Dr.M.P.Naresh Kumar, CHENNAI v. ACIT, CHENNAI

ITA 1794/CHNY/2009 | 2002-2003
Pronouncement Date: 17-09-2010 | Result: Partly Allowed

Appeal Details

RSA Number 179421714 RSA 2009
Assessee PAN AACPN7635M
Bench Chennai
Appeal Number ITA 1794/CHNY/2009
Duration Of Justice 9 month(s) 20 day(s)
Appellant Dr.M.P.Naresh Kumar, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-09-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 17-09-2010
Date Of Final Hearing 08-09-2010
Next Hearing Date 08-09-2010
Assessment Year 2002-2003
Appeal Filed On 27-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE ACCOUNTANT MEMBER] I.T.A.NO.1785/MDS/2009 ASSESSMENT YEAR : 2004-05 THE ACIT CENTRAL CIRCLE I(2) CHENNAI VS DR. M.P. NARESH KUMAR NO.93 POES GARDEN GOPALAPURAM CHENNAI 600 086 [PAN - AACPN7635M] (APPELLANT) (RESPONDENT) I.T.A.NOS.1793 TO 1798/MDS/2009 ASSESSMENT YEAR : 2001-02 TO 2006-07 DR. M.P. NARESH KUMAR NO.93 POES GARDEN GOPALAPURAM CHENNAI 600 086 VS THE ACIT CENTRAL CIRCLE I(2) CHENNAI [PAN - AACPN7635M] (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI TAPAS KUMAR DUTTA & SHRI B.SRINIVAS ASSESSEE BY : SHRI MANUEL THOMAS O R D E R PER BENCH: THIS IS A BUNCH OF SEVEN APPEALS SIX APPEALS BY THE ASSESSEE FOR ASSESSMENT YEARS 2001-02 TO 2006-07 AN D ONE APPEAL BY ITA 1785 1793 TO 1798/09 :- 2 -: THE REVENUE FOR ASSESSMENT YEAR 2004-05. FOR THE S AKE OF CONVENIENCE AND BREVITY WE PROCEED TO DECIDE THEM BY A COMMON ORDER. I.T.A.NO. 1793/MDS/09 (A.Y 2001-02) 2. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-I CHENNAI DATED 3.8.2009. 3. THE SOLE ISSUE INVOLVED IN THIS APPEAL RELATES TO SUSTENANCE OF ADDITION OF ` 5 94 374/- ADDED ON ACCOUNT OF UNEXPLAINED CREDITS . THE ASSESSEE IS A PRACTICING DOCTOR SPECIALIZED IN CARD IAC SURGERY. HE IS ALSO MANAGING DIRECTOR OF M/S HARVEY HEART HOSPITAL S LTD AND HARVEY HEALTH CARE LTD. A SEARCH AND SEIZURE OPERATION U/ S 132 OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT' FOR SHORT) WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF THE AS SESSEE ON 14.12.2005. CONSEQUENT UPON THE SEARCH A NOTICE U /S 153A R.W.S 143(3) WAS ISSUED TO THE ASSESSEE FOR THE ASSESSMEN T YEARS UNDER CONSIDERATION INCLUDING ASSESSMENT YEAR 2001-02. I N RESPONSE TO THE NOTICE THE ASSESSEE REQUESTED THAT THE ORIGINAL RE TURN FILED FOR ASSESSMENT YEAR 2001-02 ON 31.7.2001 DISCLOSING A T OTAL INCOME OF ` 8 93 190/- MAY BE TREATED AS THE RETURN FILED IN RE SPONSE TO THIS NOTICE. AN ORDER U/S 143 R.W.S 153A WAS FRAMED ON 28.12.2007 ITA 1785 1793 TO 1798/09 :- 3 -: DETERMINING TOTAL INCOME OF ` 17 22 029/-. AGGRIEVED BY THE ORDER THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) AGAINST SUSTENANCE OF THE ADDITION OF ` 5 94 374/- ADDED ON ACCOUNT OF UNEXPLAINED CASH CREDIT WHO CONFIRMED THE SAME. B EFORE US THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT APPEALS ERRED IN SUSTAINING THE ADDITION OF UNEXPLAINED CREDITS OF ` 5 94 374/- ON THE GROUND THAT THE EXPLANATION WAS INCOMPLETE. HARVEY HEART HOSPITALS LIMITED WAS SET UP IN 1995. AS THE COMPANY WAS IN NASCENT STAGE AND AS THE ASSESSEE ENJOYED A BETTER CREDIT STANDING THAN THE HOSPITAL HE HAD BORROWED LOANS AND GIVEN IT TO THE COMPANY FOR DEVELOPMENT ACTIVITIES. THE ASSESSEE HA S ALSO BEEN GIVING HAND LOANS OUT OF HIS INCOME IN TI MES OF NEED AS HE WAS ALSO A DIRECTOR OF THE COMPANY. THESE AMOUNTS WERE RETURNED BY THE COMPANY AS AND WHEN IT HAD ENOUGH FUNDS. THE AMOUNT ADDED AS UNEXPLAINED CREDIT WAS ONE SUCH HAND LOAN WHICH WAS RETURNED TO THE ASSESSEE. 3. THE LEARNED CIT OVERLOOKED THE FACT THAT THE ASSESS EE HAS IN THE NORMAL COURSE OF BUSINESS OF THE HOSPITA L PROVIDED FUNDS TO THE HOSPITAL OUT OF BORROWINGS AN D SUCH BORROWINGS WERE RETURNED BY THE HOSPITAL OUT O F ITS EARNINGS FROM TIME TO TIME. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING' IT IS PRAYED THAT THE HON'BLE TRIB UNAL MAY BE PLEASED TO DELETE THE ADDITIONS SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OR IN THE ALTERNATIVE REMIT THE MATTER BACK TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH EXAMINATION OF THE EXPLANATIONS GIVEN AND EVIDENCE IN SUPPORT THEROF PRESENTED BEFORE HIM AND THUS ALLOW THE APPEAL OF THE APPELLANT. ITA 1785 1793 TO 1798/09 :- 4 -: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE M ATERIAL AVAILABLE ON RECORD. IN RELATION TO THE IMPUGNED A DDITION THE ASSESSEE HAS PRODUCED ADDITIONAL EVIDENCE WHICH WAS NOT IN H IS POSSESSION AT THE RELEVANT TIME. AFTER BEING SATISFIED AS PER LA W WE ADMIT THE ADDITIONAL EVIDENCE AND RESTORE THE ISSUE TO THE FI LE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE EVIDENCE AN D ALLOW THE ASSESSEE TO RAISE HIS PLEA ALONGWITH EVIDENCE AS PE R LAW AFTER GIVING HIM DUE OPPORTUNITY OF BEING HEARD. 5. IN THE RESULT THIS APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. I.T.A.NO. 1794/MDS/09 (A.Y 2002-03) 6. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) CHENNAI DATED 3.8.2009. FOR THIS YEA R THE ORIGINAL RETURN FILED BY THE ASSESSEE ON 31.3.2003 DISCLOSING TOTAL INCOME OF ` 9 93 379/- WAS REQUESTED TO BE TREATED AS RETURN F ILED IN RESPONSE TO NOTICE U/S 153A. BUT WHEN THE ASSESSMENT WAS COMP LETED THE TOTAL INCOME WAS DETERMINED AT ` 80 20 801/-. THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: (I) ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL ` 31 00 633/- (II) ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITS ` 21 19 639/- (III) DISALLOWANCE OF EXPENDITURE ITA 1785 1793 TO 1798/09 :- 5 -: (A) BUSINESS PROMOTION EXPENDITURE (B) TRAVELLING EXPENSES ` 4 22 174/- ` 5 66 404/- (IV) DISALLOWANCE OF DEPRECIATION ` 1 15 736/- 7. THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF TH E ASSESSEE. THE ASSESSEE IS IN APPEAL AGAINST SUSTAINED ADDITIO NS. 8. FOLLOWING GROUNDS HAVE BEEN RAISED BEFORE US: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT HAS NOT CONSIDERED THE SUBMISSIONS MADE AND ERRED IN SUSTAINING THE ADDITION OF ` 21 19 639/- AS UNEXPLAINED CASH CREDITS. THE ADDITION WAS MADE ON THE GROUND THAT THE APPELLANT HAD NOT PROVED THE GENUINENESS OF THE CREDITS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THE EXPLANATIONS GIVEN FOR THE S OURCE OF THE CREDITS BEING LOANS OBTAINED FROM VARIOUS BA NKS . 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAS OB TAINED THE LOANS FROM THE VARIOUS LENDING AGENCIES AND ADVANCED THE SAME TO THE HOSPITAL FOR ITS DEVELOPME NT. DURING THE YEAR THE ASSESSEE HAS OBTAINED LOANS FR OM CITI BANK AMERICAN EXPRESS BANK AND ICICI BANK AND TRANSFERRED THE AMOUNT TO THE COMPANY. THE DETAILS ARE AS FOLLOWS: CITIBANK LOAN ` 2 I 7.769/- ICICI BANK ` 4 00 000/- CITIBANK LOAN ` 7 92.000/- AMERICAN EXPRESS ` 7 52 520/- 5. THE LEARNED COMMISSIONER OR INCOME TAX (APPEALS) ERRED IN NOT OBSERVING THAT ALL THE LOANS WERE FROM VERIFIABLE SOURCES AND THE GENUINENESS COULD NOT HA VE BEEN DOUBTED AT ALL. ITA 1785 1793 TO 1798/09 :- 6 -: 6. THE LEANED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE EVIDENCE FILED BEFORE HIM BY WAY OF COPIES OF THE APPELLANT'S LEDGER IN HOSPITAL BOOKS AND COPY OR THE BANK STATEMENT SUBMITTED TO PROVE THAT THESE AMOUNTS WERE GENUINE CREDITS. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE ADDITION OF A SUM OF ` 31 00 633/- AS UNEXPLAINED CAPITAL. IT WAS EXPLAINE D TO THE CIT APPEALS THAT THERE WAS A DIFFERENCE IN THE CAPITAL ACCOUNT WHEN THE ACCOUNTS WERE CONVERTED FR OM MANUAL ACCOUNTS TO TALLY AND THE DIFFERENCE WAS UNIFORMLY ` 21 54 274/-. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING IT IS PRAYED THAT THE HON'BLE TRIB UNAL MAY BE PLEASED TO DELETE THE ADDITIONS SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OR IN THE ALTERNATIVE REMIT THE MATTER BACK TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH EXAMINATION OF THE EXPLANATION GIVEN AND EVIDENCE I N SUPPORT THEREOF PRESENTED BEFORE HIM AND THUS ALLOW THE APPEAL OF THE APPELLANT. 9. IT WAS ARGUED BY THE LD.AR THAT THE LD. CIT(A) HAS INCORRECTLY SUSTAINED AN ADDITION OF ` 21 19 639/- ADDED ON ACCOUNT OF UNEXPLAINED CASH CREDIT. IT WAS ASSERTED THAT THE ASSESSEE HAS PROVED THE CASH CREDITS AS GENUINE AS PER LAW. IT WAS HIGHLIGHTED THAT THE LD. CIT(A) HAD IGNORED AND HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE HAD OBTAINED THE LOANS FROM VARIOUS LENDIN G AGENCIES AND HAD ADVANCED THE SAME TO THE HOSPITAL FOR ITS DEVEL OPMENT DURING THE YEAR. AS PER ASSESSEE LOANS FROM CITI BANK ICICI BANK AND AMERICAN EXPRESS BANK WERE RAISED DURING THE RELEVANT YEAR. ON THE OTHER ITA 1785 1793 TO 1798/09 :- 7 -: HAND THE LD.DR HAS CONTESTED THE SUBMISSION OF TH E LD.AR AFTER RELYING ON THE APPELLATE FINDING. THE CASE OF THE ASSESSEE IS THAT DURING THE APPEAL PROCEEDINGS THE ASSESSEE HAD TRA NSFERRED SEVERAL AMOUNTS THROUGH CHEQUE TO M/S HARVEY HEART HOSPITAL AND THESE PAYMENTS WERE ENTERED IN THE ASSESSEES BOOKS AS LO ANS FROM OTHERS. TO SUBSTANTIATE THE ABOVE CONTENTION COPIES OF LED GER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S HARVEY HEART HOSPITAL WERE PRODUCED. THESE EVIDENCES WERE SENT TO THE ASSESSING OFFICER BY THE LD. CIT(A) FOR EXAMINATION AND INVESTIGATION AND THEREAFTER TO SEND HIS REMAND REPORT. THE ASSESSING OFFICER HAS SENT HIS REMAND REPORT DATED 1.4.2009 IN WHICH HE SUBMITTED AS UNDER: ASSESSEE EXPLAINED THAT THESE WERE REPAYMENTS OF LOANS TAKEN BY ASSESSEE AND GIVEN TO THE HOSPITAL. IT WAS STATED THAT DUE TO HIGH REPUTATION AND CREDITWORTHINESS OF DR. M.P.NARESH KUAMR PARTIES P REFER GIVING LOANS TO DOCTOR RATHER THAN TO THE HOSPITAL. IN MY OPINION NO PRUDENT BUSINESSMAN DENIES GIVING LOANS TO A COMPANY. AT THE MOST THE DOCTOR SHOULD HAVE GIVEN SURETY FOR THE LOANS TAKEN FROM BANKS/FINANCIAL INS TITUTIONS IF HE WANTS TO USE HIS CREDITWORTHINESS. HENCE TH IS ARGUMENT OF HE ASSESSEE CANNOT BE ACCEPTED. THIS I SSUE MAY BE DECIDED ACCORDINGLY 10. THIS REMAND REPORT WAS PUT TO THE ASSESSEE TO WHICH IT WAS REPLIED AS UNDER: THE LD.AR OF THE APPELLANT SUBMITTED THAT DURING T HE YEAR THE APPELLANT OBTAINED LOANS FROM CITI BANK AMERICAN E XPRESS BANK ITA 1785 1793 TO 1798/09 :- 8 -: AND ICICI BANK AND TRANSFERRED THE AMOUNT TO M/S HA RVEY HEART HOSPITAL. THE DETAILS OF THE LOANS WERE GIVEN AS BE LOW: CITIBANK LOAN ` 2 17 769/- ICICI BANK ` 4 00 000/- CITIBANK LOAN ` 7 92 000/- AMERICAN EXPRESS ` 7 52 520/- HE SUBMITTED THAT THESE FUNDS WERE GIVEN TO THE HOS PITAL DURING THE COURSE OF THE YEAR AS WAS EVIDENT FROM THE COPY OF THE APPELLANTS LEDGER ACCOUNT IN HOSPITAL BOOKS AND TH E COPY OF DR. NARESH KUMARS BALANCE FOR THE YEAR ENDING 31.03.20 02. THE LD.AR SUBMITTED THAT IN THE ACCOUNT BOOKS THESE AM O U N T S WERE TA KEN TW I CE ONCE I N HIS INDI V I DUAL ACC O U N T A N D A GAIN CO L L E C T IVE L Y A S LO A N FROM OTHERS . HE S U B MI TT ED THA T THIS I S A N ACC OU N TI NG E R ROR AN D THE LOAN S WERE O N E AND THE SA ME . HE F UR THE R SU B MITTE D T H A T THE BANK S WE R E W ILLIN G TO L E ND TO DOC T OR S AND PEOPL E WITH GOOD TRAC K R EC O R D AND N O T T O N E W COMPAN I E S. WHENEVER TH E HOSPITAL REQU I RED FUNDS F OR ITS W O R KIN G THE APPEL L AN T WITH HI S GOOD S TAN D I N G B O R ROWED FUND S A ND GA V E I T T O TH E HOSP I T A L WHO REPAI D THE S AME WITH INTEREST . T HE LEARNED A . R. S U B MIT T E D THAT THE ENT I RE CASH CREDI T S OF THE A P PELLANT HAS BEEN FULLY EX PL A INED A N D T H E ADDITION MAD E BY THE AO SHOULD BE DELET E D . 11. IT IS FOUND FOR A FACT FROM THE PERUSAL OF ALL THES E EVIDENCES THAT THE ASSESSEE HAD FURNISHED THE COPIES OF LEDGE R ACCOUNTS AND THE RELEVANT PORTION OF THE TRIAL BALANCE. THE ASSESSI NG OFFICER HAS ADDED ENTIRE AMOUNT OF ` 21 19 639/- SHOWN AS LOAN FROM OTHERS. IT IS FOUN D TO BE AN UNDENIABLE FACT THAT THE ASSESSEE HAD PROC URED LOAN FROM DIFFERENT INSTITUTIONS AND HAS TRANSFERRED THE SAME TO THE HOSPITAL FOR ITS DEVELOPMENTAL ACTIVITIES. DURING THE YEAR. THE ASSESSEE HAS ITA 1785 1793 TO 1798/09 :- 9 -: OBTAINED LOANS FROM CITI BANK ICICI BANK AND AMERI CAN EXPRESS BANK. THE DETAILS OF THE LOANS ARE AS FOLLOWS: DAT E OF N AME OF A MOUNT EXHIBIT DATE OF C HEQUE NO RE C E IPT INSTITUTION TRAN S FER TO THE HO S PITAL 27 . 04 . 2001 CITIBANK L OAN ` 2 17 769 / - EXHIBIT - I 27 . 0 4 .2001 572688 24 . 0 7 . 2001 ICICI BANK ` 4 0 000/- EXHIBIT - II 2 4 . 07 . 200 1 572197 3 1 . 12 . 2001 C ITI B ANK L OAN ` 7 92 000 / - EXHIBIT - 02 . 0 1 . 2002 52117 2 . . III 03 . 0 1 .20 0 2 5 2 117 3 04.01 . 2002 5 2 1175 29 . 11 . 2 001 A M E RI CAN ` 7 52 5 20 / - EXHIBIT - 29 . 1 1. 200 1 DIRECT L Y EX PR ESS IV TRA N SFERR E D T O THE HO S P I T A L B Y T H E BA N K TO T A L ` 2 1 62 289/- 62 289 / - 12. THE ASSESSING OFFICER HAS NOT CONTROVERTED OR FOUND FALSE THE ABOVE EVIDENCES PRODUCED OR SENT TO HIM IN REMAND P ROCEEDINGS. HIS NARRATION IN THE REMAND REPORT IS SIMPLY EXPLANATOR Y AND BASED ONLY ON IFS AND BUTS. IT CAN BE EASILY INFERRED FROM THE D ETAILS OF LOANS TAKEN FROM FOREIGN AND PRIVATE BANKS INCLUDING MORE THAN 4 CRORES FROM TAMIL NADU INDUSTRIAL INVESTMENT CORPRN. LTD A GOV ERNMENT OF TAMIL NADU UNDERTAKING. THE FACT THAT THE HOSPITAL WAS R UNNING IN LOSSES BEING IN ITS INITIAL STAGE AND THAT THE ESTABLISHE D INSTITUTIONS WERE NOT GIVING MORE LOANS THEREFORE HE WAS PRESSED HARD T O TAKE PERSONAL LOANS. IF ASSESSEE RAISES PERSONAL LOANS AND GIVES EVIDENCE FOR THE SAME THE SOURCE OF THE SAME HAS TO BE ACCEPTED. THE ASSESSING ITA 1785 1793 TO 1798/09 :- 10 - : OFFICER HAS A RIGHT TO INVESTIGATE THEIR GENUINITY TO FIND OUT THAT THE LOANS ARE BOGUS. BUT HE HAS NOT DONE SO AND HAS ACT ED ONLY ON SURMISES AND CONJECTURES. WITHOUT GIVING A FINDIN G THAT THE IDENTITY AND CREDITWORTHINESS OF THE SOURCE IS NOT PROVED AN D THAT THE TRANSACTION IS NOT GENUINE THE ASSESSING OFFICER C ANNOT REJECT THE CASH CREDITS IN QUESTION. THE BURDEN OF PROVING THE GEN UINITY OF THE LOAN DEFINITELY LIES ON THE ASSESSEE WHICH ACCORDING TO US HAS BEEN FULLY DISCHARGED BY HIM. CONSEQUENTLY WE ORDER TO DELET E THIS ADDITION IN ENTIRETY. 13. THE NEXT ISSUE OF THIS APPEAL RELATES TO SUSTAINED ADDITION OF A SUM OF ` 31 00 633/- ADDED AS UNEXPLAINED CAPITAL. FOR ASS ESSMENT YEAR 2002-03 THE ASSESSEE HAD FILED A TRIAL BALANC E ALONGWITH BALANCE SHEET . FROM THE TRIAL BALANCE IT WAS SEEN THAT T HE OPENING BALANCE OF CAPITAL WAS ` 1 80 10 756/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE BASIS FOR ARRIVING AT THE OPENING CAPITAL BUT ACCOR DING TO THE ASSESSING OFFICER NO EVIDENCE WAS FILED IN SUPPORT OF THIS C LAIM. THE ASSESSING OFFICER TOOK THE CAPITAL BALANCE FROM THE BALANCE S HEET AS ON 31.3.2000 AVAILABLE ON RECORD AT ` 40 96 836/- AND WORKED OUT THE CAPITAL BALANCE AS ON 31.3.2001 AT ` 49 14 733/- BASED ON THE DETAILS OF INCOME DISCLOSED IN THE RETURN OF INCOME FILED F OR ASSESSMENT YEAR ITA 1785 1793 TO 1798/09 :- 11 - : 2001-02. AFTER PERUSING THE CLOSING BALANCE AS ON 31.3.2000 AND THE OPENING BALANCE AS ON 1.4.2001 THE ASSESSING OFFIC ER FOUND A DIFFERENCE IN CAPITAL OF ` 1 30 96 023/-. HE TREATED A SUM OF ` 31 00 633/- AS UNEXPLAINED CAPITAL AFTER CONSIDERIN G THE REVALUATION OF ANNANAGAR PROPERTY IN THE TRIAL BALANCE AT ` 1 06 95 390/- AS AGAINST THE COST OF ` 7 00 000/-. DURING THE APPELLATE PROCEEDINGS IT WAS STATED THAT THE ASSESSING OFFICER HAS RELIED ON THE TRIAL BALANCE AND NOT ON THE RECEIPT AND PAYMENT ACCOUNT AND BALANCE SHEE T FURNISHED AT THE TIME OF HEARING. THE ASSESSEE HAD FURNISHED A DETAILED EXPLANATION ON THE CAPITAL BALANCE BEFORE THE ASSES SING OFFICER. THE ENTIRE SUBMISSION OF THE LD.AR WAS SENT TO THE ASSE SSING OFFICER FOR OBTAINING HIS REMAND REPORT. THE ASSESSING OFFICER SUBMITTED HIS REMAND REPORT DATED 1.4.2009 WHICH READS AS UNDER: ' A SUM OF ` 31 00 633/- WAS ADDED FOR THE REASON STATED IN THE ASSESSMENT ORDER. NO FRESH EVIDENCE WAS PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE REITERATED ITS STAND THAT I NITIALLY ALL THE HOOKS OF ACCOUNTS WERE MAINTAINED MANUALLY ON CASH BASIS AND WHATEVER SUM IS RECEIVED IS REFLECTE D IN THE RECEIPTS AND PAYMENT ACCOUNT. THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED THE REASON THAT THIS ADDITION WAS MADE AFTER GIVING AMPLE OPPORTUNITY TO THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO PROVIDE DETAILS. THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS RELIED ON THE TRIAL BALANCE WITHOUT CONSIDERING THE RECEIPTS AND PAYMENTS ACCOUNT AND BALANCE SHEET HAS NO FORCE. SINCE THE TRIAL BALANCE IS THE BASIS FOR PREPARATION OF ALL FINAL ACCOUNTS T HE ITA 1785 1793 TO 1798/09 :- 12 - : ASSESSING OFFICER HAS RIGHTLY STARTED WITH THE TRIA L BALANCE SUBMITTED BY THE ASSESSEE. THE ASSESSING OFFICER HAS SYSTEMATICALLY ARRIVED AT THE DIFFERENC E IN CAPITAL ACCOUNTS AFTER GIVING DUE CREDIT FOR APPREC IATION IN THE MARKET VALUE OF ANNA NAGAR FLAT FROM ` 7 LAKHS TO ` 1 06 95 390/-. THE NET DIFFERENCE IN CAPITAL ACCOU NT IS ONLY ADDED. THUS THIS ADDITION IS CORRECTLY MADE B Y THE ASSESSING OFFICER RELYING ON THE FACTS AND RECORD A ND REQUIRES NO INTERFERENCE. 14. IN RESPECT OF THIS REMAND REPORT THE LD.AR SUBMITT ED THE FOLLOWING EXPLANATION: THE LD.AR OF THE APPELLANT SUBMITTED THAT THE ADDI TION ON ACCOUNT OF UNEXPLAINED CAPITAL WAS MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2002-03 A ND 2004-05 BASED ON THE TRIAL BALANCES AND BALANCE SHE ET OF DIFFERENT YEARS FURNISHED BY THE APPELLANT. HE SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED T HE OPENING BALANCE AS ON 1.4.2004 AT ` 2 64 99 385/- WHEN THE ACCOUNTS WERE COMPUTERIZED. TAKING THIS OPENIN G BALANCE AS ON 1.4.2004 OPENING AND CLOSING BALANCES OF CAPITAL FOR THE ASSESSMENT YEARS 2002-03 2003-04 A ND 2004-05 WOULD BE AS FOLLOWS: ASSESSMENT YEAR 04-05 03-04 2002-03 OPENING BALANCE 2 64 99 385 2 50 82 198 2 53 84 036 ADD: PROFIT 21 05 189 26 95 402 12 91 858 ADDITIONS 3 75 000 LESS: DRAWINGS 10 90 266 12 78 215 15 93 696 LESS: REVALUATION OF ANNA NAGAR PROPERTY 99 95 390 99 95 390 99 95 390 CLOSING BALANCE (A) 1 78 93 918 1 65 03 995 1 50 86 808 THE LD.AR OF THE APPELLANT SUBMITTED THAT THE ASSE SSING OFFICER HAS ALSO CONSIDERED THE OPENING BALANCE AS ON 1.4.2001 AT ` 1 80 10 756/- TO MAKE THE ADDITION OF ` 31 00 633/-. HE SUBMITTED THAT THE SAME TRIAL BALA NCE ALSO SHOWS TDS AND IT SHOULD HAVE BEEN SET OFF AGAI NST ITA 1785 1793 TO 1798/09 :- 13 - : THE CAPITAL ACCOUNT. CONSIDERING THESE AND GIVING EFFECT TO THE PROFIT AND DRAWINGS IN THE RESPECTIVE YEARS THE CAPITAL ACCOUNT FOR THE ASST. YEARS 2002-03 2003-0 4 AND 2004-05 WOULD BE AS BELOW: ASSESSMENT YEAR 2004-05 2003-04 2002-03 OPENING BALANCE 1 86 58 269 1 72 41 082 1 80 10 756 ADJUSTMENT FOR TDS IN TB ON 31.3.2001 (2 52 369) ADD: PROFIT 24 80 189 26 95 402 12 91 858 LESS: DRAWINGS 10 90 266 12 78 215 18 09 163 CLOSING BALANCE B 2 00 48 192 1 86 58 269 1 72 41 082 THE LD.AR SUBMITTED THAT THE DIFFERENCE BETWEEN TH E CLOSING BALANCES WORKED OUT BASED ON THE OPENING BALANCE AS ON 1.4.2004 AND AS ON 1.4.2001 WOULD BE AS BELOW: 31.3.2004 31.3.2003 31.3.2002 CLOSING CAPITAL(A) 1 78 93 918 1 65 03 995 1 50 86 808 CLOSING CAPITAL (B) 2 00 48 192 1 86 58 269 1 72 41 082 DIFFERENCE 21 54 274 21 54 274 21 54 274 THE LD.AR SUBMITTED THAT IT COULD BE SEEN THAT THER E IS A UNIFORM DIFFERENCE OF ` 21 54 274/- WHICH IS ATTRIBUTABLE TO THE PERIOD PRIOR TO THE PERIOD OF SEARCH ASSESSMENT . HE SUBMITTED THAT THE ADDITION OF ` 31 00 633/- MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 15. AFTER CONSIDERING THE ENTIRE EVIDENCES AND THE ORAL SUBMISSIONS IN THE LIGHT OF AVAILABLE MATERIAL WE FIND THAT TH E ASSESSING OFFICER WHILE ARRIVING AT THE ABOVE ADDITION HAS TRIED TO DIFFERENTIATE BETWEEN THE CAPITAL ACCOUNT OF THE ASSESSEE FOR FINANCIAL Y EARS 1999-2000 ITA 1785 1793 TO 1798/09 :- 14 - : 2000-01 AND 2001-02. THE ACCRETION TO THE CAPITAL ACCOUNT WAS UNEXPLAINED CAPITAL AND THEREFORE HE HAS ARRIVED A T A DIFFERENCE OF ` 1 30 96 023/- [I.E OPENING BALANCE OF FINANCIAL YEA R 2001-02 OF ` 1 80 10 756 CLOSING BALANCE OF ` 2000-01 OF ` 49 14 733/-]. AFTER TAKING THE REVALUATION OF HOUSE PROPERTY TO THE EXT ENT OF ` 9 99 539/- THE ASSESSING OFFICER ARRIVED AT A DIFFERENCE OF ` 31 00 633/- AND HAS ADDED THE SUM AS UNEXPLAINED CAPITAL. IT IS FOUND THAT IN THE TRIAL BALANCE OF THE ASSESSEE FOR FINANCIAL YEAR 1999-200 0 (AS DISPLAYED IN THE ASSESSMENT ORDER AT PAGE 2 SUB-PARA 7.2) A SUM OF ` 29 92 500/- BEING THE INVESTMENT MADE IN NODS WORLD WIDE LTD HA S BEEN INADVERTENTLY CREDITED TO BE INCLUDED WHEREAS THIS INVESTMENT HAS BEEN SHOWN IN THE TRIAL BALANCE OF 2001-02 WHICH IS THE BASIS FOR ARRIVING AT THE DIFFERENCE. IT IS FOUND THAT THESE SHARES WERE PURCHASED PRIOR TO 1999-2000 AND THE RBI LETTER EVI NCING THE SAME ON RECORD. IN CASE THIS INVESTMENT IS TAKEN INTO ACCO UNT THE OPENING BALANCE OF THE ASSESSEES CAPITAL FOR FINANCIAL YEA R 1999-2000 COMES TO ` 70 89 337/- INSTEAD OF ` 40 96 837/- AND HENCE THE ONLY DIFFERENCE OF ` 1 08 133/- REMAINS WHICH CAN BE SUSTAINED AS THE U NEXPLAINED CAPITAL. THEREFORE WE DELETE THE REST OF THE ADD ITION IN THIS ACCOUNT AND SUSTAIN ONLY ` 1 08 133/-. ITA 1785 1793 TO 1798/09 :- 15 - : 16. IN THE RESULT THIS APPEAL IS PARTLY ALLOWED. I.T.A.NO. 1795/MDS/09 (A.Y 2003-04) 17. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A) DATED 3.8.2009. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE SUSTAINED ADDITION OF ` 3 71 527/- ADDED AS UNEXPLAINED CASH CREDIT. IN THIS REGARD ALSO A REMAND REPORT WAS SOUGHT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER SENT HIS REMAND REPORT DATED 1.4.2009 AS UNDER: ASSESSEE EXPLAINED THAT THESE WERE REPAYMENTS OF LOANS TAKEN BY ASSESSEE AND GIVEN TO THE HOSPITAL. IT WAS STATED THAT DUE TO HIGH REPUTATION AND CREDITWORTHI NESS OF DR.M.P.NARESH KUMAR PARTIES PREFER GIVING LOANS TO DOCTOR RATHER THAN TO THE HOSPITAL. IN MY OPINION NO PRUDENT BUSINESSMAN DENIES GIVING LOANS TO A COMPAN Y. AT THE MOST THE DOCTOR SHOULD HAVE GIVEN SURETY FO R THE LOANS TAKEN FROM BANKS/FINANCIAL INSTITUTIONS IF HE WANTS TO USE HIS CREDITWORTHINESS. HENCE THIS ARGUMENT OF HE ASSESSEE CANNOT BE ACCEPTED. THIS ISSUE MAY BE DECIDED ACCORDINGLY 18. IN RESPONSE TO THIS THE ASSESSEE FILED HIS OBJECTI ONS AS UNDER: THE ASSESSEE HAS BEEN MAINTAINING ACCOUNTS MANUALL Y AND WHEN THE ACCOUNTS WERE WRITTEN IN TALLY BASED O N SES LEDGER ACCOUNT IN HOSPITAL BOOKS. THE ASSESSE E HAS DURING THE YEAR TRANSFERRED SEVERAL AMOUNTS BY CHEQ UE AS SHOWN IN THE HOSPITALS LEDGER. ALL THESE PAYMENTS HAVE BEEN ENTERED IN ASSESSEES BOOKS AS LOAN FROM OTHERS. THE ASSESSEE AS A PROMO TER HAS PROCURED LOANS FROM DIFFERENT INSTITUTIONS AND TRANSFERRED THE SAME TO THE HOSPITAL FOR ITS DEVELO PMENT ITA 1785 1793 TO 1798/09 :- 16 - : ACTIVITIES. LIKEWISE ALL OTHER PAYMENTS HAVE BEEN MADE FROM THE INCOME EARNED BY ASSESSEE OVER A PERIOD OF TIME. 19. WITH THE SIMILAR REASONING AS WE HAVE GIVEN IN ASSE SSMENT YEAR 2002-03 WE DELETE THIS ADDITION AND ALLOW THE APPE AL. 20. IN THE RESULT THIS APPEAL IS ALLOWED. I.T.A.NO. 1796/MDS/09(ASSESSEES APPEAL) & 1785/MDS /09(REVENUES APPEAL)(A.Y 2004-05) 21. THESE CROSS APPEALS ARISE OUT OF THE ORDER OF THE L D. CIT(A) DATED 3.8.2009. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT HAS RELIED ON THE ASSESSMENT ORDER AND SUSTAINED THE ADDITION WITHOUT CONSIDERING THE EXPLANATION GIVEN BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. THE AR EXPLAINED THAT THERE WAS A DIFFERENCE IN OPENING BALANCE AMOUNTING TO ` 21 54 274/- WHICH HAS OCCURRED WHEN THE ACCOUNTS WERE COMPUTERIZED. THE AR EXPLAINED TO THE ASSESSING OFFICER THAT INITIALLY T HE DOCTOR WAS MAINTAINING HIS ACCOUNTS ON 'CASH BASIS' AND WHATEVER WAS ACTUALLY RECEIVED FROM THE HOSPITAL WAS TAKEN INTO ACCOUNT. ALSO THE ASSESSEE WAS MAINTAINING ACCOUNTS MANUALLY. HOWEVER THE COMPANY HAS BEEN CREDITING THE DOCTOR WITH HUGE AMOUNTS AS PROFESSIONAL FEE. SUBSEQUENTLY WHEN THE ACCOUNTS WERE COMPUTERIZED THE BALANCES IN THE ACCOUNTS OF THE HOSPITAL WERE TAKEN. 3. IN ANY CASE THE COMMISSIONER APPEALS OUGHT TO HAVE TAKEN A FAIR VIEW CONSIDERING THE RELEVANT LEGAL PRINCIPLES OF NATURAL JUSTICE BEFORE PASSING ITA 1785 1793 TO 1798/09 :- 17 - : JUST AND EQUITABLE ORDER. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING' IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO DELETE THE ADDITIONS SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OR IN THE ALTERNATIVE REMIT THE MATT ER BACK TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH EXAMINATION OR THE EXPLANATIONS GIVEN AND EVIDENCE IN SUPPORT THEROF PRESENTED BEFORE HIM AND THUS ALLOW THE APPEAL OF THE APPELLANT. 22. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN GRANTING RELIEF TOWARD S ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL TO THE EXTENT OF ` 31 00 633/-. L.B THE LEARNED CIT(A) FAILED TO NOTE THAT THERE W ILL NOT BE ANY INCREASE IN CAPITAL AS ON 31-03-2003 AS A RESULT OF ADDITION OF ` 31 00 633/- AS UNEXPLAINED CAPITAL IN THE ASSESSMENT YEAR 2002-2003 SINCE THIS SUM WAS ALREADY SHOWN AS A PART OF THE CAPITAL ACCOUNT BY THE ASSESSEE IN HIS RETURN AND ADDITION WAS MADE BECAUSE HE COULD NOT EXPLAIN SUCH PORTION OF THE CAPITAL ACCOUNT. 2.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN GRANTING RELIEF TOWARDS ADDITION ON ACCOUNT OF ADDITION TO CAPITAL TO THE EXTENT OF ` 3 00 000/-. 2.B THE LEARNED C!T(A) FAILED TO NOTE THAT THE INVESTMENTS WOULD BE APPLICATION OF INCOME/CAPITAL AND CANNOT BE AN EXPLANATION FOR THE EXISTENCE OF THE CAPITAL ITSELF AND ACCORDINGLY THE ADDITION TO CAPITAL DOES NOT STAND EXPLAINED. 2.C. THE LEARNED CIT(A) FAILED TO NOTE THAT THE EXPLANATION THAT THE INVESTMENT WAS WRONGLY SHOWN ITA 1785 1793 TO 1798/09 :- 18 - : AS DRAWINGS INSTEAD OF INVESTMENTS IN BALANCE SHEET BY THE ACCOUNTANT IS ONLY AN AFTER THOUGHT AND CANNOT BE ACCEPTED SINCE THERE WAS ADDITION TO CAPITAL AT ` 3 75 000 AS AGAINST THE INVESTMENT OF ` 3 00 000/-. 3. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND O R ALTER THE ABOVE GROUNDS OF APPEAL AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED I N APPEAL THE ORDER OF THE LEARNED CIT (APPEALS) GRANTING RELIEF TO THE EXTENT OF ` 31 00 633/- TOWARDS ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL AND ` 3 00 000/- TOWARDS ADDITION ON ACCOUNT OF ADDITION TO CAPITAL MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED 23. THE ASSESSEE FILED TRIAL BALANCE AND BALANCE SHEET FOR ASSESSMENT YEAR 2003-04 AND 2004-05. IT WAS FOUND BY THE ASSESSING OFFICER THAT THE CLOSING BALANCE OF THE ASSESSEES CAPITAL AS ON 31.3.2003 WAS ` 1 95 50 064/- WHILE OPENING BALANCE WAS SHOWN AT ` 2 64 99 385/- FOR ASSESSMENT YEAR 2004-05. THE HE TREATED THE DIFFERENCE OF ` 69 49 321/- AS UNEXPLAINED CAPITAL IN THE ABSENCE OF ANY EXPLANATION TENDERED BY THE ASSESSEE. DURING T HE APPELLATE PROCEEDINGS THE ASSESSEE SUBMITTED THROUGH HIS AR THAT THE ASSESSING OFFICER HAS RELIED ON THE TRIAL BALANCE AND NOT THE RECEIPT AND PAYMENT ITA 1785 1793 TO 1798/09 :- 19 - : ACCOUNT BALANCE SHEET AND BOOKS OF ACCOUNT FURNISH ED AT THE TIME OF HEARING. IT WAS SUBMITTED THAT THE DETAILED EXPL ANATION ON THE CAPITAL ACCOUNT WAS GIVEN AT THE TIME OF HEARING BE FORE THE ASSESSING OFFICER BASED ON WHICH THE ADDITION SHOULD NOT HAVE BEEN MADE. THE ENTIRE SUBMISSION OF THE LD.AR WAS SENT TO THE ASSE SSING OFFICER FOR HIS REMAND REPORT. THE ASSESSING OFFICER SUBMITTED HIS REMAND REPORT DATED 1.4.2009 STATING THEREIN AS UNDER: A SUM OF ` 69 49 321/- WAS ADDED AS THERE IS DIFFERENCE IN THE CLOSING BALANCE OF ASSESSEES CAPITAL ACCOUN T AS ON 31.3.2003 AND THE OPENING BALANCE FOR 04-05. AS THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE THE DIFF ERENCE IN CLOSING AND OPENING BALANCE OF CAPITAL A/C AMOUN TING TO ` 69 49 321/- WAS ADDED TO THE TOTAL INCOME. EVEN THOUGH THE ASSESSEE HAS FURNISHED A RECONCILIATION STATEMENT FOR THE DIFFERENCE IN CAPITAL A/C THE AS SESSEE WAS UNABLE TO EXPLAIN THE REASONS FOR THE SAID DIFF ERENCE WITH COGENT EVIDENCE. HENCE THE EXPLANATION OF THE ASSESSEE IS FOUND NOT ACCEPTABLE. IN VIEW OF THE A BOVE THE COMMISSIONER OF INCOME-TAX(A) MAY DECIDE THE IS SUE ACCORDINGLY. 24. THIS WAS REFERRED TO THE ASSESSEE AND HIS REPLY TO THE SAME IS AS UNDER: THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE ADDITI ON ON ACCOUNT OF UNEXPLAINED CAPITAL WAS MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2002-03 AND 2004-05 BASED ON THE TRIAL BALANCES AND BALANCE SHE ETS OF DIFFERENT YEARS FURNISHED BY THE APPELLANT. HE SUBMITTED THAT THE AO HAS ACCEPTED THE OPENING BALA NCE AS ON 1.04.2004 AT ` 2 64 99 385/- WHEN THE ACCOUNTS WERE COMPUTERIZED. TAKING THIS OPENING BALANCE AS O N 1.4.2004 OPENING AND CLOSING BALANCES OF CAPITAL FO R THE ASST. YEARS 2002-03 2003-04 AND 2004-05 WOULD BE A S ITA 1785 1793 TO 1798/09 :- 20 - : BELOW: ASSESSMENT YEAR 04-05 03-04 2002-03 OPENING BALANCE 2 64 99 385 2 50 82 198 2 53 84 036 ADD: PROFIT 21 05 189 26 95 402 12 91 858 ADDITIONS 3 75 000 LESS: DRAWINGS 10 90 266 12 78 215 15 93 696 LESS: REVALUATION OF ANNA NAGAR PROPERTY 99 95 390 99 95 390 99 95 390 CLOSING BALANCE (A) 1 78 93 918 1 65 03 995 1 50 86 808 THE LD.AR OF THE APPELLANT SUBMITTED THAT THE ASSE SSING OFFICER HAS ALSO CONSIDERED THE OPENING BALANCE AS ON 1.4.2001 AT ` 1 80 10 756/- TO MAKE THE ADDITION OF ` 31 00 633/- FOR ASSESSMENT YEAR 2202-03. HE SUBMIT TED THAT THE SAME TRIAL BALANCE ALSO SHOWS TDS AND IT S HOULD HAVE BEEN SET OFF AGAINST THE CAPITAL ACCOUNT. CONSIDERING THESE AND GIVING EFFECT TO THE PROFIT A ND DRAWINGS IN THE RESPECTIVE YEARS THE CAPITAL ACCOUN T FOR THE ASST. YEARS 2002-03 2003-04 AND 2004-05 WOULD BE AS BELOW: ASSESSMENT YEAR 2004-05 2003-04 2002-03 OPENING BALANCE 1 86 58 269 1 72 41 082 1 80 10 756 ADJUSTMENT FOR TDS IN TB ON 31.3.2001 (2 52 369) ADD: PROFIT 24 80 189 26 95 402 12 91 858 LESS: DRAWINGS 10 90 266 12 78 215 18 09 163 CLOSING BALANCE B 2 00 48 192 1 86 58 269 1 72 41 082 THE LD.AR SUBMITTED THAT THE DIFFERENCE BETWEEN TH E CLOSING BALANCES WORKED OUT BASED ON THE OPENING BALANCE AS ON 1.4.2004 AND AS ON 1.4.2001 WOULD BE AS BELOW: 31.3.2004 31.3.2003 31.3.2002 CLOSING CAPITAL(A) 1 78 93 918 1 65 03 995 1 50 86 808 CLOSING CAPITAL (B) 2 00 48 192 1 86 58 269 1 72 41 082 DIFFERENCE 21 54 274 21 54 274 21 54 274 ITA 1785 1793 TO 1798/09 :- 21 - : THE LD.AR SUBMITTED THAT IT COULD BE SEEN THAT THER E IS A UNIFORM DIFFERENCE OF ` 21 54 274/- WHICH IS ATTRIBUTABLE TO THE PERIOD PRIOR TO THE PERIOD OF SEARCH ASSESSMENT . HE SUBMITTED THAT THE ADDITION OF ` 69 49 321/- MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. THE LD.AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF ` 31 00 633/- IN THE ASSESSMENT YEAR 2002-03 ON ACCOUNT OF UNEXPLAINED CAPITAL AND HE SH OULD HAVE CONSIDERED THAT WHILE MAKING ADDITION AGAINST THE UNEXPLAINED CAPITAL OF ` 69 49 321/- IN THE ASSESSMENT YEAR 2004-05 WHICH HE HAS NOT DONE. THE LD.AR SUBMITTED THAT EVEN IF THE ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL IS CONSIDERED FOR THE ASSESSMEN T YEAR 2004-05 THE ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL FOR THE ASSESSMENT YEAR 2002-03 SHOULD BE CONSIDERED. 25. AFTER CONSIDERING THE SAME THE LD. CIT(A) HAS PART LY ALLOWED THE ASSESSEES APPEAL TO THE EXTENT OF ` 31 00 633/- AND SUSTAINED REMAINING AMOUNT. THE ASSESSEE IS AGGRIEVED AGAINS T THE SUSTAINED ADDITION AND THE REVENUE IS AGGRIEVED AGAINST THE D ELETED ADDITION. 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE RECORD. IN VIEW OF OUR DISCUSSIONS GIVEN IN EA RLIER YEARS WE ARE IN AGREEMENT WITH THE LD.AR THAT THE ENTIRE ADDITION O F ` 69 49 321/- MADE BY THE ASSESSING OFFICER IS TO BE DELETED. W E FIND FROM THE APPELLATE FINDINGS THAT AS PER THE ASSESSEE THE DIF FERENCE BETWEEN THE CLOSING BALANCES ON THE BASIS OF OPENING BALANCE AS ON 1.4.2004 AND AS ON 1.4.2001 WOULD WORK OUT AS UNDER: ITA 1785 1793 TO 1798/09 :- 22 - : 31.3.2004 31.3.2003 31.3.2002 CLOSING CAPITAL(A) 1 78 93 918 1 65 03 995 1 50 86 808 CLOSING CAPITAL (B) 2 00 48 192 1 86 58 269 1 72 41 082 DIFFERENCE 21 54 274 21 54 274 21 54 274 27. THIS DIFFERENCE OF ` 21 54 274/- IS ATTRIBUTABLE TO THE PERIODS PRIOR TO SEARCH. IT IS TRUE THAT THE CAPITAL STATE MENTS OF THE ASSESSEE WERE NOT PROPERLY AND REGULARLY DRAWN BUT STILL TH E SAME HAS BEEN CONSIDERABLY EXPLAINED BEYOND ANY DOUBT. THEREFORE WE DELETE THIS ENTIRE ADDITION AND ALLOW GROUND OF THE ASSESSEE AN D REJECT THE GROUNDS OF THE REVENUE TAKEN IN THIS REGARD. THEREFORE WE ALLOW THE APPEAL OF THE ASSESSEE AND DISMISS THAT OF THE REVENUE ON THIS ISSUE. 28. THE OTHER ISSUE IN REVENUES APPEAL RELATES TO DELE TION OF ADDITION OF ` 3 00 000/- . A LUMP SUM OF ` 3 75 000/- HAS BEEN CREDITED IN THE CAPITAL ACCOUNT. THE ASSESSING OFF ICER HAS TREATED THIS AMOUNT AS ASSESSEES INCOME AFTER REJECTING THE EXP LANATION OF THE ASSESSEE. DURING APPELLATE PROCEEDINGS THE LD.AR SUBMITTED THAT OUT OF 3 75 000/- A SUM OF ` 3 00 000/- WAS SYSTEMATICALLY INVESTED IN FRANKLIN TEMPLETON INVESTMENTS AT ` 1 00 000/- EACH ON 27.1.2003 3.2.2003 AND 3.3.2004. IT WAS EXPLAINED THAT THESE AMOUNTS WERE ITA 1785 1793 TO 1798/09 :- 23 - : ERRONEOUSLY/INADVERTENTLY SHOWN AS DRAWINGS INSTEAD OF INVESTMENTS AS THE ACCOUNTANT COULD NOT IDENTIFY THE HEAD OF AC COUNT. THEREFORE THE ERROR WAS RECTIFIED BY CREDITING THE CAPITAL AC COUNT. THIS SUBMISSION OF THE LD.AR WAS SENT TO THE ASSESSING OFFICER AND THE REMAND REPORT WAS CALLED FOR. IN HIS REMAND REPORT DATED 1.4.2009 THE ASSESSING OFFICER HAS SUBMITTED AS UNDER: REGARDING ADDITION OF ` 3 75 000/- TOWARDS ADDITIONS TO CAPITAL THE ASSESSEE HAS SUBMITTED THAT ` 3 LAKHS WAS WRONGLY TAKEN AS DRAWINGS IN THE PREVIOUS YEAR. TH IS ERROR WAS NOTICED AND WAS CORRECTED ON 01.04.03 BY PASSING A RECTIFICATION ENTRY. WE ENCLOSE HEREWITH THE STATEMENT OF FRANKLIN TEMPLETON IN THIS REGARD. A S CORRECTLY STATED IN THE ASSESSMENT ORDER ANY AMOUNT OF INCOME SHOULD BE CREDITED TO THE INCOME & EXPENDITU RE A/C ONLY. THE ASSESSEE HAS SEPARATELY SHOWN AN AMO UNT OF ` 3 75 000/- AS ADDITIONS TO THE CAPITAL A/C. THE EXPLANATION SUBMITTED BY THE ASSESSEE IS NOT TENABL E AS IT SEEMS TO BE AN AFTER THOUGHT ONLY. IN VIEW OF THE ABOVE THE COMMISSIONER OF INCOME-TAX(A) MAY DECIDE THE IS SUE ACCORDINGLY . 29. A COPY OF THIS REPORT WAS GIVEN TO THE ASSESSEE IN RESPONSE TO WHICH THE EARLIER SUBMISSION WAS REITERATED. 30. THE LD. CIT(A) FOUND ` 3 00 000/- OUT OF ` 3 75 000/- AS EXPLAINED AND HAS DELETED THE SAME. NOW THE REVEN UE IS AGGRIEVED. ITA 1785 1793 TO 1798/09 :- 24 - : 31. AFTER HEARING BOTH SIDES IT IS CLEARLY FOUND THAT THIS AMOUNT OF ` 3 00 000/- STANDS EXPLAINED AND THIS AMOUNT CANNOT BE TREATED AS UNEXPLAINED CREDIT TO THE CAPITAL ACCOUNT. HENCE WE DO NOT FIND ANY REASON TO INTERFERE IN THIS FINDING OF THE LD. CIT( A) . CONSEQUENTLY WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 32. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D AND THAT OF THE REVENUE IS DISMISSED. I.T.A.NO. 1797/MDS/09 (A.Y 2005-06) 33. THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 200 5-06 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 3.8.2009. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OR INCOME TAX (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT ERRED IN DISALLOWING TRAVELING E XPENSES CLAIMED OF ` 20 50 813/ON THE GROUND THAT IT WAS NOT IN THE SAME PROPORTION AS IN THE PREVIOUS YEAR. THE LEARNED CIT HAS NOT TAKEN INTO ACCOUNT THE BILLS F OR ` 19 82 475/- PRODUCED BY THE ASSESSEE AND HAS ALLOWE D ONLY ` 760000/- BEING A PROPORTION OF PROFESSIONAL INCOME. THE LEARNED CIT ERRED IN NOT APPRECIATING T HAT THE APPELLANT IS A FELLOW MEMBER OF SEVERAL RENOWNE D INSTITUTIONS IN THE UK AND THE US AND HAD TO TRAVEL ON A REGULAR BASIS TO DIFFERENT DESTINATIONS FOR ATTENDI NG CONFERENCES AND TO LEARN ABOUT THE NEW DEVELOPMENTS IN THE FIELD OF THE APPELLANT'S SPECIALTY. MOST OF THE ITA 1785 1793 TO 1798/09 :- 25 - : INVITATIONS WERE THROUGH E-MAILS. COPIES OF THE E-M AIL COMMUNICATIONS HAVE BEEN SUBMITTED TO THE ASSESSING OFFICER. ALL THE EXPENSES WERE INCURRED THROUGH CRE DIT CARD ONLY AND WERE FULLY VERIFIABLE. 3. THE LEARNED ERRED IN ASSUMING THAT THE TRAVEL EXPENSES INCURRED SHOULD BE PROPORTIONAL TO THE PROFESSIONAL INCOME RECEIVED. THE ASSESSEE IS A RENOWNED SPECIALIST IN HIS FIELD AND HAS TRAVELLED A LOT TO SHARE HIS EXPERTISE WITH OTHERS AND ALSO TO ENRICH HIS KNOWLEDGE. IN SUCH A SITUATION IT IS NOT AFFAIR PRACTICE TO ARRIVE AT A DECISION TO DISALLOW EXPENDITURE ON THE BASIS OF A PROPORTION TO THE PROFESSIONAL INCOME EARNED . 4. THE LEARNED CIT HAS TRIED TO ARRIVE AT A DIRECT NE XUS BETWEEN EXPENDITURE INCURRED AND INCOME EARNED WITHOUT GIVING CONSIDERATION TO THE PROFESSION OF T HE ASSESSEE WHICH REQUIRES CONTINUED PROFESSIONAL UPGRADATION. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING IT IS PRAYED THAT THE HON'BLE TRIB UNAL MAY BE PLEASED TO DELETE THE ADDITIONS SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OR IN THE ALTERNATIVE REMIT THE MATTER BACK TO THE FILE OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR FRESH EXAMINATION OF THE EXPLANATIONS GIVEN AND EVIDENCE IN SUPPORT THEREOF PRESENTED BEFORE HIM AND THUS ALLOW THE APPEAL OF THE APPELLANT. 34. THE FACTS RELATING TO THE IMPUGNED ISSUE ARE THAT D URING ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO P RODUCE THE BOOKS OF ACCOUNT BILLS AND VOUCHERS IN PROOF OF TH E CLAIM OF EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT AL ONGWITH PROOF OF EXPENSES CLAIMED AND INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF PROFESSION. AS PER THE ASSESSING OFFICER BILLS /VOUCHERS WERE NOT PRODUCED ON THE PREMISE THAT THESE WERE MISPLACED A ND THE ASSESSEE ITA 1785 1793 TO 1798/09 :- 26 - : WAS UNABLE TO LOCATE THEM THEREFORE HE DISALLOWED THE FOLLOWING EXPENSES: A) BUSINESS PROMOTION EXPENSES ` 4 19 145/- B) TRAVELLING EXPENSES ` 20 50 813/- C) CONFERENCE EXPENDITURE ` 2 67 191/- D) SALARIES PAID ` 1 50 000/- 35. DURING APPEAL PROCEEDINGS THE LD.AR SUBMITTED THAT THE EXPENSES WERE GENUINE AND THE ASSESSEE COULD NOT PR ODUCE/ADDUCE EVIDENCE IN SUPPORT OF THE EXPENSES DUE TO THE SHOR T TIME PROVIDED TO HIM. THEREFORE HE SUBMITTED THE ENTIRE EVIDENCES WHICH WERE CALLED FOR THROUGH LETTER DATED 3.12.2007 AND THE ORDER WA S PASSED ON 28.12.2007 AS IT WAS GETTING BARRED BY LIMITATION B Y 31.12.2007. THESE EVIDENCES WHICH WERE PRODUCED BEFORE THE LD. CIT(A) ALONG WITH WRITTEN SUBMISSIONS WERE SENT TO THE ASSESSING OFFI CER FOR GETTING HIS REMAND REPORT. IN HIS REMAND REPORT DATED 1.4.2009 THE ASSESSING OFFICER HAS SUBMITTED AS UNDER: 1. BUSINESS PROMOTION EXPENSES OF ` 4 19 145/- 2. TRAVELLING EXPENSES OF ` 20 50 813/- 3. CONFERENCE EXPENSES OF ` 2 67 191/- DURING THE COURSE OF REMAND PROCEEDINGS THE ASSESS EE HAS SUBMITTED SOME VOUCHERS IN SUPPORT OF THE CLAIM OF BUSINESS PROMOTION EXPENSES. THESE VOUCHERS MOSTLY RELATE TO HOTEL BILLS. SINCE THE ASSESSEE IS ONLY A DIRECTOR OF M/S HARVEY HEART HOSPITAL LTD. THESE EXPENSES CA N BE CLAIMED BY THE HOSPITAL ONLY IF IT IS INCURRED BY I T. MOREOVER IT IS NOT SURE HOW MUCH AMOUNT RELATES TO EXPENSES OF PERSONAL NATURE. ITA 1785 1793 TO 1798/09 :- 27 - : TRAVELLING EXPENSES AND CONFERENCE EXPENSES WERE DISALLOWED IN THE INDIVIDUAL HANDS SINCE THE ASSESS EE IS ONLY A DIRECTOR NOT DOING ANY INDIVIDUAL PRACTICE. HENCE THESE EXPENSES CAN BE CLAIMED BY THE HOSPITAL ONLY IF IT IS INCURRED BY IT. HENCE THE CLAIM OF THE ASSESSEE ON THESE ISSUES DO NOT MERIT ANY CONSIDERATION. SALARY ` 1 50 000/- THE ABOVE ADDITION WAS MADE IN THE ASSESSMENT ORDER AS THE ASSESSEE COULD NOT SUBMIT ANY PROOF IN SUPPO RT OF THE EXPENSES AT THE TIME OF ASSESSMENT. EVEN THOUGH THE ASSESSEE HAS SUBMITTED VOUCHERS FOR PART OF THE AMO UNT IT IS NOT A CONCLUSIVE PROOF IN THE ABSENCE OF COGE NT EVIDENCE IN THE FORM OF ENTRIES IN THE BOOKS OF ACC OUNTS OF THE ASSESSEE. HENCE THE CLAIM OF THE ASSESSEE CANNO T BE CONSIDERED AT THIS STAGE. 36. A COPY OF THIS REMAND REPORT WAS GIVEN TO THE ASSES SEE WHO OBJECTED TO THE SAME BY SUBMITTING AS UNDER: THE ASSESSING OFFICER HAS BASED HIS REPORT ON THE GROUND THAT THE ASSESSEE IS A DIRECTOR OF THE COMPA NY WITHOUT CONSIDERING THE FACT THAT HE IS A RENOWNED CARDIAC SURGEON DOING HIS OWN PRACTICE. THE LEARNED AO HAS NOT ALSO CONSIDERED THE FACT THAT HIS INCOME CONSISTS M AINLY OF PROFESSIONAL INCOME AS SHOWN IN HIS IT RETURNS A ND THESE EXPENSES HAVE BEEN CLAIMED OUT OF THE PROFESSIONAL INCOME ONLY. TRAVELLING EXPENSES HAVE BEEN INCURRED IN HIS PROFESSIONAL CAPACITY WHERE HE HAS TO ATTEND SEVERA L CONFERENCES AS FACULTY AND AS PARTICIPANT. ALSO IN THE COURSE OF HIS PROFESSION HE HAS TO ENTERTAIN A NUMB ER OF VISITORS WHO MEET HIM TO GET SOME PROFESSIONAL GUID ANCE OR FROM WHOM KNOWLEDGE IS GAINED BY THE ASSESSEE HI S FIELD. THESE EXPENSES WERE INCURRED BY THE ASSESSE E FOR THE PURPOSE OF HIS PROFESSION AND HENCE CLAIMED AS A DEDUCTION. THE VOUCHERS RELATING TO THESE EXPENSES ITA 1785 1793 TO 1798/09 :- 28 - : WERE ALSO SUBMITTED TO THE ASSESSING OFFICER FOR HI S PERUSAL. THE AO HAS AGAIN REPEATED HIS CONTENTION THAT THE ASSESSEE IS ONLY A DIRECTOR AND NOT DOING ANY INDIV IDUAL PRACTICE WHICH IS FACTUALLY INCORRECT. HIS PROFESS IONAL FEE INCOME FOR THIS YEAR WAS 50.67 LACS AND CLEARLY REF LECTED AS INCOME FROM PROFESSION IN HIS RETURN. THE LEARNED A.R. OF THE APPELLANT SUBMITTED THAT B ILLS FOR ` 1 52 957/- OF BUSINESS PROMOTION EXPENSES ` 93 847/- OF CONFERENCE EXPENSES AND ` 1 35 105/- OF SALARY WERE PRODUCED BEFORE THE AO DURING THE REMAND PROCEEDING S AND THE AO HAS NOT COMMENTED ADVERSELY ON THE BILLS PRODUCED. THE LEARNED A.R. SUBMITTED THAT THE EXPE NSES WERE GENUINE AND THE APPELLANT COULD NOT PRODUCE TH E BALANCE BILLS AND VOUCHERS DUE TO PASSAGE OF TIME. HE SUBMITTED THAT THE DISALLOWANCE OF EXPENSES MADE IN THE ASSESSMENT ORDER SHOULD BE DELETED. 37. THE LD. AR HAS SUBMITTED ON THE LINES OF OBJECTIONS RAISED AT THE TIME OF REPLYING TO THE REMAND REPORT AND ON THE SU BMISSIONS PRODUCED BEFORE THE LD. CIT(A). IN RESPECT OF CLA IM OF TRAVELING EXPENSES OF ` 20 50 813/- THE LD. CIT(A) HAS SUSTAINED THE ADD ITION. 38. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MA TERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE LD. CIT(A ) HAS RELIED ON THE PERCENTAGE OF EXPENSES INCURRED ON PROFESSIONAL REC EIPTS QUA TRAVELING EXPENSES CLAIMED DURING THOSE YEARS. THE FOLLOWING TABLE VIEWS THE PICTURE OF SUCH PERCENTAGE FROM ASSESSMENT YEAR 200 3-04 TO 2006-07: ITA 1785 1793 TO 1798/09 :- 29 - : ASSESSMENT YEARS 2003-04 2004-05 2005-06 2006-07 PROFESSIONAL RECEIPTS 34.96 28.47 50.67 27.34 TRAVEL EXPENSES CLAIMED WITH EVIDENCE 4.30 3.46 19.82 4.40 PERCENTAGE 12.3% 12.15% 39.12% 16.09% 39. FROM THE ABOVE CHART HE HAS FOUND THAT IN THE PREC EDING AND SUBSEQUENT ASSESSMENT YEARS THE RANGE OF PERCENTAG E OF EXPENSES IN RECEIPT OF PROFESSIONAL RECEIPTS QUA TRAVELING EXPE NSES COMES BETWEEN THE RANGE OF 12% TO 16%. THEREFORE HE HAS OBTAINE D THE FIGURE OF 15%. CONSEQUENTLY HE HAS SUSTAINED THE ADDITION O F ` 12 90 813/-. IT IS FOUND FROM THE RECEIPTS THAT OUT OF THE TOTAL TRAVELLING EXPENDITURE OF ` 20 50 813/- BILLS AND VOUCHERS TO THE EXTENT OF ` 19 82 475/- WERE PRODUCED BEFORE THE LD. CIT(A) WHICH WAS SENT TO A SSESSING OFFICER. THE LD. CIT(A) HAS FOLLOWED THE EXPENSES OF EARLIER YEARS WHICH IN OUR OPINION IS NOT A CORRECT METHOD WHEN THE ASSESSEE H AS SUBMITTED THE PROOF OF EXPENSES. WE ARE IN AGREEMENT WITH THE LD . A.R. THAT THERE CANNOT BE A DIRECT CO-RELATION BETWEEN THE GROSS RE CEIPTS AND THE TRAVELLING EXPENSES. THE EXPENDITURE HAS BEEN DISA LLOWED WITH REFERENCE TO ITS QUANTUM WITHOUT CONSIDERING THE NA TURE AND CONTEXT OF THE EXPENDITURE. THERE SEEMS TO BE NO JUSTIFICATIO N IN DISALLOWING THE EXPENSES WHICH ARE SUPPORTED AND SUBSTANTIATED BY B ILLS. ITA 1785 1793 TO 1798/09 :- 30 - : CONSEQUENTLY WE ORDER TO DELETE THE ENTIRE ADDITIO N BY FOLLOWING THE DECISION OF ITAT INDORE BENCH IN THE CASE OF RAJAT TRADECOM INDIA PVT. LTD VS DY. CIT ORDER DATED 12.9.2008 3 ITR ( TRIB) 321 INDORE IN WHICH IT HAS BEEN HELD THAT EXPENSES DISALLOWED ON ADHOC BASIS ARE LIABLE TO BE DELETED. 40. IN THE RESULT THIS APPEAL IS ALLOWED. I.T.A.NO. 1798/MDS/2009 (A.Y 2006-07) 41. THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 20 06-07 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 3.8.2009. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT ERRED IN SUSTAINING THE ADDITION OF ` 6 00 000/- AS UNEXPLAINED CASH CREDIT. THIS WAS ACTUALLY A LOAN TAKEN FROM M/S MOSQ. THIS HAD BEEN EXPLAINED TO THE ASSESSING OFFICER AND THE CIT(A) AND CONFIRMATION FROM MOSQ REPELLANT AND BANK STATEMENT OF MOSQ REPELLANT HAVE BEEN SUBMITTED TO THE CIT (APPEALS). 3. THE LEARNED CIT ERRED IN SUSTAINING THE ADDITION OF ` 12 21 175/- AS UNEXPLAINED ASSETS FOUND DURING THE SEARCH. ACCORDING TO THE ASSESSING OFFICER TOTAL GOLD JEWELLERY FOUND AT THE TIME OF SEARCH WA S 3602 GRAMS. THE ASSESSING OFFICER HAS GIVEN CREDIT ONLY FOR A QUANTITY OF 250 GRAMS AS RELATING TO PURCHASES BEFORE 1.4.1999 AND 250 GRAMS AS ITA 1785 1793 TO 1798/09 :- 31 - : BELONGING TO MOTHER IN LAW. THE CIT HAS ALLOWED ANOTHER 216 GRAMS AS BELONGING TO MOTHER IN LAW. APART FROM THESE SOME JEWELLERY WERE GIVEN TO HIS WIFE AT THE TIME OF MARRIAGE AND ASSESSEE WAS WORKING ABROAD FOR MORE THAN 13 YEARS AND HAD PURCHASED JEWELLERY FROM TIME TO TIME. SUCH OLD JEWELLERY COULD BE EASILY IDENTIFIED FROM THE PATTE RN OF THE JEWELLERY. ALSO THOSE JEWELLERY ITEMS HAD MARKINGS IN ARABIC ON THEM. THIS COULD BE PROVED THROUGH INSPECTION BY A REGISTERED VALUER. CONSIDERING THESE FACTS AND THE LONG DURATION OF THE APPELLANTS STAY ABROAD THE ADDITION MADE IS TOTALLY UNJUSTIFIED. 4. THE LD. CIT ERRED IN SUSTAINING THE ADDITION OF ` 1 66 250/- AS VALUE OF DIAMOND JEWELLERY FOUND AT THE TIME OF SEARCH. FOR REASONS STATED IN THE PRECEDING GROUND THIS ADDITION IS LIABLE TO BE DELETED. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO DELETE THE ADDITIONS SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OR IN THE ALTERNATIVE REMIT THE MATT ER BACK TO THE FILE OF THE COMMISSIONER OF INCOME TAX(APPEALS) FOR FRESH EXAMINATION OF THE EXPLANATIONS GIVEN AND EVIDENCE IN SUPPORT THEREOF PRESENTED BEFORE HIM AND THUS ALLOW THE APPEAL OF THE APPELLANT. 42. THE FIRST ISSUE PERTAINS TO SUSTAINED ADDITION O F ` 6 LAKHS ADDED ON ACCOUNT OF UNEXPLAINED CASH CREDIT. THE A SSESSEE HAS CLAIMED THAT THIS AMOUNT WAS TAKEN AS LOAN FROM M/S MOSQ REPELLANT AND THE SAME WAS EXPLAINED TO THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) AND CONFIRMATION FROM MOSQ REPELLANT WAS ALS O FILED. IN THIS CASE ALSO THE LD. CIT(A) HAS CALLED FOR THE REMAND REPORT FROM THE ITA 1785 1793 TO 1798/09 :- 32 - : ASSESSING OFFICER IN RESPONSE TO WHICH THE ASSESSEE HAS SUBMITTED HIS REPLY. 43. AFTER HEARING BOTH SIDES AND IN VIEW OF THE RECORDS WE FIND THAT THE ASSESSEE HAS PRODUCED ENOUGH EVIDENCE TO SHOW R ECEIPT OF LOAN BY CHEQUE ALONGWITH CONFIRMATION LETTER AND ALSO PROVE D THE REPAYMENT OF THIS LOAN ON 6.10.2005. THEREFORE IN OUR CONSIDER ED OPINION THIS AMOUNT CANNOT BE ADDED AS UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE BECAUSE THE SAME STANDS PROVED ON RECORD AS PER LAW. 44. ANOTHER ISSUE PERTAINS TO SUSTAINED ADDITION OF ` 12 21 175/- AS UNEXPLAINED ASSETS FOUND DURING SEARCH. ACCORDING TO THE ASSESSING OFFICER TOTAL GOLD JEWELLERY FOUND DURING SEARCH W AS 3602 GMS. THE ASSESSING OFFICER HAS GIVEN CREDIT ONLY FOR A QUANT ITY OF 250 GMS RELATING TO PURCHASES BY THE ASSESSEE BEFORE 1.4.19 99 AND 250 GMS AS BELONGING TO HIS MOTHER-IN-LAW. FURTHER THE LD . CIT(A) HAS ALLOWED ANOTHER 216 GMS AS BELONGING TO ASSESSEES MOTHER-I N-LAW. THE CASE OF THE ASSESSEE IS THAT HE WAS WORKING ABROAD FOR 1 3 YEARS WHERE HE PURCHASED JEWELLERY FROM TIME TO TIME. WITH REFERE NCE TO MARKING MADE ON THESE JEWELLERY IN ARABIC IT WAS SUBMITTED THAT THIS FACT CAN BE FOUND FROM THE JEWELLERY ITSELF IN PROOF OF ASSE SSEES CLAIM. ITA 1785 1793 TO 1798/09 :- 33 - : 45. AFTER HEARING BOTH SIDES IT WAS FOUND THAT MOST OF THE JEWELLERY WAS PURCHASED BY THE ASSESSEE PRIOR TO 1999. HE WA S LIVING OUTSIDE INDIA . THE LOWER AUTHORITIES HAVE TOTALLY IGNORED THE BASIC CLAIM OF THE ASSESSEE THAT THE VERY PERUSAL OF THE JEWELLERY WOULD SHOW THE MARKINGS MADE THERON IN ARABIC LANGUAGE WHICH DEFIN ITELY GOES TO SHOW THAT THE JEWELLERY WAS PURCHASED FROM OUTSID E THE COUNTRY. HOWEVER MOST OF THE REMAINING JEWELLERY HAS BEEN T REATED AS EXPLAINED BY THE DEPARTMENT. BEFORE US THE FACT T HAT THE JEWELLERY IN QUESTION BEARS ARABIC MARKINGS ON THEM COULD NOT BE CONTROVERTED OR DENIED BY THE LD.DR. THEREFORE WE FIND FORCE IN T HIS EXPLANATION OF THE ASSESSEE THAT THESE JEWELLERY WHICH REMAINED AS UNEXPLAINED WAS PURCHASED BY THE ASSESSEE WHILE HE WAS ABROAD FOR 1 3 YEARS. THEREFORE THERE IS NO JUSTIFICATION TO MAKE ADDITI ON OF VALUE OF THIS JEWELLERY IN THE HANDS OF THE ASSESSEE. THE ENTIRE ADDITION IS THEREFORE UNCALLED FOR AND HENCE DELETED. 46. THE LAST ISSUE OF THIS APPEAL IS REGARDING SUSTAIN ED ADDITION OF ` 12 66 250/- BEING THE VALUE OF DIAMOND FOUND AT T HE TIME OF SEARCH. REGARDING 20.58 CTS OF DIAMONDS FOUND DURING SEARCH IT WAS EXPLAINED THAT THESE WERE PURCHASED FROM OUTSIDE TH E COUNTRY BUT THE ASSESSING OFFICER WITHOUT MENTIONING ABOUT THIS FA CT SIMPLY WENT ON ITA 1785 1793 TO 1798/09 :- 34 - : REASONING THAT THIS JEWELLERY HAS NOT BEEN DECLARED IN THE WEALTH TAX RETURNS THEREFORE HE REJECTED ASSESSEES CLAIM AN D MADE THE IMPUGNED ADDITION. 47. ON THE BASIS OF SIMILAR REASONING AS WE HAVE GIVEN IN REGARD TO THE GOLD JEWELLERY WE DELETE THE ADDITION OF ` 1 66 250/- ALSO. 48. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. 49. TO SUMMARIZE THE RESULT ASSESSEES APPEALS IN I.T. A.NO. 1793/MDS/09 IS ALLOWED FOR STATISTICAL PURPOSES 17 94/MDS/2009 IS PARTLY ALLOWED WHEREAS I.T.A.NOS. 1795 1796 179 7 & 1798/MDS/09 ARE ALLOWED. REVENUES APPEAL IN I.T.A.NO. 1785/MD S/09 IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 17.9 .10. SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 17 TH SEPTEMBER 10 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR