Fanal Securities & Alied Services, Ahmedabad v. The Income tax Officer,Ward-4(3,, Ahmedabad

ITA 112/AHD/2008 | 2001-2002
Pronouncement Date: 28-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 11220514 RSA 2008
Assessee PAN AAACF1779L
Bench Ahmedabad
Appeal Number ITA 112/AHD/2008
Duration Of Justice 3 year(s) 23 day(s)
Appellant Fanal Securities & Alied Services, Ahmedabad
Respondent The Income tax Officer,Ward-4(3,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2001-2002
Appeal Filed On 04-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA JM & SHRI A N PAHUJA AM ITA NOS.112 & 113/AHD/2008 (ASSESSMENT YEARS:-2001-02 & 2003-04) FANAL SECURITIES & ALLIED SERVICES PVT. LTD. 401 4 TH FLOOR PAWAN PLAZA SARDAR PATEL COLONY NARANPURA AHMEDABAD V/S THE INCOME-TAX OFFICER WARD-4(3) AHMEDABAD PAN: AAACF 1779 L [APPELLANT] [RESPONDENT] ASSESSEE BY :- SMT. URVASHI SHODHAN AR REVENUE BY:- SHRI R K DHANESTA DR O R D E R A N PAHUJA: THESE TWO APPEALS BY THE ASSESSEE DIRECTED AGAINS T TWO SEPARATE ORDERS DATED 26-10-2007 OF THE LD. CIT (APPEALS)-VIII AHMEDABAD FOR THE ASSESSMENT YEARS (AYS) 2001-02 AND 2003-04 RAISE THE FOLLOWING GROUNDS:- ITA NO.112/AHD/2008- AY 2001-02: 1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN REOPENING THE ASSESSMENT PROCEEDING S U/S. 147 OF THE I.T. ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ACTION OF REOPENING IS WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR ON FACT. THE PRESENT PROCEEDINGS THEREFO RE ARE REQUIRED TO BE QUASHED 2 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING CONTRIBUTION TO PROVIDE NT FUND AMOUNTING TO RS.17 29 519/- U/S 43B R.W.S. 36(I)(VA ) R.W.S. 2(24)(X) OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE WHEN THE PAYMENT TOWARDS PROVIDENT FUND DUES ARE MADE WITHIN THE DUE DATE OF FILING OF RETURN THE SAID EXPENDITURE OUGH T TO HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE. 3 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN ADDING RS.5 34 429/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. ITA N OS.112 & 113/AHD/2008 2 4 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING RS.2 99 044/- OUT OF NO N-RECOVERABLE AMOUNT DEBITED TO P & L ACCOUNT. 5 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN NOT ALLOWING BENEFIT OF TELESCOPING BETWEEN THE ADDITIONS AND DISALLOWANCES SO MADE BY HIM. 6 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT A ND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS EXPL ANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IM PUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BRE ACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVE S TO BE QUASHED. 7 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN CHARGING INTEREST UNDER SECTION 234 B AND 234C OF THE ACT. 8 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN INITIATING PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SATISFACTION AS CONTEMP LATED UNDER THE ACT. 9 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN INITIATING PENALTY UNDER SECTION 27 1(1)(B) OF THE ACT. 10 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN INITIATING PENALTY UNDER SECTION 27 1A(2)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER ED IT DELETE MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT TH E TIME OF OR BEFORE THE HEARING OF THE APPEAL. ITA NO.113/AHD/2008 - AY 2003-04:- 1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN REOPENING THE ASSESSMENT PROCEEDING S U/S. 147 OF THE I.T. ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ACTION OF REOPENING IS WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR ON FACT. THE PRESENT PROCEEDINGS THEREFO RE ARE REQUIRE TO BE QUASHED 2 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING CONTRIBUTION TO PROVIDE NT FUND AMOUNTING TO RS.43 98 904/- U/S 43B R.W.S. 36(I)(VA ) R.W.S. 2(24)(X) ITA N OS.112 & 113/AHD/2008 3 OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE WHEN THE PAYMENT TOWARDS PROVIDENT FUND DUES ARE MADE WITHIN THE DUE DATE OF FILING OF RETURN THE SAID EXPENDITURE OUGH T TO HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE. 3 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN ADDING RS.1 03 000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 4 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT A ND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS EXPL ANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IM PUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BRE ACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVE S TO BE QUASHED. 5 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN CHARGING INTEREST UNDER SECTION 234 B AND 234C OF THE ACT. 6 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN INITIATING PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SATISFACTION AS CONTEMP LATED UNDER THE ACT. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER E DIT DELETE MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT TH E TIME OF OR BEFORE THE HEARING OF THE APPEAL. 2 AT THE OUTSET THE LEARNED AR ON BEHALF OF THE AS SESSEE DID NOT PRESS GROUND NO.1 RELATING TO REOPENING OF ASSESSME NTS U/S 147 OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO A S THE ACT] IN THESE TWO APPEALS. ACCORDINGLY THE SAID GROUND NO. 1 IN THESE TWO APPEALS IS DISMISSED. 3 GROUND NO.2 IN BOTH THESE APPEALS RELATES TO DIS ALLOWANCE OF RS.17 29 519/- FOR THE PERIOD RELEVANT TO THE AY 2 001-02 AND RS.43 98 904/- FOR THE PERIOD RELEVANT TO THE AY. 2 003-04 ON ACCOUNT OF BELATED EMPLOYEES CONTRIBUTION TOWARDS PF. THE AO NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE SE TWO ASSESSMENT YEARS THAT THE ASSESSEE DEPOSITED EMPLOY EES ITA N OS.112 & 113/AHD/2008 4 CONTRIBUTION TOWARDS PF BEYOND THE DATES STIPULATED UNDER THE RELEVANT ENACTMENT AND U/S 36(1)(VA) OF THE ACT. T O A QUERY BY THE AO THE ASSESSEE FILED A REVISED STATEMENT OF COMPU TATION OF INCOME ADMITTING THE TAX LIABILITY ON THE BELATED EMPLOYEES CONTRIBUTION TOWARDS PF IN TERMS OF PROVISIONS OF S ECTION 2(24)(X) READ WITH SECTION 36(1)(VA) & 43B OF THE ACT IN THE FOLLOWING TERMS:- FOR AY 2001-02:- WE HAVE ATTEMPTED TO CALCULATE THE REVISED STATEME NT OF INCOME FOR THE AY 2001-02 AFTER GIVING EFFECT TO THE DISALLOWANCE IN RESPECT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF U/S 43B AN D LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF U/S 36(1)(VA) OF THE ACT. WE ENCLOSE THE SAME STATEMENT OF INCOME FOR AY 2001-02. WE HAVE AL SO CALCULATED INTEREST PAYABLE U/S 234B AND 234C. ACCORDINGLY THE TOTAL TAX AND INTEREST ACCORDING T O US WORK OUT TO THE TUNE OF RS.11 70 918/-. WE HAVE PAID A SUM OF RS.2 00 000/- TODAY A COPY OF TOKEN OF CHALLAN IS ENCLOSED. FOR AY 2003-04:- WE HAVE ATTEMPTED TO CALCULATE THE REVISED STATEM ENT OF INCOME FOR THE AY 2003-04 AFTER GIVING EFFECT TO THE DISALLOWANCE IN RESPECT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF U/S 43B AN D LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PF U/S 36(1)(VA) OF THE ACT. WE ENCLOSE THE SAME STATEMENT OF INCOME FOR AY 2003-04. WE HAVE AL SO CALCULATED INTEREST PAYABLE U/S 234B AND 234C. ACCORDINGLY THE TOTAL TAX AND INTEREST ACCORDING T O US WORK OUT TO THE TUNE OF RS.21 01 551/-. WE WILL MAKE THE PAYMENT IN INSTALLMENTS. IN THE LIGHT OF AFORESAID REPLY BY THE ASSESSEE IN THESE TWO ASSESSMENT YEARS THE AO DISALLOWED THE AFORESAID A MOUNT. 4 ON APPEAL THE LEARNED CIT(A) WHILE RELYING UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SYNERGY FINANCIAL EXCHANGE LTD. 288ITR366(MAD.) CONCLUDED T HAT ONLY THE ITA N OS.112 & 113/AHD/2008 5 PAYMENTS MADE BEFORE THE DUE DATES STIPULATED UNDER THE PF ACT WERE ALLOWABLE AND THEREFORE UPHELD THE DISALLOWAN CE MADE BY THE AO. 5 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE WHILE RELYING UPON THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. ( 2009) 319 ITR 306 (SC) CONTENDED THAT BELATED EMPLOYEES CONTRIB UTION TOWARDS PF IS ADMISSIBLE U/S 43B OF THE ACT. THE LEARNED D R ON THE OTHER HAND SUPPORTED THE FINDINGS OF THE LOWER AUTHORITI ES. 6 WE HAVE HEARD BOTH THE PARTIES AND GONE THR OUGH THE FACTS OF THE CASE. AS REGARDS EMPLOYERS AND EMPLOYEES CONTRIB UTION TOWARDS PF WE FIND THAT THE ITAT AHMEDABAD BENCHES HAVE BEEN CONSISTE NTLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. P.M.ELECTRONICS LTD. 220 CTR 635 (DELHI) WHEREIN RELYING UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD. 213 CTR (SC) 268 THE HONBLE COURT CONCURRED WITH THE VIEW TAKEN BY THE HONBLE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD. 219 CTR(MAD) 54 IN HOLDING THAT EMPLOYER/EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND PAYMENTS MADE A FTER THE DUE DATE PRESCRIBED UNDER THE EMPLOYEES PROVIDENT FUND ACT AND RULES M ADE THEREUNDER AND BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF IN COME UNDER SUB SEC. 1 OF SEC. 139 OF THE ACT ARE ALLOWABLE UNDER S.36(1)(VA) REA D WITH SEC. 2(24(X) AND SEC. 43B OF THE ACT. 6.1 MOREOVER RECENTLY HONBLE APEX COURT IN THE CASE O F CIT VS ALOM EXTRUSIONS LTD 319 ITR 306 (SC) HELD THAT THE OMISS ION OF THE SECOND PROVISO TO SECTION 43B OF THE ACT BY THE FINANCE ACT 2003 OP ERATED RETROSPECTIVELY IS WITH EFFECT FROM APRIL 1 1988 AND NOT PROSPECTIVELY FR OM APRIL 1 2004. HONBLE COURT OBSERVED THAT EARLIER UNDER THE SECOND PROVISO TO SECTION 43B AS AMENDED BY THE FINANCE ACT 1989 THE ASSESSEES WERE ENTITLED TO DEDUCTION ONLY IF THE CONTRIBUTION STOOD CREDITED ON OR BEFORE THE DUE DA TE GIVEN IN THE PROVIDENT FUNDS ACT. THIS CREATED FURTHER DIFFICULTIES AND O N A REPRESENTATION MADE TO THE ITA N OS.112 & 113/AHD/2008 6 FINANCE MINISTRY ONE MORE AMENDMENT WAS MADE BY TH E FINANCE ACT 2003. THOUGH THIS AMENDMENT WAS MADE APPLICABLE WITH EFFE CT FROM APRIL 1 2004 THE AMENDMENT WAS CURATIVE IN NATURE AND APPLIED RETROS PECTIVELY WITH EFFECT FROM APRIL 1 1988.IT WAS CLARIFIED THAT WHEN A PROVISO IN A SECTION IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE SECTION WOR KABLE THE PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION THEREIN IS REQUIRED TO BE READ RETROSPECTIVELY IN OPERATION PARTICULARLY TO GIVE EFFECT TO THE SECTI ON AS A WHOLE. 6.2 HONBLE KARNATAKA HIGH COURT IN THEIR DECIS ION IN ANZ INFORMATION TECHNOLOGY P LTD.(SUPRA) WHILE FOLLOWING THEIR EARL IER DECISION IN CIT VS. SABARI ENTERPRISES 298 ITR 141(KAR.) CONCLUDED THAT DEPOS ITS MADE BY THE EMPLOYER OF THE EMPLOYEES CONTRIBUTION BELATEDLY AND CONTRIBUT ION TOWARDS ESI & PF UNDER THE RELEVANT ENACTMENTS CAN NOT BE TREATED AS INCOM E OF THE ASSESSEE U/S 36(1)(VA) READ WITH SEC. 2(24)(X) IN VIEW OF PROVI SIONS OF SEC. 43B OF THE ACT. 6.3 HONBLE DELHI HIGH COURT IN ANOTHER DECISION DATED 23.12.2009 IN CIT VS. AIMIL LTD.(DELHI)IN ITA NO. 1063/2008 OBSERVED THAT SEC. 2(24)(X) PROVIDES THAT AMOUNTS RECEIVED BY AN ASSESSEE FROM EMPLOYEES TOWA RDS PF CONTRIBUTIONS ETC SHALL BE INCOME. S. 36 (1) (VA) PROVIDES THAT IF SUCH SUMS ARE CONTRIBUTED TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF LEGISLATION THE ASSESSEE SHALL BE ENTITLED TO A DEDUCTION. THE SECOND PROVISO TO S. 43B (B) PROVIDED THAT ANY SUM PAID BY THE ASS ESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND SHALL BE ALLO WED AS A DEDUCTION ONLY IF PAID ON OR BEFORE THE DUE DATE SPECIFIED IN 36(1)(VA) OF THE ACT. AFTER THE OMISSION OF THE SECOND PROVISO W.E.F 1.4.2004 THE DEDUCTION IS ALLOWABLE UNDER THE FIRST PROVISO IF THE PAYMENT IS MADE ON OR BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME. THE HONBLE HIGH COURT WHILE CONSIDERING WHETHER THE BENEFIT OF S. 43B CAN BE EXTENDED TO EMPLOYEES CONTRIBUTION AS W ELL WHICH ARE PAID AFTER THE DUE DATE UNDER THE PF LAW BUT BEFORE THE DUE DATE F OR FILING THE RETURN HELD THAT (I) THOUGH THE REVENUE HAS ARGUED THAT A DISTINCTIO N IS TO BE MADE BETWEEN EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUT ION AND THAT EMPLOYEES CONTRIBUTION BEING IN THE NATURE OF TRUST MONEY IN THE HANDS OF THE ASSESSEE CANNOT BE ALLOWED AS A DEDUCTION IF NOT PAID ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF ETC LAW THE SCHEME OF THE ACT IS THAT EM PLOYEES CONTRIBUTION IS TREATED ITA N OS.112 & 113/AHD/2008 7 AS INCOME U/S 2 (24) (X) ON RECEIPT BY THE ASSESSEE AND ALLOWED AS A DEDUCTION U/S 36 (1) (VA) ON MAKING DEPOSIT WITH THE CONCERNE D AUTHORITIES. S. 43B (B) STIPULATES THAT SUCH DEDUCTION WOULD BE PERMISSIBLE ONLY ON ACTUAL PAYMENT; (II) THE QUESTION AS TO WHEN ACTUAL PAYMENT SHOULD BE MADE IS ANSWERED BY VINAY CEMENTS 213 CTR 268 WHERE THE DELETION OF THE SECOND PROVI SO TO S. 43B W.E.F 1.4.2004 WAS HELD APPLICABLE TO EARLIER YEARS AS WELL. AS THE DELETION OF THE 2ND PROVISO IS RETROSPECTIVE THE CASE HAS TO BE GO VERNED BY THE FIRST PROVISO. DHARMENDRA SHARMA 297 ITR 320 (DEL) & P.M. ELECTRONICS 313 ITR 161 (DELHI) FOLLOWED; (III) IF THE EMPLOYEES CONTRIBUTION IS NOT DEPOSIT ED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO FO R WHICH SPECIFIC PROVISIONS ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI A CT. THEREFORE THE ACT PERMITS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS SUBJECT TO THE AFORESAID CONSEQUENCES. INSOFAR AS THE INCOME-TAX ACT IS CONCERNED THE ASS ESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE B EFORE THE RETURN IS FILED AS PER THE PRINCIPLE LAID DOWN IN VINAY CEMENT . 6.4 IN VIEW OF THE FOREGOING WE HAVE NO HESITAT ION IN HOLDING THAT THE EMPLOYEES CONTRIBUTION TOWARDS PF MADE BY THE AS SESSEE BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT FOR THE A SSESSMENT YEARS UNDER CONSIDERATION IS ADMISSIBLE. THEREFORE WE HAVE NO HESITATION IN VACATING THE FINDINGS OF THE LD. CIT(A) AND CONSEQUENTLY DIR ECT THE AO TO ALLOW PAYMENT MADE ON ACCOUNT OF EMPLOYEES CONTRI BUTION TOWARDS PF ON OR BEFORE THE DUE DATES OF FILING OF RESPECTI VE RETURNS IN THESE TWO ASSESSMENT YEARS U/S 139(1) OF THE ACT. WITH TH ESE DIRECTIONS GROUND NO.2 IN THESE APPEALS IS DISPOSED OF. 7 GROUND NO.3 IN THESE APPEALS RELATES TO AN ADDITI ON OF RS.5 34 429/- IN THE AY 2001-02 AND RS.1 03 000/- U /S 68 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED ON PERUSAL OF ANNEXURE-6 TO THE TAX AUDIT REPORT THAT THE ASSESSEE RECEIVED THE FOLLOWING LOANS DURING THE YEAR:- (IN RS.) 1. BHARGAVI D ATODARIA 50 000 2. LEKHA D ATODARIA 7 40 000 3. HONEY MARKETING & MANAGEMENT SERVICES PVT. LTD 6 38 929 ITA N OS.112 & 113/AHD/2008 8 TO A QUERY BY THE AO SEEKING CONFIRMATION OF THE A FORESAID PARTIES THE ASSESSEE REPLIED LETTER DATED 25-08-2006 THAT T HERE WAS NO ADDITION TOWARDS UNSECURED LOANS DURING THE YEAR UN DER CONSIDERATION. SINCE THE ASSESSEE FAILED TO ESTABLI SH IDENTITY AND CREDITWORTHINESS OF THE AFORESAID CREDITORS OR EVEN GENUINENESS OF THE TRANSACTIONS THE AO ADDED THE ENTIRE AMOUNT OF RS.14 28 929/- U/S 68 OF THE ACT. 7.1 LIKEWISE IN AY 2003-04 THE AO NOTICED ON PER USAL OF BALANCE SHEET OF THE ASSESSEE THAT SHARE CAPITAL OF THE ASS ESSEE INCREASED FROM RS.1 00 000/- TO RS.5 00 000/- AND UNSECURED L OANS FROM RS. 90 000 TO RS.1 79 385/- IN THE YEAR UNDER CONSIDERA TION. TO A QUERY BY THE AO SEEKING CONFIRMATION ALONG WITH PAN. ETC. OF ALL PERSONS FROM WHOM NEW SHARE CAPITAL AND NEW UNSECURED LOANS WERE RECEIVED THE ASSESSEE MERELY REPLIED VIDE LETTER D ATED 25-08-2006 THAT THERE WAS NO SUCH UNSECURED LOAN DURING THE YE AR. HOWEVER THE AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESS EE AND IN THE ABSENCE OF IDENTITY AND CREDITWORTHINESS OF THE INV ESTORS /DEPOSITORS AND GENUINENESS OF TRANSACTIONS ADDED AN AMOUNT OF RS.4 89 385/- U/S 68 OF THE ACT. 8 ON APPEAL THE LEARNED CIT(A) REDUCED THE ADDITIO N TO RS.5 34 429/- IN THE AY 2001-02 IN THE FOLLOWING TE RMS:- 4.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE AND THE DECISIONS CITED BY THE ID. AUTHORIZED REPRESENTATIV E. DURING THE COURSE OF APPEAL HEARING THE APPELLANT FURNISHED CONFIRMATIO N LETTERS FROM THE DEPOSITORS WHICH WERE NOT PRODUCED BEFORE THE AO. T HE APPELLANT ALSO FURNISHED DETAILS OF BILLS IRRECOVERABLE BILLS AS A NNEXURE-C TO THE WRITTEN SUBMISSION. AS THESE DOCUMENTS CONSTITUTED NEW EVID ENCES THE SAME WERE SENT TO THE A.O. FOR HIS EXAMINATION AND A REM AND REPORT WAS CALLED FOR FROM THE A.O. THE A.O. SUBMITTED THE REMAND REP ORT DATED 12-10-2007 AND STATED THAT IN RESPECT OF LOAN OF RS.50 000/- F ROM BHARGAVI ATODARIA THE SAID PARTY HAS CONFIRMED THE LOAN OF RS.25 000/ - AND THE BALANCE LOAN OF RS.25 000/- WAS NOT CONFIRMED . AS REGARDS LOAN FROM LEKHA ATODARIA THE PARTY HAS CONFIRMED LOAN OF RS.5 40 000/- AND B ALANCE AMOUNT OF RS.2 LACS WAS NOT CONFIRMED. IN RESPECT OF LOAN FROM HO NEY MARKETING & MANAGEMENT SERVICES PVT. LTD. THE SAID PARTY HAS C ONFIRMED THE AMOUNT ITA N OS.112 & 113/AHD/2008 9 OF RS.2 04 500/- ONLY AND BALANCE AMOUNT OF RS.4 34 429/- WAS NOT CONFIRMED. I HAVE CONSIDERED THE SUBMISSIONS OF TH E A.R. AND THE REMAND REPORT OF THE AO. IN RESPECT OF THE AMOUNT OF RS.2 5 000/- FROM ATODARIA LEKHA THE A.R. HAS SUBMITTED THAT IN RESPECT OF T HE FIRST ENTRY OF RS.25 000/- THE NAME HAS BEEN WRONGLY WRITTEN AS 'F ASCAL' BUT THE DEPOSITOR HAS CONFIRMED AND COPY OF BANK PASS BOOK OF THE DEPOSITOR HAS BEEN FILED IN SUPPORT OF THE SAME AND THE AMOUNT D ATE AND CHEQUE NUMBER TALLY. CONSIDERING THESE FACTS I HOLD THAT THE DEPOSIT OF RS.50 000/- FROM BHARGAVI ATODARIA IS GENUINE. IN RESPECT OF LO AN FROM LEKHA ATODARIA THE TOTAL AMOUNT SHOWN BY THE A.O. IN THE REMAND RE PORT AS RS.5 40 000/- IS FOUND TO BE RS.6 40 000/- ON CORRECT TOTALLING. AS THE AMOUNT OF RS.6 40 000/- IS CONFIRMED BY THE A.O. TO THAT EXT ENT THE CREDIT IS HELD GENUINE AND ONLY ADDITION OF BALANCE AMOUNT OF RS.1 00 000/- IS CONFIRMED OUT OF CASH CREDIT OF RS.7 40 000/- IN THE NAME OF LEKHA ATODARIA. IN RESPECT OF LOAN FROM HONEY MARKET & MANAGEMENT SERV ICES PVT. LTD. THE A.R. SUBMITTED THAT THE SAID PARTY IS ASSESSED WITH THE SAME AO SO THE AO COULD HAVE VERIFIED THE RECORDS OF THE CREDITOR. THE ID. A.R. HAS FILED CONFIRMATION LETTER FROM THE SAID PARTY. THE A.O. I N THE REMAND REPORT HAS CONFIRMED RS.2 04 500/- IN RESPECT OF THIS PARTY. A S THE CREDIT TO THE EXTENT OF RS.2 04 500/- ONLY HAS BEEN CONFIRMED BY THE AO IN RESPECT OF THIS PARTY THE BALANCE AMOUNT OF CREDIT OF RS.4 34 429/ - IS CONFIRMED. THUS THIS GROUND IS PARTLY ALLOWED. 8.1 LIKEWISE IN AY 2003-04 THE LEARNED CIT(A) RE DUCED THE ADDITION TO RS.1 03 000/- IN THE FOLLOWING TERMS:- 5. THE FOURTH GROUND IS AGAINST ADDITION OF UNEX PLAINED CASH CREDIT OF RS.4 89 385/-. THE AO MADE THE ADDITION ON THE GROU ND THAT APPELLANT DID NOT FILE ANY CONFIRMATION LETTERS WITH PAN FOR NEW UNSECURED LOANS AND NEW SHARE CAPITAL RECEIVED. 5.1 BEFORE ME THE ID. A.R. MADE DETAILED WRITTEN SU BMISSION WHICH IS REPRODUCED UNDER: 'LD. AO FURTHER ADDED RS.4 89 385/- U/S 68 OF THE A CT ON THE GROUND THAT APPELLANT HAS FAILED TO PROVE THE CREDIT-WORTH INESS IDENTITY AND GENUINENESS OF THE CREDITORS WITHOUT APPRECIATING T HAT DURING THE YEAR UNDER CONSIDERATION THERE IS NO FRESH BORROWIN GS AND THEREFORE NO ADDITION U/S 68 OF THE ACT COULD HAVE BEEN MADE. THE APPELLANT SUBMITS THAT OUT OF THE ABOVE STATED AMOUNT RS.4.00 LACS IS TOWARDS INCREASE IN THE SHARE CAPITAL COMP LETE DETAILS WHEREOF IS AT PAGES 20 TO 23 OF THE P/B. AS REGARDS THE REMAINING RS.89 385/- RELEVANT CONFIRMATION; WITH NAME ADDRE SS AND P A NOS ARE ANNEXED HERETO AND MARKED AS ANNEXURE A TO THIS SUBMISSIONS. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT IT HAS GIVEN THE NAME ADDRESS. PAN AND CONFIRMATION OF THE DEPOSITOR WHO IS ALSO A ITA N OS.112 & 113/AHD/2008 10 DIRECTOR OF THE APPELLANT COMPANY. THE APPELLANT MO ST RESPECTFULLY SUBMITS THAT IN ORDER TO PROVE THE CREDITS APPEARIN G IN ITS BOOKS OF ACCOUNTS IT HAS TO PROVE THE FOLLOWING THREE THINGS :- (I) THE GENUINENESS OF THE TRANSACTION (II) IDENTITY OF THE DEPOSITOR; AND (III) CREDITWORTHINESS AND CAPACITY OF THE DEPOSITO R. IN THE FACTS OF THE PRESENT CASE IT HAS PROVED ALL THESE THREE THINGS IN AS MUCH AS NAME AND ADDRESS PROVE THE IDENTITY CLOSE RELATIONSHIP PROVE THE GENUINENESS OF THE TRANSACTI ON AND COPY OF THE PAN PROVES THE CREDITWORTHINESS. ONCE THESE THR EE INGREDIENTS ARE PROVED BURDEN SHIFTS ON THE REVENUE MORE SO WH EN ALL THE UNDERLYING TRANSACTIONS ARE BY A/C PAYEE CHEQUES. I N THIS CONNECTION ATTENTION OF YOUR HONOURS IS BROUGHT TO THE FOLLOWING DECISIONS WHEREIN IT WAS HELD THAT WHEN THE ASSESSE E HATS GIVEN THE NAMES AND ADDRESSES OF THE CREDITORS THE BURDE N IS ON THE REVENUE TO EXAMINE THE SOURCE OF THE INCOME OF THE SAID CREDITORS THEIR CREDIT WORTHINESS AND CAPABILITY TO ADVANCE T HE SAID LOAN. IN THE PRESENT CASE THE APPELLANT HAS ADMITTEDLY GIVE N THE NAMES AND ADDRESSES OF THE CREDITOR/DONOR AND THEREFORE HAVI NG DISCHARGED THE INITIAL BURDEN THE OUNCE WAS ON THE REVENUE TO VERITY THE DETAILS OF THE CREDIT IN THE BOOKS OF THE CREDITORS. RELIAN CE IS PLACED ON THE FOLLOWING AUTHORITIES: I) MURLIDHAR LAHORIMAL VS. CIT [280ITR 512 (GUJ). II) CIT VS. PRAGATI CO.OP. BANK LTD. [278 ITR 170 ( GUJ)] III) CIT V. ORISSA CORPORATION P. LTD. [159 ITR 078 (SC) IV) NEMI CHAND KOTHARI V. CIT (264 ITR 254 (GAU) V) DCIT V. ROHINI BUILDERS. (256ITR 360)(GUJ) VI) ADDL CIT V. HANUMAN AGARWAL (151 ITR 150 VII) ADDL. CIT V. BAHRI BROS. P. LTD. (154 ITR 244 VIII) SAROGI CREDIT CORPORATION V. CIT(103 ITR 344 ) (PAT) 5.2 DURING THE COURSE OF APPEAL HEARING THE APPELL ANT FURNISHED PAPER BOOK CONTAINING DETAILS OF INCREASE IN SHARE CAPITA L AND FORM-2 FILED WITH ROC IN CONNECTION WITH INCREASE IN SHARE CAPITAL AN D CONFIRMATION LETTERS FOR DEPOSITS OF RS.89 385/- FROM THE DEPOSITORS WHI CH WERE NOT PRODUCED BEFORE THE A.O. AS THESE DOCUMENTS CONSTITUTED NEW EVIDENCES THE SAME WERE SENT TO THE A.O. FOR HIS EXAMINATION AND A REM AND REPORT WAS CALLED FOR FROM THE A.O. THE A.O. SUBMITTED THE REMAND REP ORT DATED 15-10-2007 IN THE REMAND REPORT THE A.O. HAS REPORTED THAT IN RESPECT OF UNSECURED LOAN OF RS.89 385/- WHICH CONSISTED OF RS.62 272/- FROM GOVARDHANBHAI ITA N OS.112 & 113/AHD/2008 11 MANCHARAM PATEL AND RS.27 113/- FROM KAMLESH GOVARD HANBHAI PATEL THE PARTIES HAVE FILED CONFIRMATION LETTERS IN RESP ONSE TO SUMMONS ISSUED U/S 131 BUT THEY HAVE NOT MENTIONED THE MAIN FACTOR S LIKE MODE OF PAYMENT SOURCE OF PAYMENT AND DATE OF INTRODUCTION OF LOAN HENCE THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES COULD NOT BE VERIFIED. AS AGAINST THE REMAND REPORT OF THE A. O. THE A.R. HAS SUBMITTED THAT THE SAID PARTIES HAVE CONFIRMED THE CREDITS AND THEY HAVE EXPLAINED THAT THE DEPOSITS HAVE BEEN MADE OUT OF T HEIR PAST SAVINGS. THEIR PAN NUMBERS WERE GIVEN. THEREFORE THE ADDITI ON OF THE SAME WAS NOT JUSTIFIED. AS THE CONFIRMATION LETTERS AND PAN WERE FILED IN RESPECT OF THE UNSECURED LOANS AND THE LOANS ARE FROM THE DIRE CTORS THE LOANS ARE HELD AS GENUINE AND ADDITION OF RS.89 385/- IS DELE TED . AS REGARDS THE NEW SHARE CAPITAL FUND OF RS.4 LACS THE APPELLANT F URNISHED THE LIST OF PARTIES FROM WHOM SHARE CAPITAL MONEY WAS RECEIVED. THE A.O. DURING REMAND STAGE ISSUED SUMMONS IN RESPONSE TO WHICH 3 PARTIES I.E. GOVARDHAN PATEL KAMLESH G. PATEL AND TRUPTIBEN K. PATEL HAVE SUBMITTED COPIES OF ACKNOWLEDGEMENTS OF RETURNS BUT HOWEVER THE A.O. HAS REPORTED THAT DETAILS OF MODE OF PAYMENT SOURCE OF PAYMENT AND DATE OF INTRODUCTION OF LOAN WERE NOT FURNISHED HENCE THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES COU LD NOT BE PROVED FOR THE TRANSACTION OF SHARE CAPITAL. AS AGAINST THIS THE A R SUBMITTED THAT THE NAMES AND ADDRESSES OF THE SHAREHOLDERS WERE SUBMIT TED AND THEY ARE IDENTIFIED. THE ABOVE 3 PARTIES HAVE FILED CONFIRMA TION LETTERS. THE AR RELIED UPON THE DECISION OF JODHPUR BENCH OF THE IT AT IN UMA POLYMERS LTD. 100 ITD 1 AND CONTENDED THAT AS THE PARTIES A RE IDENTIFIED NO ADDITION SHOULD BE MADE ON ACCOUNT OF SHARE CAPITAL. I FIND THAT IN RESPONSE TO THE SUMMONS ISSUED BY THE AO 3 SHAREHOLDERS CONFIRMED A S ABOVE AND THE AMOUNT INTRODUCED BY THESE 3 SHAREHOLDERS COMES TO RS.2 97 000/-. AS THE CONFIRMATION HAS BEEN RECEIVED TO THE TUNE OF R S.2 97 000/- TO THAT EXTENT THE ADDITION IS REDUCED AND THE BALANCE AMOU NT OF RS.1 03 000/- IS CONFIRMED AS NO CONFIRMATIONS WERE FURNISHED FOR TH EM. 9 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A) FOR THE TWO ASSESSME NT YEARS. THE LEARNED AR ON BEHALF OF THE ASSESSEE WHILE RELYING UPON THE DECISIONS IN THE CASES REPORTED IN CIT VS. LOVELY E XPORTS (P) LTD. 216 CTR 195 (SC) CIT VS. PRAGATI CO-OPERATIVE BANK LTD. 278 ITR 170 (GUJ) AND MURLIDHAR LAHORIMAL 280 ITR 512 ( GUJ) CONTENDED THAT THE ASSESSEE HAD FURNISHED NAMES AND ADDRESSES OF THE CREDITORS/DEPOSITORS AS ALSO THEIR PANS. SINCE THE CREDITORS/ SHAREHOLDERS WERE IDENTIFIED THE LEARNED CIT(A) WA S NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.5 34 429/- IN AY 2001- 02 AND RS.1 03 000/- IN AY 2003-04. TO A QUERY BY THE BENC H THE LEARNED ITA N OS.112 & 113/AHD/2008 12 AR DID NOT PRODUCE EITHER CONFIRMATIONS OR EVEN A C OPY OF THE REMAND REPORT SUBMITTED BY THE AO BEFORE THE LD. CI T(A) NOR EVEN ANY OTHER MATERIAL IN SUPPORT OF HER ARGUMENTS. ON THE OTHER HAND THE LEARNED DR WHILE CARRYING US THROUGH THE IMPUGN ED ORDERS SUPPORTED THE FINDINGS OF THE LD. CIT(A). 10 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY DESPITE SPECIFIC REQUEST MA DE BY THE AO FOR SUBMITTING CONFIRMATIONS OF THE AFORESAID CREDITORS / SHAREHOLDERS IN SUPPORT OF THE INCREASE IN UNSECURED LOANS/SHARE CA PITAL THE ASSESSEE VIDE LETTER DATED 25.8.2006 ALTOGETHER DEN IED HAVING RECEIVED ANY NEW UNSECURED LOANS. ON APPEAL THE AS SESSEE SUBMITTED BEFORE THE LD. CIT(A) CONFIRMATIONS OF T HE AFORESAID PARTIES. THE LEARNED CIT(A) AFTER HAVING A REMAND R EPORT ON THESE CONFIRMATIONS AND SUBMISSIONS ON BEHALF OF THE ASS ESSEE FOUND THAT CONFIRMATIONS WERE FILED ONLY TO THE EXTENT OF RS. 6 40 000/- OUT OF UNSECURED LOANS OF RS.7 40 000/- RECEIVED FROM M S. LEKHA D ATODARIA IN THE AY 2001-02. LIKEWISE OUT OF LOANS O F RS.6 38 929/- FROM HONEY MARKETING & MANAGEMENT SERVICES LTD. TH E ADDITION WAS DELETED TO THE EXTENT OF THE AMOUNT CONFIRMED B Y THE SAID PARTY AND REMAINING ADDITION OF RS.4 34 429/- WAS UPHELD. SIMILARLY IN AY 2003-04 THE ADDITION TO THE EXTENT OF RS.1 03 000/- WAS UPHELD FOR WANT OF CONFIRMATIONS FROM THE RESPECTIVE PARTIES. DESPITE SPECIFIC REQUEST MADE BY US THE LEARNED AR DID NOT PRODUCE ANY MATERIAL BEFORE US EVIDENCING THAT THE AFORESAID AMOUNT OF RS. 1 00 000/- OR RS. 4 34 429/- BY WAY OF UNSECURED LOANS WAS IND EED RECEIVED FROM THE AFORESAID PARTIES IN THE PERIOD RELEVANT T O THE AY 2001- 02.LIKEWISE IN THE AY 2003-04 THE LD. AR DID NOT EITHER IDENTIFY THE SHAREHOLDERS FROM WHOM THE AMOUNT OF RS.1 03 000/- HAD INDEED BEEN RECEIVED. IN THE ABSENCE OF ANY MATERIAL EVID ENCING IDENTITY/CREDITWORTHINESS OF THE PERSONS FROM WHOM THE AMOUNTS TO THE AFORESAID EXTENT HAD BEEN RECEIVED BY THE ASSES SEE NOR THE HAVING ESTABLISHED GENUINENESS OF THE TRANSACTIONS THERE IS NO ITA N OS.112 & 113/AHD/2008 13 BASIS ENABLING US TO TAKE A DIFFERENT VIEW IN THE M ATTER. IN THE ABSENCE OF RELEVANT MATERIAL IN THE INSTANT CASE EVEN THE RELIANCE ON BEHALF OF THE ASSESSEE ON THE VARIOUS DECISIONS IS ALSO MISPLACED. IN THESE CIRCUMSTANCES WE HAVE NO ALT ERNATIVE BUT TO UPHOLD THE ADDITION OF RS.5 34 929/- IN AY 2001-02 AND RS.1 03 000/- IN AY 2003-04 U/S 68 OF THE ACT. THER EFORE GROUND NO.3 IN THESE TWO APPEALS IS REJECTED. 11 GROUND NO.4 IN THE APPEAL FOR THE AY 2001-02 REL ATES TO CLAIM FOR DEDUCTION OF BAD DEBT OF RS.2 99 044/-. THE AO NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSES SEE CLAIMED DEDUCTION OF RS.2 99 044/-ON ACCOUNT OF IRRECOVERAB LE BILLS. DESPITE SERVICE OF NOTICE TO PROVIDE RELEVANT DETAILS THE ASSESSEE DID NOT CARE TO FURNISH ANY DETAILS NOR ESTABLISHED THAT TH E AMOUNT REALLY BECAME IRRECOVERABLE IN THE YEAR UNDER CONSIDERATIO N. ACCORDINGLY THE AO DISALLOWED THE AMOUNT. ON APPEAL THE LEARNE D CIT(A) UPHELD THE DISALLOWANCE IN THE FOLLOWING TERMS:- 5.2 THE AR HAS SUBMITTED THAT THE SAID AMOUNT WAS OFFERED TO TAX IN EARLIER YEARS AND THAT THE APPELLANT HAD NO HOPE OF RECOVERY. IN THE REMAND REPORT THE AO SUBMITTED THAT THE APPELLANT H AS NOT MENTIONED FOR WHICH YEAR THE BILL AMOUNTS ACTUALLY PERTAINED AND WHETHER ANY LEGAL STEPS HAVE BEEN TAKEN FOR RECOVERY AND THE APPELLANT HAS NOT FURNISHED THE INDIVIDUAL PARTY'S ACCOUNTS AND THE APPELLANT HAS N OT PROVED HOW THE DEBTS HAVE' BECOME BAD AND THE A.O. HAS REFERRED TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS PVT. LTD. VS. CIT REPORTED IN 207 CTR-729. I FIND THAT THE AP PELLANT HAS NOT TAKEN ANY ACTION FOR RECOVERY OF THESE AMOUNTS IF AT ALL ANY ACTION HAS BEEN TAKEN THE APPELLANT HAS NOT PRODUCED EVIDENCE FOR T HE SAME BY WAY OF CORRESPONDENCES WITH THE PARTIES NOR THE APPELLANT HAS GIVEN COPIES OF ACCOUNTS OF THESE PARTIES BEFORE ME OR AT THE REMAN D STAGE EVEN THOUGH THE A.O. HAD ASKED THE APPELLANT SPECIFICALLY. THER EFORE THE DISALLOWANCE IS CONFIRMED IN VIEW OF THE DECISION OF HON'BLE GUJ ARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS PVT. LTD. VS. CIT. 12. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED A R ON BEHALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFO RE THE LD. CIT(A) CONTENDED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ITA N OS.112 & 113/AHD/2008 14 ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN TRF LIMITED VS. CIT 323 ITR 397 (SC) . THE LEARNED DR ON THE O THER HAND SUPPORTED THE FINDINGS OF THE LD. CIT(A) 13.. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON. INDISPUT ABLY THE ASSESSEE DID NOT SUBMIT THE RELEVANT DETAILS SOUGHT BY THE AO NOR PLACED ANY SUCH DETAILS BEFORE THE LD. CIT(A) IN SU PPORT OF THEIR CLAIM FOR DEDUCTION OF BAD DEBTS. WE FIND THAT THE HON'BLE SUPREME COURT IN THE CASE OF TRF LIMITED VS. CIT 323 ITR 39 7 (SC) WHILE ADJUDICATING A SIMILAR CLAIM CONCLUDED AS UNDER: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT H AS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSI NG OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS IN FACT BEEN WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS THE BAD DEBT ACCOUNT IS DEBITED AN D THE CUSTOMER'S ACCOUNT IS CREDITED THUS CLOSING THE ACCOUNT OF THE CUSTOMER . IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATE D ABOVE THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE THE MATTER IS REMITTE D TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. 13.1. IN THE INSTANT CASE DESPITE REQUEST MADE BY THE AO AND EVEN BEFORE THE LD. CIT(A) THE ASSESSEE DID NOT PRODUC E ANY EVIDENCE AS TO THE NATURE OF DEBT AND AS TO IN WHICH YEAR THE AFORESAID AMOUNT HAD BEEN OFFERED TO TAX. EVEN BEFORE US NO SUCH MAT ERIAL HAS BEEN PLACED. IN THESE CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE WE VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE T HE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ALLOW A FINAL OPPO RTUNITY TO THE ASSESSEE FOR EXPLAINING THE NATURE OF DEBT AND FO R FURNISHING THE RELEVANT DETAILS OF THE YEAR IN WHICH THE SAID AMOU NT HAS BEEN OFFERED TO TAX AND THEREAFTER ADJUDICATE THE ISSUE IN THE LIGHT OF ITA N OS.112 & 113/AHD/2008 15 AFORESAID DECISION OF THE HONBLE APEX COURT IN TRF LTD.(SUPRA). WITH THESE DIRECTIONS GROUND NO.4 IN THE APPEAL FOR THE AY 2001-02 IS DISPOSED OF. 14 GROUND NO.5 IN THE APPEAL FOR AY 2001-02 RELATES TO BENEFIT OF TELESCOPING BETWEEN THE ADDITIONS AND DISALLOWANCES MADE BY THE AO. THERE IS NO DISCUSSION ON THIS ISSUE IN THE ASS ESSMENT ORDER WHILE THE LEARNED CIT(A) REJECTED THE GROUND IN THE ABSENCE OF ANY NEXUS BETWEEN UNEXPLAINED INCOME AND DISALLOWANCE O F EXPENSES. THE LD. AR APPEARING BEFORE US DID NOT MAKE ANY SUB MISSIONS NOR PLACED ANY MATERIAL BEFORE US ESTABLISHING THE NEX US BETWEEN UNEXPLAINED INCOME AND DISALLOWANCE OF EXPENSES. UNLESS THERE WAS A CONNECTION BETWEEN THE ADDITIONS AND DISALLOWANCE S IT WOULD BE DIFFICULT TO ACCORD SET OFF OF THE TWO FIGURES AS HELD IN THE D ECISIONS IN THE CASE OF CIT V. DEVI PRASAD VISWANATH PRASAD [1969] 72 ITR 194 (SC) AND CIT VS. JHAVERBHAI BIHARILAL & CO.160 ITR 634(PATNA). THEREFORE THE G ROUND NO. 5 IN THE APPEAL FOR THE AY 2001-02 IS DISMISSED. 15 GROUND NO.6 IN THE APPEAL FOR AY 2001-02 AND GRO UND NO.4 IN THE APPEAL FOR AY 2003-04 BEING GENERAL IN NATURE N OR ANY SUBMISSIONS HAVING BEEN MADE BY THE LEARNED AR ON T HESE GROUNDS DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE T HEREFORE DISMISSED. 16. GROUND NO.7 IN THE APPEAL FOR AY 2001-02 AND GR OUND NO.5 IN THE APPEAL FOR AY 2003-04 RELATES TO LEVY OF INTERE ST U/S 234B AND 234C OF THE ACT. THE LD. AR ON BEHALF OF THE ASSES SEE DID NOT MAKE ANY SUBMISSIONS ON THESE GROUNDS. THE LEVY OF INTEREST U/S 234B & 234C OF THE ACT BEING MANDATORY [COMMISSIONER OF INCOME TAX. VS ANJ UM M. H. GHASWALA AND OTHERS 252 ITR 1(SC) AFFIRMED BY HON'BLE APEX COUR T IN THE CASE OF CIT V. HINDUSTAN BULK CARRIERS [2003] 259 ITR 449 (SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564 (SC) ] THESE GROUNDS ARE DISMISSED. HOWEVER THE AO MAY ALLOW CONSEQUENTIAL RELIEF IF ANY WHILE GIVING EFFECT TO THIS ORDER. ITA N OS.112 & 113/AHD/2008 16 17. GROUND NOS.8 9 AND 10 IN THE APPEAL FOR AY 200 1-02 RELATE TO INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) 27 1(1)(B) AND 271A(2)(C) OF THE ACT RESPECTIVELY WHILE GROUND NO. 6 IN THE APPEAL FOR THE AY 2003-04 RELATES TO INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE LEARNED AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THESE GROUNDS IN THESE CIRCUMSTANCES ESPECIALLY WHEN NO APPEAL IS PROVIDED AGAINST MERE INITIATION OF PENALTY PROCEEDINGS THESE GROUNDS ARE DISMISSED 18. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF RESIDUARY GROUND IN THESE TWO APPEALS THESE GROUNDS ARE ALSO DISMISSED. 19. IN THE RESULT BOTH THESE APPEALS ARE PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 28 -01-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 28 -01-2011 COPY OF THE ORDER FORWARDED TO: 1. FANAL SECURITIES & ALLIED SERVICES PVT. LTD. 40 1 4 TH FLOOR PAWAN PLAZA SARDAR PATEL COLONY NARANPURA AHMEDA BAD 2. ITO WARD-4(3) AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VIII AHMEDABAD 5. DR ITAT AHMEDABAD BENCH-A AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD