The ITO, Ward-4(4),, Ahmedabad v. Mahalaxmi Hsg. & Finstock Pvt. Ltd.,, Ahmedabad

ITA 114/AHD/2005 | 1991-1992
Pronouncement Date: 26-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 11420514 RSA 2005
Assessee PAN ABCMO3064R
Bench Ahmedabad
Appeal Number ITA 114/AHD/2005
Duration Of Justice 5 year(s) 4 month(s) 15 day(s)
Appellant The ITO, Ward-4(4),, Ahmedabad
Respondent Mahalaxmi Hsg. & Finstock Pvt. Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 26-05-2010
Date Of Final Hearing 25-05-2010
Next Hearing Date 25-05-2010
Assessment Year 1991-1992
Appeal Filed On 11-01-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' [BEFORE SHRI BHAVNESH SAINI JM & SHRI A N PAHUJA AM ] ITA NO.114/AHD/2005 (ASSESSMENT YEAR:-1991-92) INCOME-TAX OFFICER WARD- 4(4) AHMEDABAD V/S MAHALAXMI HOUSING & FINSTOCK P. LTD. NARAYAN CHAMBERS ASHRAM ROAD AHMEDABAD [PAN: AABCMO 3064 R] [APPELLANT] [RESPONDENT] ITA NO.685/AHD/2007 (ASSESSMENT YEAR:-1991-92) INCOME-TAX OFFICER WARD- 4(4) AHMEDABAD V/S MAHALAXMI HOUSING & FINSTOCK P. LTD. NARAYAN CHAMBERS ASHRAM ROAD AHMEDABAD [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI C K MISHRA DR ASSESSEE BY:- SHRI ANIL N SHAH AR O R D E R A N PAHUJA: THESE TWO APPEALS BY THE REVENUE -ONE QUANTUM APPEAL IN ITA NO.114/A/05 AGAINST AN ORDER DATED 08 -11-2004 OF THE LD.CIT(APPEALS)-VIII AHMEDABAD AND THE OTHER IN I TA NO.685/A/2007 AGAINST AN ORDER DATED 30-11-2006 OF THE CIT(A)-VII AHMEDABAD CANCELLING PENALTY OF RS.2 64 840/- LEV IED U/S 271(1)(C) OF THE INCOME-TAX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT] FOR THE AY 1991-92 WERE HEARD TOGETHER FOR THE SAKE OF CON VENIENCE AND ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER. ITA NO.114/A/05 2. ADVERTING FIRST TO THE QUANTUM APPEAL THE R EVENUE HAVE RAISED THE FOLLOWING GROUNDS: 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION MADE BY THE AO U/S 68 OF THE IT ACT AMOUNTING TO RS .5 99 200/-. ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 2 2 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION MADE BY THE AO U/S 68 OF THE IT ACT TO THE EXTENT O F RS.22 63 525/-. 3 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE OF DEPRECIATION TO THE EXTENT OF RS.91 122/-. 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO 5 IT IS THEREFORE PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTOED TO T HE ABOVE EXTENT. 3. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL FA CTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT IN PURSUANCE TO RETUR N DECLARING LOSS OF RS.30 17 188/- ASSESSMENT WAS ORIGINALLY COMPLETED ON AN INCOME OF RS.68 62 681/- VIDE ORDER DATED 28.3.1994. ON AP PEAL THE LD. CIT(A) VIDE HIS ORDER DATED 16-12-1998 SET ASIDE T HE ADDITION OF RS.5 99 200/- U/S 68 OF THE ACT ON ACCOUNT OF CREDI TS FROM THE FOLLOWING TWO PARTIES: 1 SHRI V PRAKASH RS.3 44 000/- 2 M/S MAN-VIJAY ASSOCIATES RS.2 55 000/- ---------------- RS.5 99 000. ON FURTHER APPEAL BY THE REVENUE THE ITAT VIDE TH EIR ORDER DATED 27.1.2006 UPHELD THE ORDER OF THE LD. CIT(A) IN ITA NO.406/AHD./1999. IN PURSUANCE TO DIRECTIONS OF TH E LD. CIT(A) THE AO ASKED THE ASSESSEE TO PRODUCE SHRI V PRAKASH AND CHAIRMAN OF M/S MAN VIJAY ASSOCIATES. INSTEAD OF PRODUCING T HESE TWO PERSONS THE ASSESSEE VIDE ITS LETTER DATED 4-12-20 00 STATED THAT THERE WAS NO ACCOUNT IN THE NAMES OF V PRAKASH AND MAN-VIJAY ASSOCIATES. VIDE ORDER-SHEET ENTRY DATED 22-12-2000 THE ASSESSEE WAS ASKED TO EXPLAIN WHY THIS FACT WAS NEVER STATED BEFORE THE LD. CIT(A). SINCE DURING THE COURSE OF ORIGINAL ASSESSM ENT PROCEEDINGS THE ASSESSEE HAD FILED COPIES OF ACCOUNTS OF THESE PERSONS AND NOW ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 3 THE ASSESSEE STATED THAT THERE WERE NO SUCH ACCOUNT S WHILE DESPITE REPEATED REQUESTS TO PRODUCE THESE PERSONS THE AS SESSEE DID NOT COMPLY AND EVEN THE SUMMON ISSUED TO THE CHAIRMAN OF THE MAN- VIJAY ASSOCIATES COULD NOT BE PERSONALLY SERVED IN VIEW OF THE INCORRECT ADDRESS GIVEN BY THE ASSESSEE THE AO ADD ED THE AFORESAID AMOUNT U/S 68 OF THE ACT. 4. ON APPEAL THE ASSESSEE SUBMITTED THAT THE COR RECT PARTY WAS SHRI B. PRAKASH AND NOT SHRI V. PRAKASH AS MENTIONED IN THE ASSESSMENT ORDER. WHILE DRAWING ATTENTION OF THE LD. CIT(A) TO A LETTER DA TED 5.1.2001 ADDRESSED TO THE THEN DCIT CIRCLE 7(4) AHMEDABAD IT WAS POINTED O UT THAT SHRI PRAKASH FUIBHAI. PATEL WAS PRODUCED BEFORE THE AO AND HIS STATEMENT WAS ALSO RECORDED AND THE APPELLANT HAD REQUESTED A COPY OF THE SAME. REFEREN CE WAS ALSO INVITED TO A LETTER DATED 24.01.2001 WHEREUNDER THE ASSESSEE HA D FILED EVIDENCE IN FORM NO. 7/12 IN SUPPORT OF AGRICULTURAL LAND OWNED IN THE N AME OF SHRI PRAKASH FULBHAI PATEL WHO HAD GIVEN LOAN OF RS.3 44 000/- AND A CON FIRMATION FROM SHRI PRAKASH FULBHAI PATEL WAS ALSO ENCLOSED . ACCORDINGLY IT WAS PLEADED THAT NO ADDITION WAS CALLED FOR . SINCE THE ASSESSEES REPRESENTATI VE HAD SUBMITTED TWO PAPER BOOKS NO 1 AND 2 BEFORE THE LD. CIT(A) ACCORDINGLY COMMENTS OF THE AO WERE CALLED FOR. IN THE SAID PAPER BOOK THE ASSESSEE HA D SUBMITTED NECESSARY DOCUMENTS FROM THE SOCIETY IN RESPECT OF THE MEMBER S WHO HAD MADE ADVANCES IN CASH. THEREAFTER THE ITO WARD-4(4) AHMEDABA D SUBMITTED HIS REMAND REPORT DATED 19-7-2002 IN SUPPORT OF AN EARLIER R EPORT DATED 27-5-2002 AND THE SAME WERE CONFRONTED TO THE ASSESSEE COMPANY BY THE LD. CIT(A). AFTER HAVING REPLY OF THE ASSESSEE FURTHER CLARIFICATION FROM THE AO WITH REFERENCE TO THE ABOVE TWO CREDITS OF RS.3 44 000/- APPEARING IN THE NAME OF SHRI V PRAKASH AND RS.2 55 000/- IN THE NAME OF M/S MAN-VIJAY ASSOCIAT ION WAS SOUGHT. IN HIS REPORT DATED 7-10-2003 THE AO STATED THAT CONFIRMATION LE TTERS FROM THE SAID TWO CREDITORS HAD BEEN DULY FILED BEFORE HIM. WHILE QUO TING FROM THE ORIGINAL ASSESSMENT ORDER DATED 28-3-1994 THE AO STATED AS UNDER: ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 4 ON GOING THROUGH THE RE-ASSESSMENT RECORD THE CON TENTION OF THE APPELLANT IS FOUND TO BE CORRECT. HE HAS FILED COPY OF EXTRACT OF 7/12 CERTIFICATE OF REGISTRATION OF NTC REGISTERED UNDER BOMBAY NON- TRADING ACT 1958 AUDITED ACCOUNT ETC. 5. IN THE LIGHT OF SUBMISSIONS ON BEHALF OF THE ASSESSEE AND REPORT OF THE AO THE LD. CIT(A) DELETED THE ADDITION IN THE FOLLOWIN G TERMS: 2.6 I HAVE PERUSED THE DETAILS FILED AND ALSO THE REMAND REPORT CALLED FOR AND SUBMITTED BY THE AO AND FIND THAT THE AO HAS NOT DENIED THAT THE CONFIRMATION LETTERS HAVE NOT BEEN FILED AND IN V IEW OF THE CONFIRMATION LETTERS AND OTHER EVIDENCES FILED IN CONTINUATION O F THE EARLIER SUBMISSIONS AND THE CONTENTION OF THE APPELLANT THAT THE BURDEN UPON IT HAS BEEN DISCHARGED IS CORRECT I DO NOT SEE ANY JUSTIFICATI ON IN MAKING THE ADDITION MORE SO PARTICULARLY WHEN SHRI B. PRAKASH HAS ALREA DY BEEN PRODUCED WHICH WAS ONE OF THE BASIS FOR MAKING ADDITION IN REASSESSMENT PROCEEDINGS. ACCORDINGLY THE ADDITION OF RS.3 44 0 00/- RELATING TO SHRI V. PRAKASH (CORRECT NAME SHRI B PRAKASH) AND SIMILARLY ADDITION OF RS.2.55.000/- IN RESPECT OF M/S MANVIJAY ASSOCIATIO N CANNOT BE SUSTAINED CONSIDERING THAT CERTIFICATE OF REGISTRATION AS NTC HAS BEEN FILED BEFORE THE AO AND CONFIRMED BY HIM IN HIS REPORT DATED 7-10-20 03 AND ACCORDINGLY DIRECTED TO BE DELETED. 6. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE S UPPORTED THE FINDINGS OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY THE ADDITIONS MADE U/S 68 O F THE ACT IN RESPECT OF AMOUNTS RECEIVED FROM AFORESAID TWO PERS ONS NAMELY SHRI B PARKASH AND M/S MAN-VIJAY ASSOCIATION HAVE BEEN DELETED BY THE LD. CIT(A) ON THE BASIS OF REMAND REPORTS OF THE AO AC CEPTING THE CONTENTIONS OF THE ASSESSEE IN THE LIGHT OF CONFIRM ATIONS OF THESE TWO PARTIES AS ALSO DUE TO THE FACT THAT SHRI B PARKAS H HAD ALREADY BEEN PRODUCED. IN THESE CIRCUMSTANCES ESPECIALLY WHEN T HE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL FOR TAKING A DIFFERENT VIEW ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 5 IN THE MATTER NOR EVEN ATTEMPTED TO CONTROVERT THE FINDINGS OF THE LD. CIT(A) WE ARE NOT INCLINED TO INTERFERE. THEREFORE GROUND NO.1 IN THE APPEAL IS DISMISSED. 8. GROUND NO.2 RELATES TO ADDITION OF RS. 22 63 525 /- U/S 68 OF THE ACT. IN FACT THE ADDITION OF RS.26 99 525/- MADE B Y THE AO U/S 68 OF THE ACT IN THE ORIGINAL ASSESSMENT PROCEEDINGS HA D BEEN RESTORED TO THE FILE OF THE AO FOR CONDUCTING FURTHER ENQUIR IES BY THE LD. CIT(A) VIDE HIS ORDER DATED 16.12.1998. THE RELEVA NT FACTS IN BRIEF ARE THAT DURING THE COURSE OF ORIGINAL ASSESSMENT P ROCEEDINGS THE AO ASKED THE ASSESSEE TO FURNISH THE NAMES AND ADDR ESSES OF ALL THE PERSONS WHO HAD GIVEN THE ADVANCE IN CASH IN EX CESS OF RS.20 000/- IN THE HOUSING SCHEME. THE ASSESSEE TH EREAFTER FURNISHED CONFIRMATORY LETTERS FROM SOME OF THE PER SONS COPIES OF POSSESSION LETTERS / FOLIO OF SHARE CERTIFICATES W HEREVER AVAILABLE. IN ORDER TO ASCERTAIN THE IDENTITY OF THE PAYER AND THE GENUINENESS OF THE TRANSACTIONS THE ASSESSEE WAS ASKED TO PROD UCE THE PERSONS TO EXAMINE THEM. THE ASSESSEE DID NOT PRODUCE THE P ERSONS WHO HAD GIVEN THE ADVANCE. THE AO THEREAFTER SHOWCAUS ED THE ASSESSEE PROPOSING TO ADD THE AMOUNT OF RS.26 99 525/- U/S 68 OF THE ACT.. SINCE THE ASSESSEE FAILED TO ESTABLISH TH E IDENTITY AND CAPACITY OF THE AFORESAID PERSONS AS ALSO GENUINEN ESS OF THE SAID CREDITS DESPITE REPEATED OPPORTUNITY THE AO ADDED THE AMOUNT OF RS.26 99 525/- U/S 68 OF THE ACT. 9. ON APPEAL THE LD. CIT(A) FOUND THAT THE AO HAD NOT ADDRESSED THE SPECIFIC ISSUE I.E. WHETHER THE CREDITS RECEIVED BY THE FIRM WERE GENUINE OR NOT AND ACCORDINGLY DIRECTED THE AO TO MAKE FURTHER SPE CIFIC INQUIRIES WITH REFERENCE TO AMOUNTS RECEIVED IN EXCESS OF RS.20 000/- WITH T HE FOLLOWING REMARKS AT PARA 20: ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 6 '29. THE APPELLANT HAS FURNISHED THE NAME-WISE DETA ILS OF THE PERSONS FROM WHOM ADVANCES HAVE BEEN RECEIVED FOR T HE VARIOUS SCHEMES GIVING RECEIPT NO. ETC. FOR THE PAYMENT RE CEIVED. THESE DETAILS SHOW THAT WHILE PAYMENTS FROM SOME OF THE P ERSONS HAVE BEEN RECEIVED BY CHEQUE LARGE SUMS HAVE ALSO BEEN RECEIVED IN CASH FROM VARIOUS PERSONS. KEEPING IN VIEW THAT A L ARGE NUMBER OF CREDITS APPEAR IN THE NAMES OF A LARGE NUMBER OF PE RSONS PERTAINING TO VARIOUS SCHEMES THE AO MAY NOW VERIFY AT LEAST THE AMOUNTS RECEIVED IN CASH IN EXCESS OF RS.20 000/- BY SUBJEC TING THE MATTER TO THE TESTS OF A CASH CREDIT I.E. IDENTITY OF THE PAYER HIS CREDITWORTHINESS AND GENUINENESS OF THE AMOUNT RECE IVED. FOR THIS PURPOSE THE MATTER IS AGAIN REMANDED BACK TO THE L EVEL OF THE AO AND RESTORED TO HIS FILE FOR EXAMINING AND DECIDING THE ISSUE ON THE LINES INDICATED ABOVE. THE APPEAL IS SET ASIDE FOR THE LIMITED PURPOSE OF DECIDING THE ISSUE OF CREDITS IN SCHEME ADVANCE MONEY AS WELL AS THE CASH CREDITS REFERRED TO IN P ARA 19 ON PAGE 14 OF HIS ORDER. 9.1 IN PURSUANCE TO AFORESAID DIRECTIONS OF THE L D. CIT(A) DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO PRODUCE THE PERSONS MAKING THE ADVANCES. THE ASSESSEE DID NOT PRODUCE A NY OF THESE PERSONS WHILE SUMMONS ISSUED BY REGISTERED POST TO THESE PERSONS AT THE ADDRESSES GIVEN BY THE ASSESSEE WERE RETURNED BACK BY THE POSTAL AUTHORITY UNSERVED. THEREAFTER INQUIRY WAS CONDUC TED THROUGH INSPECTOR OF THE CIRCLE WHO REPORTED THAT CERTAIN A DDRESSES GIVEN BY THE ASSESSEE WERE FOUND TO BE INCORRECT AND THE PE RSONS WERE NOT AVAILABLE ON THESE ADDRESSES GIVEN AS THE PREMISES WERE CLOSED. SINCE THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY AND CAPACITY OF THE AFORESAID PERSONS AS ALSO GENUINENESS OF THE SA ID CREDITS DESPITE REPEATED OPPORTUNITY VIDE ORDER SHEET ENTRI ES DATED 10.10.2000 22.12.2000 AND SHOWCAUSE NOTICE DATED 20 .11.2000 & 27.2.2001 THE AO ADDED THE AMOUNT OF RS.26 99 525 /- U/S 68 OF THE ACT.THE DETAILS OF THESE PARTIES HAVE NOT BEEN DISC USSED IN THE ASSESSMENT ORDER WHILE THE LD. CIT(A) APPENDED A LIST OF THES E PARTIES AS ANNEXURE-I TO HIS ORDER. THE LD. CIT(A) NOTICED THAT THE CONFIRMATIO NS RELATED TO 20 PERSONS WHO WERE STATED TO HAVE BOOKED FLATS IN VARIOUS SCHEMES . IN THE REMAND REPORT CALLED FOR THE LD. CIT(A) THE AO SUBMITTED IN HIS LETTER DATED 19.7.2002 THAT SMT. ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 7 USHABEN M. PANCHAL INSPECTOR HAD VISITED THE PREMI SES/VARIOUS SCHEMES AND VERIFIED THE FACTUAL POSITION WHEN A NUMBER OF PR EMISES WERE FOUND LOCKED WHILE IN RESPECT OF OTHERS DIFFERENT PERSONS WERE OCCUPYING THE SAID PREMISES. IN PARTICULAR IT WAS STATED THAT SUMMONS WERE ISSUED TO FIVE PARTIES OF WHICH THREE WERE RETURNED UNNERVED . AS REGARDS SUMMONS SERVED ON THE TWO PARTIES NAMELY. SHRI_SUNILKUMAR RATILAL SHAH- RS.2.18 000/- APPEARING AT SR NO 16 OF THE ANNEXURE AND SHRI RATILAL BHANUBHAI SHAH- RS.40 .000/- AND RS.1.78 000/- APPEARING AT SR. NO. 14 AND 15 OF THE ANNEXURE THE AO INFORMED THAT IN THEIR REPLY FILED ON 1.6.2002 THESE PERSONS HAD DENIED H AVING DEPOSITED ANY AMOUNT WITH THE ASSESSEE COMPANY NOR THEY HAD EVEN HEARD THE NAME OF THE ASSESSEE. THEREAFTER DESPITE SHOW CAUSE NOTICE DATED 21-5-20 02 TO PRODUCE THE SAID 20 PERSONS THE ASSESSEE DID NOT PRODUCE ANY OF THE S AID THE PERSONS. HOWEVER FURTHER EVIDENCE OF ALLOTMENT LETTERS AGREEMENT WI TH THE COMPANY ETC WERE PRODUCED IN RESPECT OF SOME OF THE PARTIES. IN THE IR COMMENTS ON THE REMAND REPORT THE ASSESSEE'S REPRESENTATIVE SUBMITTED T HAT SOME OF THE PARTIES MAY NOT HAVE BEEN AVAILABLE AT THE PREMISES AS STATED IN TH E APPLICATION FORMS SINCE MEMBERS MIGHT HAVE MIGRATED AFTER SELLING THE FLATS OR MIGHT HAD SHIFTED OUT OF THE CITY PARTICULARLY WITH REFERENCE TO EARTHQUAKE WHICH TOOK PLACE ON 26.1.2001 THE PERIOD DURING WHICH THE AO MADE INQUIRIES. IN THE LIGHT OF THESE SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT OF TH E AO THE LD. CIT(A) CONCLUDED AS UNDER: 3-3 I HAVE GONE THROUGH THE COPIES OF VARIOUS EVIDE NCES IN THE SHAPE OF EVIDENCES INCLUDING CONFIRMATION LETTERS COPIES O F ACCOUNT OF THE SAID PERSONS NAME OF SAID PERSONS WHO HAVE ADVANCED MON IES TO THE COMPANY F FIND THAT THE AO HAS CALLED UPON THE APP ELLANT COMPANY TO. PRODUCE THE SAID PARTIES HOWEVER NONE OF THEM HAVE BEEN PRODUCED FOR REASONS STATED BY THE APPELLANT'S REPRESENTATIVE SH RI ANIL SHAH AND SHN A. P. NANAVATY. HOWEVER AT THE .SAME TIME THE AO HAS MADE INQUIRIES IN RESPECT OF THE ABOVE TWO PERSONS WHO HAVE CATEGORIC ALLY DENIED HAVING GIVEN ADVANCES TO THE APPELLANT COMPANY. THEREFORE IT WAS INCUMBENT AND IMPERATIVE UPON THE APPELLANT TO PRODUCE THE SA ID TWO PARTIES ATLEAST SINCE THE AO HAS MADE INQUIRIES AND AS PER EVIDENCE S ON RECORD THE PERSONS HAD DENIED HAVING MADE ADVANCES TO THE APPE LLANT COMPANY. I AM INCLINED TO HOLD THAT THE INFERENCE DRAWN BY THE AO IN RESPECT OF ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 8 FOLLOWING 2 AMOUNTS DEPOSITED IN CONNECTION WITH TH E APPELLANT COMPANY AS UNEXPLAINED INCOME U/S 68 OF THE ACT: NAME AMOUNT DEPOSITED SR. NO. APPEARING IN ANNEXURE --------------------------------------------------- ---------------------------- SHRI RATILAL B SHAH RS. 40 000 14 SHRI RATILAL B SHAH RS.1 78 000 15 SHRI SUNILKUMAR R SHAH RS.2 18 000 16 --------------- RS.4 36 000 3.4 ACCORDINGLY THE SAID ADDITION OF RS.4 36 000 /- IS CONFIRMED AND IN RESPECT OF BALANCE AMOUNT HAVING REGARD TO THE EVID ENCES PLACED ON RECORD AND THE INQUIRIES CONDUCTED BY THE AO IT IS HELD THAT THE APPELLANT HAS DISCHARGED ONUS IN RESPECT OF THE SAID CREDITS TO THE EXTENT WHICH IT WAS FEASIBLE AND NOTHING ADVERSE HAS OTHERWISE FOUN D BY THE AO AS SEEN FROM THE ASSESSMENT ORDER NO ADDITION IS CALLED FO R IN RESPECT OF THE SAID AMOUNTS. ACCORDINGLY THE APPELLANT COMPANY GETS RE LIEF OF RS.22 63 525/- (RS.26 99 525 RS.4 36 000/-). 10. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A) DELETING THE ADDITION OF RS. 22 63 525/- . THE LD. DR WHILE SUPPORTING THE ORDER OF THE AO CON TENDED THAT DESPITE A NUMBER OF OPPORTUNITIES GIVEN BY THE AO THE ASSESSEE DID NOT PRODUCE ANY OF THE TWENTY PARTIES LISTED IN TH E ANNEXURE TO THE ORDER OF THE LD. CIT(A). SINCE THE ASSESSEE HAD NOT ESTABLISHED IDENTITY AND CREDITWORTHINESS OF THE AFORESAID DEPO SITORS NOR EVEN GENUINENESS OF THE TRANSACTIONS ESPECIALLY WHEN TW O OF THESE PERSONS SHRI RATILAL B SHAH & SHRI SUNILKUMAR R SH AH HAD DENIED HAVING HEARD EVEN THE NAME OF THE COMPANY THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 22 63 52 5/-. THERE IS NOTHING TO SUGGEST IN THE ORDER OF THE LD. CIT(A) THAT THE ASSESSEE DISCHARGED THE ONUS LAID DOWN UPON THEM IN ESTABLIS HING IDENTITY/CREDITWORTHINESS OF ANY OF THESE PERSONS OR EVEN GENUINENESS OF THE TRANSACTIONS THE LD. DR ARGUED. ON THE OTHER HAND THE LEARNED AR ON BEHALF OF THE ASSESSEE WHILE CAR RYING US ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 9 THROUGH THE PAPER BOOK SUPPORTED THE ORDER OF THE LD. CIT(A). THE LD. AR PLEADED THAT THE PERSONS MENTIONED IN THE AN NEXURE TO THE ORDER OF THE LD. CIT(A) WERE NOT AVAILABLE INITIALL Y DUE TO EARTHQUAKE AND LATER DUE TO GODHRA RIOTS IN VIEW OF FEAR PSY CHOSIS PREVAILING AT THAT TIME. 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT BEFORE THE AO THE ASSE SSEE INITIALLY DID NOT DISCHARGE THE ONUS PLACED ON THEM FOR ESTABLISH ING IDENTITY/CREDITWORTHINESS OF ANY OF THE AFORESAID C REDITORS NOR EVEN GENUINENESS OF THE TRANSACTIONS . NOT ONE OF THESE DEPOSITORS WAS PRODUCED BEFORE THE AO DESPITE REPEATED OPPORTUNITI ES PROVIDED BY HIM. ON APPEAL THE LD. CIT(A) DELETED THE ADDITIO N ON THE GROUND THAT THE ASSESSEE HAD DISCHARGED ONUS IN RESPECT OF THE SAID CREDITORS TO THE EXTENT FEASIBLE HAVING REGARD TO THE EVIDENCES PLACED ON RECORD AND THE INQUIRIES CONDUCTED BY THE AO AND NOTHING ADVERSE HAS OTHERWI SE FOUND BY THE AO . WE FAIL TO UNDERSTAND WHEN CREDITORS WERE NOT EVEN PR ODUCED BEFORE THE AO DESPITE REPEATED REQUESTS HOW COULD AO FIND SOMETHING ADVE RSE AGAINST THE ASSESSEE. THE LD. CIT(A) HAS NOT STATED IN EXPLICIT TERMS HOW THE ASSESSEE DISCHARGED ONUS IN RESPECT OF ANY OF THESE CREDITORS NOR RECOR DED HIS SPECIFIC FINDINGS REGARDING THE IDENTITY/CREDITWORTHINESS OF ANY OF T HE PERSONS LISTED IN THE ANNEXURE OR EVEN IN RESPECT OF GENUINENESS OF THE T RANSACTIONS. WE ARE OF THE OPINION THAT THE APPLICATION OF MIND TO THE MATERIA L FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF THE INCOME TAX ACT MANDATES THAT THE ORDER OF THE CIT(A) WHILE DISPOSI NG OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATIO N THE DECISION THEREON AND THE REASON FOR THE DECISION. AS IS APPARENT FROM THE I MPUGNED ORDER IN OUR OPINION THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE NAMELY THA T EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER WHICH SHOU LD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAI SED BEFORE IT. THE REQUIREMENT ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 10 OF RECORDING OF REASONS AND COMMUNICATION THEREOF B Y THE QUASI-JUDICIAL AUTHORITIES HAS BEEN READ AS AN INTEGRAL PART OF TH E CONCEPT OF FAIR PROCEDURE AND IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF T HE RULE OF LAW. IT INTRODUCES CLARITY CHECKS THE INTRODUCTION OF EXTRANEOUS OR I RRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINESS IN THE DECISION-MAKING PROC ESS. WE MAY REITERATE THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. I T EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB (1995)1SCC 760(SC)]. THE RELEVANT FACTS ON T HE ISSUE DO NOT FIND MENTION IN THE APPELLATE ORDER EVEN BRIEFLY. THE RESULT IS THAT THE IMPUGNED ORDER SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKI NG ORDER. IN VIEW OF THE FOREGOING ESPECIALLY WHEN THE LD. CIT(A) HAS NOT P ASSED A SPEAKING ORDER WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE O RDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE APPEAL ON T HIS ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL THE LEARNED CIT(A ) SHALL PASS A SPEAKING ORDER KEEPING IN MIND INTER ALIA THE MANDATE OF PROVISI ONS OF SEC. 250(6) OF THE ACT. WITH THESE OBSERVATIONS GROUND NO. 2 IS DISPOSED O F. 12. GROUND NO.3 RELATES TO DISALLOWANCE OF DEPRECI ATION OF RS. 91 122/-. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE ASSESSEE DID NOT PRODUCE RELEVANT VOUCHERS IN RESPE CT OF PURCHASE OF MACHINERY. ACCORDINGLY THE AO DISALLOWED DEPREC IATION OF RS.1 10 379/-. ON APPEAL THE LEARNED CIT(A) CONCLU DED AS UNDER:- IN THE WRITTEN SUBMISSIONS MADE BEFORE ME IT IS P LEADED THAT THE SAID DEPRECIATION IS ADMISSIBLE AND THE SAME HAS BEEN AL LOWED IN AY 92-93 ON SIMILAR GROUNDS. 4.1 I HAVE GONE THROUGH THE FIXED ASSETS SCHEDULE OF BALANCE SHEET AS ON 31-3-1991 AND FIND THAT THE FOLLOWING TWO ITEMS HAD BEEN PURCHASED DURING THE FY 90-91: (I) AIR CONDITIONER RS. 21 500/- (II) MOTOR CAR RS. 2 07 730/- ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 11 ON WHICH DEPRECIATION OF RS.5 407/- AND RS.13 850/- RESPECTIVELY HAVE BEEN CLAIMED WHEREAS THE AO HAS DISALLOWED RS.1 10 379/-. HAVING REGARD TO THE FACT THAT THE APPELLANT HAD NOT PURCH ASED THE ASSETS DURING THE YEAR THE ACTION OF THE AO IS VALID TO THE EXTE NT OF THE ABOVE TWO ITEMS OF DEPRECIATION CLAIM OF RS.5 407/- + RS.13 850/- = RS.19 257/- AND THE APPELLANT COMPANY GETS RELIEF OF RS.91 122/- (RS.1 10 379 RS.19 257) ON THIS GROUND. 13 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR RELIED O N THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE S UPPORTED THE FINDINGS OF THE LD. CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY THE ASSESSEE PURCHASED ONLY AN AC AND MOTOR CAR DURING THE YEAR UNDER CONSIDERATION. IN THE ABSENCE OF RELEVANT BILLS THE LD. CIT(A) UPHELD THE DISALLOWA NCE OF DEPRECIATION ON THESE TWO ASSETS AND ALLOWED THE REMAINING DEPRE CIATION. THE LD. DR APPEARING BEFORE US COULD NOT POINT OUT ANY INFI RMITY IN THESE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A). IN TH E ABSENCE OF ANY MATERIAL BEFORE US WE ARE UNABLE TO TAKE A DIFFERE NT VIEW IN THE MATTER. THEREFORE GROUND NO. 3 IN THE APPEAL IS DI SMISSED. ITA NO.685/AHD/2007: 15. IN THIS APPEAL THE FOLLOWING GROUNDS HAVE BEE N RAISED BY THE REVENUE: 1 THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF T HE CASE IN CANCELING THE PENALTY OF RS.2 64 840/- LEVIED U/S 271(1)(C) O F THE I.T. ACT ON THE GROUND THAT EVEN THE ASSESSED INCOME WAS NIL AND AF TER FOLLOWING THE DECISION OF THE HONBLE ITAT AHMEDABAD SPECIAL BEN CH IN THE CASE OF APSARA PROCESSORS PVT. LTD. REPORTED IN 92 TTJ 645 IGNORING THE FACT THAT FACTS IN THIS CASE ARE DIFFERENT. 2 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN R ELYING UPON THE HONBLE ITAT SPECIAL BENCH AHMEDABAD DECISION IN T HE CASE OF CIT ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 12 VS. APSARA PROCESSORS PVT. LTD. (92 TTJ 645) WITHOU T APPRECIATING THE FACT THAT THE EXPLANATION 4(A) AS AMENDED WITH EFFE CT FROM 1-4-2003 IS CLARIFICATORY / CURATIVE IN NATURE AND HENCE HAS RE TROSPECTIVE EFFECT. IN THE CASE OF CIT VS. PRITHIPAL SINGH & CO. REPORTED IN 249 ITR 670 (SC) THE ASSESSMENT YEAR INVOLVED WAS 1970-71 I.E. BEFOR E EXPLANATION 4 WAS INSERTED IN SECTION 271(1)(C) OF THE I.T. ACT. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 4 IT IS THEREFORE PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED TO THE ABOVE EFFECT. 16. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THA T ASSESSMENT IN THIS CASE WAS COMPLETED VIDE ORDER DATED 28-3-94 U /S 143(3) OF THE ACT DETERMINING TOTAL INCOME OF RS.68 02 681/- AS AGAINST RETURNED LOSS OF RS.30 17 188/-. INTER ALIA PENALTY PROCEED INGS U/S 271(1)(C) OF THE ACT WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN PURSUANCE TO APPELLATE ORDER DATED 8.11 .2004 LOSS WAS DETERMINED AT RS.17 79 297/-.THE LD. CIT(A) IN THE SAID ORDER UPHELD ADDITION OF RS.56 513/- ON ACCOUNT OF BRAZIL-DELHI PROJECT ADDITION OF RS.4 36 000/- ON ACCOUNT OF ADVANCES RECEIVED FROM TWO PERSONS WHO DENIED HAVING GIVEN ANY ADVANCE AND DISALLOWANC E OF RS. 19 257/- ON ACCOUNT OF DEPRECIATION ON P & M IN RE SPONSE TO SHOWCAUSE NOTICE ISSUED BY THE AO BEFORE LEVY OF P ENALTY THE ASSESSEE SUBMITTED VIDE LETTER DATED 13.4.2005 THAT SINCE THE DEPARTMENT HAD PREFERRED APPEAL BEFORE THE ITAT PE NALTY PROCEEDINGS MAY BE KEPT IN ABEYANCE. HOWEVER THE A O DID NOT ACCEPT THIS PLEA ON THE GROUND THAT THE ASSESSEE T RIED TO EVADE TAX BY ADOPTING VARIOUS MEANS AND FURNISHING INACCURATE PA RTICULARS. THE ASSESSEE CLAIMED CAPITAL EXPENDITURE AS REVENUE EXPENDITURE; TRIED TO INTRODUCE UNEXPLAINED CASH IN THE FORM OF ADVANCES AND CLAIME D DEPRECIATION ON ASSETS NOT PUT TO USE AND THIS PROVED THE MALAFIDE INTENTION ON ITS PART. ACCORDINGLY THE AO CONCLUDED THAT THE ASSESSEE CONCEALED INCOME BY FUR NISHING INACCURATE ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 13 PARTICULARS THEREOF AND THEREFORE IMPOSED A PENALT Y OF RS.2 64 840/-@ 100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME OF RS.5 1 1 770 . 17. ON APPEAL THE LEARNED CIT(A) RELIED ON DECISIO NS IN THE CASE OF APSARA PROCESSORS (P) LTD. 92 TTJ 645(AHMEDABAD ) CIT VS. ZAM ZAM TANNEN 279 ITR 197 (ALL) R G SALES PVT. LTD. VS. CIT 278 ITR (CAL) CIT VS. PRITHIPAL SINGH 249 ITR 670 AND CONCLUDED THAT NO P ENALTY IS LEVIABLE WHEN THE TOTAL INCOME IS COMPUTED AT A NEGATIVE FIGURE OR NI L FIGURE. 18. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE RELYIN G UPON THE DECISION IN THE CASE OF CIT V. GOLD COIN HEALTH FOOD P. LTD . [2008] 304 ITR 308 (SC) CONTENDED THAT PENALTY IS IMPOSABLE EVEN W HEN INCOME IS ASSESSED AT A NEGATIVE FIGURE AND LOSS IS REDUCED. SINCE THE LD. CIT(A) HAS NOT DECIDED THE LEVY OF PENALTY ON MERI TS THE LD. DR ARGUED THAT MATTER MAY BE RESTORED TO THE FILE OF T HE LD. CIT(A). ON THE OTHER HAND THE LD. AR ON BEHALF OF THE ASSESS EE SUPPORTED THE ORDER OF THE LD. CIT(A). 19. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE HONBLE APEX COURT IN GO LD COIN HEALTH FOOD P. LTD.(SUPRA) HELD THAT EXPLANATION 4(A) TO S ECTION 271(1)(C) IS CLARIFICATORY AND NOT SUBSTANTIVE AND IS INTENDED TO LEVY THE PENALTY NOT ONLY IN A CASE WHERE AFTER ADDITION OF CONCEALED INCOME A LO SS RETURNED AFTER ASSESSMENT BECOMES POSITIVE INCOME BUT ALSO IN A CASE WHERE AD DITION OF CONCEALED INCOME REDUCES THE RETURNED LOSS AND FINALLY THE ASSESSED INCOME IS ALSO A LOSS OR A MINUS FIGURE. THEREFORE EVEN DURING THE PERIOD BET WEEN APRIL 1 1976 AND APRIL 1 2003 THE POSITION WAS THAT THE PENALTY WAS LEVIABL E EVEN IN A CASE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETURNED L OSS HONBLE APEX COURT CONCLUDED. IN THE LIGHT OF VIEW TAKEN BY THE HONB LE APEX COURT THE LD. CIT(A) WAS NOT JUSTIFIED IN CANCELLING THE PENA LTY ON THE GROUND THAT THE TOTAL INCOME WAS COMPUTED AT A NEGATIVE FI GURE. WE FIND THAT THE ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 14 LD. CIT(A) HAVE NOT RECORDED HIS FINDINGS ON THE MERITS OF PENALTY IMPOSED BY THE AO AS A RESULT OF THE TAX SOUGHT TO BE EVADED ON THE INCOME OF RS..5 11 770 .IN THESE CIRCUMSTANCES WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A ) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE APPEAL AFRESH IN ACCORDANCE W ITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY TH AT WHILE REDECIDING THE APPEAL THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER KEE PING IN MIND INTER ALIA THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. TH EREFORE GROUND NOS. 1 & 2 IN THE APPEAL ARE ALLOWED. 20. GROUND NOS. 4 & 5 IN ITA NO. 114/AHD./2005 AND GROUND NOS. 3 & 4 IN ITA NO. 685/AHD./2007 BEING GENERAL IN NATUR E DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFORE DISMI SSED. 21. IN THE RESULT APPEAL IN ITA NO. 114/AHD./2005 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHILE IN ITA NO. 685/AHD./ 2007 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 26-05-2 010 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 26-05-2010 COPY OF THE ORDER FORWARDED TO : 1. MAHALAXMI HOUSING & FINSTOCK P. LTD. NARAYAN CH AMBERS ASHRAM ROAD AHMEDABAD 2. THE ITO WARD-4(4) AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VIII AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER ITA NO.114/AHD/2005 & ITA NO.685/AHD/2007 FOR AY 1991-92 MAHALAXMI HOUSING & FINSTOCK P. LTD. 15 DEPUT Y REGISTRAR/ASSISTANT REGISTRAR ITAT AHMEDABAD