M/S Hiral Pharma Ltd, Ahmedabad v. The Dycit Com Cir-7(3), Ahmedabad

ITA 1255/AHD/2001 | 1997-1998
Pronouncement Date: 29-01-2010 | Result: Allowed

Appeal Details

RSA Number 125520514 RSA 2001
Assessee PAN AAACH2878N
Bench Ahmedabad
Appeal Number ITA 1255/AHD/2001
Duration Of Justice 8 year(s) 7 month(s) 29 day(s)
Appellant M/S Hiral Pharma Ltd, Ahmedabad
Respondent The Dycit Com Cir-7(3), Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 01-05-2006
Date Of Final Hearing 20-01-2010
Next Hearing Date 20-01-2010
Assessment Year 1997-1998
Appeal Filed On 31-05-2001
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE SHRI BHAVNESH SAINI J.M. AND SHRI A.N.PAHUJ A A.M. ITA NO.1255/AHD/2001 ASSESSMENT YEARS: 1997-98 HIRAL PHARMA LTD. 1347/33 KASTURBHAI BLOCK CHAMUNDA CROSS ROAD NARODA AHMEDABAD. V/S DY. COMMISSIONER OF INCOME TAX COMPANY CIRCLE 7(3) AHMEDABAD. PAN NO. AAACH2878N (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI S.N.DIVETIA A.R FOR DEPARTMENT: SHRI C.K.MISHRA SR.DR O R D E R PER SHRI BHAVNESH SAINI J.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LEARNED CIT(APPEALS)-IX AHMEDABAD DATED 21.03.2001 FOR AY 1997-98 ON THE FOLLOWING GROUNDS. 1. THE APPELLATE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-VII AHMEDABAD ON 21.03.2001 I S ARBITRARY ILLEGAL AND BAD IN LAW. THE SAID ORDER THEREFORE DESERVES TO BE QUASHED OR SET ASIDE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ACTED ARBITRARILY BY NOT CONSIDERING ALL THE FA CTS AND THE CIRCUMSTANCES OF THE APPELLANTS CASE ON RECORD AND SELECTIVELY CONSIDERING THE FACTS OF THE APPELLAN TS CASE AND AS WELL AS THE APPELLANTS WRITTEN SUBMISSIONS AND ARGUMENTS ONLY TO ARRIVE AT PRE-DETERMINED DECISION AND HAS THEREFORE ACTED ARBITRARILY AND CAPRICIOUSLY AS A RESULT OF WHICH THE APPELLATE PROCEEDINGS HAVE BEEN TOTALLY VITIATED AN D HENCE RENDERED ILLEGAL AND BAD IN LAW. THE APPELLATE ORDE R IS THEREFORE ILLEGAL AND BAD IN LAW AND RESERVED TO BE QUASHED AND SET ASIDE. 3. WITHOUT PREJUDICE TO THE ABOVE PRIMARY GROUNDS THE APPELLATE RAISES THE FOLLOWING FURTHER GROUNDS OF A PPEAL:- 2 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN:- I) OBSERVING THAT IT IS ALSO NOT THE CASE OF THE A PPELLANT THAT THE SAID LOAN AMOUNT HAS BEEN OUTSTANDING AND PAYABLE BY THE APPELLANT COMPANY TO THE SAID BANK AND II) HOLDING THAT THE GENUINENESS OF THE SAID TRANSA CTION IS NOT ESTABLISHED AND THE CAPACITY OF THE CREDITOR HA S BEEN TOTALLY DENIED. III) FURTHER HOLDING THAT THE SAID CREDITOR WAS NOT IN A POSITION TO ADVANCE SUCH BIG LOANS AND THAT THIS NO T REFLECTED IN THE BOOKS OF ACCOUNT EITHER. IV) NOT CONSIDERING THE FACT THAT THE CREDITOR WAS INDEED HAVING CURRENT BANK ACCOUNT NO.4479 WITH SARVODAYA CO. OPERATIVE BANK LIMITED AHMEDABAD AS EVIDENT FROM THE COPY OF BANK ACCOUNT OF THE CREDITOR SUBMI TTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WITH REFERENCE TO THE STATEMENT OF EXECUT IVE DIRECTOR MR. K.B. SASIDHARAN THAT THE CREDITOR IS N OT HAVING ANY BANK ACCOUNT WITH THE SAID BANK. V) OBSERVING THAT THE SAID BANK WOULD HAVE CERTAINL Y STAKE CLAIM FOR RECOVERY OF THE SAID LOAN FROM THE CREDITOR AND NO SUCH EVIDENCE HAS BEEN ADDUCED EITHER BEFORE THE ASSESSING OFFICER OR THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT ANY SUCH LEGAL NOTICES WERE ISSUED BY SARVODAY CO-OP. BANK LTD. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ACTIO N OF THE ASSESSING OFFICER IN TREATING THE SAID LOAN OF RS.6 085000/- AS UNEXPLAINED AND THEREFORE TREATED AS INCOME FR OM OTHER SOURCES U/S.68. 6. IT IS PRAYED THAT ON THE FACTS AND THE CIRCUMSTA NCES OF THE APPELLANTS CASE THE APPELLATE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) BE QUASHED AND SET ASIDE. ALTERNATIVELY THE ADDITION OF RS.6085000/- MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CREDIT AND TRE ATED AS INCOME FROM OTHER SOURCES U/S.68 FULLY DELETED. 2. EARLIER THIS APPEAL WAS DISMISSED FOR DEFAULT VI DE ORDER DATED 1.05.2006. THE TRIBUNAL WHILE ALLOWING THE M.A. OF THE ASSESSEE IN M.A.NO.299/2009 RECALLED THE EARLIER ORDER AND DIRE CTED TO FIX THE 3 APPEAL FOR HEARING ON MERIT. APPEAL WAS ACCORDINGLY POSTED FOR HEARING ON MERITS. 3. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSI DERED THE MATERIAL AVAILABLE ON RECORD. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN MANUFACTURING OF DRUGS AND AS AGAINST TH E TOTAL LOSS RETURNED TO RS.6 23 260/- THE INCOME HAS BEEN ASSE SSED AT RS.54 61 740/-. THE ADDITION WAS MADE UNDER SECTION 68 IN RESPECT OF UNEXPLAINED CASH CREDIT OF RS.60 85 000/- CLAIMED T O BE RECEIVED FROM M/S. PAPPILON EXPORTS LTD. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE ASSESSING OFFICER THAT DURING THE F.Y.1996-97 THE ASSESSEE HAD SHOWN LOAN OF RS.60 85 000/- FROM M/S. PAPPILON EXPORTS LTD. TIRUPUR TAMILNADU. THE ASSE SSING OFFICER CALLED FOR THE CONFIRMATION LETTER DETAILS OF PAN NO. AND OTHER EVIDENCES TO EXAMINE THE GENUINENESS OF THE SAID CR EDIT. THE ASSESSEE COULD NOT GIVE THE DETAILS OF PAN NO. EITH ER ON 15.11.1999 OR 13.12.1999. THEREAFTER THE ASSESSING OFFICER ISSUE D COMMISSION UNDER SECTION 131 OF THE I.T.ACT TO THE I.T.O. EROD E TO CONFIRM THE SAID TRANSACTION OF THE SAID CREDITOR AND THE ASSESSEE C OMPANY. THE A.O.(I.T.O.) REPORTED TO THE ASSESSING OFFICER THAT NO SUCH TRANSACTION HAD BEEN ENTERED INTO BY M/S. PAPPILON EXPORTS LTD. AND THE ASSESSEE THE SAID COMPANY I.E. M/S. PAPPILON EXPORTS LTD. WA S ALSO FACING FINANCIAL CONSTRAINS AND SOME OF THE CHEQUES ISSUED BY THE SAID COMPANY HAD BOUNCED. FURTHER COUNSEL OF ASSESSEE HA D ALSO ISSUED LEGAL NOTICES TO THE SAID CREDITOR FOR LIABILITY OF RS.4.56 CRORES. HE CONVEYED THAT THE EXECUTIVE DIRECTOR SHRI K.B.SASID HARAN HAS DENIED THAT ANY LOAN ADVANCED TO THE ASSESSEE. EXTRACT FRO M THE STATEMENT OF SHRI K.B.SASIDHARAN WERE DISCUSSED AT PAGES 4 5 AN D 6 OF THE 4 ASSESSMENT ORDER AND THE REPLIES TO QUESTION NO.2 5 AND 6 ARE REPRODUCED BELOW FOR REFERENCE. UPTO 1994-95 THE COMPANY WAS FUNCTIONING NORMALLY. SOMETIME IN DECEMBER 1995 THE MANAGING DIRECTOR SHRI MOHAN GUPTA HAS RESIGNED BUT THIS RESIGNATION WAS NOT ACCEPTED. THEN SHRI BHAGWAN PREMCHANDANI HAS BECOME THE CHAIRMAN OF THE COMPANY. SOMETIME IN MAY-JUNE 1996 SHRI BHAGWAN PREMCHANDANI HAS STATED THAT HE HAS ALSO RESIGNED WHEREAS I HAVE NO T RECEIVED ANY WRITTEN COMMUNICATION FOR HIS RESIGNAT ION. THEREFORE THE COMPANY IS NOT ABLE TO FUNCTION WITH OUT THE QUORUM. OUR BANKERS CANERA BANK OVERSEAS BRANCH TIRUPUR HAS ISSUED A LEGAL NOTICE ON 5.08.1 996 TO REPAY THE ENTIRE AMOUNT DUE TO THE BANK I.E. A S UM OF RS.4.56 CRORES WITHIN TWO WEEK FROM THE DATE OF THE LEGAL NOTICE. SINCE THE COMPANY WAS UNABLE TO PAY T HE SAID SUM OF RS. 4.56 CRORES THE LIABILITY THE BAN KERS M/S. CANARA BRANCH OVERSEAS BRANCH TIRUPUR HAVE FILED A CASE BEFORE THE DEPARTMENT OF RECOVERY TRIB UNAL AT CHENNAI. AT PRESENT I DO NOT HAVE THE CASE PAPE R IN HAND. ALL THE CONNECTED PAPERS ARE WITH MY LAWYERS SHRI KOTHANDARAMAN CHENNAI. AFTER THE BANKERS HAVE FILE D CASE AGAINST THE COMPANY PAPPILON EXPORTS LTD NO FINANCIAL TRANSACTIONS HAVE BEEN CARRIED ON IN THE BOOKS OF PAPPILON EXPORTS LTD. THE BUSINESS OF THE COMPAN Y HAS BECOME STANDSTILL. 5. THEREAFTER THE AO CONFRONTED THE SAID STATEMENT TO THE ASSESSEE COMPANY WHICH WAS DISCUSSED AT PARA 4 AND 5 PAGE 6 OF THE ASSESSMENT ORDER AND ACCORDINGLY ISSUED SHOW CA USE NOTICE AS TO WHY THE SAID CREDIT NOT BE HELD AS UNEXPLAINED. THE REAFTER THE ASSESSEE REPLIED VIDE LETTER DATED 21.02.2000 THAT M/S. PAPPILON EXPORTS LTD. HAD ISSUED CHEQUE NO.133279 DRAWN OF S ARVODAYA CO. OP. BANK LTD. AHMEDABAD FOR RS.60 85 000/-. IT WAS CREDITED IN THE COMPANYS ACCOUNT NO.4471. AFTER RECEIPT OF THIS RE PLY THE ASSESSING OFFICER AGAIN REFERRED THE MATTER TO THE I.T.O. ERO DE. THIS WAS DISCUSSED AT PARA 4.7 PAGE 7 OF THE ASSESSMENT ORDE R. THEREAFTER HE GAVE FOLLOWING REPORT TO THE ASSESSEE IN HIS LETTER DATED 1.03.2000 AS UNDER:- 5 IN THE STATEMENT RECORDED UNDER SECTION 131 OF THE INCOME TAX ACT IT IS STATED BY SHRI K.B.SASODHARAN EXECU TIVE DIRECTOR OF M/S. PAPPILON EXPORTS LTD. TIRUPUR THAT (1) THEY DO NOT HAVE ANY BANK ACCOUNT WITH SHRI SAR VODAYA CO.OP. BANK LTD. AHMEDABAD. (2) HE HAS NO IDEA WHO ISSUED CHEQUE NO.133279 OF S HRI SARVODAYA CO.OP. BANK LTD. AHMEDABAD WHEN THEY DO NOT HAVE ANY BANK ACCOUNT WITH THE SAID BANK. (3) IT IS STATED BY HIM THAT THE LOAN CONFIRMATION DATED 2.11.1999 ENCLOSED BY YOU THE LETTER-PAD ITSELF IS WRONGLY PRINTED PAPILON EXPORTS LTD. INSTEAD OF PAPPILON EXPORTS LTD. 2. ANGERIPALAYAM ROAD TIRUPUR. (4) IT IS ALSO STATED BY HIM THAT SINCE THERE WAS N O BUSINESS TRANSACTION FROM 1-4-1996 NO BOOKS OF ACCOUNT HAVE BEEN MAINTAINED. THE CONFIRMATION LETTER ENCLOSED BY YOU APPEAR TO B E SIGNED BY ONE SHRI BHAGWAN. ONE OF THE BOARD OF DIRECTORS NAME IS SHRI BHAGWAN PREMCHANDANI. HIS SIGNATURE IS FOUND I N DEED OF PERSONAL GUARANTEE TO A FINANCING COMPANY. THE C OPY OF THE DEED IS ALSO ENCLOSED TO VERIFY THE GENUINENESS OF THE SIGNATURE. THE SIGNATURE IN THE CONFIRMATION LETTER AND THE DEED OF PERSONAL GUARANTEE DIFFERS. THE CONFIRMATION LETTER WAS FURNISHED BY ONE OF THE DIRECTORS/AUTHORISED SIGNATORY ON 2-11-1999. ALONGW ITH MY REPORT DATED 27-1-2000 I HAVE ALSO FORWARDED THE C OPY OF THE STATEMENT RECORDED FROM SHRI K.B.SASIDHARAN AND ALSO COPY OF THE LEGAL NOTICE ISSUED BY CANARA BANK OVE RSEAS BRANCH TIRUPUR AND TWO LETTERS ISSUED ONE SHRI JAG ANNATH TEXTILES LTD. AND ALVATEX SHORANUR. THIS CLEARLY E STABLISHES THAT THE COMPANY WAS NOT IN A SOUND FINANCIAL POSIT ION TO LEND AN AMOUNT OF RS.60 85 00/- AS UNSECURED LOAN T O M/S. HIRAL PHARMA LTD. AHMEDABAD. AS THE BANKERS CANARA BANK OVERSEAS BRANCH TIRUPUR HAS ISSUED A LEGAL N OTICE TOWARDS THE BANK LIABILITY OF RS.4.56 CRORES IT IS HARD TO BELIEVE THAT M/S. PAPPILON EXPORTS LTD. HAD LEND A N AMOUNT OF RS.60 85 000/- AS UNSECURED LOAN TO M/S. HIRAL P HARMA LTD. AHMEDABAD IN THE SAME PERIOD. 6. IN THE ABOVE CIRCUMSTANCES THE ASSESSEE WAS AGA IN CONFRONTED AND SHOW CAUSE NOTICE DATED 21.03.2000 W AS ISSUED TO THE ASSESSEE WHICH IS REPRODUCED AS UNDER:- PLEASE REFER TO THE ABOVE AND SHOW CAUSE NOTICE DA TED 1.02.2000 ISSUED BY THIS OFFICE. IN COMPLIANCE TO T HIS NOTICE YOU HAVE FURNISHED YOUR RELY VIDE LETTER DATED 21.0 2.2000 WHEREIN YOU HAVE CLAIMED THAT YOU HAVE RECEIVED AN UNSECURED LOAN AMOUNTING TO RS.60 85 000/- FROM M/S . PAPPILON EXPORTS LTD. VIDE CHEQUE NO.133279 OF SAR VODAYA 6 CO.OP. BANK LTD. AHMEDABAD. THEREFORE THE EXECUTI VE DIRECTOR OF M/S. PAPPILON EXPORTS LTD. WAS CONFRON TED WITH THIS FACT AND ON HIS OWN STATEMENT UNDER SECTION 13 1 OF THE INCOME TAX ACT HE HAS CATEGORICALLY STATED THAT M/ S. PAPPILON EXPORTS LTD. IS NOT HAVING ANY BANK ACCOU NT WITH SARVODAYA CO.OP. BANK AHMEDABAD AND HAVE NO IDEA ABOUT THE ISSUANCE OF THE CHEQUE NO.133279 OF SARVO DAYA CO.OP. BANK LTD AHMEDABAD. UNDER THE ABOVE CIRCUMSTANCES IT IS CLEAR THAT M/S . PAPPILON EXPORTS LTD. HAD NOT EXTENDED/GIVEN ANY LOAN TO YO U AND IT IS ALSO CLEAR THAT YOU HAVE INTRODUCED YOUR UNEXPLA INED INCOME FROM UNDISCLOSED SOURCE. THEREFORE YOU ARE HEREBY GIVEN A FINAL OPPORTUNITY TO SHOW CAUSE AS TO WHY T HIS ACCOUNT SHOULD NOT BE ADDED TO YOUR TOTAL INCOME AS UNEXPLAINED CASH CREDIT U/S.68 OF THE INCOME TAX AC T. 7. THEREAFTER THE ASSESSING OFFICER AGAIN CONFRONT ED THIS MATERIAL RECEIVED FROM THE I.T.O. ERODE AND SHOW CA USE NOTICE ISSUED IN THIS RESPECT AS DISCUSSED AT PARA 4.9 PAGE 8 AND 9 OF THE ASSESSMENT ORDER. THE ASSESSEE THEREAFTER REPLIED VIDE LETTER DATED 27.03.2000 AND REITERATED THE EARLIER SUBMISSIONS M ADE. IT ALSO SUPPORTED COPIES OF DEPOSIT SLIPS OF SARVODAYA CO.O P. BANK LTD. HOWEVER IN THE LIGHT OF EVIDENCE COLLECTED BY THE ASSESSING OFFICER ARE THE DENIAL OF ANY CONFIRMATION FROM M/S. PAPPIL ON EXPORTS LTD. THE EXPLANATION OF THE ASSESSEE WAS REJECTED AND THE SA ID ADDITION MADE U/S.68. 8. THE ADDITION WAS CHALLENGED BEFORE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) AND IT WAS SUBMITTED THAT THE COUNSEL OF ASSESSEE FILED WRITTEN SUBMISSION REITERATED THE SU BMISSIONS MADE BEFORE THE ASSESSING OFFICER AND SUBMITTED THAT ASS ESSEE FILED A LETTER TO THE ASSESSING OFFICER AND SUBMITTED CERTIFICATE DATED 3.01.1997 ISSUED BY THE BANK MANAGER OF SARVODAYA CO.OP. BANK LTD. AHMEDABAD. PHOTO COPY OF THE SAME IS AGAIN SUBMITTE D BEFORE HIM. ON PERUSAL OF THE SAME IT IS SEEN THAT THE SAID CE RTIFICATE IS ISSUED TO M/S. BHAGWAN DAS PREMCHANDANI WAS AN EXECUTIVE DIRE CTOR OF PAPPILIN EXPORTS LTD. THE EXTRACT OF THE SAME READS AS UNDER:- 7 TO MR. BHAGWAN DAS PREMCHANDANI DIRECTOR POPILON EXPORTS LTD A-4 GARIB SOCIETY ROAD NO.5 JUHU SCHEME BUMBAI-400 049. THIS IS TO CERTIFY THAT ON 01/01/1997 M/S. PAPILON EXPORTS LTD HAS ISSUED CHEQUE NO.133279 OF RS.60 85 000/- FROM ITS CURRENT A/C. MAINTAINED WITH OUT BANK IN FAVOUR OF HIRAL PHARMA LTD. THE BANK HAS GRANTED TEMPORARY OVERDRAF T FACILITY TO M/S. PEPILON EXPORTS LTD. THROUGH ITS DIRECTOR M R. BHAGWAN PREMCHANDANI RESIDING AT A-GARIB SOCIETY ROAD NO.5 JUHU SCHEME MUMBAI-400049 AND AGAINST THIS FACILITY CHE QUE NO.133279 DATED 01/01/1997 ISSUED TO HIRAL PHARMA L TD. WAS CLEARED BY MAKING NECESSARY BOOK ADJUSTMENTS. FOR SHRI SARVODAYA CO.OP. BANK LTD. SD/- MANAGER. 9. IN FURTHER CONTINUATION OF THE SAID WRITTEN SUBM ISSION IT SUBMITTED THE FOLLOWING FACTS AS UNDER:- IT IS PERTINENT TO MENTION HERE THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS INQUIRES BEHIND THE BACK OF ASSESSEE COMPANY WERE CONDUCTED AND SUCH INQUIRES W ERE CONFIRMED TO ONLY ONE OF THE DIRECTORS OF M/S. PAPP ILON EXPORTS LIMITED. THE NAME OF SUCH DIRECTOR IS SHRI K.B. SASIDHARAN. THE ASSESSEE COMPANY HAS TRANSACTED THE SUM THROUGH ANOTHER DIRECTOR OF THE SAME COMPANY NAMELY MR. BHAGWAN DAS PREMCHANDANI. THE SAID DIRECTOR OF LOA NER COMPANY WAS NEVER EXAMINED BY THE DEPARTMENT. A PERUSAL OF THE CERTIFICATE TRUE COPY OF LETTER DA TED 3.01.1997 ISSUED BY THE MANAGER OF THE BANK CLEARLY REVEALS THAT THE SUM INVOLVED WAS SOURCED FROM TEMPORARY OV ER DRAFT FACILITY GRANTED BY THE BANK TO M/S. PAPPILON EXPOR TS LTD. THROUGH ITS DIRECTOR MR. BHAGWAN DAS PREMCHANDANI. THE SUM WAS TRANSACTED BY MAKING NECESSARY BOOK ADJUSTM ENT ONLY AS THE BANK ACCOUNTS OF 1. THE ASSESSEE COMPAN Y AS WELL AS OF 2. M/S. PAPPILON EXPORTS LTD. WERE WITH THE SAME BANK ONLY. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF THE SAID SUM IN TERMS OF THE PROVISIONS OF SECTION 68 OF THE ACT AS PER THE PROVISIONS WHEN THE ASSESSEE OFFERS NO EXPLANAT ION ABOUT THE NATURE AND SOURCES THEREOF OR THE EXPLANA TION 8 OFFERED BY HIM IS NOT SATISFACTORY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF ASSES SEE FOR THAT PREVIOUS YEAR. IN THE INSTANT CASE RIGHT FROM THE BEGINNING THE ASSESSEE COMPANY HAD PLEADED THAT THE SUM WAS INDEED ADVANCED TO IT BY THE LOANER COMPANY RE QUESTED THE ASSESSING OFFICER AS WELL AS THE ADMINISTRATOR OF THE BANK TO VERIFY AND/OR CONFIRM THE SAME RESPECTIVELY . THE NATURE OF TRANSACTION WAS A LOAN RECEIVED BY WAY OF BOOK ADJUSTMENT AND SOURCED FROM TEMPORARY OVER DRAFT FA CILITY OBTAINED BY THE LOANER. IT IS NOBODYS CASE THAT UN EXPLAINED CASH WAS INTRODUCED IN THE BANK ACCOUNT OF M/S. PAP PILON EXPORTS AND THROUGH THIS SOURCE THE CHEQUE NO.13327 9 OF RS.60 85 000/- ISSUED BY THE ABOVE COMPANY WAS CLEA RED IN FAVOUR OF THE ASSESSEE COMPANY. IN SUCH EVENTUALITY THE NATURE AND SOURCES REMAINS SATISFACTORILY EXPLAINED . BEING OF LOAN NATURE IT CANNOT PARTAKE THE CHARACTER OF INCO ME NATURE AND THEREFORE ADDITION IS LIABLE TO BE DELETED IN FULL. 10. THEREAFTER THE ASSESSEE HAS AGAIN SUBMITTED TH E WRITTEN SUBMISSION DATED 9.03.2001 REFERRED ABOVE IN WHICH IT IS PLEADED THAT THE SAID TRANSACTION WAS ENTERED BY SHRI SUREN DRA RAJPUT CHAIRMAN OF THE ASSESSEE COMPANY WITH SHRI BHAGWAN DAS PREMCHANDANI REFERRED ABOVE AND THAT THE SAID LOAN IS GENUINE AND NEED THE FOLLOWING SUBMISSION WHICH ARE REPRODUCED AS UNDER:- IN ORDER TO PROTECT THE INTERESTS OF THE ASSESSEE COMPANY AND ITS CONNECTED COMPANIES WHICH HAD GIVEN THE ABO VE LOAN AND ADVANCES SHRI SURENDRA RAJPUT CHAIRMAN/D IRECTOR OF THE ASSESSEE COMPANY PUT LOT OF PRESSURE ON SHRI BHAGWAN DAS PREMCHANDANI FOR REPAYMENT OF THE LOANS AND ADVANCES GIVEN BY THE GROUP AND FINALLY SUCCEEDED A S SHRI BHAGWANDAS PREMCHANDANI AGREED TO RAISE SOME TEMPOR ARY LOAN IN THE ABSENCE OF ANY OTHER ALTERNATIVE. SHRI BHAGWANDAS PREMCHANDANI ENTERED INTO AN ARRANGEMENT WITH SARVODAY CO.OP. BANK LTD. AHMEDABAD AND OBTAIN ED TEMPORARY OVER DRAFT FACILITY IN HIS CAPACITY AS CH AIRMAN CUM DIRECTOR OF M/S. PAPPILON EXPORTS LTD. ACCORDINGLY M/S. PAPPILON EXPORTS LTD. ISSUED A CHEQUE NO.133279 DAT ED 1.01.1997 ON SARVODAYA CO.OP. BANK LTD. IN THE ASS ESSEE COMPANYS FAVOUR FOR RS. 60 85 000/-. THE SAID CHEQ UE WAS SIGNED BY SHRI BHAGWANDAS PREMCHANDANI. THE ABOVE PAYMENT OF RS.60 85 000/- IS CREDITED AND REFLECTED IN THE CURRENT ACCOUNT NO.4471 OF THE ASS ESSEE COMPANY WITH SARVODAYA CO.OP. BANK LTD. THE FOLLOWI NG DOCUMENTS HAVE BEEN FURNISHED TO THE ASSESSING OFFI CER IN SUPPORT OF THE ABOVE PAYMENT AND CREDIT ENTRY:- (I) XEROX COPY OF DEPOSIT SLIP COUNTERFOIL BEARING ACCOUNT NO.4471 DATED 1.01.1997 WITH TRANSFER STAMP DATED 1.01.1997 OF THE SARVODAYA CO. 9 OP. BANK LTD. WITH THE DETAILS OF CHEQUE NO. DATE AND THE NAME OF THE DRAWEE (PEPLIN EXPORT LTD;) ON THE REVERSE OF THE SAID COUNTERFOIL. (II) COPY OF STATEMENT OF OUR CURRENT ACCOUNT NO.4471 WITH SARVODAYA CO. OP. BANK LTD SHOWING ABOVE CREDIT ENTRY ON 2.01.1997 ISSUED BY THE BANK IN THE ORDINARY COURSE OF ITS BUSINESS. 11. ALTHOUGH THE ABOVE PAYMENT RECEIVED BY THE ASS ESSEE COMPANY IN REAL TERMS WAS ONLY A REPAYMENT/RETURN O F LOAN OF RS.73 50 000/- ADVANCED BY THE ASSESSEE COMPANY AND ITS CONNECTED COMPANIES EARLIER THE SAID PAYMENT CONST ITUTED A LOAN OF THE SAID AMOUNT IN SO FAR AS THE BOOKS OF ACCOUNT O F THE ASSESSEE COMPANY WERE CONCERNED. 12. EVEN IF THE SAID AMOUNT OF RS.60 85 000/- WAS C ONSIDERED AS A LOAN THE ASSESSEE COMPANY HAD ITS ONUS OF PROVIDIN G THE FOLLOWING; I. THE IDENTITY OF THE PERSON FROM WHOM THE LOAN WAS TAKEN I.E. PAPLION EXPORTS LTD THROUGH ITS CHAIRMA N AND DIRECTOR BHAGWAN DAS PREMCHANDANI A-4 GARIB SOCIETY ROAD NO.5 JUHU SCHEME BOMBAY-400 049. II. THE GENUINENESS OF THE CREDIT ENTRY I.E. RECEIV ED BY CHEQUE NO.133279 DATED 1.01.1997SARVODAYA CO.OP. BANK LTD. DRAWN BY PAPPILON EXPORTS LTD. AND SIGNE D BY SHRI BHAGWAN DAS PREMCHANDANI AND DULY HONOURED THE BANK AS REFLECTED IN THE AUDITED BOOK SO ACCOUNTS OF THE ASSESSEE COMPANY. III. THE COURSE OF THIS PAYMENT WAS TEMPORARY OVER DRAFT FACILITY GRANTED BY THE BANK TO PAPPILON EXPORTS LT D. THROUGH ITS CHAIRMAN/DIRECTOR SHRI BHAGWAN DAS PREMCHANDANI AND THE PAYMENT WAS AFFECTED BY TRANSFER IN THE BOOKS OF BANK AS CURRENT BANK ACCOUNT OF PAPPILON EXPORTS LTD AND THAT OF THE ASSESSEE COMPANY WERE WITH THE SAME BANK. IN OTHER WORDS THE BANK DEBITED CURRENT ACCOUNT OF PAPPILON EXPORTS LTD. BY RS. 60 85 000/- AND CREDITED THE APPELLANT COMPANYS BANK ACCOUNT BY MAKING CORRESPONDING ENTRY OF EQUAL AMOUNT FOR THE CHEQUE AMOUNT ISSUED BY PAPPILON EXPORTS LTD; AND 10 IV. FINALLY THE APPELLANT COMPANY HAS FILED CERTIF IED COPY OF THE CERTIFICATE DATED 3/1/1997 ISSUED BY SARVODA Y CO.OP. BANK LTD. CONFIRMING THAT: A. PEPILON EXPORTS LTD WAS GRANTED TEMPORARY OVERDRAFT FACILITY. B. PEPILON EXPORTS LTD. WAS HAVING CURRENT ACCOUNT NO.4479 WITH BANK (A COPY OF WHICH OR PART PERIOD IS AVAILABLE WITH THE APPELLANT COMPANY AND CAN BE PRODUCED IF DESIRED.) C. PAPILON EXPORTS LTD ISSUED CHEQUE NO.133279 DATED 01/01/1997 FOR RS.60 85 000/- FROM ITS CURRENT ACCOUNT IN FAVOUR IN HIRAL PHARMA LTD. THE APPELLANT COMPANY AND D. THE CHEQUE WAS ISSUED BY BHAGWAN DAS PREMCHANDANI PAPILON EXPERT LTD. IN THIS CONNECTION RELIANCE IS PLACED ON THE FOLLOW ING JUDGEMENT OF THE SUPREME COURT AND HIGH COURTS: I. DAULAT RAM RAWATMAL (1973) ITR 349 (SC) II. PRECISION FINANCE P. LTD. (1994) 208 ITR 465 (CAL.) III. ORIENTIAL WIRE IND. PVT. LTD. (1981) 131 ITR 6 88 (CAL) HE ALSO RELIED ON THE CASE LAWS REFERRED ABOVE. IN ADDITION TO THE DECISION OF THE GUWAHATI HIGH COURT 227 ITR 900 AND COPY OF THE JUDGEMENT OF 52 ITD 286 IN THE CASE OF RAJ MOTI INDUSTRIES VS. ITO IN SUPPORT OF ITS SUBMISSIONS. 13. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MA TERIAL ON RECORD DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 5 AND 6 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER:- I HAVE CAREFULLY CONSIDERED AND PERUSED THAT ALL T HE FACTS BROUGHT ON RECORD BEFORE THE ASSESSING OFFICER AS W ELL AS THE UNDERSIGNED AND HAVE ALSO PERUSED THE JUDICIAL DECISIONS REFERRED BY THE APPELLANTS COUNSEL AND A LSO THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. I T IS NOTED THAT THE APPELLANTS CASE THAT THE ASSESSING OFFICE R HAS COLLECTED THE MATERIAL AT THE BACK OF THE APPELLANT IS NOT CORRECT IN AS MUCH AS BOTH THE OCCASIONS WHEN HE CO LLECTED THE COMMISSION REPORT UNDER SECTION 131. THE SAME W AS DULY CONFRONTED TO THE APPELLANT AS DISCUSSED ALREA DY. IT IS WELL SETTLED THAT FOR THE ACCEPTANCE OF A CASH CRED IT THE APPELLANT HAS TO PROVE THE IDENTITY GENUINENESS AN D THE CAPACITY OF THE CREDITOR. IN THE INSTANT CASE WHILE THE 11 APPELLANT HAS CONTENDING THAT THE LOAN HAS BEEN REC EIVED FROM M/S. PAPPILON EXPORTS LTD. AS PER THE SAID BAN KING TRANSACTION IT IS STRANGE THAT THE SAID CREDITOR H AS BEEN DENYING. OBVIOUSLY NO CREDITOR WOULD DENY A GENUINE LOAN TH AT HAS BEEN GIVEN AS IT WOULD BE AGAINST ITS INTEREST . FURTHER EVEN ASSUMING THAT THE BANK HAS ADVANCED LOAN TO M/ S. PAPILON EXPORT LIMITED AND THERE WAS CHANGE IN THE DIRECTORS OF THE COMPANY M/S. PAPPILON EXPORTS LTD. THE SAID TRANSACTION ON LOAN WOULD HAVE BEEN APPEARING IN THE BOOKS OF ACCOUNTS OF THE SAID CREDITOR. THIS HAS BE EN DENIED BY THE SAID CREDITOR AS DISCUSSED IN THE PRECEDING PARAGRAPHS. THE APPELLANT IS REPLYING ON THE FACT T HAT THE TRANSACTION IS TRUE A BANKING CHANNEL IT SHOULD BE ACCEPTED IN THIS RESPECT. IT WOULD BE RELEVANT TO NOTE THAT IN THE CASE OF PRECISION FINANCE P. LTD. REPORTED IN 208 ITR 465 (CAL) HIGH COURT IT HAS BEEN HELD THAT THE BANKING TRANSA CTION ARE NOT CONCLUSIVE. THIS IS VERY RELEVANT TO THE FACT O F THE INSTANT CASE. THE CASE-LAWS CITED BY THE APPELLANTS COUNSE L DO NOT HELP THE APPELLANTS CASE IN VIEW OF THE FACT THAT THE PRINCIPLE OF NATURAL JUSTICE HAVE BEEN FOLLOWED BY THE A.O. A ND SUFFICIENT TIME WAS ALSO ALLOWED TO THE APPELLANT T O DISCHARGE THE BURDEN CAST UPON IT TO PROVIDE THE ESSENTIAL IN GREDIENTS ON ACCEPTABLE CASH CREDITS. DETAILED INQUIRES HAVE ALSO BEEN CONDUCTED IN THE PRESENT CASE BY THE A.O. ON REFER ENCE TO THE WRITTEN SUBMISSION MADE BY THE APPELLANT DATED 3 RD MARCH 2001 REFERRED ABOVE THE PLEA OF THE APPELLANT THAT THE IDENTITY AND GENUINENESS OF THE LOAN STAND ESTABLIS HED IS NOT CONVINCING. IT IS CLEAR FROM THE ABOVE FACTS THAT T HE SAID CREDITOR WAS NOT IN A POSITION TO ADVANCE SUCH HUGE LOANS TO THE APPELLANT COMPANY. THE A.O. HAS ALSO REFERRED T O THE REPORT TO THE A.O. ERODE AND ALSO STATEMENT OF THE EXECUTIVE DIRECTOR OF THE SAID CREDITOR STATING THAT THE CRED ITOR DID NOT HAVE THE CAPACITY TO ADVANCE SUCH BIG LOANS. THIS I S NOT REFLECTED IN THE BOOKS OF ACCOUNTS EITHER. THE REAL TERMS IS TO EXAMINE IS AS TO WHOSE FUNDS WERE USED WHILE CREDIT ING THE SAID AMOUNT OF RS.60 85 000/- IN THE CURRENT ACCOUN T OF THE APPELLANT COMPANY WHILE THE APPELLANT TAKES THE AR GUMENT THAT THERE WAS CONTRA ENTRY IN THE BOOKS OF ACCOUNT S OF SARVODAYA CO.OP. BANK LTD. AND THE ACCOUNT OF THE SAID CREDITOR WERE DEBITED AND THE ACCOUNT OF THE APPELL ANT COMPANY WERE CREDITED. AS PER THE SAID LETTER OF TH E BANK DATED 3.01.1997 REFERRED ABOVE. THEN IN THAT SITUAT ION THE SAID BANK WOULD HAVE CERTAINLY STAKE CLAIM FOR RECO VERY OF THE SAID LOAN FROM THE CREDITOR. NO SUCH EVIDENCE H AS BEEN ADDUCED EITHER BEFORE THE A.O. OR BEFORE THE UNDERS IGNED THAT ANY SUCH LEGAL NOTICES WERE ISSUED BY SAID SAR VODAYA CO. OP. BANK LTD. IT IS ALSO NOT THE CASE OF THE AP PELLANT THAT THE SAID LOAN AMOUNT HAS BEEN OUTSTANDING AND PAYAB LE BY THE APPELLANT COMPANY TO THE SAID BANK. THIS CLEARL Y ESTABLISHES THAT THE GENUINENESS OF THE SAID TRANSA CTION IS 12 NOT ESTABLISHED AND THE CAPACITY OF THE CREDITOR HA S BEEN TOTALLY DENIED. 6. IN A RECENT DECISION OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF R.B. MITTAL VS. CIT REPORTED IN 165 CTR PAGE 366 IT HAS BEEN HELD THAT THE BURDEN IS U PON THE APPELLANT TO PROVE THE CAPACITY AS WELL AS THE GENU INENESS OF THE CREDITOR. BOTH ELEMENTS HAVE NOT BEEN PROVED BY THE APPELLANT AND MERE REFERENCE TO THE TRANSACTION BEI NG CHANNELLED THROUGH A BANK. EVEN IF IT IS ACCEPTED F OR THE SAKE OF ARGUMENT WOULD NOT LEAD TO THE CONCLUSION T HAT BOTH WERE ESSENTIAL INGREDIENTS OF THE CASH CREDITS HAVE BEEN ESTABLISHES. IN VIEW OF THE ABOVE REASONS I AM INC LINED TO HOLD THAT THE ACTION OF THE A.O. IN TREATING THE SA ID LOAN OF RS.60 85 000/- AS UNEXPLAINED AND THEREFORE TREATE D AS INCOME FROM OTHER SOURCES U/S. 68 IS UPHELD. 14. LEARNED COUNSEL FOR ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT AS SESSEE HAS FILED CONFIRMATION LETTER FROM M/S. PAPPILON EXPORTS LTD. DULY SIGNED BY ONE OF ITS DIRECTOR SHRI BHAGWANDAS PREMCHANDANI I N WHICH IT WAS ADMITTED THAT THE AMOUNT OF RS.60 85 000/- IS GIVEN TO THE ASSESSEE. IT WAS ALSO EXPLAINED THAT THE SAID AMOUNT WAS GIVE N VIDE CHEQUE NO.133279 DATED 01.01.1997 DRAWN ON SARVODAYA CO.OP . BANK LTD. AHMEDABAD. COPY OF THE BANK CERTIFICATE CONFIRMING THE ABOVE FACT WAS ALSO FILED. HE HAS THEREFORE SUBMITTED THAT SI NCE THE CHEQUE ISSUED BY SHRI BHAGWANDAS PREMCHANDANI FOR SETTLEME NT OF THE DUES ON ACCOUNT OF THE AMOUNT GIVEN BY THE ASSESSEE TO T HE CONNECTED GROUP COMPANIES AT THE INSTANCE OF SHRI BHAGWANDAS PREMCHANDANI. THEREFORE SHRI K. B. SASIDHARAN ANOTHER DIRECTOR O F M/S. PAPPILON EXPORTS LTD. MAY NOT BE KNOWING THE ISSUE OF THE CH EQUE. THERE WAS NO NEED TO EXAMINE SHRI K. B. SASIDHARAN. THE STATE MENT OF K. B. SASIDHARAN WAS NEVER SUBJECTED TO CROSS EXAMINATION BY THE ASSESSEE. SHRI BHAGWANDAS PREMCHANDANI WAS NEVER EX AMINED BY THE ASSESSING OFFICER DESPITE GIVING SPECIFIC SUBMI SSION. HE HAS SUBMITTED THAT ASSESSEE HAS THEREFORE PROVED IDENTI TY OF THE CREDITOR GENUINENESS OF THE TRANSACTION AND THE SOURCE OF TH E CREDITOR. COPIES OF THE CONFIRMATION AND COPIES OF THE BANK CERTIFIC ATE ARE FILED. HE HAS REFERRED TO PB-17 WHICH IS REPLY FILED BEFORE LEARN ED COMMISSIONER 13 OF INCOME TAX (APPEALS) IN WHICH IN PARA 5.5 THE D ETAILS ARE EXPLAINED ABOUT THE AMOUNTS GIVEN BY THE ASSESSEE T O THE GROUP/SISTER CONCERNS AT THE INSTANCE OF SHRI BHAGW ANDAS PREMCHANDANI. IT IS ALSO EXPLAINED THAT IN ORDER TO PROTECT THE INTEREST OF THE ASSESSEE COMPANY SHRI BHAGWANDAS PREMCHANDA NI WAS PRESSURISED TO REPAY THE AMOUNT AND ULTIMATELY SHRI BHAGWANDAS PREMCHANDANI OBTAINED SOME OVERDRAFT FROM SARVODAYA CO.OP. BANK LTD. AHMEDABAD AND PAID THE AMOUNT IN QUESTION TO T HE ASSESSEE COMPANY THROUGH CHEQUE AND THE CHEQUE WAS ALSO SIGN ED BY SHRI BHAGWANDAS PREMCHANDANI. THE DETAILS OF BANK SLIP COPY OF THE BANK STATEMENT ARE ALSO FILED. HE HAS SUBMITTED THA T SINCE IT WAS A RETURN OF THE AMOUNT THEREFORE ASSESSEE IS NOT CON CERNED WHY IT WAS NOT RECORDED IN THE BOOKS OF THAT COMPANY. PB-29 IS THE COPY OF THE BANK SLIP AND PB-30 AND 31 ARE BANK STATEMENTS. PB- 35 TO 37 ARE THE COPIES OF ACCOUNTS. ON THE OTHER HAND LEARNED DR REPLIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSEE DID NOT GIVE PAN NO. OF M/S. PAPPILON EXPORTS LTD. COMMISS ION WAS ISSUED TO THE I.T.O. ERODE TO MAKE THE INQUIRY FROM M/S. P APPILON EXPORTS LTD. AND REPORT IS FILED IN WHICH THE DIRECTOR OF M /S. PAPPILON EXPORTS LTD. SHRI K.B . SASIDHARAN DENIED ANY TRANSACTION W ITH THE ASSESSEE COMPANY AND ALSO DENIED GIVING OF ANY CHEQUE. NO BO OKS OF ACCOUNT ARE MAINTAINED BY M/S. PAPPILON EXPORTS LTD. THE SI GNATURE OF BHAGWANDAS PREMCHANDANI DIFFERED AS NOTED BY THE AU THORITIES BELOW. LD DR THEREFORE SUBMITTED THAT AUTHORITIES BELOW WERE JUSTIFIED IN CONFIRMING THE ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT. 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICE R NOTED THAT ASSESSEE HAS OBTAINED UNSECURED LOAN OF RS.60 85 00 0/- IN THE ASSESSMENT YEAR IN QUESTION FROM M/S. PAPPILON EXPO RTS LTD. TIRUPUR TAMILNADU. ASSESSEE WAS ASKED TO FILE COMP LETE DETAILS 14 ALONGWITH CONFIRMATION FROM THE ABOVE PARTY. COMMIS SION WAS ALSO ISSUED TO I.T.O. ERODE (TAMILNADU) TO MAKE THE INQ UIRY FROM THE CONCERN PARTY REGARDING GIVING OF THE LOAN. ONE OF THE DIRECTOR OF THIS CONCERN SHRI K. B. SASIDHARAN WAS EXAMINED IN WHICH HE HAS DENIED GIVING OF ANY CHEQUE OF THE AMOUNT IN QUESTION TO T HE ASSESSEE COMPANY. ANY TRANSACTION WITH THE ASSESSEE WAS ALSO DENIED. NO BOOKS OF ACCOUNTS ARE MAINTAINED. THE SAID STATEMEN T OF SHRI K. B. SASIDHARAN WAS NEVER PUT TO THE ASSESSEE FOR THE PU RPOSE OF ALLOWING ANY CROSS EXAMINATION ON BEHALF OF THE ASS ESSEE. WE MAY ALSO NOTE THAT HIS STATEMENT WOULD ALSO NOT BE RELE VANT BECAUSE IN HIS STATEMENT HE HAS STATED THAT HE HAS NO IDEA ABO UT THE CHEQUE ISSUED ON BEHALF OF THEIR COMPANY FROM SARVODAYA CO . OP. BANK LTD. AHMEDABAD. HE HAS NOT DISPUTED THE CONFIRMATION LET TER FILED BY SHRI BHAGWANDAS PREMCHANDANI. IN SUCH CIRCUMSTANCES THE VERIFICATION OF THE BANK ACCOUNT AT AHMEDABAD SHOULD HAVE BEEN M ADE EITHER BY I.T.O. ERODE OR BY ASSESSING OFFICER HIMSELF AT AHM EDABAD. THE ASSESSEE ADMITTEDLY FILED CONFIRMATION LETTER SIGNE D BY SHRI BHAGWANDAS PREMCHANDANI ONE OF THE DIRECTOR/AUTHORI SED SIGNATORY OF M/S. PAPPILON EXPORTS LTD. FROM WHOM AMOUNT WAS RECEIVED IN WHICH HE HAS ADMITTED TO HAVE GIVEN THE AMOUNT IN Q UESTION TO THE ASSESSEE COMPANY. COPY OF THE BANK CERTIFICATE IS ALSO FILED WHICH IS REPRODUCED IN THE IMPUGNED ORDER AND COPY OF THE SAME IS ALSO FILED AT PB-12. THE SAID BANK CERTIFICATE IS ISSUED BY SHRI SARVODAYA CO.OP. BANK LTD. TO SHRI BHAGWANDAS PREMCHANDANI DI RECTOR OF M/S. PAPPILON EXPORTS LTD. AND COPY OF THE SAME WAS ALSO GIVEN TO THE ASSESSEE IN WHICH BANK HAS CERTIFIED THAT CHEQUE NO .133279 DATED 01.01.1997 OF RS.60 85 000/- HAS BEEN ISSUED IN FA VOUR OF M/S. HIRALAL PHARMA LTD. I.E. THE ASSESSEES COMPANY. IT WAS ALSO CERTIFIED THAT M/S. PAPPILON EXPORTS LTD. MAINTAINED BANK ACC OUNT WITH THIS BANK AND HAS BEEN GRANTED TEMPORARY OVERDRAFT FACIL ITY. THE CONFIRMATION FILED BY THE ASSESSEE COMPANY HAVE NOT BEEN EXAMINED BY THE ASSESSING OFFICER SIMILARLY LEARNED COMMISS IONER OF INCOME 15 TAX (APPEALS) DID NOT EXAMINE THE BANK CERTIFICATE OR DIRECTED THE ASSESSING OFFICER TO FILE THE REMAND REPORT. THE A SSESSING OFFICER ALSO DID NOT EXAMINE SHRI BHAGWANDAS PREMCHANDANI IN ORDER TO ELICIT THE TRUTH. THE AFORESAID BANK ACCOUNT OF M/S . PAPPILON EXPORT LTD. IS MAINTAINED AT AHMEDABAD BRANCH AND THE ASSESSING OFFICER ALSO HAVE ITS OFFICE AT AHMEDABAD DESPITE THAT FACT THE ASSESSING OFFICER DID NOT VERIFY THE FACT S AT AHMEDABAD AND CHOSE TO GET THE ISSUE EXAMINED AT TAMILNADU THROUG H THE I.T.O. ERODE. THE I.T.O. ERODE ALSO DID NOT EXAMINE SHRI B HAGWANDAS PREMCHANDANI AND THE BANK ACCOUNT AT AHMEDABAD DESP ITE SUFFICIENT MATERIAL AVAILABLE BEFORE HIM ALSO. FU RTHER REPORT OF I.T.O. ERODE WAS CONFRONTED TO THE ASSESSEE VIDE LETTER D ATED 21.03.2000 BY THE ASSESSING OFFICER AND THE ASSESSEE VIDE LETT ER DATED 27.03.2000 (PB-11) AGAIN EXPLAINED BEFORE HIM THAT M/S. PAPPILON EXPORTS LTD. HAD ADVANCED A SUM OF RS.60 85 000/- THROUGH THE ABOVE CHEQUE NO. OF SARVODAYA CO.OP. BANK LTD. AND AGAIN REQUESTED THE ASSESSING OFFICER TO ISSUE NOTICE TO THE BANKER AND GET THE STATEMENT OF ACCOUNT OF M/S. PAPPILON EXPORTS L TD. AND VERIFY THE FACTS. IT WAS ALSO SUBMITTED THAT ASSESSEE HAS ALRE ADY FILED BANK STATEMENT AND COPY OF THE BANK SLIP THEREFORE IT IS THE RESPONSIBILITY OF THE DEPARTMENT TO VERIFY THE CORRECTNESS OF THE EVIDENCE FROM AVAILABLE SOURCES. THE ASSESSEE THEREFORE REQUESTED TO SUMMON THE BANK FOR GETTING THE MATTER VERIFIED. THE ASSESSING OFFICER DID NOT ACT UPON ON THE REQUEST OF THE ASSESSEE AND DID NOT SUM MON THE BANKER TO VERIFY THE ABOVE FACTS AND ALSO DID NOT ALLOW AN Y CROSS EXAMINATION TO THE STATEMENT OF SHRI K.B. SASIDHARAN AND PASSED THE ASSESSMENT ORDER WITHIN 2 DAYS ON 29.03.2000. THE CROSS EXAMIN ATION OF SHRI K. B. SASIDHARAN ON BEHALF OF THE ASSESSEE EXAMINATIO N OF SHRI BHAGWANDAS PREMCHANDANI AND BANK ACCOUNT ON THE REQ UEST OF THE ASSESSEE WAS NECESSARY TO BRING THE TRUTH ON RECORD . THE ASSESSING OFFICER HOWEVER INSTEAD OF TAKING ANY PROPER RECOU RSE IN ACCORDANCE WITH LAW MADE THE ADDITION BY TREATING THE ADVANCE THROUGH BANKING 16 CHANNEL AS UNEXPLAINED BANK DEPOSIT. HONBLE M. P. HIGH COURT IN THE CASE OF CIT VS. RAMESHCHANDRA SHUKLA [MAIT NO.7 1/2003 DECIDED ON 1.04.2005] REPORTED IN 10 ITJ 286 HELD A S UNDER:- IT IS NOW WELL SETTLED THAT WHERE THE ASSESSEE REQ UESTS THE ASSESSING OFFICER TO ISSUE SUMMONS TO ENFORCE ATTE NDANCE OF THE CREDITORS TO ESTABLISH THE GENUINENESS AND C APACITY OF THE CREDITORS IT IS DUTY OF THE ASSESSING OFFICER TO ENFORCE ATTENDANCE OF CREDITORS BY ISSUING SUMMONS. IF THE ASSESSING OFFICER DOES NOT CHOOSE TO ISSUE SUMMONS AND EXAMINE THE CREDITORS HE CANNOT SUBSEQUENTLY TREAT THE LOANS STANDING IN THE NAME OF SUCH CREDITORS AS NON - GENUINE NOR ADD THE AMOUNT THEREOF TO THE ASSESSEE S INCOME VIDE THE DECISION OF THE ALLAHABAD HIGH COUR T IN (1963 49 ITR 561 NATHU RAM PREMCHAND VS. COMMISSIONER OF INCOME TAX U.P. AND DECISION OF THI S COURT IN 1971 TAX LR 355- R.S. SETH GOPIKISAN AGRAWAL VS. ASSISTANT COMMISSIONER OF S.T. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SMC SHARE BROKERS LTD. 288 ITR 345 HELD THERE IS NO DOUBT THAT THE S TATEMENT OF MANOJ AGARWAL HAD EVIDENTIARY VALUE BUT WEIGHT COULD NOT BE GIVEN TO IT IN PROCEEDINGS AGAINST THE ASSESSEE WITHOUT IT BEING T ESTED UNDER CROSS EXAMINATION. IN THE ABSENCE OF THE STATEMENT BEING TESTED IT CANNOT BE SAID THAT IT SHOULD BE BELIEVED COMPLETELY TO TH E PREJUDICE OF THE ASSESSEE. CONSIDERING THE ABOVE DISCUSSION IT IS CLEAR THAT THE STATEMENT OF SHRI K. B. SASIDHARAN RECORDED BY I.T.O. ERODE AND HIS REPORT WOULD NOT BE RELEVANT TO THE MATTER IN ISSUE AS WELL AS C ANNOT BE READ IN EVIDENCE AGAINST THE ASSESSEE BECAUSE ASSESSEE WAS NEVER ALLOWED ANY CROSS EXAMINATION TO SUCH STATEMENT AT THE ASSESSMENT STAGE. WE THEREFORE EXCLUDE THE STATEMENT OF SHRI K. B. SASIDHARAN AND REPORT OF I.T.O. ERODE FROM CONSIDERATION IN TH E PRESENT APPEAL. 17. THE ASSESSEE IN THE WRITTEN SUBMISSION FILED BE FORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (PB-17) EXPLAI NED THAT THE 17 ASSESSEE COMPANY AND ITS SISTER COMPANIES GAVE LOAN S AND ADVANCES TO SUPREME MONEY MANAGEMENT LIMITED CONTRO LLED BY ITS CHAIRMAN AND DIRECTOR SHRI BHAGWANDAS PREMCHANDANI. DESPITE SEVERAL EFFORTS BY THE ASSESSEE THE AMOUNT WAS NOT REPAID BY SHRI BHAGWANDAS PREMCHANDANI AND NO EFFORT WAS MADE BY H IM TO HELP THE ASSESSEE. THE ASSESSEE THEREFORE PRESSURISED T HE BHAGWANDAS PREMCHANDANI FOR REPAYMENT OF THE AMOUNT AND ULTIMA TELY SHRI BHAGWANDAS PREMCHANDANI DIRECTOR OF M/S. PAPPILON E XPORTS LTD. ISSUED CHEQUE OF RS. 60 85 000/- IN FAVOUR OF THE A SSESSEE AFTER OBTAINING OVERDRAFT FACILITY FROM SARVODAYA CO. OP. BANK LTD. THE ABOVE SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN PRO PERLY APPRECIATED BY THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS). THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DI D NOT APPRECIATE THAT ASSESSEE WAS CONCERNED WITH THE REP AYMENT OF THE AMOUNT IN QUESTION WHICH WAS GIVEN TO THE GROUP CON CERN THROUGH SHRI BHAGWANDAS PREMCHANDANI. IF ANOTHER ACCOUNT IS MAINTAINED BY SHIR BHAGWANDAS PREMCHANDANI ON BEHALF OF M/S. PAPP ILON EXPORTS LTD. WITH SARVODAYA CO. OP. BANK LTD. AHMEDABAD AS CHAIRMAN/DIRECTOR AND HE HAS ISSUED CHEQUE IN QUEST ION IN FAVOUR OF ASSESSEE COMPANY FOR SETTLEMENT OF THE DUES WHERE IS A FAULT OF ASSESSEE. THE ASSESSEE IN THE BEST INTEREST OF THE BUSINESS ACTIVITY OF ITS COMPANY WAS REQUIRED TO RECEIVE BACK THE MON EY. SIMILARLY IF M/S. PAPPILON EXPORTS LTD. DID NOT MAINTAINED ANY B OOKS OF ACCOUNT AT THE TIME OF ISSUE OF THE CHEQUE IN FAVOUR OF THE ASSESSEE HOW ASSESSEE COULD BE BLAMED BECAUSE ASSESSEE HAS NO CO NTROL OVER THE INTERNAL AFFAIRS OF M/S. PAPPILON EXPORT LTD. A ND TWO OF ITS DIRECTORS. THE ASSESSEE HAS EXPLAINED THE IDENTITY OF M/S. PAPPILON EXPORTS LTD. AND COMPLETE ADDRESS IS ALSO GIVEN BEF ORE ASSESSING OFFICER. THE ITO ERODE ALSO EXAMINED ONE OF THE DIR ECTOR OF M/S. PAPPILON EXPORTS LTD. AND CONFIRMED THE IDENTITY AN D EXISTENCE OF M/S. PAPPILON EXPORTS LTD. AT TAMILNADU. SHRI BHA GWANDAS PREMCHANDANI BEING ONE OF THE DIRECTOR OF M/S. PAPP ILON EXPORTS 18 LTD. ISSUED CHEQUE IN FAVOUR OF THE ASSESSEE COMPAN Y OUT OF ITS BANK ACCOUNT WITH SARVODAYA CO. OP. BANK LTD. AHMEDABAD. AS NOTED ABOVE THE ASSESSING OFFICER DID NOT EXAMINE SHRI B HAGWANDAS PREMCHANDANI AND THE BANK ACCOUNT OF M/S. PAPPILON EXPORTS LTD. WITH SARVODAYA CO. OP. BANK LTD. AT AHMEDABAD. THE DETAILS FILED FOR THE BANK ACCOUNT HAD NOT BEEN DISPUTED BY THE A SSESSING OFFICER. THE BANK CERTIFICATE FILED ON RECORD AND REPRODUCED IN THE IMPUGNED ORDER PROVED THAT M/S. PAPPILON EXPORTS LTD. MAINTA INED BANK ACCOUNT WITH SARVODAYA CO. OP. BANK LTD. AHMEDABAD THROUGH ITS DIRECTOR SHRI BHAGWANDAS PREMCHANDANI. IT IS ALSO NOT DISPUTED THAT SHRI BHAGWANDAS PREMCHANDANI WAS ALSO ONE OF THE DI RECTOR AND CHAIRMAN OF THE CREDITOR COMPANY. THE TRANSACTION IN QUESTION IS THEREFORE NOT DISPUTED. THE SOURCE OF ISSUE OF THE CHEQUE IS EXPLAINED TO BE OVERDRAFT FACILITY GRANTED TO M/S. PAPPILON EXPORTS LTD. BY THE SARVODAYA CO. OP. BANK LTD. THUS THE ASSESSEE HAS BEEN PRIMA FACIE ABLE TO PROVE THE CREDITWORTHINESS OF THE CREDITOR IN ISSUING THE CHEQUE IN QUESTION IN FAVOUR OF THE ASS ESSEE COMPANY. 18. HOWEVER WE MAY ALSO NOTE HERE THAT THE ASSESS EE DESPITE MAKING A REQUEST TO THE ASSESSING OFFICER TO SUMMON THE BANKER FOR VERIFICATION OF THE BANK ACCOUNT OF M/S. PAPPILON E XPORTS LTD. WITH SARVODAYA CO.OP. BANK LTD. AHMEDABAD VIDE LETTER DA TED 27.03.2000 (PB-11) DID NOT FILE THE BANK CERTIFICA TE BEFORE THE ASSESSING OFFICER. THIS FACT IS ALSO RECORDED BY LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNE D ORDER AT PAGE 6 PARA-4 IN WHICH THE SUBMISSION OF THE ASSE SSEE IS RECORDED THAT THE SAID BANK CERTIFICATE COULD NOT BE FURNISH ED BEFORE THE ASSESSING OFFICER BEFORE ORDER WAS PASSED. THEREFOR E FOR THE ENDS OF JUSTICE IT WOULD BE RELEVANT TO RESTORE THE MAT TER TO THE FILE OF THE ASSESSING OFFICER TO MAKE VERIFICATION OF THE BANK ACCOUNT AND BANK CERTIFICATE ISSUED BY SARVODAYA CO. OP. BANK LTD. A HMEDABAD 19 BECAUSE THE ASSESSING OFFICER DID NOT HAVE OCCASION TO EXAMINE SUCH BANK CERTIFICATE. 19. CONSIDERING THE ABOVE DISCUSSION WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF THE ASSESSING OFFICER TO RE-DECIDE THE ISSUE BY VERIFYING THE BAN K ACCOUNT OF M/S. PAPPILON EXPORTS LTD. MAINTAINED WITH SHRI SARVODA YA CO. OP. BANK LTD. AHMEDABAD AND THE CERTIFICATE ISSUED BY THEM ON THE MATTER IN ISSUE AS IS REPRODUCED IN THE ORDER OF LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) AS WELL AS PAGE 7 OF THIS ORDE R. THE ASSESSING OFFICER SHALL REDECIDE THE ISSUE AS PER OBSERVATION GIVEN IN THIS ORDER BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE WITHIN THE PERIOD OF 6 MONTHS FROM THE REC EIPT OF THE ORDER. 20. AS A RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY 2010. SD/- SD/- (A.N.PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 29-01-2010 PARAS* COPY OF THE ORDER FORWARDED TO : 1. THE RESPONDENT 2. THE DCIT (APPELLANT). 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR ITAT 6. GUARD FILE BY ORDER //TRUE COPY// DY.R/AR ITA T AHMEDABAD