Late Shri Atmaram J. Navani through L/H Gangaben A. Navani, Adipur-Kutch V. The Deputy Commissioner of Income Tax, Central Circle-1, RAJKOT-GUJARAT

ITSSA 6/RJT/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8058 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: SANJAY SHAH
• Keywords: Unexplained investment; Gift; Additional evidence; Block assessment; Commercial expediency
• Section: 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.06/RJT/2010 (ASSESSMENT YEAR 2007-08) LATE SHRI ATMARAM J NAVANI VS DY.CIT, CENT.CIR.1 THROUGH LEGAL HEIR RAJKOT GANGABEN A NAVANI PLOT NO.406-407 WARD 2-B, ADIPUR, GANDHIDHAM PAN : AATPN1652N (APPELLANT) (RESPONDENT) DATE OF HEARING : 10-08-2011 DATE OF PRONOUNCEMENT : 12-08-2011 APPELLANT BY : SHRI SANJAY SHAH RESPONDENT BY: SHRI MK SINGH O R D E R PER N.R.S. GANESAN, JM THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-IV, AHMEDABAD DATED 30-10-2009 AND PERTAINS TO ASSESSME NT YEAR 2007-08. 2. THE FIRST ISSUE RELATES TO DISALLOWANCE OF INTER EST EXPENSES OF RS. 9,11,848. 3. SHRI SANJAY SHAH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE INTEREST WAS PAID TO TWO BANKS AND THREE PRIVAT E PARTIES AND THAT THE MAJOR AMOUNT OF LOANS WERE TAKEN FROM BHUJ MERCANTILE CO- OP BANK & GANDHIDHAM MERCANTILE CO-OP BANK LTD. THE LD.REPRESENTATIVE F URTHER SUBMITTED THAT OUT OF THE BORROWED FUNDS, RS.70 LAKHS WAS PAID TO HARDIK HOTELS PVT LTD FOR EARNING ITA NO.06/RJT/2010 2 INTEREST AS WELL AS FOR PROMOTING THE BUSINESS. TH E LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE IS A DIRECTOR OF HARDIK HOTELS PVT LTD AND ALONGWITH HIS WIFE THEY HOLD 50% STAKE IN THE SHAREHOLDING OF THE COMPANY. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT FIRST YEAR NO INTEREST WAS CHARGED, HOWEVER, FROM THE SECOND YEAR INTEREST WAS CHARGED AS PER THE AGREEMENT. THEREFORE THERE IS NO QUESTION OF ANY DISALLOWANCE. 4. SHRI MK SINGH, THE LD.DR, ON THE OTHER HAND, SUB MITTED THAT HE WANTS TO PLACE RELIANCE ON THE DECISION OF THE LOWER AUTHORI TIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT( A), IN AN ATTEMPT TO FIND OUT THE COMMERCIAL EXPEDIENCY REQUIRED THE ASSESSEE TO PROVE WITH DOCUMENTARY EVIDENCE OR BY PRODUCTION OF BOOKS OF ACCOUNTS THAT THE FUNDS WERE USED FOR BUSINESS PURPOSE. THE COUNSEL APPEARING FOR THE AS SESSEE BEFORE THE CIT(A) COULD COMPLY WITH ANY OF THOSE REQUIREMENTS OF THE CIT(A). THE CIT(A) THEREFORE, CONFIRMED THE DISALLOWANCE OF INTEREST T O THE EXTENT OF RS. 9,11,848 AS REDUCED BY THE INTEREST DISALLOWABLE U/S 14A OF THE ACT. THE ASSESSEE, BEFORE US, IN THE PAPER BOOK HAS FURNISHED COPY OF ACCOUNT OF HARDIK HOTELS PVT LTD FOR THE RELEVANT FINANCIAL YEAR UNDER CONSIDERATION (PA GES 18-19) AND COPY OF LEDGER ACCOUNTS OF OTHER INDIVIDUAL LENDERS (PAGES 45 & 46 ). THE LD.REPRESENTATIVE HAS ALSO FILED COPY OF FORM NO.32 CERTIFYING APPOINTMEN T OF THE ASSESSEE AS DIRECTOR IN HARDIK HOTELS PVT LTD (PAGES 26-44) TO BUTTRESS THE POINT THAT THE ASSESSEE ITA NO.06/RJT/2010 3 BEING A DIRECTOR IN HARDIK HOTELS PVT LTD THERE IS A COMMERCIAL EXPEDIENCY IN THE AMOUNT BORROWED AND THE AMOUNT LOANED WITHOUT INTER EST. THERE IS ALSO A CLAIM THAT THE ASSESSEE AND HIS WIFE OWNS 50% SHARE IN HA RDIK HOTELS PVT LTD TO WHOM RS.70 LAKHS HAVE BEEN ADVANCED FREE OF INTEREST. T HE LD.CIT(A) SUSTAINED THE DISALLOWANCE FOR LACK OF EVIDENCE WHEREAS THE ASSES SEE BEFORE US HAS PRODUCED ABOVE DOCUMENTS. THEREFORE, THE CLAIM OF THE ASSES SEE NEEDS TO BE EXAMINED IN THE LIGHT OF THE MATERIAL PRODUCED BY THE ASSESS EE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. THE ISSUE OF INTEREST DISALLOWED IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECON SIDERATION. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF THE MATE RIAL PRODUCED BY THE ASSESSEE AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH L AW. 6. THE NEXT GROUND OF APPEAL PERTAINS TO CONFIRMATI ON OF RS. 63,483 OUT OF ADDITION OF RS. 78,483 TOWARDS THE UNEXPLAINED INVE STMENT IN SILVER. 7. SHRI SANJAY SHAH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN THE COURSE OF SEARCH SILVER WEIGHING 5.16 KGS WAS F OUND WHICH WAS ACCUMULATED OVER 20 YEARS THROUGH CUSTOMARY GIFTS OF NOMINAL VA LUES ON VARIOUS OCCASIONS. HE FURTHER SUBMITTED THAT THE CIT(A) THOUGH FOUND T HAT THE ASSESSING OFFICER COULD NOT ESTABLISH THAT THE SILVER ARTICLES AND CO INS WERE PURCHASED DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R CONSIDERATION, CONFIRMED THE ADDITION TO THE EXTENT OF RS.63,483 WHICH IS BA SED ON PURE SURMISES AND ITA NO.06/RJT/2010 4 PRESUMPTION. THE LD.REPRESENTATIVE SUBMITTED THAT IN THE ABSENCE OF ANY MATERIAL TO CONTROVERT THE CONTENTIONS OF THE ASSESSEE, THE ADDITION NEEDS TO BE DELETED. 8. SHRI MK SINGH, THE LD.DR, ON THE OTHER HAND, REL IED UPON THE ORDER OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE SUBMISSIONS ON EITHER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A) FOUND THA T THE ASSESSING OFFICER COULD NOT ESTABLISH THAT THE SILVER ARTICLES AND COINS WE RE PURCHASED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CIT(A) ALSO FOUND THAT THE ASSESSEE WAS SUBJECTED TO SEARC H ON 07-02-2002 AND THE ASSESSING OFFICER HAD DISCUSSED THE SAME IN THE ASS ESSMENT ORDER FOR AY 2001- 02 WHICH WAS PASSED ON 30-12-2008. THEREFORE, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER COULD HAVE VERY WELL ASCERTAINED AS TO HOW MUCH SILVER WAS RECOVERED DURING THE COURSE OF PREVIOUS SEARCH AND THE DIFFERENCE COULD HAVE BEEN TREATED AS UNEXPLAINED. THE CIT(A) ALSO FOUND FROM THE ASSESSMENT ORDER FOR AY 2001-02 THAT ALL THE ADDITIONS MADE IN THE B LOCK ASSESSMENT WERE DELETED. THE CIT(A) ALSO OBSERVED THAT NO ADDITION ON ACCOUN T OF UNEXPLAINED SILVER WAS MADE IN THE BLOCK ASSESSMENT NOR DID THE COUNSEL AP PEARING FOR THE ASSESSEE BEFORE HIM COULD THROW ANY LIGHT IN THIS REGARD. T HE CIT(A) EVEN AFTER FINDING SO, RESORTED TO PRESUMPTION AND TAKING INTO ACCOUNT THE SEIZE OF THE FAMILY AND THEIR STATUS, HELD THAT ACCUMULATION OF GIFTS OF SILVER A RTICLES / COINS OF 1 KG IS REASONABLE AND THEREFORE, ALLOWED RELIEF OF RS.15,0 00. THE ASSESSEE EXPLAINED ITA NO.06/RJT/2010 5 THAT GIFTS OF SILVER ARTICLES / COINS WERE ACCUMULA TED OVER 20 YEARS AND IF IT WERE TO BE REJECTED, IT WAS FOR THE DEPARTMENT TO ESTABLISH THAT THE SILVER ARTICLES / COINS WERE NOT ACCUMULATED OVER 20 YEARS AND IN FACT PURC HASED DURING THE YEAR CONSIDERATION, IF ANY ADDITION WAS TO BE MADE. AS FOUND BY THE CIT(A) THERE WAS SEARCH ON AN EARLIER OCCASION AND THE RECORDS ARE W ITH THE DEPARTMENT. FURTHER, THE CIT(A) HAS CLEARLY FOUND THAT THERE WAS NO ADDI TION ON ACCOUNT OF UNEXPLAINED SILVER IN THE BLOCK ASSESSMENT ORDER AN D THAT ALL THE ADDITIONS MADE IN THE ASSESSMENT YEAR 2001-02 WERE DELETED IN APPE AL. IN THESE CIRCUMSTANCES, THERE WAS NO SCOPE FOR RESORTING TO ANY SURMISES AN D CONJECTURES. THEREFORE, IN OUR OPINION, THE MATTER NEEDS TO BE LOOKED INTO AFR ESH AT THE ASSESSMENT STAGE. ACCORDINGLY THE ORDER OF THE LOWER AUTHORITY ON THI S ISSUE IS SET ASIDE AND THE SAME IS RESTORED TO THE FILE OF THE ASSESSING OFFIC ER. THE ASSESSING OFFICER IS DIRECTED TO FIND OUT AS TO WHETHER THERE WAS ANY SE IZURE OF SILVER ARTICLES / COINS IN THE SEARCH PROCEEDINGS AND WHETHER ANY ADDITION ON THAT ACCOUNT WAS MADE AND IF SO, DUE CREDIT SHOULD BE GIVEN FOR THE SAME IN T HE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER SH ALL BRING ON RECORD ALL THE MATERIAL AND THEREAFTER DECIDE THE SAME IN ACCORDAN CE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 10. THE NEXT GROUND PERTAINS TO DELETION OF ADDITIO N OF RS. 29,255 TOWARDS UNEXPLAINED INVESTMENT ON THE BASIS THAT STAMP DUTY , REGISTRATION FEE AND ADDITIONAL STAMP DUTY IS NOT RECORDED IN THE BOOKS OF ACCOUNT. ITA NO.06/RJT/2010 6 11. SHRI SANJAY SHAH, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE THE ADDITION ON THE GROU ND THAT THE AMOUNT OF RS.29,255 WAS NOT ACCOUNTED FOR. THE CIT(A) REFUS ED TO ADMIT THE AFFIDAVIT FILED BY THE SELLER, SHRI MANUBHA JITUBHA ZALA AFFIRMING THAT THE STAMP DUTY, REGISTRATION FEE AND ADDITIONAL STAMP DUTY WAS PAID BY HIM, ON THE GROUND THAT THE AFFIDAVIT WAS AN ADDITIONAL EVIDENCE AND THE AS SESSEE HAD NOT EXPLAINED THE REASON WHY THE ADDITIONAL EVIDENCE WAS FILED. THE LD.REPRESENTATIVE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN NOT ACCEPTING THE AFFIDAVIT ON RECORD IN THE WAKE OF THE FACT THAT THE ASSESSING OFFICER HAS NOT PROVIDED ADEQUATE OPPORTUNITY OF HEARING BEFORE COMPLETING THE ASSESSMENT. HE PL EADED THAT THE ADDITION MAY BE DELETED. 12. SHRI MK SINGH, THE LD.DR, ON THE OTHER HAND, RE LIED UPON THE ORDERS OF AUTHORITIES BELOW. 13. WE HAVE HEARD THE SUBMISSIONS ON EITHER SIDE AN D HAVE GONE THROUGH THE MATERIAL PLACED BEFORE US. THE ADDITION OF RS. 29, 555 WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PAYMENT OF STAMP DUTY, RE GISTRATION FEE AND ADDITIONAL STAMP DUTY ON THE GROUND THAT THE SAME WERE NOT FOU ND RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE, IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A), HAS SOUGHT TO FILE AN ADDITIONAL EVIDENCE I N THE FORM OF AFFIDAVIT FROM THE SELLER, SHRI MANUBHA JITUBHA ZALA. THE CIT(A) REF USED TO ADMIT THE AFFIDAVIT ON THE GROUND THAT NO REASON WAS ADDUCED BY THE ASSESS EE AND THEREFORE WAS NOT ITA NO.06/RJT/2010 7 IN CONFORMITY WITH RULE 46A OF IT RULES. AS PER TH E LD..REPRESENTATIVE FOR THE ASSESSEE, THE ASSESSING OFFICER DID NOT PROVIDE ADE QUATE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE COMPLETING THE ASSESSMENT. THIS PLEA WAS RAISED BEFORE THE CIT(A) ALSO. THEREFORE, IN OUR OPINION, THE CIT (A) WAS NOT CORRECT IN HOLDING THAT THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY THE ASSESSEE WAS NOT IN CONFORMITY WITH RULE 46A OF IT RULES. THEREFORE, I N OUR OPINION, THE ISSUE NEEDS TO BE CONSIDERED AFRESH. HOWEVER, SINCE WE HAVE RE MITTED THE OTHER ISSUES IN THIS APPEAL TO THE FILE OF THE ASSESSING OFFICER, F OR THE SAKE OF CONSISTENCY, THE ORDER OF CIT(A) ON THIS ISSUE IS SET ASIDE AND THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DI RECTED TO TAKE THE AFFIDAVIT OF SHRI MANUBHA JITUBA ZALA ON RECORD AND DECIDE THE I SSUE AFRESH AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 14. THE NEXT ISSUE PERTAINS TO ADDITION OF RS.6,58, 200 U/S 68 IN RESPECT OF GIFTS. 15. SHRI SANJAY SHAH, THE LD.REPRESENTATIVE FOR THE ASSESSEE FAIRLY CONCEDED THAT EXACTLY IDENTICAL ISSUE OF ADDITION U/S 68 IN RESPECT OF GIFTS, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 IN ITA NO.606/ RJT/2010 AND IT (SS) A NO.05/RJT/2010 HAS BEEN DECIDED BY THIS BENCH OF TH E ITAT VIDE ORDER DATED 21- 07-2011. THE TRIBUNAL RESTORED THE ISSUE TO THE FI LE OF THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH IN THE LIGHT OF JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS P MOHANA KALA (2007) 291 ITR 278 (SC ). THE LD. DR AGREED TO ITA NO.06/RJT/2010 8 THIS PROPOSITION. THEREFORE, CONSISTENT WITH THE P RECEDENT, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSIN G OFFICER IS DIRECTED TO FOLLOW THE DIRECTIONS CONTAINED IN THE ORDER OF THE TRIBUNAL D ATED 21-07-2011 PASSED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 12- 08-201 1. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 12 TH AUGUST, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-IV, AHMEDABAD 4. THE CIT, CENTRAL-II, AHMEDABAD 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT