The ITO, Ward-2(3),, Bhavnagar v. Shri Mahendrakumar Natvarlal Bhayani, Bhavnagar

ITA 1405/AHD/2008 | 1992-1993
Pronouncement Date: 31-08-2010 | Result: Allowed

Appeal Details

RSA Number 140520514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 1405/AHD/2008
Duration Of Justice 2 year(s) 4 month(s) 8 day(s)
Appellant The ITO, Ward-2(3),, Bhavnagar
Respondent Shri Mahendrakumar Natvarlal Bhayani, Bhavnagar
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 31-08-2010
Date Of Final Hearing 23-08-2010
Next Hearing Date 23-08-2010
Assessment Year 1992-1993
Appeal Filed On 22-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI MUKUL SHRAWAT JM & SHRI A N PAHUJA AM ITA NO.1405/AHD/2008 (ASSESSMENT YEAR:-1992-93) INCOME-TAX OFFICER WARD- 2(3) BHAVNAGAR V/S SHRI MAHENDRAKUMAR NATVARLAL BHAYANI C/O NATVARLAL & SONS OPP. BHIDBHANJAN MAHADEV BHAVNAGAR [PAN: NOT AVAILABLE] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI VIMALENDU VERMA DR ASSESSEE BY:- SHRI T P HEMANI AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 28- 12-2007 OF THE LD. CIT(APPEALS)-XX AHMEDABAD RAIS ES THE FOLLOWING GROUNDS:- 1 THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.6 02 000/- OUT OF RS.7 00 000/- MADE ON ACCOUNT OF CASH/CHEQUE BEING UNEXPLAINED MONEY IN THE BANK ACC OUNT OF THE ASSESSEE AND ADDED U/S 68 OF THE ACT. 2 THE LD. CIT(A) ERRED IN LAW AND ON FACTS TO IGNOR E THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS OF THE SO CALLED DEPOSITORS CLAI MED BY THE ASSESSEE. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 4 IT IS THEREFORE PRAYED THAT THE ORDER OF THE CI T(A) BE SET ASIDE AND THAT OF AO BE RESTORED TO THE ABOVE EFFEC T. 2 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT A SEARCH U/S 132 OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED T O AS THE ACT] WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 2/3-09 -1992. IN HIS STATEMENT ON OATH RECORDED U/S 132(4) OF THE ACT T HE ASSESSEE DENIED HAVING ANY BANK ACCOUNT. DURING THE POST SEA RCH INQUIRIES IT ITA NO.1405/AHD/2008 2 TRANSPIRED THAT THE ASSESSEE HAD BANK ACCOUNTS IN HIS NAME AS ALSO IN THE NAME OF HIS FAMILY MEMBERS . ON GOING THROUGH A COPY OF THE BANK ACCOUNT NO. 6593 WITH THE UNION BANK OF INDIA LOKHAND BAZAR BHAVNAGAR IT WAS REVEALED THAT THE ASSESSEE HAD DEPOSITED CASH OF RS.5 LACS ON 04-04-91 AND RS.2 LACS ON 16- 04-1991. THE ASSESSEE EXPLAINED THAT HE HAD DEPOSITED THE SAID A MOUNT OUT OF LOAN RECEIVED FROM THE 42 PERSONS OF BOMBAY. ALL T HESE AMOUNTS BORROWED BY HIM DURING THE PERIOD 1-4-1991 TO 13-4- 1991 WERE IN CASH AND BELOW RS.20 000/- EACH . 2.1. SUBSEQUENTLY THE ASSESSEE FILED HIS RETURN O N 10-12-93 DECLARING INCOME OF RS.71.902/- AND THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS THE ASSESSEE SUBMITTED THAT THE LOANS WERE ARRANGED BY ONE SHRI BALWANTRAI DOSHI OF BOMBAY AND FURNISHED ADDRESSES OF THE DEPOSITORS AT BOMBAY. THE ASSESSING OFFICER[AO IN S HORT] ACCORDINGLY DEPUTED THE INSPECTOR FOR ENQUIRIES WHEN IT WAS FOUND THAT EXCEPT 6-7 PARTIES NONE ELSE WERE AVAILABLE A T THE ADDRESSES GIVEN BY THE ASSESSEE. THE AO ALSO CAMPED AT BOMBAY FOR THE PURPOSE AND RECORDED THE STATEMENT OF SHRI BALVANT RAI DOSHI WHO DENIED TO HAVE ARRANGED ANY LOANS FOR THE ASSESSEE. THE AO WHILE REFERRING TO FINDINGS IN THE ORIGINAL ASSESSMENT OR DER DATED 24-3-95 OBSERVED THAT THE SO CALLED DEPOSITS WERE FOUND TO BE BOGUS AND THE CASH DEPOSITED IN THE BANK REMAINING UNEXPLAINE D AN ADDITION OF AN AMOUNT OF RS.7 LACS WAS MADE RESULTING IN ASSE SSMENT OF TOTAL INCOME OF RS.9.24.202/- ON APPEAL THE ID. CIT(A) VIDE ORDER DATED 11-1-1996 DELETED THE ADDITION OF RS.6 02.000/- OUT OF RS.7 LACS. ON FURTHER APPEAL BY THE ASSESSEE AND THE REVENUE THE ITAT RESTORED THE ISSUE TO THE FILE OF THE AO VIDE THEIR ORDER DA TED 30-6-2004 IN ITA NOS. 609-1022/AHD/1996 IN THE FOLLOWING TERMS: 'WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. IN OUR OPINI ON THE MATTER NEEDS FURTHER EXAMINATION. THE ASSESSEES CASE HAS A PECU LIAR FACTS THAT CERTAIN AMOUNTS WERE FOUND CREDITED IN THE BANK ACCOUNT WHI CH IS NOT DISCLOSED TO ITA NO.1405/AHD/2008 3 THE DEPARTMENT. WHEN THE UNDISCLOSED BANK ACCOUNT W ERE DETECTED BY THE REVENUE AND THE ASSESSEE WAS ASKED TO EXPLAIN THE S OURCES OF THE CREDIT IN THOSE BANK ACCOUNT THE ASSESSEE CLAIMED TO HAVE BORROWED MONEY IN CASH FROM 42 PERSONS OF BOMBAY. ALL THE BORROWINGS ARE IN CASH AND DURING THE COURSE OF HEARING BEFORE US IT WAS ACCE PTED BY THE ASSESSEES COUNSEL THAT NO INTEREST IS PAID ON THE ABOVE DEPOS ITS. IT NEEDS TO BE EXAMINED WHY SUCH LARGE NUMBER OF PERSONS DEPOSITED MONEY WITH THE ASSESSEE IN CASH AND THAT TOO WITHOUT CHARGING OF I NTEREST. IN THE ABOVE CIRCUMSTANCES WE SET ASIDE THE ORDERS OF REVENUE. AUTHORITIES BELOW AND RESTORE THE MATTER BACK TO THE FILE OF ASSESSING 0F FICER AND DIRECT HIM TO CONFRONT THE ASSESSEE WITH THE REPORT OF THE INSPEC TOR AND THE MATERIAL GATHERED BY THE INSPECTOR WHICH HE PROPOSES TO UTIL IZE AGAINST THE ASSESSEE. THE ASSESSEE WILL BE GIVEN AN OPPORTUNITY TO REBUT THE SAME. THE BURDEN OF PROVING THE CASH CREDIT IS UPON THE A SSESSEE. HOWEVER THE ASSESSING OFFICER WILL GIVE ADEQUATE OPPORTUNITY TO THE ASSESSEE TO PROVE HIS CLAIM THAT MONEY WAS BORROWED FROM SEVERAL CRED ITORS SO AS TO DEPOSIT IN THE BANK ACCOUNT. THEREAFTER THE ASSESSING OFFI CER WILL RE-ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AND AFTER CONSIDER ING ALL THE FACTS. 2.2 IN PURSUANCE TO THE AFORESAID DIRECTIONS OF THE ITAT THE AO SERVED A LETTER ON THE ASSESSEE ON 21ST SEPTEMBER 2005 ALONG WITH MATERIAL GATHERED BY THE INSPECTOR DEPUTED TO BOMBA Y FOR INQUIRY IN THE FOLLOWING TERMS : 'YOU ARE WELL AWARE THAT SEARCH U/S. 132 OF THE ACT WAS CARRIED OUT BY THE INCOME-TAX DEPARTMENT AT YOUR PREMISES. ON POST SEA RCH ENQUIRIES IT WAS REVEALED THAT YOU WERE MAINTAINING SEVERAL BANK ACC OUNTS IN YOUR NAME AND IN THE NAME OF THE FAMILY MEMBERS. IN THESE BAN K ACCOUNT IT WAS OBSERVED THAT RS.5 LAKHS WAS DEPOSITED ON 04-04-199 1 AND RS.2 LAKHS DEPOSITED ON 16-04-1995. DURING THE COURSE OF ASSESSMENT PROCEEDINGS YOU WE RE ASKED TO EXPLAIN THE SOURCES OF AMOUNT SO DEPOSITED IN THE BANK ACCO UNTS. IN REPLY YOU HAVE CLAIMED THAT YOU HAD BORROWED CASH BELOW RS.20 000/- FROM 42 PERSONS OF BOMBAY. THE NECESSARY ENQUIRIES THROUGH INSPECTOR WAS MADE BY THE ASSESSING OFFICER AT THE ADDRESSES GIVEN BY YOU AT BOMBAY. IT WAS REPORTED BY THE INSPECTOR DEPUTED FOR THE PURPOSE T HAT EXCEPT FEW DEPOSITORS NONE WAS AVAILABLE AT THE ADDRESSES GIVE N. CONSIDERING THIS FACTUAL POSITION THE ASSESSING OFFICER HAD VIDE OR DER DATED 24.03.1995 ADDED THE AMOUNT DEPOSITED IN THE BANK ACCOUNT I.E. RS.7 LAKHS AS UNEXPLAINED INVESTMENT OUT OF INCOME FROM UNDISCLOS ED SOURCES. THE MATTER WAS CARRIED BY YOU BEFORE THE CIT(A) WHO HA D VIDE ORDER DATED 11- 01-1995 DIRECTED TO DELETE THE ADDITION OF RS.6 82 500/- OUT OF THE AMOUNT OF RS.7 LAKHS ADDED IN THE ORDER OF ASSESSMENT. THE MATTER WAS AGAIN BEFORE THE ITAT RAJKOT BENCH RAJKOT WAS CARRIED FOR DECISION BY YOU AS WELL AS THE DEPARTMENT. THE HON'BLE LUMBERS OF THE TRIBUNAL VIDE ORDER ITA NO.1405/AHD/2008 4 DATED 30-06-2004 DECIDED THE ISSUE AND RESTORED BAC K THE MATTER TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION THAT:- 'WE SET-ASIDE THE ORDERS OF REVENUE AUTHORITIES BEL OW AND RESTORED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER AND DI RECT HIM TO CONFRONT THE ASSESSEE WITH THE REPORT OF THE INSPECTOR AND THE M ATERIALS GATHERED BY THE INSPECTOR WHICH HE PROPOSES TO UTILIZE AGAINST THE ASSESSEE. THE ASSESSEE WILL BE GIVEN AN OPPORTUNITY TO REBUT THE SAME. BUR DEN OF PROVING THE CASH CREDITS IS UPON THE ASSESSEE'. 2. UNDER THESE CIRCUMSTANCES AND AS DIRECTED BY THE HON'BLE MEMBERS OF FF/E ITAT I AM ENCLOSING HEREWITH REPOR TS OF THE INSPECTOR DEPUTED BY THE ASSESSING OFFICER AT BOMBAY ALONG WI TH THE MATERIALS GATHERED BY HIM WITH A REQUEST TO PLEASE OFFER YOUR EXPLANATION IF ANY WITH COGENT EVIDENCES IN YOUR SUPPORT AND PROVE THE CASH CREDITS WHICH ARE CLAIMED TO HAVE BEEN OBTAINED BY YOU. PLEASE NOTE T HAT IN ABSENCE OF ANY CONCRETE AND CONVINCING EVIDENCES YOUR CLAIM WILL BE ENTITLED TO BE REJECTED. YOUR CASE IS FIXED FOR HEARING ON 10-10-0 5 AT 11.00 AM. 2.3 HOWEVER ON THE APPOINTED DAY THERE WAS N O COMPLIANCE BY THE ASSESSEE. EVEN ANOTHER OPPORTUNITY GRANTED IN TERMS OF A NOTICE U/S. 142(1) OF THE ACT SERVED UPON THE ASSES SEE ON 02-12-05 WAS NOT AVAILED NOR IN TERMS OF FINAL NOTICE U/S. 142(1) OF THE ACT SERVED UPON THE ASSESSEE ON 26-12-05. SINCE THE ASS ESEE DID NOT RESPOND THE AO COMPLETED THE ASSESSMENT U/S 144 OF THE ON THE BASIS OF MATERIAL AVAILABLE ON RECORDS VIDE ORDER D ATED 23.1.2006. IN NUTSHELL THE AO CONCLUDED THAT SINCE THE ASSESSEE DID NOT REBUT THE DOCUMENTS PUT BEFORE HIM IT WAS PROVED THAT THE AS SESSEE HAD NO EXPLANATION TO OFFER AND THERE WAS NO EVIDENCE WITH HIM TO PROVE H IS CLAIM AS GENUINE ONE. THEREFORE THE AMOUNT OF RS.7 LAKHS DEPOSITED IN TH E BANK WAS HELD TO BE UNEXPLAINED AND TREATED AS ASSESSEES INCOME FROM U NDISCLOSED SOURCES. 3. ON APPEAL THE LEARNED AR ON BEHALF OF THE AS SESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT DURING THE COURSE OF RE ASSESSMENT PROCEEDINGS FROM 02-12-2005 TO 28-12-2005 THE ASSE SSEE HAD INTIMATED HIS CHARTERED ACCOUNTANTS AT RAJKOT TO FI NALISE THE RE- ASSESSMENT PROCEEDINGS AND THUS THE ASSESSEE WAS U NDER BONAFIDE BELIEF THAT HIS CHARTERED ACCOUNTANTS ATTENDED THE MATTER AND WOULD ITA NO.1405/AHD/2008 5 HAVE FINALIZED THE RE-ASSESSMENT PROCEEDINGS. HOWEV ER THE C.A. OF THE ASSESSEE DID NOT ATTEND BEFORE THE AO RESULTIN G IN EXPARTE ASSESSMENT U/S 144 R.W.S. 254 OF THE. THUS PROPER OPPORTUNITY WAS NOT AVAILED BY THE ASSESSEE TO EXPLAIN THE BANK DEP OSIT OF RS.7 00 000/- IT WAS SUBMITTED. IT WAS FURTHER PO INTED OUT THAT SINCE THE APPEAL WAS FILED BELATEDLY BEFORE THE LD. CIT(A ) ON 25.5.2006 INSTEAD OF 14-03-2006 AS STIPULATED UNDER THE LAW THE LD. CIT(A) REJECTED THEIR REQUEST FOR CONDONATION OF DELAY I N FILING THE APPEAL VIDE ORDER DATED 09-08-2006. ON FURTHER APPEAL THE ITAT VIDE THEIR ORDER DATED 17-11-2006 IN ITA NO. 1923/AHD/2006 DI RECTED THE LD. CIT(A) TO CONDONE THE DELAY AND DECIDE THE APPEAL ON MERITS IN ACCORDANCE WITH LAW. 3.1 IT WAS FURTHER SUBMITTED THAT THE A.O. ERRED IN PASSING THE ORDER U/S 144 R.W.S. 254 ON 23-01-2006 INCLUDING THE EARL IER ADDITION RS.7 00 000/- IN THE TOTAL INCOME WITHOUT CONSIDE RING THEIR WRITTEN SUBMISSIONS FILED ALONGWITH EVIDENCE PRODUCED AT TH E TIME OF REGULAR ASSESSMENT. WHILE REFERRING TO THE FINDINGS OF THE LD. CIT(A) IN FIRST ROUND OF LITIGATION THE ASSESSEE CONTENDED THAT SINCE THEY HAD FILED CONFIRMATIONS FROM ALL THE PARTIES THE LD. C IT(A) WAS NOT JUSTIFIED IN UPHOLDING EVEN THE ADDITION OF RS. 98 000/- IN THE FIRST ROUND. 3.2 THE LD. AR ON BEHALF OF THE ASSESSEE FURTHER SU BMITTED THAT THE ASSESSEE COULD NOT APPEAR BEFORE THE AO IN RESP ONSE TO NOTICES ISSUED ON 10-10-2005 AND 02-12-2005 FOR HEARING BE ING BUSY IN A MATTER BEFORE THE HONBLE HIGH COURT DUE TO DISPUT E BETWEEN THE FIRM M/S. NATVARLAL & CO. IN WHICH THE ASSESSEE W AS A PARTNER AND BHARAT PETROLEUM CORPORATION LTD. ON ACCOUNT OF LEA KAGE IN OIL TANKER. AS REGARDS NOTICE ISSUED U/S. 142(1) SERVED UPON THE ASSESSEE ON 26-12-2005 FIXING THE HEARING ON 28-12- 2005 IT WAS CONTENDED THAT THE ASSESSEE HAD APPLIED FOR ADJOURN MENT ON 09-01- 2006 UP TO 25TH JANUARY 2006. CONTINUING IT WAS FU RTHER SUBMITTED ITA NO.1405/AHD/2008 6 THAT DESPITE DIRECTIONS OF THE ITAT IN THEIR ORDER DATED 30-O6-2004 THE AO PASSED THE ASSESSMENT ORDER U/S. 144 ON 23/01/2006 WITHOUT PROVIDING SUFFICIENT OPPORTUNITY . ACCORDINGLY IT WAS PLEADED THAT THE ORIGINAL ORDER DATED 11/01/1996 OF THE LD. CIT( A) MAY BE TAKEN INTO CONSIDERATION. THE LD. CIT(A) CALLED FOR A RE MAND REPORT FROM THE AO ON THE WRITTEN SUBMISSIONS DATED 18-04-2007 FILED BY THE ASSESSEE . 3.3 THE AO IN HIS REPORT DATED 31-10-2007 SUBMITTED T HAT DURING THE POST SEARCH INQUIRIES THE ASSESSEE HIMSELF IN HIS STATEMENT STATED THAT THE TRANSACTIONS RECORDED IN THE BANK ACCOUNTS WERE TOTALLY OUTSIDE THE BOOKS AND THIS VERY FACT CAST DOUBTS ABOUT THE CLAIM SUBSEQUENTLY MADE BY THE ASSESSEE THAT DEPOSI TS WERE ACCEPTED BY HIM FROM 42 DEPOSITORS OF BOMBAY. EVEN SHRI BALVANTRAI DOSHI WHO IS STATED TO HAVE ARRANGED LOANS DENIED TO HAVE ARRANGED ANY SUCH LOANS . MOREOVER THE ASSESSEE'S COUNSEL AT THE APPELLATE STAGE STATED THAT THE ASSESSEE HAD NOT PA ID INTEREST TO ANY OF THE 42 DEPOSITORS OF BOMBAY WHEREAS IN ALL THE CONFIRMATIONS GIVEN BY THE DEPOSITORS INTEREST WAS SHOWN TO HAV E BEEN PAID TO THE DEPOSITORS IN CASH . ACCORDINGLY THE FACTS STA TED AND SHOWN WERE IN DIRECT VARIANCE AND CONTRADICTORY TO EACH O THER THE AO SUBMITTED AND THEREFORE THE CONFIRMATIONS SUBMITTE D BY THE DEPOSITORS COULD NOT BE ACTED UPON. EVEN WHEN IN T HE ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO P RODUCE THE ALLEGED DEPOSITORS THESE WERE NOT PRODUCED AND INS TEAD IT WAS CLAIMED THAT SINCE ALL THE DEPOSITORS WERE ASSESSED TO TAX GENUINENESS OF DEPOSIT SHOULD BE ACCEPTED. THE AO POINTED OUT THAT IN PURSUANCE TO INQUIRIES THE SO CALLED DEPOS ITORS WERE NOT EVEN FOUND TO EXIST AT THE GIVEN ADDRESSES AND NO N EW ADDRESSES OR WHEREABOUTS OF THE DEPOSITORS WERE SUBMITTED. THERE FORE THE CONTENTION OF THE ASSESSEE REGARDING GENUINENESS O F THE DEPOSITORS MERELY ON THE BASIS OF THESE BEING ASSE SSED TO TAX CANNOT BE ACCEPTED AS THEIR IDENTITY WAS NOT ESTABL ISHED NOR THEIR ITA NO.1405/AHD/2008 7 CREDITWORTHINESS. AT THE ORIGINAL STAGE APART FROM THE CONFIRMATIONS NO OTHER EVIDENCES HAVE BEEN FILED BY THE ASSESSEE. SINCE THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY & CREDITW ORTHINESS OF THE DEPOSITORS OR EVEN GENUINENESS OF THE SAID DEPOSIT S THE CONTENTIONS OF THE ASSESSEE CAN NOT BE ACCEPTED. 3.4 IN HIS REJOINDER THE LD. AR ON BEHALF OF THE ASSESSEE CONTENDED THAT THE AO DID NOT GIVE ANY OPPORTUNITY TO THE ASSESSEE BEFORE SUBMITTING HIS REMAND REPORT. IT WAS CONTEND ED THAT THE LD. CIT(A) VIDE HIS ORDER DATED 11.1.1996 RIGHTLY DELET ED THE ADDITION OF RS.6 02 000/- 4 AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF TH E ASSESSEE AND REMAND REPORT OF THE AO THE LEARNED CIT(A) CON CLUDED AS UNDER:- 3.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE ORDER OF THE ASSESSING OFFICER SUBMISSIONS MADE BY THE LEARNED COUNSEL OF THE APPELLANT AND REMAND REPORT OF THE ASSESSING OFFICE R. I HAVE ALSO PERUSED THE PAPERS FILED BY THE DEPARTMENT AS WELL AS FILED BY THE APPELLANT DURING THE COURSE OF FIRST ROUND OF APPEAL. A REPORT OF TH E ASSESSING OFFICER DATED 31-10-2007 WAS RECEIVED FROM THE ASSESSING OFFICER ON THE PLEA RAISED BY THE APPELLANT IN HIS SUBMISSIONS. THE SUMMARY OF OR IGINAL SUBMISSION AND SUBSEQUENT SUBMISSION IN SUPPORT OF THE CLAIM THAT NO ADDITION CAN BE MADE OUT OF DEPOSIT OF RS.7 LACS MADE AS PLACED BY THE REPRESENTATIVE OF THE APPELLANT HAS BEEN CONSIDERED. THE APPELLANT EXPLAINED THAT HE HAD TAKEN LOANS FRO M VARIOUS PERSONS AT BOMBAY THROUGH HIS MATERNAL UNCLE SHRI BALVANTRAI D OSHI WHO IS STAYING AT BOMBAY. DURING THE COURSE OF ORIGINAL ASSES SMENT PROCEEDINGS THE APPELLANT FILED CONFIRMATIONS FROM ALL PERS ONS FROM WHOM HE HAD TAKEN LOANS DURING F.Y. 1991-92. IT WAS ALSO CLARIF IED THAT ALL THE FORTY TWO PERSONS WERE ASSESSED TO I.T. AT BOMBAY. IT WAS ALS O CLAIMED AT ORIGINAL STAGE THAT THE ALLEGED INQUIRES WERE MADE BEHIND TH E BACK OF THE APPELLANT AND THE A.O. HAD NOT ALLOWED OPPORTUNITY TO CROSS E XAMINE WITNESSES WHOSE STATEMENTS WERE RECORDED BY THE A.O. EVEN AF TER THE HON'BLE TRIBUNAL'S DIRECTIONS THE PROPER OPPORTUNITY HAS N OT BEEN GIVEN TO THE APPELLANT BY THE ASSESSING OFFICER. THE APPELLANT H AD ALSO FILED THE COPIES .OF RETURNS OF INCOME WHICH WERE FILED BY THE DEPOS ITORS. IN SOME DEPOSITORS' CASES COPIES OF RATION CARDS WERE ALSO FILED. THE CONFIRMATION LETTERS HAVE BEEN SUBMITTED BY THE APPELLANT IN ALL DEPOSITORS' CASES BEFORE MY PREDECESSOR IN FIRST ROUND OF APPEAL. IN MANY CA SES THE DEPOSITORS HAD ITA NO.1405/AHD/2008 8 SENT LETTERS INFORMING THE A.O. ABOUT THE CHANGE OF THEIR ADDRESSES. IN THE FOLLOWING SIX CASES HOWEVER IT WAS NOTICED FROM T HEIR RESPONSES THAT THEY DID NOT KNOW SHRI MAHENDRAKUMAR BHAYANI THE APPELLANT OR SHRI BALVANTRAI DOSHI. THEY ALSO DENIED TO HAVE MADE ANY DEPOSITS WITH THE APPELLANT. THE NAMES OF SUCH PARTIES ARE AS UNDER:- (1) MADHAVI C. SHAH RS.17 500/- (2) KANTABEN L SHAH RS.16 500/- (3) YOGESH V. PAREKH RS.15 50 0/- (4) KHIMJI CHAUHAN RS.16 000 /- (5) KIRIT S. DOSHI RS.17 000/- (6) LAVCHAND JOSHI RS.15.500/- RS.98 000/- THOUGH THE APPELLANT CLAIMS THAT ALL THE SIX PERSON S HAVE GIVEN THE CONFIRMATIONS AND THAT THEY ARE ALSO ASSESSED TO T AX BUT AS PER ENQUIRY MADE' BY THE A 0 THEY DENIED TO HAVE MADE DEPOSITS WITH THE APPELLANT. THEREFORE CONFIRMATIONS CANNOT BE RELIED IN THEIR CASES. IT HAS CONSISTENTLY BEEN HELD BY DIFFERENT JUDICIAL AUTHORITIES THAT IN THE CASE OF DEPOSITORS THE FOLLOWING THREE CONDITIONS ARE TO BE FULFILLED FOR TREATING THE DEPOSITS AS GENUINE. THESE ARE - (A) THE IDENTITY OF THE DEPOSITORS SHOULD BE PROVED (B) THE CREDIT WORTHINESS OF THE DEPOSITORS SHOULD BE PROVED AND (C) THE GENUINENESS OF THE TRANSACTION SHOULD BE P ROVED. 3.5 THE MATTER HAS NOW BECOME VERY OLD WHICH RELATE S TO F Y 1991-92. AFTER A GAP OF MANY YEARS IT IS NOT POSSIBLE TO CO NTACT ALL PERSONS AT GIVEN ADDRESSES. THE MATTER HAS TO BE DECIDED ON THE BASI S OF FACTS AND MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE FACT THAT THE C ONFIRMATION LETTERS HAVE BEEN FURNISHED AND ALL THE DEPOSITORS WERE ASSESSED TO TAX DURING THE PERIOD OF DEPOSITS I AM OF THE VIEW THAT ALL THE D EPOSITS ARE GENUINE ONES EXCEPT IN THE CASES OF SIX PERSONS MENTIONED ABOVE. IN REGARD TO THE SIX PERSONS I AM OF THE VIEW THAT AN INFERENCE U/S. 68 CAN BE DRAWN THAT THE NATURE AND SOURCES OF THE DEPOSITS AS HELD BY THE H ON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT - 214 ITR 801 H AS NOT BEEN PROVED. THEREFORE OUT OF RS.7 LACS THE ADDITION TO THE EX TENT OF RS.98 000/- IS UPHELD AND THE BALANCE ADDITION OF RS.6 02 000/- IS HEREBY DELETED. THE GROUND IS THUS PARTLY ALLOWED. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR WHILE C ARRYING US THROUGH THE IMPUGNED ORDERS SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTE D THE FINDINGS OF THE LD. CIT(A). TO A QUERY BY THE BENCH THE LD. AR SUBMITTED THAT IN ITA NO.1405/AHD/2008 9 PURSUANCE TO THE DIRECTIONS OF THE ITAT THE ASSESS EE WAS NOT SUPPLIED WITH THE REPORT OF INSPECTOR IN RESPECT OF ENQUIRIES AT BOMBAY NOR DID THEY FURNISH ANY REPLY THEREON. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. WE FIND THAT IN HIS STATEMENT ON OATH REC ORDED U/S 132(4) OF THE ACT THE ASSESSEE DENIED HAVING ANY BANK AC COUNT . DURING POST SEARCH INQUIRIES IT WAS DETECTED THAT THE ASS ESSEE HAD BANK ACCOUNTS IN HIS NAME AS ALSO IN THE NAME OF HIS FAMILY MEMBERS . ON GOING THROUGH A COPY OF THE BANK ACCOUNT NO. 659 3 WITH THE UNION BANK OF INDIA LOKHAND BAZAR BHAVNAGAR IT W AS REVEALED THAT THE ASSESSEE HAD DEPOSITED CASH OF RS.5 LACS ON 04- 04-91 AND RS.2 LACS ON 16-04-1991. THE ASSESSEE EXPLAINED THAT H E HAD DEPOSITED THE SAID AMOUNT OUT OF LOAN RECEIVED IN CASH FROM T HE 42 PERSONS OF BOMBAY DURING THE PERIOD 1-4-1991 TO 13-4-1991 THR OUGH SHRI BALVANTRAI DOSHI. SHRI DOSHI IN HIS STATEMENT DENIE D TO HAVE ARRANGED ANY LOANS FOR THE ASSESSEE. IN THE LIGHT OF THESE UNDISPUTED FACTS THE ITAT VIDE THEIR ORDER DATED 3 0.6.2004 RESTORED THE MATTER TO THE FILE OF THE AO WITH THE OBSERVATI ONS THAT THE ASSESSEES CASE HAS PECULIAR FACTS WHEN CERTAIN AM OUNTS WERE FOUND CREDITED IN THE BANK ACCOUNT NOT DISCLOSED TO THE DEPARTMENT. WHEN THE UNDISCLOSED BANK ACCOUNT WAS DETECTED BY THE REVENUE AND THE ASSESSE E WAS ASKED TO EXPLAIN THE SOURCES OF THE CREDIT IN THOSE BANK ACCOUNT TH E ASSESSEE CLAIMED TO HAVE BORROWED MONEY IN CASH FROM 42 PERSONS OF BOMBAY. T HE ITAT FURTHER OBSERVED THAT ALL THE BORROWINGS WERE IN CASH AND IT WAS ACC EPTED BY THE ASSESSEES COUNSEL THAT NO INTEREST WAS PAID ON THE ABOVE DEPO SITS. ACCORDINGLY THE ITAT CONCLUDED THAT IT NEEDS TO BE EXAMINED WHY SUCH LAR GE NUMBER OF PERSONS DEPOSITED MONEY WITH THE ASSESSEE IN CASH AND THAT TOO WITHOUT CHARGING OF INTEREST. IT IS NOTICED FROM THE OBSERVATIONS O F THE AO IN HIS REMAND REPORT QUOTED ABOVE THAT THE CONFIRMATIONS REVEALED PAYM ENT OF INTEREST TO DEPOSITORS. WE FIND THAT THE LD. CIT(A) WITHOUT RECORDING ANY F INDINGS ON THE FACTS FOUND BY THE AO AND IGNORING THE OBSERVATIONS OF THE ITAT I N THEIR ORDER DATED 30.6.2004 MERELY FOLLOWED THE EARLIER ORDER OF THE LD. CIT(A) AND DELETED THE ADDITION OF RS. ITA NO.1405/AHD/2008 10 6 02 000 ON THE BASIS OF CONFIRMATIONS FILED BY T HE ASSESSEE EVEN WHEN THE LATTER ADMITTED THAT THEY DID NOT AVAIL THE OPPORTU NITY PROVIDED BY THE AO IN TERMS OF DIRECTIONS OF THE ITAT. DESPITE OBSERVATIONS OF THE ITAT IN THEIR ORDER DATED 30.6.2004 THAT THE BURDEN OF PROVING THE CASH CREDI T IS UPON THE ASSESSEE THE LD. CIT(A) WITHOUT RECORDING ANY FINDINGS AS TO HOW THE SAID BURDEN WAS DISCHARGED BY THE ASSESSEE REDUCED THE ADDITION APPARENTLY I N TERMS OF AN EARLIER ORDER OF THE LD. CIT(A) WHICH STOOD VACATED BY THE ITAT. 6.1 WE MAY POINT OUT THAT MERE FILING OF CONFIRMA TORY LETTERS DOESNT DISCHARGE THE ONUS LAID DOWN UPON THE ASSESSEE FOR ESTABLISHING IDENTITY AND CREDITWORTHINESS OF DEPOSITORS OR EVEN GENUINENESS OF TRANSACTIONS AS HELD IN A NUMBER OF DECISIONS INCLUDING IN SHANKAR INDUSTRIE S VS. CIT 114 ITR 689 (CAL) BHARTI PVT. LTD. VS CIT 111 ITR 951 (CAL) NANANK CH ANDRA LAXMAN DAS VS. CIT 140 ITR 151 (ALL). MERE FILING OF I.T. FILE NUMBER OF CREDITOR IS NOT ENOUGH AND THAT IDENTITY AND CREDITWORTHINESS OF THE CREDITOR HAS TO BE ESTABLISHED AS HELD IN CIT VS KORLAY TRADE CO. LTD. 232 ITR 820 (CAL)- 6.2 IN VIEW OF THE FOREGOING ESPECIALLY WHEN THE ASSESSEE DID NOT APPEAR BEFORE THE AO IN TERMS OF DIRECTIONS OF THE ITAT DESPITE SUFFICIENT OPPORTUNITY PROVIDED BY THE AO AND EVEN WHEN MATERIAL GATHERED BY THE INSPECTOR WAS PROVIDED TO HIM WHIL E THE LD. CIT(A) MERELY REITERATED EARLIER DECISION OF THE LD. CIT(A ) AND DID NOT CARE TO ASCERTAIN THE CORRECT FACTS NOR PASSED A SPEAKIN G ORDER IN THE LIGHT OF MATERIAL AVAILABLE ON RECORD NOR EVEN RECO RDED HIS FINDINGS AS TO HOW THE ONUS LAID DOWN UPON THE ASSESSEE IN E STABLISHING IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS OR EVEN GENUINENESS OF THE TRANSACTIONS STOOD DISCHARGED ESPECIALLY W HEN SHRI BALWANT DOSHI DENIED TO HAVE ARRANGED ANY LOANS FOR THE ASS ESSEE AND IT WAS CLAIMED BEFORE THE ITAT THAT NO INTEREST WAS CH ARGED WHILE CONFIRMATIONS FILED BY THE ASSESSEE REVEALED OTHERW ISE WE ARE OF THE OPINION THAT MATTER NEEDS TO BE RECONSIDERED BY HIM . THE APPLICATION OF MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFES T ITSELF IN THE ORDER. SECTION 250(6) OF THE INCOME TAX ACT MANDATES THAT THE ORDE R OF THE CIT(A) WHILE ITA NO.1405/AHD/2008 11 DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHA LL STATE THE POINTS FOR DETERMINATION THE DECISION THEREON AND THE REASON FOR THE DECISION. AS IS APPARENT FROM THE IMPUGNED ORDER IN OUR OPINION T HE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE NAMELY THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. TH E REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATION THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDURE AND SAFEGUARD TO ENSURE O BSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARITY CHECKS THE INTRODUCTION OF E XTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINESS IN THE D ECISION-MAKING PROCESS. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEA N THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB (1995)1SCC 760(SC)]. 7.1 AS ALREADY MENTIONED ABOVE SINCE THE LD. CI T(A) HAS NOT PASSED A SPEAKING ORDER AND IGNORED THE OBSERVATIONS OF THE ITAT IN THEIR ORDER DATED 30.6.2004 WE CONSIDER IT FAIR AND APPROPRIATE TO SE T ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ISSUES RAISED IN GROUND NO S.1 &2 OF THE APPEAL TO HIS FILE FOR DECIDING THE MATTER AFRESH IN ACCORDANCE WITH L AW IN THE LIGHT OF OUR AFORESAID OBSERVATIONS AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL THE LEARNED C IT(A) SHALL PASS A SPEAKING ORDER KEEPING IN MIND INTER ALIA THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. WITH THESE OBSERVATIONS GROUND NOS. 1 &2 ARE DISPOSED OF. 8. GROUND NOS. 3 & 4 BEING MERE PRAYER DO NOT R EQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFORE DISMISSED . ITA NO.1405/AHD/2008 12 9. IN THE RESULT APPEAL IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 31-08-2010 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 31-08-2010 COPY OF THE ORDER FORWARDED TO: 1. SHRI MAHENDRAKUMAR NATVARLAL BHAYANI C/O NATVAR LAL & SONS OPP. BHIDBHANJAN MAHADEV BHAVNAGAR 2. THE ITO WARD-2(3) BHAVNAGAR 3. CIT CONCERNED 4. CIT(A)-XX AHMEDABAD 5. THE DR BENCH-D ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD