Shree Saiprakashan Pvt. Ltd., Surat v. The Income Tax Officer, Ward -4(4), Surat

ITA 2393/AHD/2004 | 2001-2002
Pronouncement Date: 09-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 239320514 RSA 2004
Assessee PAN AADCS3053K
Bench Ahmedabad
Appeal Number ITA 2393/AHD/2004
Duration Of Justice 5 year(s) 7 month(s) 30 day(s)
Appellant Shree Saiprakashan Pvt. Ltd., Surat
Respondent The Income Tax Officer, Ward -4(4), Surat
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 09-04-2010
Date Of Final Hearing 06-04-2010
Next Hearing Date 06-04-2010
Assessment Year 2001-2002
Appeal Filed On 10-08-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING: 06/04/2010 DRAFTED ON:06/04/20 10 ITA NO.2393/AHD/2004 ASSESSMENT YEAR : 2001-2002 SHREE SAIPRAKASHAN PRIVATE LIMITED 9 AMBANAGAR OPPOSITE NAVRANG SOCIETY UDHNA MAGDALLA ROAD SURAT. VS. INCOME TAX OFFICER WARD 4(4) AAYAKAR BHAVAN OPP. NEW CIVIL HOSPITAL MAJURA GATE SURAT-395001 PAN/GIR NO. : AADCS 3053 K (APPELLANT) .. (RESPONDENT) ITA NO.2465/AHD/2004 ASSESSMENT YEAR : 2001-2002 INCOME TAX OFFICER WARD 4(4) AAYAKAR BHAVAN OPP. NEW CIVIL HOSPITAL MAJURA GATE SURAT-395001 VS. SHREE SAI PRAKASHAN PRIVATE LIMITED 9 AMBANAGAR OPPOSITE NAVRANG SOCIETY UDHNA MAGDALLA ROAD SURAT. PAN/GIR NO. : AADCS 3053 K (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI J. P. SHAH RESPONDENT BY: SMT. NEETA SHAH SR. D.R. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS)-III SURAT DATED 15.06.2004. 2. GROUND NOS.1 TO 4 OF THE APPEAL OF THE ASSESSEE ARE DIRECTED AGAINST ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING ADDITION OF RS.1 29 500/- RECEIVED TOWAR DS COMMON FACILITIES SERVICES FROM M/S. BANSI ART AND PRINTS PVT. LTD. RS.2 22 000/- RECEIVED - 2 - TOWARDS COMMON FACILITIES SERVICES FROM SHRI RAMKRI SHNA MAHESHWARI SHRI ANILKUMAR MAHESHWARI AND SHRI ANIUL SHARDA RS .37 000/- RECEIVED TOWARDS COMMON FACILITIES SERVICE FROM SHRI JAYVADA N HARILAL AND RS.18 500/- RECEIVED TOWARDS FACILITATE FROM SHRI J HAVERILAL SURAJMAL AS UNDISCLOSED SALES BY THE ASSESSEE. 3. GROUND NO.1 OF THE APPEAL OF THE REVENUE IS DIRE CTED AGAINST THE DELETING THE ADDITION OF RS.2 46 000/- ON ACCOUNT O F BUSINESS TRANSACTION AND RS.3 70 629/- ON ACCOUNT OF ESTIMATED SALES. BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 4. SINCE THE FACTS AND ISSUE INVOLVED IN THE ABOVE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE AND REVENUE ARE COMMON THEY ARE BEING CONSIDERED AND DECIDED TOGETHER. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS HELD AS UNDER:- THE FIRST GROUND OF APPEAL RELATES TO THE ADDITION OF RS. 653 000/- MADE BY THE A.O. AFTER THE PERUSAL OF ASSESSMENT OR DER IT IS SEEN THAT A.O HAD CALLED FOR INFORMATION FROM 37 PARTIES U/S. 133(6) OF THE ACT AND TALLIED THE SAME WITH THE CORRESPONDING ACCOUNTS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT COMPANY AND FOUND THAT SOME OF THE ACCOUNTS DID NOT TALLY WITH THE ACCOUNT S AS MAINTAINED IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY. AFTER THE PERUSAL OF THE ASSESSMENT ORDER IT IS FO UND THAT THE A.O HAS CALLED FOR INFORMATION U/S. 133(6) OF THE ACT R ELATING TO 25 PARTIES WHICH HAD CARRIED OUT THE BUSINESS TRANSACT IONS WITH THE APPELLANT COMPANY. FROM SOME OF THESE PARTIES THE R EPLY WAS RECEIVED WHEREAS THE OTHERS DID NOT SUBMIT ANY REPL Y. IT WAS FURTHER MENTIONED BY THE A.O THAT IN CASE OF THOSE PARTIES FROM WHICH INFORMATION WERE RECEIVED AND AFTER THAT WHEN THESE WERE VERIFIED WITH THE BOOKS OF ACCOUNTS OF THE APPELLAN T COMPANY THESE DID NOT TALLY AT ALL AND SOME DIFFERENCE WAS NOTICED IN TERMS OF AMOUNT. THE A.O ON THE BASIS OF ABOVE REFERRED F ACTS AND BY RELYING UPON THE FINDINGS OF HON'BLE GAUHATI HIGH C OURT IN THE CASE OF KESHRICHAND JAISUKHLAL VS. CIT 248 ITR 247 REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT COMPANY HOLDING THAT THE BOOKS OF ACCOUNTS AS MAINTAINED BY THE APPELLANT CO MPANY WERE - 3 - NOT RELIABLE AND CORRECT AND PROFIT COULD NOT BE DE DUCED. FOR THE ABOVE REJECTION OF BOOKS OF ACCOUNTS THE A.O HAD A LSO MENTIONED ABOUT THE TRANSACTIONS WHICH THE APPELLANT COMPANY HAS CARRIED OUT WITH SHRI A.M. LAKHANI AND SHRI N.R. IHANI WHO COULD NOT EXPLAIN SUCH TRANSACTIONS PROPERLY. 4.1 AGAIN ON 27.02.04 THE A.O HAD ISSUED FURTHER S HOW CAUSE NOTICE TO THE APPELLANT COMPANY TO PRODUCE 37 PARTI ES (FOR WHICH LIST WAS GIVEN BY A.O) ALONGWITH THEIR BOOKS OF ACC OUNTS FOR VERIFICATION OF THE TRANSACTIONS AS SHOWN IN THEIR BOOKS OF ACCOUNTS VIS-A-VIS THE BOOKS OF ACCOUNTS OF THE APPELLANT C OMPANY BECAUSE IN SUCH CASES NOTICES U/S. 133(6) COULD NOT BE SERVED. IN THE SAID SHOW CAUSE NOTICE THE APPELLANT COMPANY W AS FURTHER REMINDED OF RECONCILING THE STATEMENT OF ACCOUNTS R ELATING TO PARTIES ABOUT WHICH IT WAS INTIMATED IN EARLIER LET TERS (OF THE A.O) DTD. 02.12.03 AND 13.01.04. IN THE SAID SHOW CAUSE NOTICE DTD. 27.02.04 THE A.O HAS MENTIONED THAT THE VERIFICATI ON WAS REQUIRED BECAUSE THE ACCOUNTS IN THE CASE OF ABOVE REFERRED PARTIES AS MENTIONED IN ITS BOOKS OF ACCOUNTS DID NOT TALLY WI TH THOSE WHICH WERE RECEIVED AS A RESULT OF NOTICE U/S. 133(6) OF THE ACT (IN CASE OF VERY FEW PARTIES). IT WAS FURTHER MENTIONED BY T HE A.O THAT IT (APPELLANT CO.) COULD NOT GIVE DETAILS OF CHEQUE NU MBERS RELATING TO PAYMENTS RECEIVED BY IT FROM CERTAIN PARTIES WHI CH AGAIN DID NOT ESTABLISH THE TRANSPARENCY OF THE BOOKS OF ACCOUNTS AS MAINTAINED BY IT AND ALSO IT DID NOT PAY ANY INTEREST TO PARTI ES AGAINST WHICH IT HAD SHOWN CERTAIN AMOUNTS RECEIVED IN THE FORM OF A DVANCES. 4.2 IN RESPONSE TO THE ABOVE SHOW CAUSE NOTICE THE APPELLANT COMPANY HAS MADE FOLLOWING SUBMISSION : - 'IN PARA NO. (A) OF ABOVE REFERRED SHOW CAUSE NOTIC E YOUR GOOD SELF HAS MADE A REMARK THAT OUT OF 25 PARTIES AS MENTIONED IN LETTER DTD. 13.01.04 OF YOUR GOODSELF IN MOST OF CASES TRANSACTIONS AND CLOSING BALANCE AS SHOWN BY US ARE NOT TALLYING WITH THE ONE SHOWN BY THE RESPECTIVE PARTIES. KINDL Y NOTE THAT THIS REMARK IS NOT PROPER BECAUSE OF VARIOUS EXPLANATION S OFFERED HEREIN AFTER IN RESPONSE TO PARA NO. 3 OF YOUR GOOD SELF'S ABOVE REFERRED SHOW CAUSE NOTICE. IN PARA (B) OF ABOVE REFERRED SHOW CAUSE NOTICE YOU R GOODSELF HAS MADE A REMARK THAT OUT OF 25 PARTIES AS MENTIONED I N FETTER DT 13.01.04 OF YOUR GOODSELF IN MOST OF CASES WHERE W E HAVE RECEIVED ADVANCES WE ARE UNABLE TO TRACE OUT THEM. IN THIS REGARD WE WOULD LIKE TO BRING TO YOUR KIND NOTICE THE FACT THAT OUT OF 25 PARTIES MENTIONED BY YOUR GOODSELF NOTICE U/S. 133 (6) COULD NOT BE SERVED TO ONLY NINE PARTIES AND SIXTEEN PARTIES HAD ALREADY RECEIVED THE NOTICES OUT OF SIXTEEN PARTIES ONLY T WO PARTIES ARE - 4 - SUCH FROM WHOM WE HAVE RECEIVED ADVANCE AND ARE SHO WN AS SUCH IN ALL THE OTHER PARTIES SUCH ADVANCES HAVE B EEN SHOWN AS SALE OF SHOPS AND CREDITED TO INCOME ACCOUNT. THIS FACT HAS BEEN ALSO CLARIFIED ON PAGE NO. 3 (BELOW THE TABLE SHOWI NG THE DETAILS OF RECEIPTS) OF OUR LETTER DTD. 06.02.04 WRITTEN IN RE SPONSE TO YOUR GOODSELF'S SHOW CAUSE NOTICE DTD. 13.01.04. FURTHER KINDLY ALSO NOTE THAT BOTH THE PARTIES MENTIONED AT SR. NO. 17 & 18 OF YOUR GOODSELF'S SHOW CAUSE NOTICE DTD. 13.01.04 AND SHOW N IN THE LIST OF ADVANCE RECEIVED HAS DULY ACCEPTED THE LETTER SE NT U/S. 133(6) OF THE ACT. THUS BOTH PARTIES FROM WHOM ADVANCE HA S BEEN RECEIVED OUT OF TOTAL 25 PARTIES MENTIONED IN YOUR GOODSELF'S SHOW CAUSE NOTICE DTD. 13.01.04 HAS ALREADY BEEN TRACED OUT. NOW COMING TO BALANCE OF 23 PARTIES WE WOULD ONCE AGAIN LIKE TO SUBMIT THAT IN MOST OF CASES WE HAVE ALREADY PROVID ED THE NAMES OF THE PARTIES THEIR ADDRESSES AND DETAILS OF RECE IPT IN ADDITION TO THE FACT THAT THE SAME HAS ALREADY BEEN OFFERED AS INCOME. THUS WHEN WE HAVE ALREADY OFFERED THE AMOUNT RECEIVED AS SALES TO THE BEST OF OUR KNOWLEDGE AND BELIEF EVEN IF WE A RE UNABLE TO TRACE OUT RESPECTIVE PARTIES DUE TO VARIOUS REASONS STATED HEREIN ABOVE IT DOES NOT HAVE ANY ADVERSE EFFECT ON THE I NCOME REFLECTED BY US DURING THE YEAR UNDER CONSIDERATION . IN PARA (C) OF ABOVE REFERRED SHOW CAUSE NOTICE YOU R GOODSELF HAS MADE A REMARK THAT OUT OF 25 PARTIES AS MENTIONED I N LETTER DTD. 13.01.04 OF YOUR GOODSELF IN FEW CASES WE HAVE BEE N UNABLE TO PROVIDE THE DETAILS IN FORM OF CHEQUE NO. AND BANK NAME OF PAYMENT RECEIPTS TO WHOM WE HAVE SHOWN SALES DURING THE YEAR UNDER CONSIDERATION. IN THIS REGARD WE WOULD LIKE TO BRING TO YOUR GOODSELF'S KIND NOTICE THAT ONE OF THE MAIN REASONS FOR NON- AVAILABILITY OF SUCH DETAILS OF RECEIPT AT PRESENT IS THAT OUR MAIN DIRECTOR IS IN NOT IN A POSITION TO RECALL THIS DET AILS AT PRESENT DUE TO THE REASON ALREADY PLACED ON RECORD. FURTHER KINDL Y ALSO NOTE THAT THE PROJECT UNDER CONSIDERATION IS MORE THAN 10 YEA RS OLD AND FIRST BOOKING WAS RECEIVED ON AS EARLY AS 27.09.1993. THU S DUE TO AFFLUX OF TIME AND ON ACCOUNT OF MAJOR CHANGES IN A CCOUNTING STAFF IT IS NOT POSSIBLE TO GIVE EXACT DETAILS OF CHEQUE NO. ETC. IN FEW CASES. WE WOULD ONCE AGAIN LIKE TO STRESS THE FACT THAT ALL SUCH RECEIPTS HAVE ALREADY BEEN OFFERED AS INCOME. THUS WHEN WE HAVE ALREADY OFFERED THE AMOUNT RECEIVED AS SALES I N CASE OF THOSE PARTIES TO THE BEST OF OUR KNOWLEDGE AND BELI EF IT DOES NOT HAVE ANY ADVERSE EFFECT ON THE INCOME REFLECTED BY US DURING THE YEAR UNDER CONSIDERATION. IN PARA NO. (D) OF ABOVE REFERRED SHOW CAUSE NOTICE YOUR GOODSELF HAS MADE A REMARK THAT OUT OF 25 PARTIES AS MENTION ED IN LETTER DTD. 13.01.04 OF YOUR GOODSELF IN THOSE CASES WHIC H HAS BEEN SHOWN AS ADVANCE WE HAVE NOT PAID ANY INTEREST ON THE AMOUNT - 5 - RECEIVED AS BOOKING DEPOSIT. IN THIS REGARD WE WOU LD MOST HUMBLY LIKE TO EMPHASIS THE FACT THAT AS PER THE PR EVAILING TREND IN SUCH KIND OF BUSINESS INTEREST IS NEVER PAID ON BO OKING DEPOSITS. AS PER THE GENERAL PRACTICE FOLLOWED IN THIS KIND O F CONSTRUCTION BUSINESS INTEREST IS NEVER PAID ON THE BOOKING DEP OSIT. FURTHER TO THE BEST OF OUR KNOWLEDGE AND BELIEF IF WE HAVE NOT PAID ANY INTEREST ON BOOKING DEPOSIT AS PER STANDARD BUSINES S PRACTICE PREVAILING IN THE SIMILAR INDUSTRY THEN ONLY ON AC COUNT OF NON PAYMENT OF INTEREST THAT SUCH TRANSACTIONS PERTAINI NG TO BOOKING DEPOSIT DOES NOT BECOME NON-TRANSPARENT ESPECIALLY WHEN BOTH THE PARTIES SHOWN AS ADVANCES AND TO WHOM LETTER U/ S. 133(6) WAS SERVED AND ACCEPTED BY THEM'. BESIDES ABOVE REPLY THE APPELLANT COMPANY FURTHER FILED COPIES OF ACCOUNTS OF THE OTHER 37 PARTIES IN RESPONSE TO SHO W CAUSE NOTICE DTD. 27.02.04 AS REFLECTED IN ITS BOOKS OF ACCOUNTS . 4.3 AFTER THE PERUSAL OF THE ABOVE REFERRED REPLY O F THE APPELLANT COMPANY IT WAS HELD BY THE A.O THAT THE APPELLANT COMPANY COULD NOT RECONCILE THE ACCOUNTS BECAUSE DIFFERENCE IN TH E ACCOUNTS RELATING TO CERTAIN PARTIES STILL REMAINED UNEXPLAI NED. ACCORDING TO THE A.O. IN THE CASE OF FOLLOWING PARTIES THE DIFFE RENCE COULD NOT BE EXPLAINED BY IT SR.NO. NAME OF PARTY DIFFERENCE IN AMT. 1. M/S. BANSI ART & PRINTS (P) LTD. 230 000 2. (A) SHRI RAMKRISHA MAHESHWARI (B) SHRI ANILKUMAR MAHESHWARI TOTAL OF 2(A) & (B) 222 000 3. SHRI JAYVARDHAN HARILAL 7 1 000 4. SHRI ZHAVERILAL SURAJMAL 50 000 5. SHRI JAYSHREE RIBBONS 80 000 TOTAL 6 53 000 4.4 IT WAS HELD BY THE A.O THAT THIS DIFFERENCE WAS WITH REGARD TO 37 PARTIES FOR WHICH THE APPELLANT COMPANY WAS GIVE N THE SHOW CAUSE NOTICE DTD. 27.02.04. ACCORDING TO A.O THERE WERE OTHER 21 PARTIES ABOUT WHICH THE APPELLANT COMPANY COULD NOT FILE ANY RECONCILIATION IN TERMS OF AMOUNT AND THEREFORE HE HAD FURTHER WORKED OUT IN RESPECT OF THESE PARTIES THE AMOUNT OF CONCEALMENT OF INCOME IN THE FORM OF UNDISCLOSED SALES ON PRO-R ATA BASIS OF RS. 17 649/- FOR EACH PARTY BY TAKING AN AVERAGE OF CON CEALMENT IN THE CASE OF 37 PARTIES AS REFERRED ABOVE (RS. 653 0 00 / 37 = 17 469). THUS FOR ALL THE 58 PARTIES (37 + 21) THE A.O MADE AN ADDITION OF RS. 10 23 629/- TO THE TOTAL INCOME TRE ATING THE SAME AS NOT DISCLOSED IN ITS RETURN OF INCOME. - 6 - 4.5 DURING THE APPELLATE PROCEEDINGS THE A.RS VEHE MENTLY ARGUED AGAINST THE ABOVE REFER FINDING OF THE A.O A ND SUBMITTED THEIR REPLY ON VARIOUS DATES IN THIS REGARD SUCH A S ON 07.05.04 20.05.04 AND 28.05.04. AFTER GOING THROUGH THE SUBM ISSION IT IS FOUND THAT THE A.RS HAVE FILED CATEGORICAL DETAILS ABOUT THE TRANSACTIONS CARRIED OUT WITH SUCH PARTIES. 4.5.1. IN THE CASE OF BANSI ART & PRINTS (P) LTD. A N ADDITION OF RS.2 30 000/- WAS MADE BY THE LEARNED ASSESSING OFF ICER TREATING THE SAME AS SALES CONSIDERATION RECEIVED F ROM THIS PARTY BUT THE SAME WAS NOT SHOWN AS PART OF ITS INCOME. 6. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) THE ASSESSEE SUBMITTED AS UNDER:- IN THIS REGARD IT IS MOST HUMBLY SUBMITTED THAT T HE M/S.BANSI ART & PRINTS (P) LTD. VIDE ITS LETTER DATED 12.11.03 H AS STATED THAT IT HAD BEEN ALLOTTED 7 SHOPS BY THE APPELLANT IN ITS RELEVANT PROJECT AND FOR THE SAME THEY HAD PAID RS.6 50 000/- ON VAR IOUS DATES STARTING FROM 05.10.93 TO 18.03.98 AS BOOKING AMOUN T TO THE APPELLANT. AS AGAINST THIS THE APPELLANT HAD SHOWN RS.7 79 500 /- AS AMOUNT RECEIVED FROM M/S.BANSI ART & PRINTS (P) LTD. BEING THE RS.6 50 000/- AS SHOWN BY THE RELEVANT PARTY + RS.1 29 500/- RECEIVED TOWARDS COMMON FACILITY SERVICES. FURTHER KINDLY ALSO NOTE THAT OUT OF TOTAL OF RS.7 79 500/- APPELLANT H AS DULY TRANSFERRED RS.5 49 500/- IN SHOP SALES ACCOUNT BEI NG THE AMOUNT PERTAINING TO 7 SHOPS (SHOP NOS.401 TO 404 AND 410 TO 412) EACH OF 170 SQ. FT. AND SOLD AT RS.78 500/- PER SHOP. BA LANCE OF RS.2 30 000/- HAS BEEN SHOWN AS BOOKING ADVANCE BY THE APPELLANT (RS.7 79 500/- BEING THE AMOUNT SHOWN AS RECEIVED FROM THE RELEVANT PARTY LESS RS.5 49 500/- BEING TH E AMOUNT PERTAINING TO SHOP SOLD TO THE RELEVANT PARTY DURIN G THE YEAR UNDER CONSIDERATION). 7. THE ASSESSEE FURTHER SUBMITTED COPY OF ACCOUNTS OF M/S.BANSI ART & PRINTS(P) LTD. ACCORDING TO WHICH IT IS FOUND THAT THE SAID PARTY HAD MADE TOTAL PAYMENT OF RS.6 50 000/- ONLY BUT AT THE SAME TIME THE APPELLANT COMPANY HAD SHOWN TOTAL RECEIPT FROM THIS PARTY AT RS.7 79 500/-. ACCORDING TO THE COPY OF ACCOUNT OF THE SAID PARTY AS MAINTAINED IN ITS BOOKS OF ACCOUNTS IT (APPELLANT C OMPANY) HAD SHOWN RS.5 49 500/- BEING THE AMOUNT RECEIVED FROM THE AB OVE PARTY - 7 - PERTAINING TO SHOPS SOLD TO THAT PARTY AND THE BALA NCE OF RS.2 30 000/- HAD BEEN SHOWN AS ADVANCE AGAINST THE BOOKING OF SH OPS. BUT IT COULD NOT SPECIFY AS TO AGAINST WITH SPECIFIC SHOP NUMBER S THE SAID ADVANCE WAS MADE BY THE ABOVE PARTY. BESIDES ABOVE DISCUSSE D AMOUNT THE APPELLANT COMPANY HAD FURTHER SHOWN RS.1 29 500/- R ECEIVED IN THE FORM OF CASH FROM THE SAID PARTY AS PAYMENT OF COMMON FA CILITY SERVICES. BUT THIS AMOUNT WAS NOT FOUND REFLECTED BY THE M/S.BANS I ART & PRINTS (P) LTD. IN ITS BOOKS OF ACCOUNTS. 8. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER:- DURING THE APPELLATE PROCEEDINGS I HAD PUT SPECIF IC QUESTION TO THE ARS TO EXPLAIN THIS DISCREPANCY IN THE ACCOUNTS . IN RESPONSE TO THIS QUERY NO REPLY WAS FILED BEFORE ME. IN VIEW OF THE ABOVE REFERRED FACTS THE ADDITION AS MADE BY THE LEARNED ASSESSING OFFICER OF RS.2 30 000/- IS RESTRICTED TO RS.1 29 5 00/- AND THUS THE APPELLANT COMPANY GET A RELIEF OF RS.1 00 500/-. 4.5.2 REGARDING THE ADDITION IN THE CASE OF SHRI RA MKRISHNA MAHESHWARI AND SHRI ANILKUMAR MAHESHWARI IT IS SEE N THAT THE A.O HAD MADE AN ADDITION OF RS. 2 22 000/- TREATING THE SAME AS NOT REFLECTED IN IT'S SALES INCOME. DURING THE APPE LLATE PROCEEDINGS IT WAS SUBMITTED BY THE A.RS THAT THER E WERE THREE PERSONS IN THIS GROUP NAMELY SHRI RAMKRISHNA MAHESH WARI SHRI ANILKUMAR MAHESHWARI AND SHRI ANIL SHARDA. THE A.RS HAD GIVEN THE BREAKUP OF THE PAYMENTS RECEIPT FROM THESE PART IES AND THESE ARE REPRODUCED BELOW :- SR.NO. NAME DETAILS OF PAYMENT(RS) 1. SHRI R.K. MAHESHWARI 165 000/- FOR 3 SH OPS 2. SHRI ANILKUMAR MAHESHWARI 165 000/- FOR 3 SHOPS 3. SHRI ANIL SHARDA 330 000/- FOR 6 SHOPS TOTAL 660 000/- THE A.RS HAVE ALSO PRODUCED THE COPIES OF ACCOUNTS OF THE ABOVE PARTIES WHEREIN THE ABOVE REFERRED PAYMENTS ARE FOU ND REFLECTED. HOWEVER IN ITS BOOKS OF ACCOUNTS THE APPELLANT COM PANY HAD SHOWN FURTHER RECEIPT OF RS.222 000/- FROM THESE PA RTIES TOWARDS COMMON FACILITY SERVICES IN ADDITION TO ABOVE REFER RED AMOUNTS RECEIVED AGAINST SALE OF SHOPS. THIS AMOUNT OF RS. 222 000/- HAS NOT BEEN FOUND REFLECTED AS PAYMENT TOWARDS COMMON FACILITY - 8 - SERVICES IN THE BOOKS OF ABOVE REFERRED PARTIES. DU RING THE APPELLATE PROCEEDINGS ON BEING ENQUIRED THE A.RS COULD NOT GIVE ANY REPLY IN THIS REGARD IN VIEW OF THE ABOVE THE ADDITION OF RS.222 000/- AS MADE BY THE A.O IS CONFIRMED AS UND ISCLOSED SALES. 4.5.3 IN THE CASE OF SHRI JAYVARDHAN HARILAL IT WA S STATED BY THE A.O THAT THIS PARTY HAD PAID RS. 333 000/- TO THE A PPELLANT COMPANY AND THE SAME WAS SHOWN AS ADVANCE IN ITS BO OKS OF ACCOUNTS. HOWEVER THE A.RS OF THE APPELLANT COMPAN Y SUBMITTED DURING THE APPELLATE PROCEEDINGS THAT IT (APPELLANT COMPANY) HAD SHOWN RS. 370 000/- AS THE TOTAL AMOUNT RECEIVED FR OM THE ABOVE PARTY. ABOUT THE DIFFERENCE OF RS. 37 000/- (RS. 37 0 000 MINUS RS. 333 000) IT WAS EXPLAINED BY THE A.RS THAT THE SAM E WAS RECEIVED AS PAYMENT TOWARDS COMMON FACILITY SERVICE S. AFTER EXAMINING THE COPY OF ACCOUNTS OF THE ABOVE REFER P ARTY IT IS FOUND THAT IT HAS NOT-SHOWN THE SAID AMOUNT OF RS. 37 000 /- AS PAID TO THE APPELLANT COMPANY NEITHER FOR COMMON FACILITY S ERVICES NOR AS ADVANCE FOR PURCHASE OF SHOPS. WHEN THE A.RS WERE A SKED TO EXPLAIN THE DISCREPANCY IN THE ACCOUNTS THEY COULD NOT GIVE ANY SATISFACTORY REPLY. IN VIEW OF THE ABOVE THE ADDIT ION IN THIS CASE IS RESTRICTED TO RS. 37 000/- AS AGAINST RS. 71 000/- MADE BY THE A.O IN THE FORM OF UNDISCLOSED SALES. IN THIS WAY THE APPELLANT COMPANY GETS A RELIEF OF RS. 34 000. 4.5.4 REGARDING THE ADDITION OF RS. 50 000/- MADE B Y THE A.O RELATING TO THE TRANSACTIONS CARRIED OUT IN THE NAM E OF SHRI ZHAVERILAL SURAJMAL IT WAS SUBMITTED BY THE A.RS DURING THE APPELLATE PROCEEDINGS THAT IN ITS BOOKS OF ACCOUNT S THE APPELLANT COMPANY HAD SHOWN AN AMOUNT OF RS. 99 500/- AS RECE IPT FROM THIS PARTY AND OUT OF THIS RS. 81 000/- WAS SHOWN A S SALES CONSIDERATION FOR THE SHOPS ALLOTTED TO THIS PARTY AND RS. 18 500/- WAS SHOWN AS RECEIPT TOWARDS COMMON FACILITY SERVIC ES. THE COPY OF ACCOUNT OF THE ABOVE PARTY WAS ALSO PRODUCED FOR VERIFICATION AND AFTER PERUSING THE SAME IT IS FOUND THAT THIS PARTY HAS NOT SHOWN THE PAYMENT OF RS. 18 500/-TO THE APPELLANT C OMPANY. THE A.RS WERE ASKED TO EXPLAIN THE NATURE OF DISCREPANC Y IN THE ACCOUNTS OF APPELLANT COMPANY IN THIS REGARD BUT NO TING CONVINCING WAS SUBMITTED. IN VIEW OF THE ABOVE / C ONFIRM THE ADDITION AS MADE BY THE A.O TO THE EXTENT OF RS. 18 500/- BEING DIFFERENCE BETWEEN THE ACCOUNTS AS MAINTAINED BY TH E APPELLANT COMPANY AND SHRI ZHAVERILAL SURAJMAL TREATING THE SAME AS UNDISCLOSED SALES INCOME. THUS THE APPELLANT COMPAN Y GET A RELIEF OF RS. 31 500/- (RS. 50 000 - RS. 18 500). - 9 - 4.5.5 IN THE CASE OF M/S. JAYSHREE RIBBONS THE A.O HAD MADE AN ADDITION OF RS. 80 000/- TREATING THE SAME AS UNEXP LAINED INCOME IN THE HANDS OF THE APPELLANT COMPANY. DURING THE A PPELLATE PROCEEDINGS THE A.RS HAD SUBMITTED THAT SMT. JAYSH REEBEN: PROP: M/S. JAYSHREE RIBBONS VIDE HER CONFIRMATION L ETTER DTD. 28.1.03 DIRECTLY SUBMITTED TO THE A.O STATING THA T SHE HAD PAID RS. 131 000/- TO THE APPELLANT COMPANY IN THE FORM OF ADVANCE AGAINST BOOKING OF SHOPS IN ITS BOOKS OF ACCOUNTS. ACCORDING TO A.O HOWEVER THE APPELLANT COMPANY HAD SHOWN ONLY RS. 51 000/- AS AMOUNT RECEIVED FROM THE RELEVANT PARTY AS BOOKING ADVANCE. THE A.RS HAD FURTHER SUBMITTED THAT THE BA LANCE OF RS. 80 000/- WAS SHOWN AS BOOKING ADVANCE IN THE NAME O F M/S. NILESH SILK MILLS A SISTER CONCERN OF M/S. JAYSHRE E RIBBONS AND THEREFORE THE ACCOUNTS DID NOT TALLY. THE A.RS HAD SUBMITTED THE COPIES OF ACCOUNTS OF M/S. JAYSHREE RIBBONS AND M/S . NILESH SILK MILLS SHOWING THE ABOVE REFER ADVANCES. AFTER EXAMI NATION THESE ACCOUNTS WERE FOUND IN ORDER. AS PER THE A.RS THE AMOUNT OF RS. 80 000/- WAS LATER ON SHOWN AGAINST THE NAME OF M/S . NILESH SILK MILLS AFTER SEEKING CLARIFICATION FROM M/S. JAYSHRE E RIBBONS DURING THE ACCOUNTING PERIOD ITSELF AND THEREFORE NO ADVER SE VIEW SHOULD BE TAKEN OUT OF IT. AFTER GOING THROUGH THE ABOVE R EFER FACTS AND ALSO AFTER EXAMINING THE ACCOUNTS OF THE PARTIES T HE CONTENTION OF THE A.RS IS FOUND CORRECT. I THEREFORE IN VIEW OF THE ABOVE DELETE THE ADDITION OF RS.80 000/- AS MADE BY THE A.O. THU S ON THE BASIS OF ABOVE DISCUSSED FACTS OUT OF THE ADDITION MADE BY THE A.O AN AMOUNT OF RS.4 07 000/- ARE CONFIRMED AND F OR REMAINING AMOUNT OF RS.2 46 000/- THE APPELLATE COMPANY GETS RELIEF. 5. THE SECOND GROUND OF APPEAL RELATES TO THE ADDIT ION MADE BY THE A.O OF RS.3 70 629/- BY WORKING OUT THE UNDISCL OSED ESTIMATED SALES FOR OTHER 21 PARTIES TO WHOM SHOPS WERE SOLD BY THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATI ON. AFTER THE PERUSAL OF THE ASSESSMENT ORDER IT IS SEEN THAT TH E A.O HAD WORKED OUT A FIGURE OF RS.6 53 000/- AS UNDISCLOSED SALES IN RELATION TO ABOVE REFERRED 6 PARTIES AFTER VERIFYI NG THE ACCOUNTS OF 37 PARTIES WITH THOSE AS MAINTAINED IN THE BOOKS OF THE APPELLANT COMPANY. IT WAS HELD BY THE A.O THAT IN THE CASE OF 37 PARTIES THE TOTAL UNDISCLOSED SALES WAS RS.6 53 000/- AND THERE FORE ON AN AVERAGE IN THE CASE OF EACH PARTY SUCH UNDISCLOSED SALE AMOUNT WOULD COME TO RS.17 649/- (RS. 6 53 000/37). THE A. O HAD APPLIED SAME RATIO OF RS.17 649/- FOR THE REMAINING 21 PARTIES AND WORKED OUT THE TOTAL UNDISCLOSED SALES AT RS.3 70 6 29/- (RS.17 649 X 21) WHICH WAS NOT SHOWN BY THE APPELL ANT COMPANY IN ITS INCOME. THUS ON THE BASIS ABOVE WORKING THE A.O HAD MADE A FURTHER ADDITION OF RS.3 70 629/-. - 10 - 5.1 DURING THE APPELLATE PROCEEDINGS THE A.RS OF T HE APPELLANT COMPANY HAVE VEHEMENTLY ARGUED AGAINST THIS ADDITIO N AND STATED THAT THE A.O HAD MADE SUCH ADDITION WITHOUT ANY BAS E AND FINDINGS. ACCORDING TO THE A.RS NO CLEAR CUT REASON S WERE ASSIGNED WHILE MAKING SUCH ADDITIONS. THE A.RS HAVE CITED VARIOUS CASE LAWS SUCH AS M/S. DHAKESHWARI COTTON M ILLS VS. CIT 26 ITR 775 (SC) AND VIT VS. R.Y. DURLABHJI 211 ITR 179 (RAJ) IN SUPPORT OF THEIR CONTENTION WHEREIN IT WAS HELD BY THE HON'BLE COURTS THAT WHILE MAKING ASSESSMENT U/S. 143(3) TH E A.O IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMEN T WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL AN D THERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT THE A SSESSMENT. THE A.RS HAVE ALSO RELIED ON THE FINDINGS OF THE HO N'BLE SUPREME COURT IN THE CASE OF DHIRAJLAL GIRDHARILAL VS. CIT 26 ITR 736 (SC) IN SUPPORT OF THEIR CONTENTION. 5.2 AFTER THE PERUSAL OF THE FINDINGS OF THE A.O IN THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE A.RS AND THE C ASE LAWS CITED BY THEM I AM OF THE VIEW THAT THE A.O WAS NO T JUSTIFIED IN MAKING FURTHER ADDITION OF RS.3 70 629/- IN CONNECT ION WITH OTHER 21 PARTIES. ACCORDING TO ME THIS ADDITION WAS MADE WITHOUT VERIFYING THE DETAILS OF ACCOUNTS OF THESE 21 PARTI ES AND IT WAS MADE PURELY ON THE BASIS OF CONJECTURES AND SURMISE S. I THEREFORE IN VIEW OF THE ABOVE FACTS AND ALSO RELY ING UPON THE RATIOS AS LAID DOWN BY THE HON'BLE SUPREME COURT IN ABOVE REFERRED CASES DELETE THE ADDITION OF RS.3 70 629/ - AS MADE BY THE A.O. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PU BLICATION OF NEWSPAPER AND ALSO UNDERTAKING BUSINESS OF CONSTRUC TION AND SALE OF SHOPS. DURING THE YEAR LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED TO HAVE SOLD SHOPS FOR RS.5 49 500/- TO M/S.BANSI ART AND PRINTS PVT. LTD. AND ALSO CLAIMED TO HAVE R ECEIVED RS.2 30 000/- AS ADVANCE FROM THE SAID PARTY. THUS THE ASSESSEE HAS CLAIMED TOTAL RECEIPT OF RS.7 79 500/- FROM THE SAID PARTY. ON VE RIFICATION THE LEARNED ASSESSING OFFICER FOUND THAT THE SAID PARTY HAVE CO NFIRMED PAYMENT OF RS.6 50 000/- ONLY. IN THIS VIEW OF THE MATTER THE LEARNED ASSESSING - 11 - OFFICER CONSIDERED ENTIRE AMOUNT OF RS.7 79 500/- A S SALE PROCEEDS OF SHOPS AND ADDED RS.2 30 000/- TO THE INCOME OF THE ASSESSEE. 10. ON APPEAL THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) FINDING THAT THE ASSESSEE HAS SHOWN EXCESS RECEIPT OF RS.1 29 500/- ONLY CONFIRMED THE ADDITION TO THE EXTENT OF RS.1 29 500/- ONLY AND DELETED THE BALANCE AMOUNT OF ADDITION OF RS.1 00 5 00/-. 11. BEFORE US THE REVENUE CONTENDED THAT THE ENTIR E AMOUNT OF RS.6 50 000/- WAS PAID BY M/S.BANSI ART AND PRINTS PVT. LTD. TO THE ASSESSEE TOWARDS SALE OF SHOPS AND THEREFORE AS TH E ASSESSEE HAS ONLY SHOWN RS.5 49 500/- AS INCOME THE LEARNED ASS ESSING OFFICER WAS JUSTIFIED IN ADDING RS.1 00 500/- AS SUPPRESSED SALE PROCEEDS AND RS.1 29 500/- AS UNEXPLAINED CASH CREDIT. THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFIED IN DELETIN G RS.1 00500/- OUT OF TOTAL ADDITION OF RS.2 30 000/-. 12. ON THE OTHER HAND THE ASSESSEE CONTENDED BEFOR E US THAT THE ENTIRE AMOUNT OF RS.7 79 500/- WAS SHOWN BY THE ASS ESSEE AS ITS INCOME THEREFORE THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) WAS NOT JUSTIFIED IN RETAINING ADDITION TO THE EXTE NT OF RS.1 29 500/- WHICH TANTAMOUNT TO DOUBLE ADDITION. 13. BEFORE US BOTH THE PARTIES COULD NOT PRODUCE AN Y EVIDENCE AS TO THE NATURE OF RS.6 50 000/- AS CLAIMED BY THE SAID M/S.BANSI ART AND PRINTS PVT. LTD.. IN OUR CONSIDERED OPINION IF THE PAYMENT OF RS.1 00 500/- OUT OF TOTAL PAYMENT OF RS.6 50 000 AS CLAIMED BY M/S.BANSI ART AND PRINTS PVT. LTD. IS NOT TOWARDS S ALE OF SHOP WHICH WERE SOLD TO IT BY THE ASSESSEE DURING THE YEAR UNDER CO NSIDERATION THEN NO ADDITION IN RESPECT OF ADVANCE OF RS.1 00500/- WAS WARRANTED. - 12 - 14. FURTHER IN RESPECT OF BALANCE AMOUNT OF RS.1 29 500/- WHICH THE ASSESSEE HAS CLAIMED AS RECEIPT BUT NOT CONFIRMED B Y M/S.BANSI ART AND PRINTS PVT. LTD. IF ALREADY SHOWN BY THE ASSESSEE A S ITS INCOME IN THE PROFIT & LOSS ACCOUNT THEN LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE AD DITION OF THIS AMOUNT. HOWEVER IF THE ASSESSEE HAS SHOWN THIS AMOUNT AS L IABILITY IN THE BALANCE SHEET THEN THE LOWER AUTHORITIES WERE JUST IFIED IN MAKING THE ADDITION OF THE SAID AMOUNT. AS THE FULL FACTS ARE NOT PLACED BEFORE US BY BOTH THE PARTIES WE ARE NOT IN A POSITION TO ADJUD ICATE THE ISSUE COMPLETELY. WE THEREFORE SET ASIDE THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFICATION AND THEN ADJUDICATING THE ISSUE AFRESH IN LIGHT OF THE DISCUSSION MADE HEREIN ABOVE AFTER ALLOWING REASONABLE OPPORTUNITY TO THE ASSESSEE. 15. THE LEARNED ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED RS.8 82 000/- FROM MAH ESHWARI GROUP WHEREAS MAHESHWARI GROUP HAS CONFIRMED ONLY PAYMENT OF RS.6 60 000/-. ACCORDING TO THE LEARNED ASSESSING O FFICER THE ASSESSEE HAS NOT SHOWN RS.2 22 000/- AS ITS INCOME AND THEREFORE ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 16. ON APPEAL THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) CONFIRMED THE ABOVE ADDITION. 17. BEFORE US THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE SUBMITTED THAT AMOUNT OF RS.8 82 000/- INC LUDING RS.2 22 000/- IN QUESTION WAS SHOWN BY THE ASSESSEE IN ITS INCOME AND THEREFORE THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.2 22 000 /- WHICH TANTAMOUNT TO DOUBLE ADDITION. - 13 - 18. WE AGREE WITH THE CONTENTION OF THE ASSESSEE TH AT WHEN ENTIRE AMOUNT OF RS.8 82 000/- WAS DISCLOSED BY THE ASSESS EE AS ITS INCOME IN THE PROFIT & LOSS ACCOUNT THEN SEPARATE ADDITION OF RS.2 22 000/- WAS NOT WARRANTED ONLY ON THE GROUND THAT THE PAYER HAS CONFIRMED PAYMENT OF LESSER AMOUNT. HOWEVER WE FIND THAT NO MATERIAL WAS PLACED BY THE ASSESSEE TO SHOW THAT THE ENTIRE AMOUNT OF RS.8 82 000/- WAS SHOWN BY IT AS INCOME IN THE PROFIT & LOSS ACCOUNT. IN THE CIRCUMSTANCES IN OUR CONSIDERED OPINION IT SHALL BE IN THE INTEREST OF JUSTICE TO SET ASIDE THE ISSUE BACK TO THE FILE OF LEARNED ASSESSING OFFICER FOR PROPER VERIFICATION AND THEREAFTER ADJUDICATION OF THE ISSUE AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE AFTER ALLOWING REASONABLE O PPORTUNITY OF HEARING TO THE ASSESSEE. WE ORDER ACCORDINGLY. 19. ACCORDING TO THE LEARNED ASSESSING OFFICER THE ASSESSEE HAS SHOWN TOTAL RECEIPT OF RS.3 70 000/- FROM JAYVADAN HARILAL WHICH COMPRISED OF RS.2 99 000/- IN RESPECT OF SALES OF S HOP AND RS.71 000/- AS ADVANCE. ON VERIFICATION FROM THE SAID SHRI JAYV ADAN HARILAL THE LEARNED ASSESSING OFFICER OBSERVED THAT THE SAID PA RTY HAS CONFIRMED PAYMENT OF RS.3 33 000/-ONLY. ON FINDING THIS DISCR EPANCY THE LEARNED ASSESSING OFFICER TREATED RS.71 000/- AS INCOME OF THE ASSESSEE. WE FIND THAT THE FACTS ARE SIMILAR TO THE FACTS INVOLV ED IN THE CASE OF M/S.BANSI ART AND PRINTS (P) LTD. DISCUSSED ABOVE. FOR THE SIMILAR REASON AS QUOTED ABOVE IN THE CASE OF M/S.BANSI ART & PRINTS (P) LTD. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DEL ETED ADDITION OF RS.34 000/- AND CONFIRMED ADDITION OF RS.37 000/-. WE FOR THE SAME REASON AS MENTIONED IN RELATION TO THE ADDITION REL ATING TO M/S.BANSI ART & PRINTS (P) LTD. SET ASIDE THE ISSUE OF ADDITION O F ENTIRE AMOUNT OF RS.71 000/- BACK TO THE FILE OF THE LEARNED ASSESSI NG OFFICER WITH THE SAME DIRECTION AS GIVEN IN THE CASE OF M/S. BANSI A RT & PRINTS (P) LTD. - 14 - 20. SIMILAR IS THE FACTS INVOLVED IN RESPECT OF ADD ITION OF RS.50 000/- MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF TRANSACTIONS WITH SHRI ZAVERILAL SURAJMAL AND RS.80 000/- IN RESPECT OF THE TRANSACTIONS MADE WITH M/S.JAYSHREE RIBBONS. 21. ON APPEAL LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) HAD DELETED RS.18 500/- AND CONFIRMED THE ADDITION OF R S.50 000/- AND DELETED THE ADDITION OF RS.80 000/- IN RESPECT OF T RANSACTION WITH M/S.JAYSHREE RIBBONS. 22. IN OUR CONSIDERED OPINION THE ISSUE REQUIRES P ROPER VERIFICATION BY THE REVENUE FOR PROPER ADJUDICATION OF THE ISSUE. W E THEREFORE SET ASIDE THE ISSUES BACK TO THE FILE OF THE LEARNED ASSESSIN G OFFICER FOR ADJUDICATION AFRESH AFTER PROPER VERIFICATION AS PE R LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE GROUND OF APPEAL OF THE ASSESSEE AND THE GROUND OF APPEAL OF THE REVENUE BOTH ARE ALLOWED IN RESPECT OF ADDITION OF RS.50 000/- A ND RS.80 000/- RESPECTIVELY FOR STATISTICAL PURPOSES. 23. IN RESPECT OF REVENUES GROUND RELATING TO RS.3 70 629/- WHICH WAS DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) WE FIND THAT NO MATERIAL COULD BE BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE ACTUALLY RECEIVED SALE CONSIDERATION O F AN AMOUNT MORE THAN THE SALE CONSIDERATION DISCLOSED BY IT IN RESP ECT OF 21 PARTIES. THE LEARNED ASSESSING OFFICER HAD MADE THE ADDITION ONL Y ON THE BASIS OF ASSUMPTION AND PRESUMPTION THAT AS THE ASSESSEE HAD SUPPRESSED SALE IN RESPECT OF SOME PARTIES IT MUST HAVE SUPPRESSED SALE PROCEEDS IN RESPECT OF REMAINING PARTIES ALSO. THE LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION AFTER FINDING THA T THE ADDITIONS WAS MADE ON CONJECTURES ONLY. - 15 - 24. WE FIND THAT NO ERROR IN THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) COULD BE POINTED OUT BY THE LEA RNED DEPARTMENTAL REPRESENTATIVE. IN OUR CONSIDERED OPINION TO MAKE ASSESSMENT IS A QUASI JUDICIAL FUNCTION AND NO ADDITION IN RESPECT OF SUPPRESSED INCOME CAN BE MADE WITHOUT BRINING ON RECORD COGENT MATERI AL TO ESTABLISH THE SAME. THE ADDITION OF RS.3 70 629/- WAS MADE WITHOU T BRINING ANY COGENT MATERIAL ON RECORD AFTER VERIFICATION FROM T HE CONCERNED PARTIES. WE THEREFORE DO NOT FIND ANY MERIT IN THIS GROUND O F APPEAL OF THE REVENUE AND ACCORDINGLY THE SAME IS DISMISSED. 25. GROUND NO.5 OF THE ASSESSEES APPEAL IS DIRECTE D AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) OF CONFIRMING ADDITION OF RS.2 12 001/- MADE UNDER SECTION 43B DI SALLOWING THE PAYMENTS PERTAINING TO PF AND ESI BEYOND THE DUE DA TE PRESCRIBED UNDER RESPECTIVE ACT BUT DULY PAID DURING THE SAME FY OR IN THE MONTH OF APRIL IN THE CASE OF AMOUNT PAYABLE IN THE MARCH. 26. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS DECIDED AS UNDER:- 6. THE THIRD GROUND OF APPEAL RELATES TO MAKING TH E ADDITION OF RS. 2 12 001/- U/S. 43B OF THE ACT BY THE A.O HOLDI NG THAT THESE PAYMENTS WERE MADE ON ACCOUNT OF EMPLOYER'S CONTRIB UTION AS WELL AS EMPLOYEE'S CONTRIBUTION PERTAINING TO PROVI DENT FUND (PF) AND ESI WERE PAID BEYOND THE DUE DATES AS PRESCRIBE D UNDER THE RESPECTIVE PF ACT AND ESI ACT THOUGH PAID IN THE S AME FINANCIAL YEAR OR IN THE MONTH OF APRIL IN THE CASE OF AMOUNT S PAYABLE IN THE MONTH OF MARCH 2001. 6.1 THE A.O HAD PREPARED A TABLE ON PAGE NO. 13 OF THE ASSESSMENT ORDER SHOWING THE AMOUNT AND VARIOUS DAT ES OF PAYMENTS. THE A.O HAD GIVEN A SHOWN CAUSE NOTICE TO THE APPELLANT COMPANY REQUIRING IT TO EXPLAIN AS TO WHY THE CLAIM OF ABOVE AMOUNTS BE NOT DENIED DEDUCTION U/S. 43B OF T HE ACT AS THESE PAYMENTS WERE MADE BEYOND DUE DATES. IN RESPO NSE TO THE QUERY OF THE A.O IT WAS SUBMITTED BY THE APPELLANT COMPANY THAT THOUGH PAYMENTS WERE MADE ON ACCOUNT OF PF AND ESI BEYOND DUE DATES PRESCRIBED UNDER RESPECTIVE ACT BUT THES E WERE DULY - 16 - PAID DURING THE SAME FINANCIAL YEAR OR IN THE MONTH OF APRIL IN CASE OF AMOUNTS PAYABLE FOR MARCH BEFORE THE DUE DATE OF FILING THE RETURN. IN THIS WAY THE APPELLANT COMPANY HAD REQUE STED THE A.O TO ALLOW ITS CLAIM. THE A.O HAD REJECTED THIS REPLY OF THE APPELLANT COMPANY AND DISALLOWED THE CLAIM AS MADE BY IT AND ADDED THE AMOUNT OF RS. 212 001/- TO THE TOTAL INCOME FOR BEI NG TAXED. IN SUPPORT OF HIS FINDINGS THE A.O RELIED ON VARIOUS COURT DECISION AND THE PROMINENT AMONGST THESE ARE HI-TECH (INDIA) PVT. LTD. VS. UNION OF INDIA AND OTHERS 227 ITR 446 (AP) AND CIT VS. SOUTH INDIA CORP. LTD. 242 ITR114. 6.2 BEFORE ME DURING THE APPELLATE PROCEEDINGS TH E A.RS OF THE APPELLANT COMPANY HAVE ARGUED THIS GROUND VE HEMENTLY AND SUBMITTED THAT THE RELEVANT SECOND PROVISO TO S ECTION 43B HAS BEEN DELETED BY THE FINANCE ACT 2003 AND ACCORDING LY THE PROVISIONS OF SECTION 43B ALONGWITH THE RELEVANT PR OVISO IS TO BE READ AS AMENDED AT THE TIME OF PENDING ASSESSMENT P ROCEEDINGS AS EXPRESSED IN THE JUDICIAL PRONOUNCEMENT OF JT. C IT VS. DEVI DAYAL (SALES) PVT. LTD - ITA NO. 778/MUMBAI/1999 I N WHICH THE VIEW EXPRESSED BY THE APEX COURT IN THE CASE OF ALL IED MOTORS PVT. LTD. VS. CIT 224 ITR 677 (SC) WAS FOLLOWED AN D THEREFORE ITS CLAIM SHOULD BE ALLOWED IN THE LIGHT OF ABOVE JUDIC IAL PRONOUNCEMENTS. 6.3 AFTER THE PERUSAL OF THE FINDINGS OF THE A.O IN THE ASSESSMENT ORDER AND ALSO AFTER GOING THROUGH THE S UBMISSION AS MADE BY THE ARS I AM OF THE VIEW THAT THE VIEW TAK EN BY IT (APPELLANT COMPANY) IS NOT ACCEPTABLE AT ALL. THE F INDINGS OF THE HON'BLE SUPREME COURT IN THE CASE OF ALLIED MOTORS (SUPRA) WAS RELATING TO FIRST PROVISO TO SECTION 43B AND IT WAS HELD THAT 'FIRST PROVISO TO SECTION 43B AND EXPLANATION 2 HAVE TO BE READ TOGETHER AS GIVING EFFECT TO THE TRUE INTENTION OF SECTION 4 3B. EXPLANATION 2 BEING RETROSPECTIVE THE FIRST PROVISO HAS ALSO TO BE SO CONSTRUED. WITHOUT THE FIRST PROVISO EXPLANATION 2 WOULD NOT OBVIATE THE HARDSHIP OR THE UNINTENDED CONSEQUENCES OF SECTION 43B THE PROVISO SUPPLIES AN OBVIOUS OMISSION. BUT FOR THIS PROVISO THE AMBIT OF SECTION 43B BECOMES UNDULY WIDE BRINGING W ITHIN ITS SCOPE THOSE PAYMENTS WHICH WERE NOT INTENDED TO BE PROHIBITED FROM THE CATEGORY OF PERMISSIBLE DEDUCTIONS. THE FI RST PROVISO OF SECTION 43B THEREFORE HAS TO BE TREATED AS RETROSPE CTIVE'. FROM THE ABOVE IT IS CLEAR THAT THE FINDING OF THE APEX COURT RELATES TO PAYMENTS MADE IN CLAUSE (A) AND NOT FOR CLAUSE (B) OF SECTION 43B OF THE ACT WHICH DEALS WITH THE PAYMENT OF CONTRIBUTION TO ANY PF OR SUPERANNUATION FUND AND G RATUITY FUND ETC. IT WILL BE USEFUL TO REFER TO THE RELEVANT PRO VISIONS OF THE EPF ACT AND THE ESI ACT HERE. SECTION 6 OF THE E.P.F. A CT DIRECTS THAT - 17 - THE EMPLOYER'S CONTRIBUTION (EIGHT AND ONE THIRD PE RCENT OF THE BASIC WAGES DEARNESS ALLOWANCE AND RETAINING ALLOW ANCE IF ANY PAYABLE TO EACH OF THE EMPLOYEES' WHETHER EMPLOYED BY HIM DIRECTLY OR BY OR THROUGH A CONTRACTOR) AND AN EQUA L SUM AS EMPLOYEES' CONTRIBUTION SHALL BE PAID BY THE EMPLO YER. AN OPTION IS GIVEN TO THE EMPLOYEE TO PAY A HIGHER SUM WITHOU T OBLIGING THE EMPLOYER TO PAY THE CONTRIBUTION EQUAL TO THE EXCES S AMOUNT PAID BY HIM. U/S. 5 OF THE SAID ACT THE CENTRAL GOVERNMENT PREPA RED A SCHEME CALLED 'THE EMPLOYEES' PROVIDENT FUNDS SCHE ME'. PARAGRAPH 38 OF THE SAID SCHEME DIRECTS THAT BEFORE PAYING AN EMPLOYEE HIS WAGES IN RESPECT OF ANY PERIOD OR PART OF THE PERIOD FOR WHICH CONTRIBUTION IS PAYABLE THE EMPLOYER SHA LL DEDUCT THE EMPLOYEE'S CONTRIBUTION FROM HIS WAGES AND THAT AMO UNT TOGETHER WITH THE EMPLOYER'S CONTRIBUTION AS WELL AS A ADMIN ISTRATIVE CHARGES OF SUCH PERCENTAGE SHALL BE PAID WITHIN 15 DAYS OF THE CLOSE OF EVERY MONTH. HE IS ALSO UNDER AN OBLIGATIO N TO FORWARD THE MONTHLY STATEMENT WITHIN 25 DAYS OF THE END OF THE MONTH SHOWING RECOVERIES MADE FROM THE WAGES OF EACH EMPLOYEE AND THE AMOUNT CONTRIBUTED BY THE EMPLOYER IN RESPECT OF EA CH SUCH EMPLOYEE. IN THE EXPLANATION GIVEN BELOW - CLAUSE (VA) OF SUB SECTION (1) OF SECTION 36 THE DUE DATE HAS BEEN DEFINED AS UNDER: - EXPLANATION - FOR THE PURPOSES OF THIS CLAUSE 'DUE DATE' MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EM PLOYER TO CREDIT AN EMPLOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT IN THE RELEVANT FUND UNDER ANY ACT RULE ORDER OF NOTIFIC ATION ISSUED THERE-UNDER OR UNDER ANY STANDING ORDER AWARD CON TRACT OF SERVICE OR OTHERWISE'. SUB-CLAUSE (X) OF CLAUSE (24) OF SECTION 2 INCLUDES WITHIN THE MEANING OF 'INCOME' ANY SUM RECEIVED BY THE ASSESSE E FROM HIS EMPLOYEES AS CONTRIBUTION TO ANY PROVIDENT FUND OR SUPER ANNUATION FUND OR ANY FUND SET UP UNDER THE PROVISI ON OF THE EMPLOYEES' STATE INSURANCE ACT 1948 OR ANY OTHER FUND FOR THE WELFARE OF THE SUCH EMPLOYEES. THUS IT IS CLEAR TH AT THE EMPLOYEES' CONTRIBUTION RECEIVED BY THE EMPLOYERS W OULD BE 'INCOME' IN HIS HAND AND THAT WOULD BE ALLOWED AS P ERMISSIBLE DEDUCTION UNDER THE CLAUSE (VA) OF SUB SECTION (1) OF THE SECTION 36 IN COMPUTING THE BUSINESS INCOME U/S. 28 PROVIDE D THE ASSESSEE CREDITS THE SAME TO THE RELEVANT FUND. U/S . 43B THE SUM REFERRED TO IN CLAUSE (B) OF SECTION 43B IS TREATED DIFFERENTLY AS IT RELATES TO THE SUM PAYABLE BY THE ASSESSEE AS AN EM PLOYER WHICH INCLUDES THE EMPLOYER'S CONTRIBUTION AS WELL AS EMP LOYEES' CONTRIBUTION. SUCH CONTRIBUTION WHICH ARE PAYABLE T O ANY PROVIDENT FUND OR SUPER ANNUATION FUND OR ANY FUND IF PAID W ITHIN THE DUE - 18 - DATE THE EMPLOYER WILL BE ABLE TO AVAIL OF BENEFIT OF DEDUCTION U/S. 43B. THOUGH THE GENERAL RULE EMBODIED IN SECTION 43 B IS ONE OF ALLOWABILITY OF DEDUCTION BASED ON ACTUAL PAYMENT THE RULE CONTAINED IN THE SECOND PROVISO IS AN EXCEPTION TO THE RULE. THERE ACTUAL PAYMENT IS NOT ENOUGH THE PAYMENT SHOULD AL SO BE MADE WITHIN THE DUE DATE AS DEFINED THEREIN. THIS IS TO ENSURE THAT BENEFICIAL LEGISLATIONS FOR THE WELFARE OF THE EMPL OYEES SHOULD BE COMPLIED WITH STRICTLY. IF THE PAYMENT IS NOT MADE WITHIN THE DUE D ATE THERE IS CONTRAVENTION OF PROVISION OF THE EPF ACT AND ESI A CT FOR WHICH PROVISION IS MADE BY WAY OF PAYMENT OF INTEREST DA MAGES AND PROSECUTION. BUT UNDER THE INCOME-TAX ACT THE DEFA ULTER LOSES THE BENEFIT OF DEDUCTION WHICH IS OTHERWISE ALLOWABLE T O HIM UNDER THE SCHEME OF THE PROVISIONS OF AT HE ACT'. ON SIMILAR SET OF ISSUES THE HON. HIGH COURT OF A. P IN THE CASE OF HITECH (I) PVT. LTD. VS. UNION OF INDIA - 227 ITR 446 (AP) HAS HELD THAT ACTUAL PAYMENT IS NOT ENOUGH. THE PAYMENT SHOU LD BE MADE WITHIN THE DUE DATE AS DEFINED THEREIN AND ONLY THE N THE EMPLOYER IS ELIGIBLE TO CLAIM DEDUCTION OF SUCH AMOUNT SIMILARLY THE HON. HIGH COURT OF KERALA ON THE SIM ILAR SET OF ISSUES IN THE CASE OF CIT VS. SOUTH INDIA CORP. LT D. - 242 ITR 115 (KER) HAS ALSO LAID DOWN THE RATIO THAT THO UGH SECTION 43B OF THE I.T. ACT 1961 IS RELATABLE TO PAYMENTS ACTU ALLY MADE THE MODALITY TO BE ADOPTED IN RESPECT OF PAYMENTS OF CO NTRIBUTION TO ANY PF OR WHERE SUPER ANNUATION FUND OR GRATUITY FU ND OR ANY OTHER FUND FOR THE WELFARE OF THE EMPLOYEES FOR GET TING DEDUCTION HAS BEEN PRESCRIBED. THE TIME LIMIT HAS BEEN FIXED AND ONLY IF PAYMENT W AS MADE DURING THE PERIOD DEDUCTION CAN BE CLAIMED. THE HO N'BLE COURT HAS FURTHER OBSERVED THAT THE EXPRESSION 'DUE DATES ' MEANS THE TIME AS STIPULATED FOR PAYMENT. AS PER THE EXPLANATION TO CLAUSE (VA) OF SUB SECTIO N (1) OF SECTION 36 FOR THE PURPOSE OF THE CLAUSE 'DUE DATES' MEAN S THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CR EDIT AN EMPLOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT I N THE RELEVANT FUND. THE AMOUNT IS DEDUCTIBLE ONLY IF THE ASSESSEE CREDITS THE AMOUNT TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUN D ON OR BEFORE THE DATE BY WHICH HE IS LEGALLY OR CONTRACTU ALLY REQUIRED TO DO SO. IT CANNOT BE AN INDEFINITE DATE LEFT TO THE CHOICE OF THE ASSESSEE. IT IS TO BE NOTED THAT UNDER THE MAIN PRO VISO OF SECTION 43B OF THE ACT THE PAYMENTS MADE DURING THE CURREN CY OF THE F.Y - 19 - RELEVANT TO THE A.Y QUALIFIED FOR DEDUCTION IN CERT AIN CASE. BUT IN THE CASE OF PAYMENT RELATING TO PF ETC. STRESS HAS BEEN LAID ON PAYMENT WITHIN THE DUE DATES. THEREFORE IT CANNOT BE SAID THAT PAYMENT MADE BEYOND THE DUE DATE ALSO QUALIFIES FOR DEDUCTION IN VIEW OF THE PRESCRIPTION IN THE MAIN PROVISION ITSE LF. HAD THAT BEEN THE LEGISLATIVE INTENT THERE WAS NO NECESSITY TO E NACT THE PROVISO. THE LEGISLATURE IN ITS WISDOM HAS INCORPORATED THE PROVISO AND IT CANNOT BE SAID TO BE WITHOUT A PURPOSE. ON THE BASIS OF THE CHART AS SHOWN BY THE A.O ON PA GE NO. 13 OF THE ASSESSMENT ORDER IT IS SEEN THAT NONE OF THE P AYMENTS HAVE BEEN MADE WITHIN THE NEXT 15 DAYS OF THE CLOSING MO NTH'. IN VIEW OF THE ABOVE I DO NOT AGREE WITH THE SUBMI SSIONS OF THE ARS AND CONFIRM THE ADDITION MADE BY THE A.O. IN TH E RESULT THIS GROUND OF APPEAL IS DISMISSED. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE ASSESSEE HAS DEPOSITED CONTRIBUTION TO PF AND ESI B EYOND THE DUE DATE PRESCRIBED IN THE RESPECTIVE ACT BUT WITHIN THE FIN ANCIAL YEAR ITSELF AND BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME O F THE ASSESSEE UNDER SECTION 139(1) OF THE ACT. THE LEARNED ASSESSING O FFICER DISALLOWED DEDUCTION OF RS.2 12 001/- TO THE ASSESSEE ON ACCOU NT OF PF AND ESI CONTRIBUTION AS THE SAME WAS NOT DEPOSITED WITHIN T HE PRESCRIBED DUE DATE UNDER THE RESPECTIVE ACT. THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER. 28. WE FIND THAT THE ISSUE NOW STANDS COVERED BY TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VINAY CEMENT LTD. (2007) 213 CTR (SC) 268 WHEREIN IT WAS HELD THAT CONTRIBU TION MADE TO PROVIDENT FUND BEFORE FILING OF THE RETURN COULD NO T BE DISALLOWED UNDER S. 43B AS IT STOOD PRIOR TO THE AMENDMENT W.E.F. 1ST A PRIL 2004. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPR EME COURT WE SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) - 20 - AND DELETE THE DISALLOWANCE OF RS.2 12 001/- ON ACC OUNT OF PF AND ESI CONTRIBUTION. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 29. GROUND NO.3 TO 6 OF THE APPEAL OF THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) DELETING ADDITION OF RS.46 00 000/- MADE UNDER SECT ION 41(1) OF THE ACT. 30. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS DECIDED AS UNDER:- 7. THE FOURTH GROUND OF APPEAL RELATES TO THE ADDI TION MADE OF RS. 46 00 000/- U/S. 41(1) OF THE I.T. ACT 1961. AFTER GOING THROUGH THE ASSESSMENT ORDER IT IS SEEN THAT THE A.O HAD DISCU SSED ON PAGE NO. 5 OF THE SAID ORDER ABOUT THE 3 PARTIES WHICH W ERE ADVANCED SOME MONEY BY THE APPELLANT COMPANY IN THE PAST BU T INTEREST WAS NOT CHARGED FROM THEM. THESE THREE PARTIES ARE MENTIONED BELOW IN TABLE A. SR.NO. NAME OF THE PARTY AMT. OF LOAN GIVEN (RS.) 1. M/S. ASHA TRADING 25 29 964/- 2. M/S. SHAH & TAMBAKUWALA ASSOCIATES 4 97 398/- 3. M/S. SAINATH TRADERS 3 99 096/- SIMILARLY THE A.O HAD FURTHER DISCUSSED OTHER THRE E PARTIES ON PAGE NO.6 OF THE ASSESSMENT ORDER FROM WHICH LOANS WERE RECEIVED BY THE APPELLANT COMPANY BUT NO INTEREST W AS PAID ON IT. THESE PARTIES ARE MENTIONED BELOW IN TABLE-B TABLE - B SR.NO. NAME OF THE PARTY AMT. OF LOAN GIVEN (RS.) 1. SHRI ANVAR ALI LAKHANI 15 00 000 2. SHRI N.R. IHANI 31 00 000 3. SHRI CHANDRAKANT R. PATIL 2 35 11 120 ON THE BASIS OF ABOVE FACTS IT WAS OBSERVED BY THE A.O THAT THE APPELLANT COMPANY HAD MADE HUGE ADVANCES TO THE ABO VE PARTIES AS SHOWN IN TABLE-A BUT DID NOT CHARGE INTEREST FRO M THEM AND AT THE SAME TIME IT ALSO DID NOT PAY ANY INTEREST ON T HE ADVANCES RECEIVED BY IT FROM PARTIES AS SHOWN IN TABLE-B ABO VE. ACCORDING - 21 - TO A.O. THE APPELLANT COMPANY COULD NOT FURNISH PR OPER EXPLANATION AS TO WHY LOANS WERE TAKEN FROM THE PAR TIES MENTIONED IN TABLE-B ABOVE WHEN A HUGE CASH BALANCE OF RS. 54 08 310/-WAS AVAILABLE WITH IT. ON THE BASIS OF A BOVE REFERRED FACTS THE A.O ISSUED A SHOW CAUSE NOTICE TO THE AP PELLANT COMPANY STATING AS TO WHY THE AMOUNT OF ADVANCE SHO WN AGAINST PARTIES MENTIONED AT SR. 1 AND 2 OF TABLE-B I.E. M R. ANVAR AM LAKHANI AND SHRI N.R. IHANI TOTALING AT RS. 46 LAK HS BE NOT TREATED S ACCOMMODATION ENTRIES AS THESE WERE RECEIVED BY I T ON ACCOUNT OF CESSATION OF LIABILITIES AND BE NOT ADDED U/S. 4 1(1) OF THE ACT 1961. 7.1 IN RESPONSE TO THIS SHOW CAUSE NOTICE THE APPE LLANT COMPANY MADE SUBMISSIONS BEFORE THE A.O AND THE RELEVANT PO RTION OF THE SAME IS CAPTIONED BELOW : - 'WITH REGARDS TO ADVANCE RECEIVED FROM SHRI N.R. IH ANI BY C.R. PATIL AND NOT THE COMPANY WE WOULD MOST HUMBLY LIKE TO SUBMIT THAT SHRI N.R. IHANI HAD EXPIRED IN THE YEAR 2003 CONTRA CONFIRMATION HAD ALREADY BEEN SUBMITTED VIDE PARA N O. 4 OF OUR LETTER DTD.10.07.03. FURTHER WERE ALSO ENCLOSING H EREWITH THE PHOTOSTAT COPY OF BANK STATEMENT OF LATE SHRI N.R. IHANI HAVING CA-5727 WITH DIAMOND JUBLIEE CO-OP. BANK LTD. ZAMP A BAZAR BRANCH SURT FROM WHERE SAID AMOUNT WAS RECEIVED BY CHEQUE NO. 26072 DTD. 2441.99. IN ADDITION KINDLY ALSO NOTE T HAT SAID AMOUNT WAS DEPOSITED IN COMPANY'S BANK ACCOUNT ON BEHALF O F SHRI C.R. PATIL FROM THE FUND RECEIVED BY LT. N.R. IHANI VID E PAY ORDER NO. 149749 DTD. 24.11.99 ISSUED FROM THE BANK ACCOUNT N O. 186 OF LT. N.R. IHANI WITH DIAMOND JUBLIEE CO-OP. BANK LTD. Z AMPA BAZAR BRANCH SURAT. THUS WE HAVE TRIED TO EXPLAIN ALL T HE DETAILS OF AMOUNT TREATED AS ADVANCE WHICH IS NOT SO IN FACT AND FOR WHICH NECESSARY RECTIFICATION ENTRY HAS ALSO BEEN PASSED ON VERY FIRST DAY OF THE RELEVANT ACCOUNTING YEAR. KINDLY ALSO NO TE THAT COMPLETE ADDRESS OF SHRI N.R. IHANI HAS ALREADY BEE N MENTIONED IN PHOTOSTAT COPY OF BANK STATEMENT SUBMITTED WITH THIS LETTER AS MENTIONED HEREIN ABOVE. THUS THERE IS NO QUESTION OF PROVING THE WHEREABOUTS OF THE SAID PARTY ESPECIALLY WHEN AS P ER OUR KNOWLEDGE THE SUMMONS ISSUED U/S. 131 OF THE I.T. ACT 1961 HAS ALSO BEEN ACCEPTED ON HIS BEHALF. WITH REGARDS TO PARA NO. 6 (E) OF YOUR GOOD SELF'S ABOVE REFERRED SHOW CAUSE NOTICE WE WOULD LIKE TO STATE THAT IN VI EW OF THE ABOVE STATED FACTS AND MERITS OF THE CASE THERE IS NO QUE STION OF TREATING VARIOUS ACCOUNTING ENTRIES AS 'ACCOMMODATION ENTRIE S'. THE ABOVE TRANSACTION ARE GENUINE AND BONAFIDE. AND ADD ITION OF THE AMOUNT PERTAINING TO FIRST TWO PARTIES AS MENTIONED BY YOUR GOOD SELF IN PARA NO. 6(B) OF THE ABOVE REFERRED SHOW CA USE NOTICE U/S. - 22 - 41(1) OF THE I.T. ACT 1961 AS PROPOSED BY YOUR GOO DSELF ESPECIALLY WHEN ALL THE PARTIES HAVE CONFIRMED THE BALANCE TO BE RECEIVABLE FROM SHREE C.R. PATIL PROP: SHREE SAI C ORP. AND NOT THE COMPANY AND WE HAVE NOT SHOWN IT AS AMOUNT PAYA BLE AS ON LAST DAY OF THE RELEVANT FINANCIAL YEAR AND HAS ALS O PASSED NECESSARY RECTIFICATION ENTRY ON VERY FIST DAY OF T HE RELEVANT ACCOUNTING YEAR AS THE SAID AMOUNT WAS NOT A LIABIL ITY OF THE COMPANY FROM THE BEGINNING'. 7.2 AFTER CONSIDERING THE ABOVE SUBMISSION THE A.O DID NOT AGREE TO IT BY SAYING THAT IT WAS DIFFICULT TO BELIEVE TH AT SUCH A HUGE AMOUNT KEPT LYING IN THE BOOKS OF ACCOUNTS OF THE A PPELLANT COMPANY FROM 24.11.99 IN THE CASE OF SHRI N.R. IHAN I AND FROM 01.12.99 IN THE CASE OF SHRI A.M. LAKHANI WITHOUT A NY CAUSE OF CONCERN BY MR. C.R. PATIL IN WHOSE FAVOR THESE PAYM ENTS WERE MADE AND FINALLY ON 01.04.00 THE RECTIFICATION ENT RIES WERE PASSED IN THE BOOKS OF APPELLANT AND THAT OF MR. C.R. PATI L. ACCORDINGLY THE A.O REJECTED THE ABOVE SUBMISSION OF THE APPELL ANT COMPANY AND ADDED THE AMOUNT OF RS. 46 LAKHS U/S. 41(1) OF THE ACT TO THE TOTAL INCOME OF THE APPELLANT COMPANY TREATING IT AS A COLOURABLE DEVICE TO EVADE TAX BY RELYING UPON THE FINDINGS OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF ME. DOWELL & CO. VS. COMMERCIAL TAX OFFICER 154 ITR 148 (SC). 7.3 DURING THE APPELLATE PROCEEDINGS THE A.RS OF T HE APPELLANT COMPANY MADE DETAILED SUBMISSION VIDE THEIR REPLY D TD. 07.05.04 AND STATED THAT THE A.O HAD MADE THE ABOVE ADDITION OF RS 46 LAKHS U/S. 41(1) OF THE ACT IGNORING THE FACTS OF THE CASE AND WITHOUT BRINGING ANY CONCRETE EVIDENCE WHICH COULD EITHER SUGGEST THAT ANY ALLOWANCE OR DEDUCTION WAS GIVEN TO THE AP PELLANT COMPANY IN ANY EARLIER ASSESSMENT YEAR IN THIS REGA RD OR TO PROVE THAT THE RELEVANT TRANSACTION RECORDED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT COMPANY WHICH WERE ALSO CONFIRMED BY THE OPPOSITE PARTIES WERE ACCOMMODATION ENTRIES I.E. N O MONEY HAD ACTUALLY PASSED ON AND THE SO CALLED CREDITORS WERE THE NAME LENDERS. THE RELEVANT PORTION OF THE SUBMISSION IS QUOTED BELOW : 'SHRI ANVARALI H. LAKHANI HAS CATEGORICALLY CONFIRM ED SAID TRANSACTION ENTRY THROUGH HIS C.A. VIDE LETTER DTD. 25.02.04 WITH REFERENCE TO SUMMONS U/S. 131 (PHOTOSTAT COPY OF WH ICH IS ENCLOSED HEREWITH FOR YOUR HONOUR'S IMMEDIATE REFER ENCE). LEGAL HEIR OF LT. SHRI N.R. IHANI HAS ALSO CATEGORI CALLY CONFIRMED SAID TRANSACTION ENTRY THROUGH THE CONTRA CONFIRMAT ION COPY PROVIDED TO THE APPELLANT (PHOTOSTAT COPY OF WHICH IS ENCLOSED HEREWITH FOR YOUR HONOUR'S IMMEDIATE REFERENCE) - 23 - BOTH PARTIES HAVE ACCEPTED SUMMONS ISSUED U/S. 131 WHICH PROVES THEIR GENUINENESS AND IDENTITY. RELEVANT BANK STATEMENTS OF THE SAID PARTIES HAS BE EN SUBMITTED EITHER BY THE OPPOSITE PARTY OR THE APPELLANT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS TO SHOW THAT IN FACT FINANCI AL TRANSACTION WAS CARRIED OUT BETWEEN THEM BY WAY OF AN ACCOUNT P AYEE CHEQUES. THIS SHOWS THE GENUINENESS OF THE TRANSACT ION. RELEVANT COMPUTATION OF INCOME ALONGWITH THE ACKNOW LEDGMENT OF RETURN OF INCOME OF THE SAID PARTIES HAS BEEN SUBMI TTED EITHER BY THE OPPOSITE PARTY OR THE APPELLANT (PHOTOSTAT COPY OF WHICH ARE ENCLOSED HEREWITH FOR YOUR HONOUR'S IMMEDIATE REFER ENCE) TO SHOW THE CREDITWORTHINESS OF THE SAID PARTIES WHICH IN F ACT IS NOT REQUIRED AT ALL BECAUSE THE FINANCIAL TRANSACTION P ERTAINS TO THE DIRECTOR OF THE APPELLANT COMPANY AND NOT TO THE AP PELLANT COMPANY. LAO HAS ACCEPTED THE ONE PART OF RELEVANT TRANSACTI ON'S RECTIFICATION ENTRY BY ACCEPTING THE UNSECURED LOAN OF SHRI C.R. PATIL IN WHICH CONTRA RECTIFICATION ENTRY WITH REF ERENCE TO THE ABOVE REFERRED TWO PARTIES WERE PASSED BY THE APPELLANT. ACCORDINGLY LAO IS NOT JUSTIFIED IN MAKING THE ADDITION BY TAKI NG RECOURSE TO PARTLY BELIEVING THE CREDIT TO THE EXTENT AND PARTL Y DISBELIEVING THE BALANCE AND ADDING IT AS INCOME BY COMPLETELY IGNOR ING THE FACTUAL AND LEGAL ASPECTS OF THE CASE AND IN THE IN TEREST OF NATURAL JUSTICE AND EQUITY WHICH REQUIRES THAT THE A.O HAS TO LOOK TO THE SUBSTANCE OF THE SITUATION AND DECIDE THE MATTER IN SUCH A MANNER THAT NEITHER THE REVENUE IS PUT TO UNREASONABLE LOS S NOR IS THE ASSESSEE SUBJECTED TO UNREASONABLE HARDSHIP AS HELD IN THE CASE OF CIT VS. HAZARIBAUGH COAL SYNDICATE PVT. LTD. (19 89) 177 ITR 135 139 (CAL)'. BESIDES ABOVE SUBMISSION THE A.RS ALSO CITED THE F OLLOWING CASE LAWS IN SUPPORT OF THEIR CONTENTION WHILE STATING T HAT NOTHING HAD BEEN SHOWN BY THE A.O ON RECORD TO INDICATE THAT AN Y PART OF THE FUNDS GIVEN BY THE APPELLANT COMPANY TO THESE PARTI ES CAME BACK TO IT IN ANY FORM - I) CIT VS. M.K. BROTHERS 183 ITR 249 (GUJ) II) KISHANCHAND CHELTARAM VS. CIT 125 ITR 713 (SC) . 7.4 THE A.RS ALSO SUBMITTED THE FOLLOWING EVIDENCES BEFORE ME IN SUPPORT OF THEIR CONTENTION. 'I) LEDGER ACCOUNT OF SHRI SAI CORP. PROP: SHRI C. R. PATIL FOR F.Y. 1999-2000 AND 2000-01 FROM THE BOOKS OF ACCOUNTS OF SHRI A.H. LAKHANI ALONGWITH THE CONTRA LEDGER ACCOUNT FROM TH E BOOKS OF SHRI C.R. PATIL. - 24 - II) LEDGER ACCOUNT OF SHRI SAI CORP. PROP: SHRI C. R. PATIL FOR F.Y. 1999-2000 FROM THE BOOKS OF SHRI N.R. IHANI ALIAS N ASURIDDIN RAJABALI PATHARWALA ALONGWITH THE CONTRA LEDGER ACC OUNT FROM THE BOOKS OF SHRI C.R. PATIL FOR F.Y. 1999-00 AND 2000- 01. III) CONTRA LEDGER ACCOUNT OF SHRI A.H. LAKHANI AND SHRI N.R. IHANI FROM THE BOOKS OF ACCOUNTS OF THE APPELLANT FOR THE F.Y 2000-01 I.E. THE YEAR UNDER CONSIDERATION WHEREIN RELEVANT RECTIFICATION ENTRY HAS BEEN PASSED ON 01.14.00 ON THE BASIS OF RECTIFICATION ENTRY PASSED BY THE ABOVE STATED TWO PARTIES ON 31. 03.00'. 7.5 WHEN ASKED AS TO WHY SUCH EVIDENCES WERE NOT SU BMITTED BEFORE THE A.O. IT WAS SUBMITTED VIDE THEIR REPLY DTD. 20.05.04 THAT WHILE MAKING VARIOUS ADDITIONS THE A.O HAD NOT PRO PERLY CONSIDERED THE FACTS OF THE CASE OF THE APPELLANT C OMPANY AND IT WAS NOT ALLOWED FAIR AND REASONABLE OPPORTUNITY TO SUBMIT REQUIRED DETAILS AND THE ASSESSMENT ORDER WAS FRAME D ON THE BASIS OF SUSPICION AND HALF-BAKED-FACTS. THE ABOVE REPLY OF A.RS WAS CONSIDERED AND FOUND ACCEPTABLE AND THE ADDITIO NAL EVIDENCES ARE ADMITTED IN THE ADJUDICATION OF THIS GROUND. 7.6 AFTER GOING THROUGH THE ABOVE REFERRED DETAILS AS SUBMITTED BY THE A.RS THE CASE LAWS CITED BY THEM IN SUPPORT OF THEIR CONTENTION AND EVIDENCES PRODUCED IN THIS REGARD I T IS FOUND THAT THE A.O DID NOT BRING OUT ANY MATERIAL OR EVIDENCE ON RECORD SHOWING THAT ANY ALLOWANCE OR DEDUCTION WAS GIVEN T O THE APPELLANT COMPANY IN THE EARLIER YEAR IN THIS REGAR D OR TO PROVE THAT RELEVANT TRANSACTION WERE RECORDED IN THE BOOK S OF ACCOUNTS OF THE APPELLANT COMPANY AND ALSO CONFIRMED BY THE OPPOSITE PARTIES WERE ACCOMMODATION ENTRIES. THE ASSESSMENT RELATING TO THIS GROUND WAS MADE ON THE BASIS OF MERE SURMISES AND CONJUCTURES AND ON IRRELEVANT AND INADMISSIBLE EVID ENCES. WHILE HOLDING THE ABOVE VIEW I RELY ON THE FINDINGS OF T HE HON'BLE APEX COURT IN THE CASE OF M/S. DHAKESHWARI COTTON MILLS VS. GIT 26 ITR 775 (SC) AND DHIRAJLAL GIRDHARILAL VS. CIT 26 ITR 736 WHEREIN IT WAS HELD THAT AN ASSESSMENT BASED ON MER E CONJECTURES SURMISES OR SUSPICION OR IRRELEVANT AN D INADMISSIBLE EVIDENCES AND MATERIAL IS INVALID AND NOT SUSTAINAB LE IN THE EYES OF LAW. 7.7 THUS IN VIEW OF THE ABOVE DISCUSSED FACTS I D ELETE THE ADDITION OF RS.46 LAKHS AS MADE BY THE A.O TREATING THE SAME AS NOT JUSTIFIED /TENABLE IN THE EYES OF LAW. THIS GRO UND OF APPEAL IS ALLOWED. 8. THE FIFTH GROUND OF APPEAL RELATES TO THE TOTAL ADDITION MADE BY THE A.O AND AGITATED IN THE ABOVE REFERRED GROUNDS OF APPEAL. SINCE THE ADDITIONS AS PER RESPECTIVE GROUNDS OF AP PEAL HAVE BEEN DISCUSSED AND DECIDED THEREFORE THIS GROUND OF APPEAL IS - 25 - NOT ADJUDICATED AGAIN TO AVOID THE REPETITION OF FA CTS AND DETAILS. IN VIEW OF THIS THIS GROUND OF APPEAL BECOMES INFRACT UOUS. 9. THE SIXTH GROUND OF APPEAL RELATES TO THE INITIA TION OF PENALTY U/S. 271(1)(C) OF THE ACT. THE A.O IS DIRECTED TO T AKE ACTION ACCORDING TO THE PROVISIONS OF ACT. 10. THE GROUNDS NO. 7 8 AND 9 ARE GENERAL IN NATUR E AND RELATES TO ABOVE REFERRED GROUNDS OF APPEAL. THEREFORE THE RE IS NO NEED TO ADJUDICATE THESE AGAIN. IN RESULT THE APPEAL IS PARTLY ALLOWED. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THERE WAS BRO UGHT FORWARD LOAN OF RS.46 00 000/- NAMELY RS.15 00 000/- FROM SHRI ANV AR ALI LAKHANI AND RS.31 00 000/- FROM SHRI N.R.IHANI IN THE BOOKS OF THE ASSESSEE OF THE YEAR UNDER CONSIDERATION. THEY ARE NOT ANY FRESH CR EDITS IN THE BOOKS OF THE ASSESSEE OF THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT IN DISPUTE THAT NO INTEREST WAS PAID BY THE ASSESSEE TO THE AF ORESAID TWO PARTIES ON THE ABOVE LOANS TAKEN BY THE ASSESSEE. 32. ON THE ABOVE FACTS THE LEARNED ASSESSING OFFICE R ADDED RS.46 00 000/- TO THE INCOME OF THE ASSESSEE UNDER SECTION 41(1)OF THE ACT BY TREATING THEM AS ACCOMMODATION ENTRIES. 33. WE FIND THAT THE CONDITION PRECEDENT FOR TREATI NG AN AMOUNT AS INCOME UNDER SECTION 41(1) OF THE ACT IS THAT DEDUC TION IN RESPECT OF THE SAID AMOUNT MUST HAVE BEEN ALLOWED TO THE ASSESSEE IN ANY PRECEDING YEAR OR YEARS. IN THE INSTANT CASE IT IS NOT IN DI SPUTE THAT NO DEDUCTION ON ACCOUNT OF AMOUNT OF RS.46 00 000/- IN QUESTION WAS ALLOWED TO THE ASSESSEE IN ANY PRECEDING YEAR OR YEARS AND THEREFO RE THE ADDITION MADE UNDER SECTION 41(1) IS CLEARLY UNSUSTAINABLE. 34. FURTHER AS THE AMOUNTS WERE NOT FRESH CREDITS IN THE YEAR UNDER CONSIDERATION AND THEREFORE THE SAME CANNOT ALSO B E TREATED AS INCOME OF THE YEAR UNDER SECTION 68 OF THE ACT ALSO. - 26 - 35. IN VIEW OF THE ABOVE WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 36 IN THE RESULT THE APPEAL OF THE ASSESSEE AND OF THE REVENUE BOTH ARE PARTLY ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 09/04/2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/04/2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III SURAT. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD