAR KHATEI AND ALSO THE SEIZED BOOKS O F ACCOUNT UNDER THE MARKS OF IDENTIFICATION AKCM-3 (PAGE-400), AKCM-LL (PAGE 400)JIKP- 4(PAGE 505). WHAT IS YOUR EXPLANATION IN THIS REGAR D ? WHY THIS SHOULD NOT BE TREATED AS UNEXPLAINED INCOME OF THE K1IT? ANS. THE TRANSACTION REFLECTED IN THE LEDGER ACCOUN T OF SRI D.KHATEI (CONST.) REPRESENT THE EXPENDITURE OUT OF UNDISCLOS ED INCOME OF THE KIIT. SUBSEQUENTLY THE CIT, BHUBANESWAR VIDE HIS LETTER N O. TECH/12A/81/95- 96/4604 DI.15.11.2006 ISSUED A SHOW CAUSE NOTICE FO R CANCELLATION OF REGISTRATION U / S .12AA OF THE ACT. THE ONE OF THE REASON FOR THE CANCELLAT ION, MENTIONED IN THE SAID SHOW CAUSE LETTER IS AS; 'THE CASH BOOK FOR THE F. Y. ITA NO. 36/CTK/2015 ASSESSMENT YEAR :2010-2011 15 2004-05 AND 2005-06 CONTAIN ENTRIES IN PENCIL SHOWI NG THAT THE MONEY BELONGING TO THE SOCIETY HAS BEEN PAID TO DIFFERENT PERSON AND THIS INDICATE THAT FUND OF THE SOCIETY HAVE BEEN MIS-UTILIZED AND NOT SPENT FOR CARRYING OUT' THE STATED OBJECTIVE OF THE. SOCIETY'. IT IS F URTHER MENTIONED IN THE SAID SHOW CAUSE LETTER THAT THE PAYMENT ARE REFLECTED FR OM THE BOOKS OF ACCOUNT ON DIFFERENT RS.23 ,35,644/-, RS.5,35,000/- AND RS.4,30,000/- RESPECTI VELY. REPLY TO THE SAID SHOW CAUSE NOTICE WAS SUBMITTED TO THE CIT BY THE VIDE ITS LETTER DT.04.12.2006.F FROM THE SAID LETTER IT IS FOUND THAT THE APPELLANT HAS REPLIED REGARDING THESE ENRIES AS THE CASH BOO K FOR THE F.Y. 2004-05 AND 2005-06 CONTAIN ENTRIES IN PENCIL IS NOT CORREC T. ALL THE ENTRIES WERE MADE IN PEN. ONLY THE NAME OF THE PERSON TO WHOM P AYMENTS WERE MADE WAS MARKED IN PENCIL. THESE PAYMENTS WERE MADE TO DIFFERENT PERSONS FOR MEETING OF DAY TO DAY EXPENSES OF KIIT TO DIFFERENT STREAMS. 8.3 DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE AO TRIED TO ENQUIRE BY ISSUING A LETTER TO SRI CHITARANJAN MISH RA,,PRASANT KUMAR MISHRA AND SUDARSHAN DAS IN RESPECT OF THE AFORESAID ENTRI ES, BUT THERE WAS NO COMPLIANCE. ACCORDINGLY VIDE LETTER NO.DCLT-2(2)/KU T/2007-0H DT. 14.12.2007 THE APPELLANT WAS REQUESTED AS BELOW:- 'LETTERS REQUISITIONING INFORMATION FROM S/SRI CHIT ARANJAN MISHRA, PRASANT KUMAR MISHRA AND SUDARSHAN DAS HAVE BEEN SE RVED ON CONCERNED PERSONS AND SAME MAY BE INSPECTED. IT IS TO BE MENTIONED THAT THERE IS NO COMPLIANCE SO FAR FROM T HE SAID PERSON. YOU ARE HEREBY GIVEN THE OPPORTUNITY OF PRODUCING T HE SAID PERSON BEFORE THE UNDERSIGNED, OTHERWISE THE PAYMENT ALLEG ED TO HAVE BEEN MADE TO THEM AS APPEARING IN YOUR SEIZED BOOKS OF ACCOUNT MAY HE TREATED AS YOUR INCOME BEING UNEXPLAINED EXP ENDITURE. ' THE APPELLANT INSTEAD OF PRODUCING MR. CHITA RANJAN MISHRA, PRASANT KUMAR MISHRA AND SUDORSHAN DAS BEFORE THE AO, SUBM ITTED ITS REPLY THROUGH ITS AUTHORIZED REPRESENTATIVE VIDE LETTER D ID. 19.12.2007AS BELOW:- MR.CHITARANJAN MISHRA, PRASANT KUMAR MISHRA AND SUD ARSHAN DAS WERE HEADED DIFFERENT DEPARTMENT/WINGS OF THE ASSES SEE. IN THE USUAL ITA NO. 36/CTK/2015 ASSESSMENT YEAR :2010-2011 16 COURSE OF ITS ACTIVITIES AND MAINTENANCE OF MORE TR ANSPARENCY THE DEPARTMENT HEAD ARE WRING HEAD USED TO LAKE THE CAS H FROM THE SOCIETY AND. MEET AND MANAGED THE EXPENDITURE OF THE RESPEC TIVE DEPARTMENT WINGS OUT OF THIS CASH. AND AT THE END OF THE YEAR OR PERIOD, THEY SUBMIT THE DETAILS OF THE EXPENDITURE ALONGWITHTHE VOUCHERS AT SOCIETY'S OFFICE. SO, THE CASH WAS PAID TO THEM FOR MANAGING OR MEETING THE EXPENDITURE OF RESPECTIVE DEPARTMENT OR WING. ALL THESE PAYMENTS WERE DULY ACCOUNTED FOR IN THE ACCOUNTS OF THE KIIT. SO THE PAYMENTS MADE TO THOSE PERSONS ARE NOT TO BE ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED EXPE NDITURE. 8.4- I HAVE ALSO SEEN THE SEIZED CASH BOOK FOR THE F. Y. 2004-05 AND 2005-06 AND FOUND THAT THE MONEY HAS BEEN WITHDRAWN IN THE NAME OF D. KHATEI (CONST.) WITH A SIMULTANEOUS NOTING WITH PENCIL GIVING THE NAME OF THESE PERSONS ALONG WITH SELF K.BOSE, P. RA NJAN DAS. DURING THE COURSE OF EXAMINATION OF LEDGER ACCOUNT OF F.Y. 2004-05, IT IS FOUND THAT THE MONEY HAS BEEN WITHDRAWN ON DIFFERENT DATE S UP TO 5 ' JUNE 2004 FROM THE CASH BOOK IN THE NAME OF D. KHATEI ( CONST) AND THEREAFTER, FROM I8 LH JUNE 2004 TO 25' 1 OCTOBER 2004, THERE IS A CREDIT ENTRIES OF TOTALING RS.85,00,000/-. IN THIS PERIOD, THERE IS NO DEBIT ENTRY IN THE SAID ACCOUNT. FROM 7TH FEBRUARY 2005 TO 31 S ' MARCH, 2005 THERE ARE AGAIN DEBIT ENTRIES IN THE SAID ACCOUNT: IF THE EXPLANATION OF APPELLANT SUBMITTED BEFORE THE CAT, BHUBANESWAR AS WELL AS AO IS ACCEPTED, THEN IT IS NOT KNOWN HOW THE DIF FERENT WINGS OF THE APPELLANT'S SOCIETY MANAGED THEIR DAY-TO-DAY EXPENS ES IN THE PERIOD 18 N JUNE 2004 TO 7' FEBRUARY 2005. THEN AGAIN THE QUEST ION ARISES FROM WHERE THE CASH OFRS. 85,00,0007- HAS COME IN THE PE RIOD OF 18'' JUNE 2004 TO 25' OCTOBER, 2004. THERE IS NO EXPLANATION TO THIS FROM THE APPELLANT'. LIVEN AT THE TIME OF SEARCH, IT WAS ENQ UIRED FROM MR. PANIGRAHI WHO IS HOLDING IMPORTANT POSITION IN THE ACCOUNT SECTION OF THE APPELLANT SOCIETY AND HE COULD NOT EXPLAIN SATISFAC TORILY AS MENTIONED IN THE EARLIER PARAGRAPH. IN THE STATEMENT RECORDED ON 28.12.2007 IT WAS STATED THAT IT IS AN EXPENDITURE INCURRED OUT OF UN DISCLOSED INCOME OF KIIT. IF THE LATTER PART OF THE STATEMENT OF MR. PA N IGRAHI IS ACCEPTED, THEN THE WHOLE CASH RECEIVED (IN THOSE CASH BOOK) S HOULD HAVE BEEN TREATED AS UNEXPLAINED INCOME AND NOT ONLY TO THE E XTENT OF PAYMENTS CLAIMED TO HAVE BEEN MADE TO D.KHATEI (CANST). THER EFORE, IT APPEARS ITA NO. 36/CTK/2015 ASSESSMENT YEAR :2010-2011 17 THAT 'D. KHATEI (CONST)' IS ONLY A TITLE WHICH HAS BEEN USED FOR WITHDRAWING THE MONEY BY THE MEMBER OF THE SOCIETY FOR THEIR UNKNOWN PERSONAL PURPOSES AND BRINGING THE UNACCOUN TED MONEY BY THE APPELLANT IN THE ACCOUNT. NO CASH BOOK WAS FOUN D FOR THE A.Y. 2003- 04 AND 2004-05 BUT THE NATURE OF THE LEDGER ACCOUNT IN THE SAID NAME IS SAME. THEREFORE, THERE IS A CLEAR VIOLATION OF S ECTION 13(1) (C) OF THE ACT IN ALL THESE YEARS FOR THE DEBIT ENTRIES (WITHD RAWAL) IN THE ACCOUNT OF D KHATEI (CANST). THEREFORE, THE ADDITION MADE B Y THE AO IS CONFIRMED. HOWEVER, THE TAX ON THESE INCOMES SHOUL D BE CALCULATED AS PER SECTION 164(2) OF THE ACT. 10. ON THE SUBMISSION MADE BY THE AR THAT OPPORTUNI TY OF CROSS EXAMINATION WAS NOT PROVIDED, THE ITAT HAS SET ASID E THE ISSUE TO THE FILE OF AO FOR FRESH CONSIDERATION AND THE ORDER OF ITAT WA S ALREADY EXTRACTED BY ASSESSEE IN THE WRITTEN SUBMISSION. SO THE SAME DO ES NOT REQUIRE REPRODUCTION ONCE AGAIN HERE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, FACTS AND CIRCUMSTANCES OF THE CASE. TECHNICALLY SPEAKING ASSESSEE HAS ASKED FOR CROSS EXAMINATION OF THE TWO PERSONS INVOLVED, WHOSE STATEMENTS ONE WRI TTEN COMMUNICATION BY SRI DILLIP KR KHATEI AND OTHER A STATEMENT ON OATH AS EXTRACTED IN CIT(A) ORDER EARLIER-WERE THE BASIS FOR ADDITION CONSEQUENT TO T HE SEIZED DOCUMENTS AND ENTRIES IN LEDGER /CASH BOOK OF THE RELEVANT PERIOD . AS PER THE RECORD, IT IS A FACT THAT THE TWO ENTRIES INVOLVED ARE NOT FIGURING IN THE STATEMENT OF ACCOUNT SUBMITTED BY SRI DILIP KR KHATEI AND FOR THE REASON S BEST KNOWN TO THE ASSESSEE, ROSS EXAMINATION IN THESE PROCEEDINGS WA S NOT INSISTED. ASSESSEE ALSO FAILED TO FILE ANY EXPLANATION OR RECONCILIATI ON OF ACCOUNTS TO ESTABLISH THAT THE AMOUNTS ARE ACCOUNTED FOR IN THE BOOKS. ITA NO. 36/CTK/2015 ASSESSMENT YEAR :2010-2011 18 12. ONE OF THE ARGUMENT RAISED BY ASSESSEE IS THAT SRI PANIGRAHI HAS RETRACTED HIS STATEMENT. THE STATEMENT GIVEN BY SR I PANIGRAHI ON 20.12.2010 DOES NOT INDICATE THAT THE EARLIER STATEMENT WAS RE TRACTED. WHAT SRI PANAIGRAHI HAS STATED WAS THAT HE DOES NOT REMEMBER WHAT HE SAID, THE EXACT STATEMENT WAS EXTRACTED BY ASSESSEE IN ITS WRITTEN SUBMISSION (IN PARA 5 ABOVE). THE ANSWER GIVEN BY SRI PANIGRAHI AT BEST CAN BE CONSIDERED EVASIVE BUT IT DOES NOT INDICATE THAT THE EARLIER STATEMENT WAS RETRACTED. IN FACT THE STATEMENT RELIED ON BY REVENUE IS AFTER GIVING AN O PPORTUNITY. THE STATEMENT WAS PART OF CIT(A) ORDER EARLIER EXTRACTED ABOVE IN PARA 30.6 OF THE ITAT ORDER IN EARLIER ROUND. 13. WE ARE OF THE OPINION THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE CASE, AN REFUSED TO CROSS EXAMINE THE PERSONS INVOLVED. S O THE FINDINGS OF AO IN THE ASSESSMENT GO UNCONTROVERTED. WHY THE ASSESSEE DID NOT CROSS EXAMINE THE TWO PERSONS ARE BEST KNOWN TO ASSESSEE. THEREFORE, WE ARE OF THE OPINION THAT THE ORDER OF THE AO AND CIT(A) ON THIS ISSUE R EQUIRE CONFIRMATION; AS ASSESSEE FAILED IN ITS ATTEMPT TO COUNTER THE FINDI NGS . GROUND NOS.2 TO 4 ARE ACCORDINGLY REJECTED. 14. THAT LEAVES US WITH THE GROUND NO.5. AFTER CON SIDERING THE DETAILED SUBMISSIONS OF ASSESSEE AND FINDINGS OF THE ITAT IN EARLIER ORDER AT PARA 11, PARTICULARLY PARA 11.2(C) TO 11.3, WE ALLOW THE GRO UND AND DIRECT THE AO TO ITA NO. 36/CTK/2015 ASSESSMENT YEAR :2010-2011 19 ALLOW THE REPAYMENT OF LOAN AS APPLICATION OF INCOM E. GROUND NO.5 IS ALLOWED. 15. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 /11/20 15 SD/- SD/- , PARTHA SARATHI CHAUDHURY . ,/B.RAMAKOTAIAH 11 111 1 / JUDICIAL MEMBER 111 1 /ACCOUNTANT MEMBER CUTTACK; '! DATED 5 /11 /2015 B.K.PARIDA, SPS 0 0 0 0 (+ (+ (+ (+ 4$+ 4$+ 4$+ 4$+ / COPY OF THE ORDER FORWARDED TO : 0' 0' 0' 0' / BY ORDER, SR. PRIVATE SECRETARY, , / ITAT, CUTTACK 1. ' / THE APPELLANT : 2. ()' / THE RESPONDENT. 3. 5 ( )/THE CIT(A), BHUBANESWAR. 4. 5 / CIT , BHUBANESWAR 5. #6 (+' , / DR, ITAT, CUTTACK 6. 8 9. / GUARD FILE. )+ (+ //TRUE COPY//