Shri Ranchhodbhai J. Patel, Baroda v. The ACIT., Cent.Circle-2,, Baroda

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND BHAVESH SAINI JUDICIAL MEMBER) ITA.NO.3350 TO 3356/AHD/2007 ASSTT.YEARS : 1998-1999 TO 2004-2005 AND ITA.NO.3009 TO 3015/AHD/2009 ASSTT.YEARS : 1998-1999 TO 2004-2005 SHRI RANCHHODBHAI J. PATEL C/O. M/S.UMIYA CHEMICAL INDUSTRIES NARSINGHJI INDUSTRIAL ESTATE WADI YAMUNA MILL ROAD BARODA. VS. ACIT CENT.CIR.2 BARODA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N.SOPARKAR REVENUE BY : SHRI B.S. SANDHU O R D E R PER BENCH: THESE ARE TWO SETS OF APPEALS (SEVEN EACH) FILED BY THE ASSESSEE. ONE SET OF APPEALS IS QUANTUM APPEALS AN D SECOND SET OF APPEALS IS AGAINST THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. 2. AT THE TIME OF HEARING BEFORE US THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED A CHART EXHIBITING GROUNDS OF APPEAL IN V ARIOUS YEARS FOR THE ADDITIONS MADE IN THE ASSESSMENT PROCEEDINGS UNDER SECTION 153A. THE SAME IS REPRODUCED AS UNDER: SR. NO. PARTICULARS ASSESSMENT YEARS 1998-99 1999-01 2000-01 2001-02 2002-03 2003-04 2 004-05 A. CREDIT IN A/C.NO.4357 40598 182229 412635 316861 177411 361743 796471 B. CREDIT IN A/C.NO.4356 13975 8106 6419 5333 6812 4316 4332 C MARRIAGE EXP. 250000 90000 D INTEREST ON FDR SARVODAYA 106706 180520 204285 231179 SHRI RANCHHODBHAI J. PATEL VS. ACIT BARODA -2- E SAGGI ROADLINES BOGUS EXPS. 200000 F. INDIAN & VYASHESHWAR 800000 G. RECEIPT FROM PRAVINBHAI PATEL 300000 H. INTEREST ON LOAN SURESHBAI 74250 I. INTEREST ON LOAN SABARI CHEM. 62750 J. INDIAN & VYASHESHWAR SET OFF -800000 AT THE TIME OF HEARING BEFORE US HE HAS STATED THA T GROUNDS REPRESENTED BY ITEM NOS.D F AND G ARE NOT PRESSED BY HIM. THERE IS NO APPEAL AGAINST ADDITION REPRESENTED BY ITEM-E. ACCORDINGLY THE ADDITIONS O N ACCOUNT OF INTEREST ON FDR SARVODAYA INDIAN & VYASHESHWAR AND RECEIPT FRO M PRAVINBHAI PATEL IN RESPECTIVE YEARS ARE CONFIRMED. 3. WITH REGARD TO THE REMAINING GROUNDS HE HAS STA TED THAT THE CREDITS IN TWO BANKS ARE SUMMARIZED AS UNDER: I) CREDIT ON ACCOUNT OF DIVIDEND INCOME II) CREDIT ON ACCOUNT OF LOANS FROM OTHERS III) CREDIT ON ACCOUNT OF CHEQUE DEPOSITED RETURN UNCLEA R IV) CREDIT ON ACCOUNT OF INTEREST V) OTHER CREDITS HE SUBMITTED THAT THE ASSESSMENT YEAR UNDER CONSIDE RATION IS A.Y.1998-99 TO 2004-2005 AND EXCEPT IN ONE YEAR IN ALL OTHER YEARS THE DIVIDEND INCOME WAS EXEMPT. WITH REGARD TO CREDIT ON ACCOUNT OF LOAN F ROM VARIOUS PARTIES HE HAS STATED THAT THE AO DID NOT ACCEPT THE LOAN FROM VAR IOUS PERSONS ON THE ONLY GROUND THAT DURING THE COURSE OF RECORDING OF THE S TATEMENT THE ASSESSEE HAS STATED THAT HE HAS NOT RECEIVED ANY LOAN. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AT THE TIME OF SEARCH THE ASSESSEE WAS MENTALLY UPSET AND THEREFORE HE COULD NOT CORRECTLY REPLY TO THE QUEST IONS PUT TO HIM. HE HAS STATED SHRI RANCHHODBHAI J. PATEL VS. ACIT BARODA -3- THAT THE LOANS WERE BY CHEQUES AND WERE DEBITED IN THE BANK ACCOUNT OF THE LENDER MUCH PRIOR TO THE SEARCH. THUS THERE IS DO CUMENTARY EVIDENCE THAT THE AMOUNT WAS RECEIVED BY CHEQUE FROM OTHER PERSON. H E FURTHER STATED THAT HE IS AWARE THAT ONUS IS UPON THE ASSESSEE TO PROVE THE L OAN TAKEN BY THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS ALREADY SUBMITTED THE CONFIRMATION OF VARIOUS CREDITORS. HOWEVER IN RES PECT OF SOME OF THE CREDITORS THE CONFORMATION COULD NOT BE OBTAINED D URING THE ASSESSMENT PROCEEDINGS DUE TO PAUCITY OF TIME. THE SAME IS NO W OBTAINED AND SUBMITTED BEFORE THE ITAT. HE REQUESTED FOR ADMISSION OF TH ESE CONFIRMATIONS AS ADDITIONAL EVIDENCE. HE SUBMITTED THAT MOST OF THE CREDITORS ARE ASSESSED TO INCOME TAX AND IN THE CONFIRMATION THEIR PERMANENT ACCOUNT NUMBERS ARE DULY GIVEN. 4. WITH REGARD TO THE CHEQUE DEPOSITED BUT RETURNED UNCLEAR HE STATED THAT THIS FACT IS VERIFIABLE FROM THE BANK STATEMENT ITS ELF. WITH REGARD TO THE CREDIT ON ACCOUNT OF INTEREST ON SAVING ACCOUNT HE FAIRLY ADMITTED THAT THE SAME IS TAXABLE. SIMILARLY IN RESPECT OF OTHER CREDITS H E FAIRLY ADMITTED THAT WHEN THE ASSESSEE IS UNABLE TO GIVE ANY SPECIFIC EXPLANATION OF THE CREDIT THE ADDITION FOR THE SAME IS TO BE SUSTAINED. YEAR-WISE BREAK UP OF THE BANK ACCOUNT AS FURNISHED BY THE ASSESSEE IS ENCLOSED HEREWITH AS A NNEXURE-A1 AND A2. 5. WITH REGARD TO THE MARRIAGE EXPENSES IT IS STAT ED BY THE LEARNED COUNSEL THAT IN THE GUJARATI COMMUNITY THERE IS A TRADITION OF GROUP MARRIAGE WHEN LARGE NUMBER OF MARRIAGES TAKES PLACE SIMULTANEOUSL Y. SUCH GROUP MARRIAGE IS CONDUCTED BY THE PATEL SOCIETY AND THE EXPENDITURE OF SUCH MARRIAGE IS ALSO BORNE BY THE SOCIETY. SON AND DAUGHTER OF THE ASSE SSEE WERE ALSO MARRIED IN SUCH GROUP MARRIAGES. THAT THE AO CONSIDERED THE S TATEMENT OF THE ASSESSEES WIFE IN ISOLATION WITHOUT CONSIDERING THE STATEMENT OF THE ASSESSEE. HE THEREFORE SUBMITTED THAT THE ADDITION MADE BY THE A O ON THE GROUND OF UNEXPLAINED MARRIAGE EXPENSES IS UNCALLED FOR. THE SAME SHOULD BE DELETED. SHRI RANCHHODBHAI J. PATEL VS. ACIT BARODA -4- IN ALTERNATIVE HE HAS STATED THAT THE ESTIMATE OF THE MARRIAGE EXPENSES MADE BY THE AO IS VERY EXCESSIVE AND THE SAME SHOULD BE RED UCED REASONABLY. 6. WITH REGARD TO THE ADDITION ON ACCOUNT OF INTERE ST ON LOANS TO SURESHBHAI AND SABRI CHEMICALS IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THE FINANCIAL CONDITIONS OF THE DEBTORS HAVE BECOME BAD. THE ASS ESSEE HAS NOT RECEIVED BACK THE PRINCIPAL AMOUNT TILL DATE. NO INTEREST IS RECE IVED BY THE ASSESSEE IN THE YEAR UNDER APPEAL OR IN ANY OF THE SUBSEQUENT YEARS. HE THEREFORE STATED THAT WHEN THE PRINCIPAL ITSELF HAS BECOME BAD THERE WAS NO H OPE OF RECOVERING THE ACCRUED INTEREST THEREON. THEREFORE THE ADDITION MADE BY THE AO ON ACCOUNT OF ACCRUED INTEREST SHOULD BE DELETED. 7. THE LEARNED DR ON THE OTHER HAND RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. HE HAS STATED THAT THE ADDITION ON ACCOUNT OF CREDIT IN THE BANK ACCOUNTS MARRIAGE EXPENSES ACCRUED INTEREST ON LOANS TO OTHERS SHOULD BE CONFIRMED. HE ALSO STATED THE ADDITIONAL EVIDENCE F URNISHED BY THE ASSESSEE IN THE NATURE OF CONFIRMATION OF THE ALLEGED CREDITORS SHOULD NOT BE ADMITTED. HOWEVER HE ALTERNATIVELY SUBMITTED THAT IF THE ADD ITIONAL EVIDENCES ARE ADMITTED THE MATTER SHOULD GO BACK TO THE FILE OF THE AO SO THAT HE GETS AN OPPORTUNITY TO EXAMINE SUCH EVIDENCE. 8. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH T HE SIDES AND PERUSED MATERIAL PLACED BEFORE US. WE ARE OF THE OPINION THAT THE MATTER NEEDS RE- EXAMINATION AT THE END OF THE AO. THE AO HAS NOT E XAMINED WHETHER THE DIVIDEND INCOME IS TAXABLE OR NOT IN THE RESPECTIVE YEARS. SIMILARLY THE ASSESSEES EXPLANATION WITH REGARD TO THE LOAN WAS DENIED ON THE GROUND THAT DURING THE COURSE OF STATEMENT IN REPLY TO QUESTION NO.14 THE ASSESSEE HAS SPECIFICALLY DENIED TO HAVE RECEIVED ANY LOAN BY HI MSELF OR ANY FAMILY MEMBERS. HOWEVER IT IS CONTENDED BY THE LEARNED C OUNSEL THAT THE LOAN WAS RECEIVED BY CHEQUE WHICH IS DULY REFLECTED IN THE A SSESSEES BANK ACCOUNT AS WELL AS THE BANK ACCOUNT OF THE LENDER. IT WAS ALS O STATED BY THE LEARNED SHRI RANCHHODBHAI J. PATEL VS. ACIT BARODA -5- COUNSEL THAT DURING THE COURSE OF SEARCH AT THE ASS ESSEES PREMISES HE WAS MENTALLY UPSET AND THEREFORE COULD NOT REPLY TO THE QUESTIONS PUT TO HIM BY THE AUTHORIZED OFFICERS CORRECTLY. IN OUR OPINION THE CONTENTION OF THE ASSESSEE NEEDS VERIFICATION. IF THE AMOUNT IS RECEIVED BY T HE CHEQUE THEN THE CONTENTION OF THE ASSESSEE THAT THIS IS THE LOAN TAKEN FROM OT HER PERSONS CANNOT BE IGNORED WITHOUT FURTHER VERIFICATION. THEREFORE THE AO SH OULD ALLOW ADEQUATE OPPORTUNITY TO THE ASSESSEE TO PRODUCE NECESSARY EV IDENCE IN SUPPORT OF HIS CLAIM THEREAFTER HE SHOULD PASS A SPEAKING ORDER CONSIDERING ALL SUCH EVIDENCES. HOWEVER WE MAY VERIFY THAT AS PER SECT ION 68 ONUS TO PROVE THE CREDIT IS UPON THE ASSESSEE. THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE MARRIAGE EXPENSES ALSO NEEDS FURTHER VERIFICATION A T THE END OF THE AO. SIMILARLY THE CONTENTION OF ASSESSEE THAT THE AMOU NT ADVANCED TO SURESHBHAI AND SABRI CHEMICALS HAS BECOME BAD AND THEREFORE NO INTEREST ACCRUED THEREON ALSO REQUIRE VERIFICATION. IN VIEW OF THE ABOVE W E SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW EXCEPT IN RESPECT OF ADDITIONS OF THE AMOUNTS WHICH ARE NOT PRESSED BY THE LEARNED COUNSEL AT THE TIME OF HEARI NG. ITA.NO.3009 TO 3015/AHD/2009 9. ALL THESE APPEALS ARE AGAINST THE LEVY OF PENALT Y UNDER SECTION 271(1)(C) OF THE ACT. WHILE ADJUDICATING THE QUANTUM APPEALS IN ITA.NO.3350 TO 3356/AHD/2007 ABOVE WE HAVE SET ASIDE THE ORDERS O F THE AUTHORITIES BELOW WITH REFERENCE TO MOST OF THE ADDITIONS MADE BY THE AO ON WHICH PENALTY IS LEVIED UNDER SECTION 271(1)(C). IN THE ABOVE CIRCU MSTANCES IT WOULD MEET ENDS OF JUSTICE IF WE SET ASIDE THE PENALTY ORDERS IN AL L THESE YEARS BACK TO THE FILE OF AO. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE AU THORITIES BELOW IN ALL YEARS IN RESPECT OF PENALTY U/S.271(1)(C) TO THE FILE OF AO. WE DIRECT HIM TO RE- ADJUDICATE THE ISSUE OF LEVY OF PENALTY UNDER SECTI ON 271(1)(C) AFTER THE FINAL DETERMINATION OF INCOME AS PER OUR ORDERS IN ITA NO S.3350 TO 3356/AHD/2007. SHRI RANCHHODBHAI J. PATEL VS. ACIT BARODA -6- 10. IN THE RESULT ITA NOS.3350 TO 3356/AHD/2007 AR E DEEMED TO BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND ITA.N O.3009 TO 3015/AHD/2007 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE ONLY . ANNEXURE-A1 AND A2 REFERRED TO IN PARA-4 (ABOVE) FO RM PART OF THIS ORDER. ORDER PRONOUNCED IN OPEN COURT ON 14 TH MAY 2010. SD/- SD/- (BHAVESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD PLACE : AHMEDABAD DATE : 14 - 0 5 - 20 1 0