Shree Sai Builders, Bhopal V. Assistant Commissioner of Income Tax (Central) II, Bhopal

ITSSA 246/Ind/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5498 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 25-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: S S DESH
• Keywords: Unexplained cash credit; Opportunity of being heard; Source of fund; Set aside
• Section: 143(3); 142(1); 153A; 132; 2; 139; 68

Judgement Text

SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/20 17 ASSESSMENT YEARS 2008-09 TO 2011-12 & 2013-14 TO 20 14-15 REVENUE BY SMT. ASHIMA GUPTA, CIT ASSE SSEE BY S HRI S.S. DESHPANDE, CA DATE OF HEARING 0 8 . 0 5 . 201 9 DATE OF PRONOUNCEMENT 30 .0 5 . 201 9 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEALS ARE FILED AT THE INSTAN CE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2008-09 TO ASSESSMENT YEAR 2011-12 & ASSESSMENT YEAR 2013-14 TO 2014-15 AND ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF LD. COMMISSIONER OF INCOME TA X (APPEALS)-3 (IN SHORT LD.CIT(A)], BHOPAL DATED 30.08.2017 WHICH ARE ARISING OUT OF THE ORDER U/S 143(3) FOR THE ASSESSMENT YEAR 2014-15 AN D REMAINING ORDERS M/S. SHREE SAI BUILDERS, 43, R.R. ARCHADE, ZONE-II, M.P. NAGAR, BHOPAL VS. ACIT (CENTRAL) - II, BHOPAL ( APPELLANT ) (RESPONDENT ) PAN A B A FS9139F SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 2 U/S 153A R.W.S. 143(3) OF THE INCOME TAX ACT 1961(I N SHORT THE ACT) DATED 15.03.2016 FRAMED BY ACIT (CENTRAL)-II, BHOPA L. 2. AS THE ISSUES RAISED IN THESE APPEALS ARE COMMON I N NATURE AND RELATES TO SAME ASSESSEE, THESE WERE HEARD TOGETHE R AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF C ONVENIENCE AND BREVITY. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF REAL ESTATE. SEARCH U/S 132 OF THE ACT WAS CONDUCTED AT THE BUSI NESS PREMISES OF THE ASSESSEE FIRM AS WELL AS ON THE PREMISES OF OTHER C ONCERNS/BUSINESS ASSOCIATES ON 29.01.2014. NOTICES U/S 153A OF THE I .T. ACT DATED 12.09.2014 WERE ISSUED TO THE ASSESSEE FOR FILING R ETURNS FOR ASSESSMENT YEARS 2008-09 TO 2013-14 AND IN RESPONSE TO THAT AS SESSEE FILED RETURN OF INCOME ON 28.1.2016. FOR ASSESSMENT YEAR 2008-09 T HE ASSESSEE FILED ITS REGULAR RETURN U/S 139 OF THE ACT ON 30.09.2008 SHO WING INCOME OF RS.2,10,410/- BUT FOR REMAINING ASSESSMENT YEARS RE TURN OF INCOME WERE FILED FOR THE FIRST TIME AFTER THE ISSUANCE OF NOTI CE U/S 153A OF THE ACT. NOTICES U/S 143(2) FOLLOWED BY DETAILED QUESTIONNAI RE U/S 142(1) WERE SERVED UPON THE ASSESSEE. WRITTEN SUBMISSIONS WITH SUPPORTING SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 3 DOCUMENTS WERE FILED BY THE ASSESSEE. CONSOLIDATED ASSESSMENT ORDER WERE PASSED FOR ASSESSMENT YEAR 2008-09 TO ASSESSME NT YEAR 2011-12 & ASSESSMENT YEAR 2013-14 U/S 153A AND FOR ASSESSMENT YEAR 2014-15 U/S 143(3) OF THE ACT. LD. A.O. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE MADE FOLLOWING DISALLOWANCE/ADDITIO NS FOR VARIOUS ASSESSMENT YEARS FOR WHICH THE INSTANT APPEAL HAVE BEEN FILED. ASSESSMENT YEAR PARTICULARS AMOUNT 2008 - 09 DISALLOWANCE OF BANK INTEREST & CHARGES RS.2,24,326/ - 2009 - 10 1 . DISALLOWAN CE OF BANK INTEREST & CHARGES 2. UNEXPLAINED CREDITS U/S 68 RS.2,11,264/- RS.3,00,000/- 2010 - 11 1 . DISALLOWANCE OF BANK INTEREST & CHARGES 2.UNEXPLAINED CREDITS U/S 68 RS.2,08,819/- RS.21,000/- 2011 - 12 1.DISALLOWANCE OF BANK INTEREST & CHARGES RS.2,29,024/- SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 4 2.UNEXPLAINED CREDITS U/S 68 RS.15,17,000/- 2013 - 14 1.UNEXPLAINED CREDITS U/S 68 RS.50,000/ - 2014 - 15 1.UNEXPLAINED CREDITS U/S 68 RS.10,766/ - 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT( A) BUT COULD NOT SUCCEED. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING FOLLOWING GROUNDS OF APPEAL. IT(SS)A NO.245/IND/2017 ASSESSMENT YEAR 2008-09 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX (A), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING ADDITION IN THE YEARS WHERE THE ASSESSMENT PROCEEDINGS WERE NOT PENDING AND NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX (A), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING DISALLOWANCE OF RS. 2,24,326/- TOWARDS INTEREST PAID ON LOAN HOLDING THAT THE LOAN FUNDS WERE NOT UTILIZED FOR THE PURPOSE OF THE BUSINESS. 3. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND(S) OF APPEAL DURING OR BEFORE THE HEARING OF THE APPEAL SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 5 IT(SS)A NO.246/IND/2017 ASSESSMENT YEAR 2009-10 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX (A), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING DISALLOWANCE OF RS. 2,11,264/- TOWARDS INTEREST PAID ON LOAN HOLDING THAT THE LOAN FUNDS WERE NOT UTILIZED FOR T HE PURPOSE OF THE BUSINESS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX CA), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS. 3,00,000/- TREATING THE RECOVERY OF EXCESS WITHDRAWAL OF CAPITAL AS UNEXPLAINED. 3. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND(S) OF APPEAL DURING OR BEFORE THE HEARING OF THE APPEAL. IT(SS)A NO.247/IND/2017 ASSESSMENT YEAR 2010-11 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX (A), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING DISALLOWANCE OF RS. 2,08,819/- TOWARDS INTEREST PAID ON LOAN HOLDING THAT THE LOAN FUNDS WERE NOT UTILIZED FOR THE PURPOSE OF THE BUSINESS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX CA), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS.21,000 /- TREATING THE RECOVERY OF EXCESS WITHDRAWAL OF CAPITAL AS UNEXPLAINED. 3. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND(S) OF APPEAL DURING OR BEFORE THE HEARING OF THE APPEAL. IT(SS)A NO.248/IND/2017 ASSESSMENT YEAR 2011-12 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX (A), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 6 JUSTIFIED IN MAKING DISALLOWANCE OF RS. 2,29,024/- TOWARDS INTEREST PAID ON LOAN HOLDING THAT THE LOAN FUNDS WERE NOT UTILIZED FOR THE PURPOSE OF THE BUSINESS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX CA), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS.215,17,000 /- TREATING THE RECOVERY OF EXCESS WITHDRAWAL OF CAPITAL AS UNEXPLAINED. 3. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND(S) OF APPEAL DURING OR BEFORE THE HEARING OF THE APPEAL. IT(SS)A NO.249/IND/2017 ASSESSMENT YEAR 2013-14 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX CA), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS.50,000 /- TREATING THE RECOVERY OF EXCESS WITHDRAWAL OF CAPITAL AS UNEXPLAINED. 2. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND(S) OF APPEAL DURING OR BEFORE THE HEARING OF THE APPEAL. ITA NO.631/IND/2017 ASSESSMENT YEAR 2014-15 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LD COMMISSIONER OF INCOME TAX CA), WAS NOT JUSTIFIED I N HOLDING THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS.10,766 /- TREATING THE RECOVERY OF EXCESS WITHDRAWAL OF CAPITAL AS UNEXPLAINED. 2. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND(S) OF APPEAL DURING OR BEFORE THE HEARING OF THE APPEAL. 5. WE WILL FIRST TAKE THE ASSESSEES APPEAL FOR ASSESS MENT YEAR 2008- 2009. SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 7 6. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE REFERRIN G TO GROUND NO.1 OF THE APPEAL SUBMITTED THAT NO INCRIMINATING MATER IAL WAS FOUND DURING THE COURSE OF SEARCH AND THE ADDITION WERE MADE ONL Y ON THE BASIS OF INFORMATION RECEIVED DURING ASSESSMENT PROCEEDINGS. ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THIS CO-ORDINAT E BENCH IN THE CASE OF SAINATH COLONIERS V ACIT (2019) 35 ITJ 77 (TRIB. IN DORE) IN IT(SS) A NOS. 289 TO 291/IND/2017 DATED 28.02.2019. 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEMENT LY ARGUED AND SUPPORTING THE ORDER OF LOWER AUTHORITIES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE REC ORDS PLACED BEFORE US AND GONE THROUGH THE DECISION REFERRED AN D RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. FOR ASSESSMENT YEAR 2008 -09 ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL. GROUND NO.1 CHALLENG ES THE ADDITION ON THE GROUND THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AND ADDITION HAS BEEN MADE MERELY ON THE BAS IS OF INFORMATION CALLED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THROUGH GROUND NO.2 THE IMPUGNED ADDITION OF RS.2,24,326/- IS CHAL LENGED WITH REGARD TO DISALLOWANCE OF INTEREST PAID ON LOAN HOLDING THAT THE LOAN FUNDS WERE NOT UTILIZED FOR THE BUSINESS PURPOSES. SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 8 9. WE FIND THAT THE CO-ORDINATE BENCH WHILE ADJUDICATI NG SIMILAR ISSUE IN THE CASE OF SAINATH COLONIERS V ACIT (2019) 35 ITJ 77 (TRIB. INDORE) FOLLOWING THE JUDGMENT OF HONBLE HIGH COURT OF DEL HI IN THE CASE OF CIT V/S KABUL CHAWLA (2016) 380 ITR 573 (DEL) OBSERVE D AS FOLLOWS; WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES O F THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENTS REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE ARE OF THE CONSIDERED VIEW THAT NO ADDITION/DISALLO WANCE WAS CALLED FOR ASSESSMENT YEAR 2008-09 TO 2010-11 AS NO INCRIMINAT ING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE ASSESSEE AS THE TIME LIMIT OF ISSUANCE OF NOTICE U/S 143(2) OF THE ACT STOOD EXPI RED MUCH BEFORE THE DATE OF CONDUCTING SEARCH U/S 132 OF THE ACT. 10. EXAMINING FACTS OF THE INSTANT APPEAL IN THE LIG HT OF DECISION OF CO- ORDINATE BENCH, WE FIND THAT THE ASSESSEE FILED REG ULAR RETURN OF INCOME U/S 139 OF THE ACT FOR ASSESSMENT YEAR ON 30.09.20 08. ASSESSEES CASE WAS NOT SELECTED FOR SCRUTINY, AS NOTICE U/S 143(2) OF THE ACT WAS NOT ISSUED TO THE ASSESSEE ON OR BEFORE 30.09.2009. SE ARCH WAS CONDUCTED ON 29.1.2014. IMPUGNED ADDITION AT RS.2,24,326/- I S PURELY BASED ON INFORMATION CALLED DURING THE COURSE OF SEARCH PROC EEDINGS. IN THIS SITUATION THE ASSESSMENT FOR ASSESSMENT YEAR 2008-0 9 IS TO BE TREATED AS NON ABATED ASSESSMENTS FOR WHICH ADDITIONS COULD BE MADE ONLY ON THE SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 9 BASIS OF INCRIMINATING MATERIAL FOUND DURING THE CO URSE OF SEARCH. THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES OF T HE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH REFERRED ABOVE, WE DIRECT THE LD. A.O TO DELETE THE DISALLOWANCE OF RS.2,24,326/- AND ACCORDINGLY ALLOW GROUND NO.1 AND CONSEQUENTIALLY G ROUND NO. 2 OF THE ASSESSEES APPEAL FOR 2008-09 RAISED IN IT(SS)NO.24 5/IND/2017. 11. NOW WE TAKE UP THE APPEALS RELATING TO ASSESSMEN T YEARS 2009-10, 2010-11, 2011-12, 2013-14 AND 2014-15 WHEREIN FOLLO WING THREE ISSUES ARE UNDER CONSIDERATION:- (I) NO ADDITION IS CALLED FOR AS NO INCRIMINATING MATER IAL FOUND DURING THE COURSE OF SEARCH. (II) DISALLOWANCE OF INTEREST PAID ON BANK LOAN FOR NOT UTILIZING LOAN FOR THE BUSINESS PURPOSE. (III) UN EXPLAINED RECOVERY OF EXCESS WITHDRAWAL OF CAPIT AL BY PARTNERS 12. AS THE ISSUES ARE COMMON WE WILL ADJUDICATE GROU ND NO,.1,2&3 RAISED FOR ASSESSMENT YEAR 2009-10 AND OUR DECISION ON ADJUDICATION OF GROUNDS FOR ASSESSMENT YEAR 2009-10 WILL APPLY MUTANDIS MUTANDIS TO SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 10 THE SIMILAR ISSUES RAISED IN THE OTHER APPEALS FOR ASSESSMENT YEARS 2009- 10, 2010-11, 2011-12, 2013-14 AND 2014-15. 13. AS REGARDS GROUND NO.1 RAISED FOR ASSESSMENT YEAR 2009-10 CLAIMING THAT NO ADDITION WAS CALLED FOR AS NO INCR IMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH U/S 132 OF THE AC T, WE FAIL TO FIND ANY MERIT IN THIS GROUND BECAUSE THE ASSESSEE HAS NOT F ILED REGULAR RETURN OF INCOME U/S 139 OF THE ACT. RETURN OF INCOME FOR AS SESSMENT YEAR 2009- 10 WAS FILED ON 28.1.2016 I.E. AFTER THE DATE OF SE ARCH U/S 132 OF THE ACT. THEREFORE ASSESSMENT YEAR 2009-10 CANNOT BE TREATED AS NON ABATED ASSESSMENT AND LD. A.O WAS WELL WITHIN HIS POWERS U /S 153A R.W.S. 143(3) OF THE ACT TO CARRY OUT REGULAR ASSESSMENT P ROCEEDINGS FOR ASSESSMENT YEAR 2009-10 AND FOR MAKING ADDITIONS IF ANY AND IT WAS NOT NECESSARY TO PROVE THE NEXUS WITH THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THEREFORE THE ASSESSEE FAILS TO SUCCEED IN THIS LEGAL GROUND RAISED IN GROUND NO.1 AND THE SAM E STANDS DISMISSED. AS FACTS AND ISSUES REMAINS THE SAME FOR ASSESSMENT YEARS 2010-11, 2011-12, 2013-14 AND 2014-15 SIMILAR GROUND NO.1 R AISED IN THESE FOUR APPEALS ALSO STANDS DISMISSED. SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 11 14 . NOW WE TAKE UP GROUND NO.2 FOR ASSESSMENT YEAR 2009-10 RAISING DISALLOWANCE OF INTEREST PAID ON LOAN FOR THE ALLEG ED NON UTILIZATION OF THE LOAN FOR THE BUSINESS PURPOSES. 15. LD. COUNSEL FOR THE ASSESSEE PRAYED FOR DELETING THE ADDITION ON THE BASIS OF SUBMISSION MADE BEFORE LD. CIT(A) PAGE 1 T O 10 OF THE PAPER BOOK AND ALSO SUBMITTED THAT THE ASSESSEE FIRM IS NOT CA RRYING ANY BUSINESS ACTIVITY FROM ASSESSMENT YEAR 2009-10 ONWARDS. NO INTEREST EXPENSES HAVE BEEN CLAIMED AGAINST REVENUE, THEREFORE NO DIS ALLOWANCE FOR THE INTEREST PAID WAS CALLED FOR. 16. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED AND SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 17 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE R ECORDS PLACED BEFORE US. THE COMMON ISSUE RAISED IN GROUND NO.2 R ELATES TO DISALLOWANCE OF INTEREST PAID ON LOAN. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE STOPPED ITS BUSINESS ACTIVITY FROM 1.4 .2008 ONWARDS. CLOSING STOCK AS ON 31.3.2008 WAS NIL. ASSESSEE FI RM TOOK LOAN FROM KRISHNA MERCANTILE BANK DURING FINANCIAL YEAR 2005- 06. COPY OF THE AUDITED BALANCE AS ON 31.3.2005 AND 31.03.2006 PLA CED AT PAGE 25 TO SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 12 266 OF THE PAPER BOOK SHOWS THAT THE BANK LOAN WAS TAKEN DURING THE FINANCIAL YEAR 2005-06. AS ON 31.3.2006 THERE WAS A CREDIT BALANCE OF THE PARTNERS TOTALLING TO RS.52,58,564/- WHICH CLEA RLY ESTABLISHES THAT THE BANK LOAN TAKEN DURING THE FINANCIAL YEAR 2005-06 W AS UTILISED FOR BUSINESS PURPOSES AND WAS NOT WITHDRAWN BY THE PART NERS FOR THEIR PERSONAL PURPOSES. SO THE NEXUS OF THE APPLICATION OF THE BANK LOAN TO THE BUSINESS ACTIVITY IS ESTABLISHED BEYOND DOUBT. AFTER TAKING LOAN THE ASSESSEE HAS INCURRED LOSS CONSISTENTLY AND FROM 1. 4.2008 ONWARDS NO BUSINESS ACTIVITY WAS CARRIED OUT. 18. LD. A.O HAD OBSERVED THAT THE SECURED LOAN FROM KRISHNA MERCANTILE BANK IS APPEARING FROM ASSESSMENT YEAR 2008-09 TO 2011-12 AND DURING ASSESSMENT YEAR 2011-12 THIS LOAN HAS BEEN REPAID B Y THE ASSESSEE FIRM BY TAKING AMOUNT FROM THE PARTNERS. BEFORE THIS RE PAYMENT THE PARTNERS WERE HAVING NEGATIVE CAPITAL BALANCE. LD. A.O WITH OUT EXAMINING THE AUDITED BALANCE SHEET FOR ASSESSMENT YEAR 2004-05 A ND 2005-06 TOOK A VIEW THAT THE SECURED LOAN HAS BEEN UTILIZED FOR AD VANCING THE MONEY TO THE PARTNERS AND NOT FOR THE BUSINESS PURPOSES OF T HE FIRM AND NO INTEREST WAS CHARGED TO THE PARTNERS ON THEIR NEGATIVE CAPIT AL. ON THE BASIS OF THESE OBSERVATIONS, LD. A.O DISALLOWED THE BANK INT EREST AND BANK SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 13 CHARGES DEBITED TO PROFIT & LOSS ACCOUNT. 19. WE ARE OF THE CONSIDERED VIEW THAT THE BANK LOAN TAKEN DURING THE FINANCIAL YEAR 2005-06 WAS UTILISED ONLY FOR THE BU SINESS PURPOSES AND WAS NOT UTILISED BY THE PARTNERS FOR THEIR PERSONAL PURPOSE BY WITHDRAWING IT FROM THE FIRMS BANK ACCOUNT. THEREF ORE THE ALLEGATION OF THE LOWER AUTHORITIES THAT THE BANK LOAN WAS NOT UT ILISED FOR BUSINESS PURPOSES HAS NO LEGS TO STAND. FURTHER THE ASSESSE E HAS INCURRED CONSISTENT LOSSES. NO BUSINESS ACTIVITY IS CARRIED OUT SINCE 1.4.2008. BANK LOAN WAS OUTSTANDING. FOR REPAYMENT OF BANK LO AN THE PARTNERS HAVE BROUGHT ADDITIONAL CAPITAL TO REPAY THE LOAN. IN THESE FACTS AND CIRCUMSTANCES, WE FIND NO JUSTIFICATION IN THE ACTI ON OF LD. A.O DISALLOWING THE INTEREST PAID ON LOAN TO THE BANK C OMPLETELY IGNORING THE FACT THAT DURING THE YEAR UNDER APPEAL ASSESSEE IS HAVING NIL REVENUE AND IT IS NOT THE CASE OF THE REVENUE AUTHORITIES T HAT THE ASSESSEE HAS CLAIMED THE INTEREST TO REDUCE ITS TAX LIABILITY. WE ACCORDINGLY DELETE THE DISALLOWANCE OF RS.2,11,264/- FOR ASSESSMENT YEAR 2 009-10 AND ALLOW THIS ISSUE RAISED IN GROUND NO.2 OF ASSESSEES APPE AL. SIMILAR ISSUE IS RAISED IN GROUND NO.2 FOR 2010-11 & 2011-12 AND IN VIEW OF OUR ABOVE FINDING WE DELETE THE DISALLOWANCE OF RS.2,08,819/- AND RS. 2,29,024/- SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 14 AND ALLOW GROUND NO.2 OF ASSESSEES APPEAL FOR 2010 -11 & 2011-12 ALSO. 20. NOW WE TAKE UP THE THIRD ISSUE FOR ADDITION TOWAR DS UNEXPLAINED RECOVERY OF EXCESS WITHDRAWAL OF CAPITAL AT RS.3,00 ,000/- FOR ASSESSMENT YEAR 2009-10 AGAINST WHICH THE ASSESSEE IS IN APPEA L RAISING GROUND NO.3. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THERE WAS AN ADDITION IN THE CAPITAL ACCOUNT OF RS.3,00,000/- WHICH WAS GIVE N BY THE PARTNER MR. MANOJ JAIN AS PART OF ITS CAPITAL CONTRIBUTION. LD . A.O TREATED THE ALLEGED CREDIT OF RS.3,00,000/- AS UNEXPLAINED U/S 68 OF TH E ACT BY HOLDING THAT THE ASSESSEE FAILED TO EXPLAIN THE CASH CREDIT. LD . CIT(A) CONFIRMED THE VIEW. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. LD. COUNSEL REFERRING TO THE WRITTEN SUBMISSIONS FILED BEFORE L D. CIT(A) SUBMITTED THAT THE ALLEGED CASH CREDIT IS FROM KNOWN SOURCE I.E. P ARTNER OF THE FIRM. COPY OF THE CONFIRMATION, INCOME TAX RETURN OF THE PARTNER IS FILED. MR. MANOJ JAIN HAS OTHER SOURCES OF INCOME AND HAVING S UFFICIENT BALANCE IN BANK TO PAY TO THE ASSESSEE FIRM, THEREFORE NO ADDI TION WAS CALLED FOR U/S 68 OF THE ACT. 21. PER CONTRA DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED AND SUPPORTING THE ORDERS OF BOTH THE LOWER AUTHORITIES . SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 15 22. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. ADDITION U/S 68 OF THE ACT HAS BEEN MADE FOR UNEXPLAINED CASH CREDIT FOR THE CAPITAL ADDITION BY PARTNERS TO THE ASSESSEE FIRM. 23. WE OBSERVE THAT MR. MANOJ JAIN HAS GIVEN RS.3,00, 000/- RS.21,000/-, RS.6,65,000/-, RS.50,000/- AND RS.10,7 66/- AS CAPITAL CONTRIBUTION FOR ASSESSMENT YEAR 2009-10, 2010-11, 2011-12, 2013-14 AND 2014-15. IDENTITY OF THE PARTNER IS NOT DISPUTE D. PAYMENTS WERE MADE TO THE FIRM THROUGH ACCOUNT PAYEE CHEQUES. IN COME TAX RETURNS OF MR. MANOJ JAIN IS PLACED ON RECORD. MR.MANOJ JAIN HAS CONFIRMED THE AMOUNTS WHICH HAVE BEEN GIVEN TO THE ASSESSEE FIRM AS PART OF ITS PARTNERS CAPITAL CONTRIBUTION. FOR ASSESSMENT YEA R 2009-2010 TO 2011- 12 MR. MANOJ JAIN HAS SHOWN TOTAL TAXABLE INCOME OF RS.1,47,890/-, RS.9,56,710/- AND RS.17,98,230/- RESPECTIVELY. BAN K STATEMENT ON PAGE 74-75 OF THE PAPER BOOK SHOWS THAT SUFFICIENT BANK BALANCE WAS AVAILABLE BEFORE THE RESPECTIVE TRANSACTION OF THE CAPITAL CO NTRIBUTION. NO MAJOR AMOUNT OF CASH HAS BEEN DEPOSITED BEFORE THE ISSUAN CE OF THE CHEQUE TO THE ASSESSEE FIRM. LD. A.O HAS NOT CONDUCTED ANY E NQUIRY FROM MR. MANOJ JAIN BEFORE MAKING THE ALLEGED ADDITION. THE ALLEGED AMOUNTS OF CAPITAL CONTRIBUTION IS FOR REPAYING THE BANK LOAN OUTSTANDING IN THE SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 16 NAME OF ASSESSEE FIRM. WE THEREFORE ARE SATISFIED THAT THE ASSESSEE HAS SUCCESSFULLY PROVED THE IDENTITY, GENUINENESS AND C REDITWORTHINESS OF THE CAPITAL CONTRIBUTION RECEIVED FROM THE PARTNER MR. MANOJ JAIN. THEREFORE NO ADDITION WAS CALLED FOR U/S 68 OF THE ACT FOR RS . 3,00,000/- RS.21,000/-, RS.6,65,000/-, RS.50,000/- AND RS.10,7 66/-. 24 . AS REGARDS CAPITAL CONTRIBUTION OF RS.8,52,000/- DURING ASSESSMENT YEAR 2011-12 BY ANOTHER PARTNER MR. MANISH RAWATIYA THERE CAN BE NO DISPUTE ABOUT THE IDENTITY OF THE PARTNER MR. MANIS H RAWATIYA AND THE GENUINENESS OF THE TRANSACTION WHICH WAS ENTERED IN TO FOR REPAYING THE BANK LOAN OUTSTANDING ON THE FIRM. NOW THE LAST LI MB FOR US TO EXAMINE IS THE CREDITWORTHINESS OF THE PARTNER MR. MANISH RAWA TIYA WHO HAS PAID A SUM OF RS.8,52,000/-. LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT NO BOOKS OF ACCOUNTS WERE PREPARED THEREFORE PROVIS IONS OF SECTION 68 OF THE ACT ARE NOT APPLICABLE. WE HOWEVER FIND NO MER IT IN THIS CONTENTION BECAUSE THE PARTNERSHIP FIRM IS REQUIRED TO MAINTAI N THE BOOKS OF ACCOUNTS. BALANCE SHEET AND CAPITAL ACCOUNT HAS B EEN FURNISHED. THE CAPITAL CONTRIBUTION BY THE PARTNER MR. MANISH RAWA TIYA FOR RS.8,52,000/- DURING ASSESSMENT YEAR 2011-12 HAS TO PASS THROUGH CERTAIN ENTRIES IN WHICH ENTRY IS MADE FOR RECEIVIN G THE MONEY IN BANK BY SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 17 WHICH THE BANK ACCOUNT IS DEBITED AND PARTNERS CAPI TAL ACCOUNT IS CREDITED. NOW ASKING ABOUT THE CREDITWORTHINESS OF THE PARTNER FOR INVESTING CAPITAL OF RS.8,52,000/- IS WELL WITHIN T HE POWERS OF THE LD. A.O. THE ASSESSEE IS BOUND TO SATISFY THE LD. A.O BY PLA CING VARIOUS EVIDENCES TO PROVE THE CREDITWORTHINESS OF THE PARTNER. IN T HE INSTANT CASE WITH REGARD TO THE AMOUNT RECEIVED FROM MR. MANISH RAWAT IYA FOR RS.8,52,000/- ASSESSEE FAILED TO FILE CONFIRMATION LETTER, INCOME TAX RETURN, BANK STATEMENT AND PROOF OF SOURCE OF INCOM E. HOWEVER, LD. A.O HAS NOT CONDUCTED ANY ENQUIRY INTO THE MATTER BY IS SUING NOTICES TO SHRI MANISH RAWATIYA CALLING FOR THE NECESSARY INFORMATI ON TO PROVE THE CREDITWORTHINESS. 25. IN THESE GIVEN FACTS AND CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE ASSESSEE DESERVES ONE MORE OPPORTUNITY TO PROVE THE CREDITWORTHINESS OF THE PARTNER MR. MANISH RAWATIYA GIVING CAPITAL CONT RIBUTION OF RS.8,52,000/-. WE THEREFORE DIRECT THE ASSESSEE TO PLACE NECESSARY EVIDENCES TO PROVE THE CREDITWORTHINESS OF MR. MANI SH RAWATIYA BEFORE THE LD. A.O AND IN CASE LD. A.O IS NOT SATISFIED WI TH THE DOCUMENTS PLACED BY THE ASSESSEE THEN HE MAY ISSUE NECESSARY NOTICES TO MR. MANISH RAWATIYA CALLING FOR THE INFORMATION. AFTER CONDUCTING THESE SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 18 EXERCISES IF THE LD. A.O IS STILL NOT SATISFIED THE N HE WILL BE AT LIBERTY TO MAKE ADDITION AS PER THE PROVISIONS OF LAW. HOWEVE R OUR THIS DIRECTION SHALL NOT RESTRAIN THE ASSESSEE IN FILING APPEAL BE FORE THE HIGHER APPELLATE AUTHORITY AGAINST THE ADVERSE ACTION IF ANY TAKEN B Y THE LD. A.O. TO CONCLUDE, WE DIRECT THE LD. A.O TO DELETE THE ADDIT ION U/S 68 OF THE ACT MADE FOR THE AMOUNT OF RS. 3,00,000/- RS.21,000/-, RS.6,65,000/-, RS.50,000/- AND RS.10,766/- RECEIVED FROM THE PARTN ER MR. MANOJ JAIN FOR ASSESSMENT YEARS 2009-10, 2010-11, 2011-12, 201 3-14 AND 2014-15 WHEREAS WITH REGARD TO ADDITION OF RS.8,52,000/- U/ S 68 OF THE ACT FOR THE UNEXPLAINED CREDIT RECEIVED FROM ANOTHER PARTNER MR . MANISH RAWATIYA THE ISSUE IS SET ASIDE TO THE FILE OF LD. A.O FOR N ECESSARY ADJUDICATION AS PER OUR DIRECTION MENTIONED HEREIN ABOVE. NEEDLESS TO MENTION THAT PROPER OPPORTUNITY OF BEING HEARD MAY BE GIVEN TO T HE ASSESSEE. 26. IN THE RESULT GROUND NO.3 OF THE ASSESSEES APPEA L FOR ASSESSMENT YEARS 2009-10, 2010-11, 2013-14 AND 2014-15 ARE ALL OWED AND FOR ASSESSMENT YEAR 2011-12 IS PARTLY ALLOWED FOR STATI STICAL PURPOSES. 27. IN THE RESULT APPEALS OF THE ASSESSEE FOR 2008-09 , 2009-10,2010-11, 2013-14 AND 2014-15 ARE ALLOWED AND FOR ASSESSMENT YEAR 2011-12 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. SHREE SAI BUILDERS IT(SS)A NO.245 TO 249/IND/2017 & ITA NO.631/IND/201 7 19 THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.05.201 9. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED 30 TH MAY, 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE