Shri Rajeshkumar Valjibhai Parmar, Palanpur v. The Income tax Officer,Ward-1,, Palanpur

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI BHAVNESH SAINI JM & SHRI A N PAHUJA AM ITA NOS.2433 & 2434/AHD/2009 (ASSESSMENT YEAR:-2006-07) SHRI RAJESHKUMAR VALJIBHAI PARMAR 110 HIMMAT VIHAR COMPLEX CITY LIGHT ROAD PALANPUR V/S INCOME-TAX OFFICER WARD- 1 PALANPUR PAN: AGWPP 5695 G [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI MANISH J SHAH AR REVENUE BY:- SHRI R K DHANESTA DR O R D E R A N PAHUJA: THESE APPEALS BY THE ASSESSEE DIRECTED AGAINST TW O SEPARATE ORDERS DATED 22-05-2009 AND 18-06-2009 OF THE LD.CIT (APPEALS)-XV AHMEDABAD FOR THE ASSESSMENT YEAR (A Y) 2006-07 RAISE THE FOLLOWING GROUNDS:- ITA NO.2433/AHD/2009- 1 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N CONFIRMING THE ADDITION OF RS.1 18 105/- MADE OUT OF STATIONERY EX PENSES WITHOUT PROPERLY APPRECIATING THE SUBMISSION OF THE APPELLA NT. 2 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.6 59 383/- MADE OUT OF MEETING EXPEN SES WITHOUT PROPERLY APPRECIATING THE SUBMISSION OF THE APPELLA NT. 3 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.19201/- MADE OUT OF DIESEL EXPENSES WITHOUT PROPERLY APPRECIATING THE SUBMISSION OF THE APPELLA NT. 4 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.4 384/- MADE OUT OF VEHICLE EXPENSES WITHOUT PROPERLY APPRECIATING THE SUBMISSION OF THE APPELLA NT. 5 CRAVE LEAVE TO ADD AMEND ALTER VARY OR WITHDRA W ANY OR ALL THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. ITA NOS.2433 & 2434/AHD/09 2 ITA NO.2434/AHD/2009 1 THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N CONFIRMING THE PENALTY FOR NON COMPLIANCE OF SECOND AND THIRD NOTI CE WITHOUT PROPERLY APPRECIATING THE SUBMISSION OF THE APPELLA NT. 2 CRAVE LEAVE TO ADD AMEND ALTER VARY OR WITHDRA W ANY OR ALL THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL . 2. ADVERTING FIRST TO GROUND NO.1 IN THE QUANTUM AP PEAL FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECL ARING INCOME OF RS.88 700/- FILED ON 13-11-2006 BY THE ASSESSEE A COMMISSION AGENT OF PACL INDIA LTD. AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS TH E ACT] WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 22-05-2007.DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT]NOTICED THAT THE ASSESSEE DEBITED THE FOLLOWING EXPENSES:- 1. MEETING EXPENSES RS.9 89 938/- 2. STATIONERY EXPENSES RS.3 45 104/- 3. XEROX EXPENSES RS.1 28 124/- 2.1 IN ORDER TO ASCERTAIN THE GENUINENESS OF THE AFORESAID EXPENSES SUMMONS WAS SENT TO THE PARTIES WHO ISSU ED THE BILLS IN RESPECT OF AFORESAID EXPENSES. THE AO ALSO ISSUED C OMMISSION U/S 131(1)(D) OF THE ACT TO THE ITO WARD-1 PATAN WHO AFTER RECORDING THE STATEMENTS OF VARIOUS PARTIES SUBMITTED THAT T HE BILLS PRODUCED BY THE ASSESSEE WERE BOGUS. CONSEQUENTLY A SHOW C AUSE NOTICE SEEKING TO DISALLOW THE AFORESAID EXPENSES WAS ISSU ED AND THE ASSESSEE WAS ALSO SUPPLIED COPIES OF THE STATEMENTS RECORDED BY THE ITO WARD-1 PATAN. IN HIS LETTER DATED 10-12-200 8 WHILE ADMITTING THAT BILLS AND VOUCHERS FOR CERTAIN EXPENSES ON ACC OUNT OF GIFT AND DIWALI BONUS HOTEL EXPENSES AS ALSO TRAVELING EXP ENSES WERE NOT AVAILABLE THE ASSESSEE CONTENDED THAT HE HAD 4500/ - AGENTS WORKING UNDER HIM AND ALL EXPENSES WERE INCURRED DU RING THE COURSE OF BUSINESS. WHILE REFERRING TO THE STATEMENTS OF PROPRIETORS OF M/S ITA NOS.2433 & 2434/AHD/09 3 SONPARI MODELING STUDIO & ASHWIN ART AND OF SHRI B HIMJIBHAI A KHATRI DENYING THE OWNERSHIP OF THE BILLS SUBMITTE D BY THE ASSESSEE IT WAS CONTENDED THAT THOSE PARTIES MIGHT NOT HAVE CREDITED THE BILL AMOUNT IN THEIR BOOKS TO SAVE INCOME-TAX SALES-TAX ETC. INTER ALIA THE ASSESSEE ALSO SOUGHT CROSS EXAMINATION OF THESE PARTIES AND FURTHER ARGUED THAT THE ABSENCE OF PARTIES LIKE ASH IRVAD SALES AGENCY NAVJIVAN MANDAP DECORATION AND MOBILE CARE D ID NOT MEAN THAT CLAIM MADE BY THEM WAS BOGUS. HOWEVER THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THOUGH THE ASSESSEE WAS REQUESTED TO PRODUCE THOSE PARTIES HE DID NOT CARE WHILE EVEN SUMMONS ISSUED U/S 131(1) OF THE ACT TO THE AFORESAID PARTIES WERE RETURNED BY THE POSTAL AUTHORITIES WIT H THE REMARKS NOT KNOWN. MOREOVER THE BILLS FOR PURCHASE OF NOKIA M OBILE DID NOT REFLECT THE NUMBERS OF INSTRUMENTS WHILE THE EXPEND ITURE ON GOLD RING AND GOLD MANGALSUTRA WAS FOUND TO BE OF PERSONAL NA TURE. IN THE LIGHT OF THESE FACTS SINCE THE BILLS FOR STATIONER Y ISSUED BY VALINATH ENTERPRISE AND SHIVAM OFFSET WERE FOUND TO BE BOGUS ON INQUIRY BY THE ITO WARD-1 PATAN THE AMOUNT OF RS.1 18 105/- WAS DISALLOWED OUT OF TOTAL STATIONERY EXPENSES OF RS.3 45 104/-. 2.2 LIKEWISE MEETING EXPENSES OF RS.6 59 383/- WE RE DISALLOWED OUT OF TOTAL OF RS.9 89 938/- SINCE THE BILLS ISSUE S BY RADHE SUITCASE CENTRE RS.2 10 859/- M/S V D JEWELLERS-RS.85 769 /- YADGAR- RS.55 635/- RAJENDRA SARI CENTRE-RS.16 950/- MOBILE CARE- RS.74 450/- SONPARI MODELING STUDIO- RS.1 10 330/- ASHWIN ART- RS.19 950/- AND SHRI BHIMJIBHAI A KHATRI- RS.9120/- WERE FOUND TO BE BOGUS AS A RESULT OF ENQUIRIES . 3. ON APPEAL THE LEARNED CIT(A) UPHELD THE FINDING S OF THE AO WITH REGARD TO STATIONERY EXPENSES IN THE FOLLOWING TERMS:- AFTER GOING THROUGH RIVAL SUBMISSIONS I FIND THAT THE COPIES OF STATEMENT RECORDED BY ITO WARD-L PATAN WERE PROVIDED TO THE APPELLANT BY THE AO. FURTHER SHOW CAUSE NOTICE WAS ISSUED BY THE AO VIDE LETTER DATED 1.12.2008 ASKING THE ASSESSEE TO SHOW CAUSE AS TO W HY THE SPECIFIC BILLS ITA NOS.2433 & 2434/AHD/09 4 MENTIONED IN THE NOTICE SHOULD NOT BE DISALLOWED BE CAUSE THEY WERE FOUND BOGUS. THE ASSESSEE SUBMITTED AN EXPLANATION ALSO T O THIS NOTICE WHICH HAS BEEN CONSIDERED BY THE AO. THE AO FURTHER ASKED THE APPELLANT TO PRODUCE PARTIES WHOSE BILLS WERE FOUND DEFECTIVE / BOGUS. SUMMONS WERE ALSO ISSUED BUT THEY REMAINED UN-COMPLIED WITH. FOR THIS REFERENCE IS DRAWN TO PARA 8 OF THE ASSESSMENT ORDER. THIS IS IN THE LIGHT OF THESE ENQUIRIES AND VERIFICATIONS THAT THE DISALLOWANCE W AS MADE WHICH IS FOUND IN ORDER AND IS CONFIRMED. FURTHER IT IS NOT NECESS ARY FOR THE DEPARTMENT TO ALLOW OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE IN EACH AND EVERY CASE. 3.1 AS REGARDS DISALLOWANCE OF MEETING EXPENSES R S.6 59 383/- THE LEARNED CIT(A) CONCLUDED AS UNDER:- AFTER GOING THROUGH RIVAL SUBMISSIONS I FIND THA T THE AO ISSUED A QUERY LETTER DATED 17.11.2008 TO THE APPELLANT (ENCLOSED AS ANNEXURE-1 OF THIS ORDER) AND FURTHER ISSUED A SHOW CAUSE NOTICE TO TH E APPELLANT DATED 1.12.2008 WHICH IS ENCLOSED AS ANNEXURE-2 OF THIS O RDER THROUGH WHICH HE INFORMED THE APPELLANT THAT FOLLOWING 8 PARTIES HAD NOT CONFIRMED THE BILLS PRODUCED BY THE APPELLANT: (IN RS.) 1.RADHE SUITCASE CENTRE RADHANPUR 2 10 859 2.M/S.V.DJEWELLERS PATAN 85 769 3.M/S.YADGAR PATAN 55 635 4.RAJNDRA SADI CENTRE PATAN 16 950 5.M/S.MOBILE CARE PATAN 74 450 6.SONPARI MODELING STUDIO PATAN 1 10 330 7.ASHWIN ART PATAN 19 950 8.BHIMJIBHAI A.KHATRI PATAN 9 120 NOW THE APPELLANT'S CONTENTION IS THAT STATEMENTS O F ONLY PARTIES LISTED AT SERIAL NUMBER 6.7 AND 8 HAD BEEN PROVIDED TO THE AP PELLANT AND NOT OTHERS. THE APPELLANT IN THE SUBMISSIONS GIVEN HAD ENCLOSED REPORT OF THE NOTICE SERVER DATED 24.10.2008 (ENCLOSED AS ANNEXU RE-3 OF THIS ORDER) WHERE HE STATED THAT THE PARTY LISTED AT SERIAL NUM BER 5 ABOVE IS NOT TRACEABLE ON THE ADDRESS GIVEN. PERUSAL OF THE ASSE SSMENT ORDER SHOWS THAT SHOW CAUSE NOTICES WERE GIVEN TO THE APPELLANT TO EXPLAIN BECAUSE THE 8 PARTIES HAD NOT CONFIRMED THAT THEY ISSUED BI LLS. FURTHER PARA 8 OF THE ASSESSMENT ORDER REPRODUCED BELOW SHOWS THAT THE AO REQUESTED THE APPELLANT TO PRODUCE THE PARTIES BEFORE HIM BUT THE APPELLANT NEVER PRODUCED THEM. ALSO THE SUMMONS ISSUED U/S. 131 TO THE PARTIES REMAINED UN-COMPLIED WITH. V.D. JEWELLERS LISTED AT SERIAL N UMBER 2 ABOVE INFORMED ITA NOS.2433 & 2434/AHD/09 5 THAT HE IS ONLY DOING JOB WORK AND NOT DOING ANY BU SINESS OF SILVER PURCHASE OR SALES. PARA 8 OF THE ASSESSMENT ORDER I S REPRODUCED BELOW FOR BETTER UNDERSTANDING OF THE CASE. 'THE ASSESSEE'S SUBMISSION IS CONSIDERED CAREFULLY BUT NOT ACCEPTABLE. THE ASSESSEE HAS REQUESTED TO PRODUCE T HE PARTIES FROM WHOM THE EXPENSES BILLS ARE PRESENTED FOR VERI FICATION BUT TILL DATE THE ASSESSEE IS FAILS TO DO SO. SUMMONS U/S. 1 31 OF THE ACT WERE ISSUED TO THE ABOVE PARTIES BUT THE PARTIES WE RE NOT APPEARED BEFORE THE UNDERSIGNED.' SOME SUMMONS WAS RETURNED WITH POSTAL REMARKS 'NOT KNOWN'. FURTHER THE BILLS FOR PURCHAS E OF NOKIA MOBILE IS CLEARLY SEEMS BOGUS AS SERIAL NUMBER OF INSTRUM ENTS IS NOT MENTIONED ON THE BILL. IF IT IS ACTUAL PURCHASE ALL THESE THINGS ARE MENTIONED IN THE BILLS. AS PER THE STATEMENTS OF PR OPRIETOR OF M/S.V.D. JWELLERS HE IS DOING ONLY JOB WORK AND NO T DOING ANY BUSINESS OF SILVER PURCHASE AND SALES. HOWEVER THE ASSESSEE HAS PRODUCED THE PURCHASE BILLS FROM THAT PARTY. SOME B ILLS ARE FOUND FOR PERSONAL NATURE I.E. BILLS FOR PURCHASE OF GOLD RIN G AND GOLD MANGALSUTRA. INSPITE OF MANY SHOPS AVAILABLE AT RES IDENCE CITY OF THE ASSESSEE AT PATAN THE ASSESSEE HAS PURCHASED M AXIMUM GIFT ARTICLES FROM RADHANPUR. THE ASSESSEE IS FAILING TO DISCHARGE THE ONUS IN RESPECT OF THE GENUINENESS OF THE BILLS. C ONSIDERING THE ABOVE FACTS THE SUBMISSION TO THE ASSESSEE IS NOT ACCEPTABLE.' IN THE LIGHT OF THE VERIFICATIONS MADE BY THE AO AN D DUE OPPORTUNITIES GIVEN TO THE APPELLANT TO PRODUCE THE PARTIES I AM INCLIN ED TO CONFIRM THE ADDITION MADE BY THE AO IN RESPECT OF 8 PARTIES WHO DID NOT CONFIRM THAT THEY ISSUED BILLS TO THE APPELLANT. INSTEAD OF BLAMING T HE DEPARTMENT FOR NOT ALLOWING CROSS EXAMINATION THE APPELLANT SHOULD HAV E PRODUCED THE PARTIES HIMSELF TO MAKE HIS CASE FOOL PROOF. THE APPELLANT DESPITE OPPORTUNITIES GIVEN NEVER PRODUCED THE PARTIES BEFORE THE AO AND THEREFORE THE STAND TAKEN BY HIM THAT HE SHOULD BE GIVEN OPPORTUNITY TO CROSS EXAMINE IS NOT WELL BASED. THE ADDITION OF RS.6 59 383 IS THEREFOR E CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE WHILE RELYING UPON THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF HEIRS AND LRS OF LATE LAXMANBHAI S PATEL VS. CIT [2008] 12 DTR (GUJ) 108 CONTENDED THAT SINCE THE AO DID NOT ALLOW AN OPPORTUNITY TO CROSS EXAMINATION THE ADDI TIONS SHOULD BE DELETED. ON THE OTHER HAND THE LEARNED DR WHILE RE LYING UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS CHANDRAVILAS HOTEL [1987] 164 ITR 102 (GUJ) CONTENDED THAT IT ITA NOS.2433 & 2434/AHD/09 6 WAS ONLY WHEN THE ASSESSEE DID NOT DISCHARGE THE ON US ESTABLISHING THE GENUINENESS OF THE EXPENDITURE NOR PRODUCED THE AFORESAID PARTIES BEFORE THE AO DESPITE SPECIFIC REQUEST THA T THE AO ISSUED SUMMONS TO THE PARTIES AS ALSO HAD THE INQUIRIES M ADE THROUGH THE ITO WARD-1 PATAN BY ISSUING COMMISSION U/S 131(1) (D) OF THE ACT. SINCE THE ASSESSEE FAILED TO DISCHARGE THE ONUS LAI D DOWN UPON HIM IN ESTABLISHING THE GENUINENESS OF THEIR CLAIM OF EXPENSES THE DISALLOWANCE WAS RIGHTLY UPHELD BY THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. IT IS WELL SETTLED THAT THE ONUS IS ON TH E ASSESSEE TO ESTABLISH THE GENUINENESS OF THE CLAIM FOR DEDUCTIO N OF THE AFORESAID EXPENSES. INDISPUTABLY THE AO ASKED THE ASSESSEE TO PRODUCE THE PARTIES ISSUING THE BILLS FOR THE AFORESAID EXPENSES. THE A SSESSEE DID NOT CARE TO PRODUCE THE PARTIES NOR SUBMITTED ANY CORROBORATIVE EVIDENC E IN SUPPORT OF GENUINENESS OF THEIR CLAIM .EVEN SUMMONS U/S. 131 OF THE ACT ISSUE D TO THE SOME OF THE PARTIES WERE EITHER NOT COMPLIED WITH OR WERE RETURNED WITH THE REMARKS BY THE POSTAL AUTHORITIES 'NOT KNOWN'. AS PER THE STATEMENT OF PR OPRIETOR OF M/S.V.D. JWELLERS HE WAS DOING ONLY JOB WORK AND DID NOT CARRY ON ANY BUSINESS OF SILVER PURCHASE AND SALES WHILE SOME OF THE BILLS REVEALED PURCHASE OF GOLD RING AND GOLD MANGALSUTRA. THE STATEMENTS RECORDED BY THE ITO PA TAN WERE CONFRONTED TO THE ASSESSEE THROUGH A SHOW CAUSE NOTICE. IN THESE CIRC UMSTANCES ESPECIALLY WHEN THE ASSESSEE FAILED TO DISCHARGE THE ONUS LAID DOWN UPON HIM IN ESTABLISHING THE GENUINENESS OF CLAIM FOR DEDUCTION OF THE AFORESAID EXPENSES BEFORE THE LOWER AUTHORITIES NOR ANY MATERIAL HAS BEEN PLACED BEFORE US BY THE LD. AR ON BEHALF OF THE ASSESSEE WE ARE NOT INCLINED TO INTERFERE. THE ASSESSEE MERELY RELIED UPON A DECISION IN HEIRS AND LRS OF LATE LAXMANBHAI S PATEL VS. CIT [2008] 12 DTR (GUJ) 108 WHERE IN IT WAS CONCLUDED THAT ADD ITION MADE UNDER S. 68 PLACING HEAVY RELIANCE ON THE STATEMENT OF ONE R TO THE EFFECT THAT THE PROMISSORY NOTE IN THE SUM OF RS.8 78 358/- RECOVER ED DURING HIS SEARCH REPRESENTED AMOUNT ADVANCED BY ASSESSEE TO ONE K WI THOUT REFERRING THE SAID STATEMENT IN ASSESSMENT ORDER NOR GIVING COPY THERE OF TO THE ASSESSEE NOR AFFORDING AN OPPORTUNITY TO ASSESSEE TO CROSS-EXAMI NE R WAS LIABLE TO BE SET- ITA NOS.2433 & 2434/AHD/09 7 ASIDE FOR VIOLATION OF PRINCIPLES OF NATURAL JUSTIC E. SUCH ARE NOT THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE.THE LD. AR DID NO T DEMONSTRATE BEFORE US AS TO HOW THIS DECISION IS APPLICABLE TO THE FACTS AND CI RCUMSTANCES IN THE INSTANT CASE ESPECIALLY WHEN THE ASSESSEE DID NOT DISCHARG E ONUS IN ESTABLISHING GENUINENESS OF THEIR CLAIM FOR DEDUCTION OF THE AFORESAID EXPENSES. EVEN WHEN THE MATERIAL COLLECTED BY THE AO INCLUDING STATEME NTS RECORDED BY THE ITO PATAN WERE CONFRONTED TO THE ASSESSEE HE DID NOT COME FO RWARD IN ESTABLISHING GENUINENESS OF THE EXPENSES. IT IS THE SETTLED POS ITION OF LAW THAT RULES OF EVIDENCE DO NOT APPLY TO ASSESSMENT PROCEEDINGS UND ER THE ACT. AS HELD BY THE HONBLE SUPREME COURT IN C. VASANTLAL & CO. V. CIT [1962] 45 ITR 206 THE INCOME-TAX OFFICER IS NOT BOUND BY ANY TECHNICAL RU LES OF THE LAW OF EVIDENCE. IT IS OPEN TO HIM TO COLLECT MATERIALS TO FACILITATE ASSE SSMENT EVEN BY PRIVATE INQUIRY. IF HE DESIRES TO USE THE MATERIAL SO COLLECTED THE AS SESSEE MUST BE INFORMED OF THE MATERIAL AND MUST BE GIVEN AN ADEQUATE OPPORTUNITY OF EXPLAINING IT. THERE IS NO DISPUTE IN THE INSTANT CASE THAT MATERIAL COLLEC TED BY THE AO WAS CONFRONTED TO THE ASSESSEE.ALL THE EVIDENCE COLLECT ED BY THE ASSESSING OFFICER WHICH WAS USED AGAINST THE ASSESSEE WAS CON FRONTED TO THE ASSESSEE AND HE WAS GIVEN AN OPPORTUNITY TO REBUT . THIS PRINCIPLE IS ESTABLISHED BY THE JUDGMENT OF THE SUPREME COURT IN DHAKESWARI COTTON MILLS LTD. V. C.I.T. (26 I.T.R. 775 783) AND APPLIED BY THAT COURT IN KISH INCHAND CHELLARAM V. C.I.T. (125 I.T.R. 713) WHERE AN ASSESSMENT BASED ON THE RESUL T OF PRIVATE INQUIRIES CONDUCTED BEHIND THE BACK OF THE ASSESSEE WAS SET A SIDE BECAUSE THE EVIDENCE SO GATHERED WAS NOT PLACED BEFORE THE ASSESSEE. IN GUNDA SUBBAYYA V. C.I.T. (7 I.T.R. 21 28) LEACH CJ SAID: THE INFORMATION WHI CH THE INCOME-TAX OFFICER HAS RECEIVED MAY NOT ALWAYS BE ACCURATE AND IT IS ONLY FAIR WHEN HE PROPOSES TO ACT ON MATERIAL WHICH HE HAS OBTAINED FROM AN OUTSIDE S OURCE THAT HE SHOULD GIVE THE ASSESSEE AN OPPORTUNITY OF SHOWING IF HE CAN THAT THE INCOME-TAX OFFICER HAS BEEN MISINFORMED; BUT THE INCOME-TAX OFFICER IS OBV IOUSLY NOT BOUND TO DISCLOSE THE SOURCE OF HIS INFORMATION. AS IN THE PRESENT CASE WE FIND THAT THE ASSESSE HAD PROPER OPPORTUNITY TO CONTROVERT THE MATERIAL G ATHERED BY THE ASSESSING AUTHORITY AND USED AGAINST IT THERE HAS BEEN COMPL IANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. SIMILAR VIEW WAS TAKEN BY THE HONBLE ALLAHABAD HI GH COURT IN MOTI LAL PADAMPAT UDYOG LTD. V. C.I.T. (160 TAXMAN 233). RIGHT OF CROSS- ITA NOS.2433 & 2434/AHD/09 8 EXAMINATION OF PERSONS FROM WHOM THE ASSESSING OFFI CER HAS COLLECTED THE EVIDENCE IS NOT REQUIRED BY LAW. THE RIGHT OF CROSS EXAMINATION MAY NOT BE ABSOLUTE OR AVAILABLE IN ALL CIRCUMSTANCES. IN FACT PRINCIPLES OF NATURAL JUSTICE CANNOT BE PUT IN A STRAITJACKET. THESE WILL HAVE TO BE APPLIED DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE REQUIREMEN T OF THE STATUTE FOR A VALID ASSESSMENT WOULD BE MET IF ALL THE EVIDENCE COLLECT ED WHICH IS TO BE USED AGAINST THE ASSESSEE WHILE FRAMING THE ASSESSMENT ORDER IS PLACED BEFORE THE ASSESSEE AND HE IS GIVEN OPPORTUNITY TO REBUT THE EVIDENCE.[ C. VASANTLAL & CO. V. CIT [1962] 45 ITR 206 (SC)]. THE OBJECT OF CROSS-EXAMINATION IS TO TEST THE VERA CITY OF THE VERSION GIVEN IN EXAMINATION IN CHIEF. THE STAT EMENTS RECORDED BY THE ITO WARD-1 PATAN HAD NOT BEEN UTILIZED AGAINST THE ASSE SSEE WITHOUT AFFORDING THE OPPORTUNITY TO THE ASSESSEE. IN FACT IN THIS CASE THE ASSESSEE HAD NOT DISCHARGED INITIAL ONUS TO PRODUCE THE NECESSARY EVIDENCE TO S UPPORT THE GENUINENESS OF THE TRANSACTIONS IN RESPECT OF THE AFORESAID EXPENSES. IN THESE CIRCUMSTANCES ESPECIALLY WHEN THERE IS NO DISPUTE THAT ENTIRE MAT ERIAL COLLECTED BY THE AO WAS CONFRONTED TO THE ASSESSEE AND THE LD. AR DID NOT PLACE ANY MATERIAL WHATSOEVER SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THER EFORE GROUND NOS.1 & 2 IN THE APPEAL ARE DISMISSED. 6. GROUND NO. 3 RELATES TO DISALLOWANCE OF RS.1 9 201 OUT OF DIESEL EXPENSES AND GROUND NO.4 RELATES TO DISALLOWANCE OF RS.4 3 84 OUT OF VEHICLE EXPENSES. THE AO DISALLOWED 20% OF THE EXPENSES ON THE GROU ND THAT VEHICLES WERE USED FOR PERSONAL PURPOSES. THE LEARNED CIT(A) RESTRICT ED THE DISALLOWANCE TO 10% OF THE TOTAL EXPENSES . 7. THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT MAK E ANY SUBMISSIONS ON THESE GROUNDS NOR EVEN PLACED ANY M ATERIAL BEFORE US CONTROVERTING THE FINDINGS OF THE LD. CIT(A). S INCE PERSONAL USE OF VEHICLES BY THE ASSESSEE AND HIS FAMILY MEMBERS OR STAFF HAS NOT BEEN DENIED NOR IT WAS CLAIMED THAT THE ASSESSEE OR HIS FAMILY HAD THEIR INDEPENDENT VEHICLES FOR PERSONAL USE IN OUR OPINION DISALLOWANCE OF 1 0% OF THE AFORESAID DIESEL AND VEHICLE EXPENSES IN THE LIGHT OF PROVISIONS OF SEC. 38(2) OF THE ACT IS ITA NOS.2433 & 2434/AHD/09 9 REASONABLE THEREFORE WE ARE NOT INCLINED TO INTER FERE WITH THE FINDINGS OF THE LEARNED CIT(A) AND ACCORDINGLY DISMISS GROUND NOS. 3 & 4 IN THE APPEAL 8. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF THE RESIDUARY GROUND NO.5 IN THE APPEAL ACCORDINGLY TH IS GROUND IS ALSO DISMISSED. ITA NO. 2434/AHD/2009 9. ADVERTING NOW TO APPEAL IN ITA NO.2434/AHD/20 09 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECL ARING INCOME OF RS.88 700/- FILED ON 13-11-2006 BY THE ASSESSEE WA S SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT UPON THE ASSESSEE ON 22-05-2007. THE ASSESSEE DID NOT RESPON D NOR FILED ANY REQUEST FOR ADJOURNMENT. THEREAFTER A NOTICE U /S 142(1) OF THE ACT ISSUED ON 25-10-2007 AS ALSO SUBSEQUENT NOTICE ISSUED ON 1- 05-2008 U/S 143(2) OF THE ACT ALSO WENT UN-RESPONDE D. SINCE THE ASSESSEE WAS NOT RESPONDING TO THE NOTICES THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(B) OF THE ACT. IN RESPONSE THE ASSESSEE EXPLAINED THAT HE COULD NOT ATTEND THE HEARING ON 1 4-06-2007 DUE TO MARRIAGE CEREMONY. FOR ABSENCE ON 16-11-2007 THE ASSESSEE EXPLAINED HE WAS BUSY IN A MEETING OF PULSE COMPANY . AS REGARDS HEARING ON 19-05-2008 THE ASSESSEE EXPLAINED THAT HE COULD NOT ATTEND DUE TO ABSENCE OF HIS ACCOUNTANT. HOWEVER T HE AO DID NOT ACCEPT THESE REASONS ON THE GROUND THAT THE ASSESSE E COULD HAVE DEPUTED HIS ACCOUNTANT WITH THE BOOKS OF ACCOUNT EV EN IF HE WAS OUT OF STATION. ACCORDINGLY PENALTY @ RS.10 000/- FOR EACH DEFAULT WAS IMPOSED. 10. ON APPEAL THE LEARNED CIT(A) REDUCED THE PENAL TY ON THE GROUND THAT THE FIRST NOTICE WAS NOT COMPLIED WITH DUE TO AN ACCEPTED PRACTICE IN THE DEPARTMENT THAT THIS NOTIC E IS FOLLOWED UP WITH SUBSEQUENT NOTICES. AS REGARDS NON APPEARANCE ON LAST TWO ITA NOS.2433 & 2434/AHD/09 10 DATES I.E. 16-11-2007 AND 19-05-2008 THERE BEING N O REASONABLE CAUSE THE LEARNED CIT(A) UPHELD THE LEVY OF PENALT Y OF RS.20 000/-. 11. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE RELIED ON THEIR SUBMISSIONS BEFORE THE LEA RNED CIT(A). ON THE OTHER HAND THE LEARNED DR SUPPORTED THE FINDIN GS OF THE LD. CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. SECTION 271(1)(B) READ WITH SEC. 273B OF THE ACT LAYS DOWN THAT IF THE AO OR THE CIT(A) OR THE CIT IN THE COURSE OF ANY PROC EEDING UNDER THIS ACT IS SATISFIED THAT ANY PERSON HAS WITHOUT REASONABLE CA USE FAILED TO COMPLY WITH NOTICE UNDER SUB-SECTION (1) OF SECTION 142 OR SUBS ECTION (2) OF SEC. 143 OF THE ACT HE MAY DIRECT THAT SUCH PERSON SHALL PAY PENAL TY OF RS. 10 000/- FOR EACH SUCH FAILURE. THE WORDINGS OF THESE SECTIONS ARE EX PLICIT THAT A PERSON WHO HAS FAILED TO COMPLY WITH THE NOTICE MUST SHOW REASONAB LE CAUSE. THE ONUS IS UPON THE ASSESSEE. ONUS MAY NOT BE VERY HEAVY AS IT IS U PON THE PROSECUTION IN A CRIMINAL CASE. THE QUESTION OF ONUS MAY BE DECIDED UPON PROBABILITY BUT IT IS FOR THE ASSESSEE TO SHOW THAT THERE IS REASONABLE CAUSE . HONBLE PATNA HIGH COURT IN CIT VS. STANDARD MERCANTILE CO. 160 ITR 613 HELD THAT THE ABSENCE OF MENSREA OR FAILURE OF THE REVENUE TO ESTABLISH MENS REA ARE ENTIRE IRRELEVANT IN PENALTY PROCEEDINGS U/S 271(1)(B) OF THE ACT. IN TH E CASE UNDER CONSIDERATION WE FIND THAT THE LD. CIT(A) UPHELD THE LEVY OF PENALTY FOR DEFAULT IN COMPLYING WITH NOTICES ISSUED ON 25.10.2007 & 1.5.2008 ON THE GRO UND THAT THERE WAS NO REASONABLE CAUSE. 13.. FOR NON-COMPLIANCE OF NOTICE U/S 142(1) OF THE ACT ISSUED ON 25.10.2007 FOR HEARING ON 16.11.2007 AS ALSO OF NOTICE U/S 1 43(2) OF THE ACT SERVED UPON 2.5.2008 FOR HEARING ON 19.5.2008 NOT AN IOTA OF E VIDENCE WAS PLACED BEFORE THE AO OR THE LD. CIT(A) IN SUPPORT OF THE REASONS ADD UCED BY THE ASSESSEE WHILE NO REASONS AT ALL HAVE BEEN ADDUCED BEFORE US AS TO WH Y THE COMPLIANCE WITH AFORESAID NOTICES COULD NOT BE MADE. THE ONUS BEING ON THE ASSESSEE TO ANSWER ITA NOS.2433 & 2434/AHD/09 11 THE CHARGE OF HAVING FAILED TO COMPLY WITH THE SAID NOTICES CONSIDERING THE CONDUCT OF THE ASSESSEE DURING THE ASSESSMENT PROCE EDINGS AND NO REASONS HAVING BEEN ADDUCED BEFORE US WE ARE OF THE OPINIO N THAT THE ASSESSEE FAILED TO ESTABLISH THAT THERE WAS ANY REASONABLE CAUSE FOR N OT COMPLYING WITH THE NOTICE U/S 142(1) OF THE ACT ISSUED ON 25.10.2007 FOR HEA RING ON 16.11.2007 AS ALSO OF NOTICE U/S 143(2) OF THE ACT SERVED UPON 2.5.2008 F OR HEARING ON 19.5.2008. NO EFFORT WORTH THE NAME WAS MADE BY THE ASSESSEE TO S HOW THAT THERE WAS ANY REASONABLE CAUSE FOR THE SAID DEFAULT NOR THE LD. AR ON BEHALF OF THE ASSESSEE COULD POINT OUT ANY INFIRMITY IN THE FINDINGS OF TH E LD. CIT(A). WE ARE THEREFORE SATISFIED THAT THIS WAS A FIT CASE FOR THE LEVY OF PENALTY UNDER S. 271(1)(B) OF THE ACT FOR THE FAILURE TO COMPLY WITH THE TERMS OF NO TICE U/S 142(1) OF THE ACT ISSUED ON 25.10.2007 FOR HEARING ON 16.11.2007 AS ALSO OF NOTICE U/S 143(2) OF THE ACT SERVED UPON THE ASSESSEE ON 2.5.2008 FOR HEARING ON 19.5.2008 AND NO INTERFERENCE IN THE ORDER OF THE LD. CIT(A) IS WARR ANTED. THEREFORE LEVY OF PENALTY TO THE EXTENT OF RS. 20 000/- IS UPHELD. CONSEQUEN TLY GROUND NO.1 IN THE APPEAL IS DISMISSED. 14. NO ADDITIONAL GROUND HAVING BEEN RAISED IN T ERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL ACCORDINGLY THIS GROUND IS ALSO DISMISSED. 15. IN THE RESULT BOTH THESE APPEALS ARE DISMISSED . ORDER PRONOUNCED IN THE COURT TODAY ON 25-02-2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 25-02-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI RAJESHKUMAR VALJIBHAI PARMAR 110 HIMMAT V IHAR COMPLEX CITY LIGHT ROAD PALANPUR 2. ITO WARD-1 PALANPUR 3. CIT CONCERNED 4. CIT(A)-XV AHMEDABAD ITA NOS.2433 & 2434/AHD/09 12 5. DR ITAT AHMEDABAD BENCH-B AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD