KIRIT D. MEHTA, MUMBAI v. ITO 25(3)(2), MUMBAI

ITA 4034/MUM/2009 | 2005-2006
Pronouncement Date: 28-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 403419914 RSA 2009
Assessee PAN AADPM5167H
Bench Mumbai
Appeal Number ITA 4034/MUM/2009
Duration Of Justice 1 year(s) 6 month(s) 29 day(s)
Appellant KIRIT D. MEHTA, MUMBAI
Respondent ITO 25(3)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-01-2011
Assessment Year 2005-2006
Appeal Filed On 29-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ITA. NO. 4034/MUM/2009 ASSESSMENT YEAR 2005-2006 KIRIT D. MEHTA MUMBAI 400 101 PAN AADPM5167H VS. ITO 25 (3) (2) MUMBAI (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI HITEN DEDHIA FOR RESPONDENT : SHRI R.K. SRIVASTAVA ORDER PER D. MANMOHAN V.P. 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER PASS ED BY THE CIT(A)-XXVI MUMBAI AND IT PERTAINS TO THE ASSESSME NT YEAR 2005- 2006. AS COULD BE NOTICED FROM THE GROUNDS OF APPEA L ANNEXED TO FORM 36 THERE ARE SEVEN GROUNDS OF APPEAL OUT OF W HICH GROUND NO. 7 IS GENERAL IN NATURE AND GROUND NO.3 IS NOT PRESSED BY THE LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE. WE T HEREFORE AFFIRM THE ORDER OF THE LEARNED CIT(A) WITH REGARD TO ADDITION OF RS.72 000/- AND PROCEED TO DISPOSE OF THE GROUND NOS. 1 2 4 5 AN D 6 IN SERIATIM. 2. THE ASSESSEE AN INDIVIDUAL CLAIMED TO HAVE CA RRIED ON THE BUSINESS OF DEALING IN ENGINEERING GOODS. IN RE SPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R CONSIDERATION ASSESSEE DECLARED TOTAL INCOME OF RS.4 63 515/- WHI CH COMPRISES OF BUSINESS INCOME AND INCOME FROM OTHER SOURCES. WHEN THE CASE WAS TAKEN-UP FOR SCRUTINY THE ASSESSING OFFICER CALLED FOR SEVERAL DETAILS AND IN THE ABSENCE OF PROPER RESPONSE HE COMPLETE D THE ASSESSMENT ON A TOTAL INCOME OF RS.44 36 350/- BY MAKING VARIO US ADDITIONS. 2 3. FACTS OF THE CASE ARE STATED IN BRIEF. ASSESSEE HEREIN IS A PROPRIETOR OF A CONCERN RUN IN THE NAME AND STYLE O F M/S. MARKETING ENGINEERS. THOUGH THE AUDIT REPORT MENTIONS THE NAT URE OF BUSINESS AS PROPRIETORSHIP THE ASSESSEE DID NOT FURNISH AN Y INFORMATION SPECIFYING THE EXACT NATURE OF BUSINESS DESPITE TW O SEPARATE QUESTIONNAIRES ISSUED BY THE ASSESSING OFFICER. HOW EVER BASED UPON FEW SAMPLE BILLS OF PURCHASE FILED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASSUMED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING ON A SMALL SCAL E MANUFACTURING OF ENGINEERING GOODS AND ITS EXPORTS AS WELL. IN RESPE CT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-2006 ASSE SSEE DECLARED TOTAL TURNOVER OF RS.79 87 879/- ON WHICH GROSS PRO FIT OF RS.13 24 973/- WAS SHOWN WHICH WORKS OUT TO 16.60% OF THE TURNOVER AND NET PROFIT THEREON WAS DECLARED AT RS.3 37 747/ -. 4. ADMITTEDLY THERE WAS POOR RESPONSE TO THE NOTI CES ISSUED BY THE ASSESSING OFFICER FROM TIME TO TIME AND EVEN THE BASIC DETAILS WERE FURNISHED ONLY IN RESPONSE TO THE SHOW CAUSE N OTICE ISSUED UNDER SECTION 271 (1) (B) OF THE ACT. UNDER THESE C IRCUMSTANCES THE ASSESSING OFFICER EXAMINED THE MATERIAL BROUGHT ON RECORD WHEREBY HE NOTICED THAT DURING THE YEAR UNDER CONSIDERATION TOTAL PURCHASES WERE TO THE TUNE OF RS.73 73 947/- AS AGAINST SUNDR Y CREDITORS AT RS.80 71 879/-. FOR THE IMMEDIATELY PRECEDING YEAR SUNDRY OUTSTANDING CREDITS WERE TO THE TUNE OF RS.71 54 35 6/- WHEREAS TOTAL PURCHASES WERE TO THE TUNE OF RS.55 11 933/-. THE A SSESSEE HAS NOT DISCLOSED THE NAMES OF THE OUTSTANDING CREDITORS AN D MERELY DIRECTED THE ASSESSING OFFICER TO REFER TO BALANCE SHEET WI THOUT FURNISHING NECESSARY DETAILS. UNDER THE CIRCUMSTANCES OF THE C ASE THE ASSESSING OFFICER ASSUMED THAT SUNDRY CREDITORS TO THE EXTEN T OF AT LEAST RS.23 38 992/- ARE CARRIED FORWARD BALANCES WITHOU T ANY FURTHER PURCHASES DURING THE CURRENT YEAR AND THE RATIO OF PURCHASES TO OUTSTANDING DEBTORS AND SUNDRY CREDITORS IS TOO LOW AND NOT USUALLY SEEN IN BUSINESS. IN THE ABSENCE OF DETAILS SUNDRY CREDITORS TO THE 3 EXTENT OF RS.23 38 992/- ARE BROUGHT TO TAX UNDER S ECTION 41 OF THE I.T. ACT. 5. SIMILARLY WITH REGARD TO TOTAL EXPENDITURE OF RS.13 70 829/- SHOWN IN P & L ACCOUNT THE ASSESSEE HAVING NOT FURNISHED DETAILS OF EXPENSES WITH SUPPORTING EVIDE NCE THE ASSESSING OFFICER CONCLUDED THAT PART OF THE EXPENSES DESERVE TO BE DISALLOWED AS HAVING NO BUSINESS CONNECTION. HE ESTIMATED THE DIS ALLOWANCE AT 30% OF THE TOTAL CLAIM. 6. UNDER THE HEAD CONSULTANCY CHARGES AN AMOUNT OF RS.72 000/- WAS SHOWN TO HAVE BEEN PAID TO SHRI HAR SHAD MEHTA BUT DETAILS IN THIS REGARD WERE NOT FURNISHED. IN THE A BSENCE OF SUCH DETAILS ASSESSING OFFICER INVOKED THE PROVISIONS O F SECTION 40(A)(IA) OF THE ACT AND BROUGHT TO TAX A SUM OF RS.72 000/-. 7. SIMILARLY ASSESSEE WAS REQUIRED TO FILE THE DE TAILS OF LOANS ACCEPTED DURING THE YEAR ALONG WITH CONFIRMATIONS FROM THE CREDITORS. ASSESSEE DID NOT FURNISH NECESSARY DETAILS IN RESPO NSE TO THE INITIAL NOTICE BUT IN RESPONSE TO THE SECOND NOTICE THE ASS ESSEE STATED THAT LOAN OF RS.60 000/- WAS TAKEN IN CASH FROM FOUR CRE DITORS I.E. RS.15 000/- EACH. ASSESSEE MERELY FURNISHED NAMES O F TWO OUT OF FOUR CREDITORS AND IN RESPECT OF OTHER CREDITORS THE ASS ESSEE HAS PUT A QUESTION-MARK UNDER THE NAMES COLUMN. SINCE ONUS LI ES UPON ASSESSEE TO PROVE GENUINENESS OF THE CREDITS FOUND IN THE BOOKS IN THE ABSENCE OF DISCHARGING THE PRIMARY ONUS THE ASSESS ING OFFICER MADE AN ADDITION OF RS.1 10 000/- UNDER SECTION 68 OF TH E I.T. ACT. 8. ON PERUSAL OF THE CAPITAL ACCOUNT ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAD EARNED LONG TERM CAPI TAL GAIN OF RS.10 40 590/- ON SALE OF AN INDUSTRIAL GALA. HOWEV ER CAPITAL GAIN THEREON WAS NOT DISCLOSED IN THE RETURN OF INCOME PRESUMABLY ON THE GROUND THAT IT WAS AN EXEMPT INCOME. WHEN THE ASSES SEE WAS CONFRONTED ABOUT THIS IT WAS SUBMITTED THAT THE G AIN WAS INVESTED IN 4 CONSTRUCTION OF A BUNGALOW AND THEREBY THE ASSESSEE IS ENTITLED TO EXEMPTION FROM CAPITAL GAINS TAX. THOUGH THE ASSESS ING OFFICER CALLED FOR THE DETAILS OF BUNGALOW CONSTRUCTED ASSESSEE D ID NOT FURNISH DETAILS EXCEPT FILING A COMMENCEMENT CERTIFICATE A ND OCCUPATION CERTIFICATE DULY ISSUED BY THE LOCAL AUTHORITY. THE REUPON THE ASSESSEE WAS DIRECTED TO FURNISH COPIES OF APPROVED PLANS. A SSESSEE MERELY FURNISHED OPENING BUILDING ACCOUNT AND THE TOTAL OF ADDITIONS DURING THE YEAR ALONG WITH SOURCE OF INVESTMENT. 9. ASSESSING OFFICER NOTICED THAT UNDER THE HEAD CAPITAL GAINS THE ASSESSEE DID NOT DISCLOSE THE IMPUGNED S OURCE OF INCOME AND THOUGH THE ASSETS WERE TO THE TUNE OF RS.1.89 C RORES IT WAS NOT REFLECTED IN HIS PERSONAL BALANCE SHEET. ON THE TOP OF IT AT THE CORNER OF THE COPY OF THE PERSONAL BALANCE SHEET AND CAPIT AL ACCOUNT A REMARK NOT TO FILE WAS FOUND. THEREFORE ASSESSIN G OFFICER ASSUMED THAT THE ASSESSEE DELIBERATELY WITHHELD DETAILS OF LONG TERM CAPITAL GAINS IN THE RETURN OF INCOME. IT IS ALSO NOT OUT O F PLACE TO MENTION THAT THE ASSESSEE DID NOT CLAIM ANY DEDUCTION/EXEMP TION IN RESPECT OF THE AFOREMENTIONED LONG TERM CAPITAL GAINS. UNDER T HE CIRCUMSTANCES THE ASSESSING OFFICER HAD TO CONSIDER THE ISSUE WIT H REGARD TO ENTITLEMENT OF DEDUCTION IN RESPECT OF INCOME NOT D ISCLOSED IN THE RETURN AT ALL. PLACING RELIANCE UPON THE DECISION O F THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF USHA GUPTA 204 CTR 399 THE ASSESSING OFFICER OBSERVED THAT IN THE ABSENCE OF A NY DOCUMENT ANNEXED IN RESPECT OF CLAIM FOR DEDUCTION UNDER SEC TION 54F MERE CLAIM AT A LATER STAGE NEED NOT BE CONSIDERED. IN O THERWORDS IT IS THE DUTY OF THE ASSESSEE TO DISCLOSE EVERY INCOME EARNE D BY HIM. 10. WITHOUT PREJUDICE TO THE ABOVE THE ASSESSEE D ID NOT FURNISH FULL DETAILS OF INVESTMENT OF THE CAPITAL G AINS IN THE NEW ASSET AND DID NOT PROVE THAT THE ASSESSEE HAD NO OTHER RE SIDENTIAL HOUSE OTHER THAN THE NEW ASSET AND THE CONSTRUCTION TOOK PLACE WITHIN A PERIOD OF 3 YEARS AFTER THE DATE OF TRANSFER. FACTS OF THE INSTANT CASE SUGGESTS THAT ASSESSEE CONSTRUCTED A BUILDING CONSI STING OF MULTIPLE/ 5 SEPARATE UNITS CAPABLE OF HOLDING THEM AS SEPARATE RESIDENTIAL FLATS IN WHICH EVENT ASSESSEE IS NOT ENTITLED TO DEDUCTIO N EVEN ON THIS ACCOUNT. THUS ASSESSING OFFICER BROUGHT TO TAX A S UM OF RS.10 40 590/-. LASTLY THE ASSESSING OFFICER OBSE RVED THAT ASSESSEE IS ALREADY HOLDING A FLAT KNOWN AS PRABHU KUNJ AN D HENCE HE IS NOT ENTITLED TO CLAIM EXEMPTION UNDER SECTION 54F OF TH E ACT. 11. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A) WHEREIN IT WAS CONTENDED THAT DETAILS OF CRE DITORS WERE FILED BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSM ENT PROCEEDINGS AND HENCE THERE IS NO CASE FOR MAKING AN ADDITION OF RS.23 38 992/-. IN SUPPORT OF HIS CLAIM THE ASSESSEE FILED PAPER B OOK CONSISTING OF LETTERS ADDRESSED TO THE ASSESSING OFFICER AND OTHE R SUPPLEMENTARY EVIDENCE. THESE DETAILS WERE FORWARDED TO THE ASSES SING OFFICER FOR HIS COMMENTS. IN THE REMAND REPORT THE ASSESSING OFFIC ER OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE. IN THIS REGARD I T WAS CONTENDED THAT ASSESSEE WAS GIVEN AMPLE OPPORTUNITY TO PRODUCE DET AILS BUT ASSESSEE NEVER AVAILED OPPORTUNITY AND DELIBERATELY AVOIDED FILING OF THE DETAILS. IT WAS ALSO CONTENDED THAT IT IS NOT A FIT CASE FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF I.T. RULES SI NCE THE ASSESSING OFFICER FOLLOWED THE PRINCIPLE OF AUDI ULTERM PART EM BY GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE; HOWEVER ASSESSEE DELIBERATELY AVOIDED SUBMISSION OF DETAILS WITH LATENT INTENTION TO AVOID FURTHER INVESTIGATION/CROSS-EXAM INATION. 12. ON RECEIPT OF THE COMMENTS FROM THE ASSESSING OFFICER ASSESSEE WAS GIVEN OPPORTUNITY TO FILE HIS REPLY. I N RESPONSE THERETO ASSESSEE CONTENDED THAT NONE OF THE DOCUMENTS FILED ON 23-9-2006 CAN BE CLASSIFIED AS ADDITIONAL EVIDENCE EXCEPT SOM E CERTIFICATES FOR PROFESSIONAL FEES PAID TO SHRI HITEN DEDHIA. IT WAS ALSO SUBMITTED THAT IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 143 (2) OF THE ACT THE ASSESSEE ATTENDED AND DISCUSSED WITH THE ASSESSING OFFICER. THE CASE WAS ADJOURNED SINCE THE ASSESSING OFFICER WAS BUSY WITH TIME BARRING MATTERS. THEREAFTER NEW INCUMBENT HAD TAKENOVER CH ARGE WHO WAS 6 ALSO NOT KEEPING GOOD HEALTH. UNDER THESE CIRCUMSTA NCES CERTAIN DETAILS WERE FILED AT THE INITIAL STAGE AND FURTHER DETAILS WERE FILED AS AND WHEN CALLED UPON BY THE ASSESSING OFFICER. IT W AS ALSO CONTENDED THAT EXCEPT THE PAYMENT MADE TO THE CREDITOR IN THE SUBSEQUENT YEAR OTHER PAPERS WERE ALREADY FURNISHED BEFORE THE ASSE SSING OFFICER. ASSESSEE HAD FILED A LIST OF SUNDRY CREDITORS AS ON 31-3-2005 ALONG WITH COPIES OF LEDGER ACCOUNT OF SOME PARTIES FROM WHOM PURCHASES WERE MADE. 13. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) CONCLUDED THAT SOME OF THE EVIDENCE/ DOCUMENTS WERE ALREADY AVAILABLE WITH THE ASSESSING OFFICER EXCEPT THE DETAILS OF PAYMENT OF SUCH CREDITORS IN THE SUBSEQUENT YEARS. SINCE THE ASSESSING OFFICER HAD NOT COMMENTED ON THE MERITS O F THESE DETAILS AND MERELY RAISED A TECHNICAL OBJECTION UNDER RULE 46A THE LEARNED CIT(A) CHOSE TO ADMIT ADDITIONAL EVIDENCE IN THE IN TERESTS OF SUBSTANTIAL JUSTICE AND CONSIDERED THE MATTER ACCOR DINGLY. 14. AS REGARDS THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 41 OF THE ACT LEARNED CIT(A) OBSERVE D THAT PURCHASES FROM SOME OF THE PARTIES WERE MADE DURING THE YEAR AND CONSIDERATION WAS PAID TO THE SELLER THROUGH CHEQUES. IN SOME CAS ES THOUGH PURCHASES WERE MADE IN THIS YEAR PAYMENTS WERE NOT MADE IN THE YEAR UNDER CONSIDERATION. HE HAS DIVIDED THE LIST OF CRE DITORS INTO VARIOUS CATEGORIES. AS REGARDS CREDITORS TO THE TUNE OF RS. 8 86 141/- THEY ARE NOT SUPPORTED BY BASIC DETAILS SUCH AS NAME OF THE PARTIES COPIES OF ACCOUNTS WITH ADDRESSES. IN THE ABSENCE OF ANY OF T HE DETAILS AND EVIDENCE ADDITION TO THE EXTENT OF RS.8 86 141/- W AS CONFIRMED. CREDIT IN THE NAME OF M/S. ASIATRONICS-OLD AS ON 01 -4-2004 WAS SHOWN AT RS.3 46 263/-. DURING THE FINANCIAL YEAR U NDER REFERENCE NEITHER THE ASSESSEE TRANSACTED WITH THE PARTY NOR ANY PAYMENT MADE. IT WAS NOT EXPLAINED AS TO WHY THE CREDIT WAS OUTST ANDING SINCE MANY YEARS AND NOT PAID EVEN TILL THE END OF NEXT FINANC IAL YEAR. ASSESSEE FILED CONFIRMATION LETTER FROM THE ALLEGED CREDITOR WHICH WAS SIGNED BY 7 A PERSON NAMED SMT. JAYALAXMI GARODIA BUT NEITHER PAN NOR ADDRESS OF THE CREDITOR IS GIVEN. THEREFORE GENUIN ENESS OF THE CREDITOR IS NOT ESTABLISHED AND HENCE IMPUGNED ADDITION WAS CONFIRMED. SIMILARLY SUNDRY CREDITORS IN THE NAME OF M/S. ASI ATRONICS-NEW IS ALSO AN OPENING BALANCE AS ON 1-4-2004. HERE AGAIN COPY OF THE ACCOUNT IS SIGNED BY ONE WHOSE NAME IS NOT IDENTIFI ABLE. THOUGH THE ASSESSEE CLAIMED TO HAVE MADE THE PAYMENT SUBSEQUEN TLY NO PROOF THEREOF WAS FURNISHED. THEREFORE ADDITION OF RS.2 13 816/- WAS CONFIRMED. CREDIT IN THE NAME OF POWERTRONICS IS AN OPENING BALANCE AS ON 1-4-2004 AND IT WAS NOT REPAID TILL DATE. IT IS ALSO NOT KNOWN FOR HOW MANY YEARS THIS CREDITOR IS OUTSTANDING. THEREF ORE ADDITION OF RS.2 50 000/- WAS CONFIRMED BY THE LEARNED CIT(A). SIMILARLY CREDIT IN THE NAME OF S.P. ASSOCIATES (RS.29 056/-) AND SP ECTRUM PLAST (RS.5250/-) ARE THE OPENING BALANCES AS ON 1-4-2004 AND THERE ARE NO TRANSACTIONS IN THIS YEAR. NO CONFIRMATION OF THE C REDITORS WERE FILED BY THE ASSESSEE. THEREFORE THE SAME WERE HELD TO BE N OT GENUINE AND ACCORDINGLY ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 41 OF THE ACT WAS CONFIRMED. 15. WITH REGARD TO ADHOC DISALLOWANCE OF EXPENDITU RE DEBITED TO THE P & L ACCOUNT THE CASE OF THE ASSESSEE WAS THAT ALL THE DETAILS WERE ENCLOSED TO THE FORWARDING LETTER ADDRESSED TO THE ASSESSING OFFICER AND THOUGH THE LEARNED CIT(A) CALLED FOR T HE REMAND REPORT THE ASSESSING OFFICER DID NOT OPT TO COMMENT ON THE MERITS OF THE DETAILS AND EXPENDITURE AND HENCE IT IS NOT A FIT CASE FOR MAKING AN ADHOC DISALLOWANCE OF 30% OF THE TOTAL EXPENDITURE. 16. IN THIS REGARD LEARNED CIT(A) OBSERVED THAT T HE ASSESSEE HAD FILED BROAD HEADING WISE DETAILS OF THE EXPENDI TURE UNDER THE HEAD ADVERTISEMENT CAR EXPENSES BANK CHARGES COMPUT ER EXPENSES CONSULTANCY CHARGES ETC. THESE DETAILS ARE NOT SUP PORTED BY COPIES OF LEDGER ACCOUNT AND NO INDEPENDENT EVIDENCE IN THE F ORM OF INVOICE/BILLS WERE FURNISHED. HOWEVER TAKING AN OV ERALL VIEW OF THE MATTER LEARNED CIT(A) WAS OF THE VIEW THAT DISALLO WANCE MADE BY THE 8 ASSESSING OFFICER AT 30% OF THE TOTAL EXPENDITURE I S ON HIGHER SIDE. IN THE INTERESTS OF SUBSTANTIAL JUSTICE HE RESTRICTED THE DISALLOWANCE TO 20% OF THE TOTAL EXPENDITURE (EXCLUDING CONSULTANCY CHARGES OF RS.72000/-). THUS HE CONFIRMED THE ADDITION OF RS.2 59 766/- IN THE PLACE OF RS.4 11 249/-. 17. DISALLOWANCE OF RS.72 000/- ON ACCOUNT OF NON- DEDUCTION OF TAX (ADDITION MADE UNDER SECTION 40(A)(IA) OF TH E ACT) WAS ALSO CONFIRMED BY THE LEARNED CIT(A) SINCE THERE WAS A D EFAULT ON THE PART OF THE ASSESSEE. 18. AS REGARDS ADDITION OF RS.1 10 000/- UNDER SEC TION 68 OF THE ACT THE CASE OF THE ASSESSEE WAS THAT PART OF THE LOAN WAS TAKEN FROM NISHA MEHTA AND JITENDRA ACHARYA AND ANOTHER S UM OF RS.50 000/- WAS ON ACCOUNT OF TRANSFER FROM M/S. SH AH & MODI DEVELOPER TO JAYALAXMI GARODIA WHICH IS REFERRED TO IN THE STATEMENT GIVEN TO ASSESSING OFFICER AS CASH LOAN. 19. LEARNED CIT(A) OBSERVED THAT CONFIRMATION LETT ERS FROM NISHA MEHTA AND JITENDRA ACHARYA WERE NOT FILED BEF ORE THE ASSESSING OFFICER AND THEY DO NOT PRIMA FACIE DESERVE TO BE A DMITTED AS ADDITIONAL EVIDENCE. EVEN OTHERWISE NEITHER THE GE NUINENESS OF THE TRANSACTION NOR THE SOURCE OF CASH DEPOSIT IS EXPLA INED. ACCORDINGLY CASH LOAN TO THE EXTENT OF RS.30 000/- WAS CONFIRME D. IN RESPECT OF TWO OTHER PARTIES PARTIES COULD NOT BE IDENTIFIED AND THEREFORE THE ASSESSING OFFICER CONFIRMED DISALLOWANCE OF RS.30 0 00/-. AS REGARDS LOAN OF RS.50 000/- SHOWN AS RECEIVED FROM JAYALAXM I GARODIA NEITHER CONFIRMATION NOR CREDITWORTHINESS AND GENUI NENESS OF THE TRANSACTION WAS PROVED BY THE ASSESSEE. THEREFORE THE SAID ADDITION WAS CONFIRMED BY THE LEARNED CIT(A). 20. REGARDING ADDITION OF RS.10 40 590/- REFERABL E TO THE AMOUNT RECEIVED ON SALE OF GALA THE CASE OF TH E ASSESSEE WAS THAT THE SAME WAS INVESTED IN CONSTRUCTION OF A RESIDENT IAL HOUSE AND 9 HENCE SALE PROCEEDS ARE EXEMPT FROM LEVY OF TAX UN DER SECTION 54 OF THE I.T. ACT. RELIANCE WAS PLACED UPON THE DECISION OF THE ITAT HYDERABAD BENCH IN THE CASE OF PRABHANDAM PRAKASH V S. ITO 22 SOT 58 (HYD.) IN SUPPORT OF HIS CONTENTION THAT EXEMPTI ON IS ALLOWABLE EVEN ON CONSTRUCTION OF MULTIPLE UNITS OF RESIDENTI AL HOUSE. THE LEARNED CIT(A) HOWEVER UPHELD THE ORDER OF THE AS SESSING OFFICER BY OBSERVING AS UNDER : I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE/APPELLANT AND ALSO GONE THROUGH THE REASON S GIVEN BY THE ASSESSING OFFICER IN THE ORDER WHILE M AKING THE ADDITION OF LTCG OF RS.10 40 590/-. IN THE DETA ILED DISCUSSION IN THE ORDER THE ASSESSING OFFICER HAS PROVED BEYOND DOUBT THAT THE ASSESSEE/APPELLANT HAS NOT RETURNED LTCG ON SALE OF INDUSTRIAL GALA AND NO CLA IM FOR EXEMPTION U/S. 54F WAS MADE. THE ASSESSING OFFICER HAS ALSO RELIED ON THE JUDGMENT OF RAJASTAN HIGH COURT AND CONCLUDED THAT NO DEDUCTION IS ALLOWABLE IF THE SAM E IS NOT CLAIMED IN THE RETURN OF INCOME FILED WITH THE DEPA RTMENT. THE ASSESSING OFFICER HAS ALSO EXAMINED THE CLAIM O F ASSESSEE/APPELLANT ON MERITS ALTERNATIVELY U/S. 5 4F OF THE I.T. ACT AND CONCLUDED THAT THE ASSESSEE/APPELL ANT HAS CONSTRUCTED GROUND + SEVEN STORIES WHICH ARE MULTIP LE RESIDENTIAL UNITS PROBABLY MEANT FOR SALE. ACCORDIN GLY INVESTMENT IN CONSTRUCTION OF MULTIPLE RESIDENTIAL FLAT OUT OF CAPITAL GAIN IS PRIMA FACIE DOES NOT SATISFY THE CO NDITION LAID DOWN IN THE PROVISIONS OF SECTION 54F OF THE A CT. IT IS ALSO MENTIONED BY THE ASSESSING OFFICER THAT THE ASSESSEE/APPELLANT IS OWNING MORE THAN ONE PROPERTY WHICH INCLUDES A FLAT IN THE PRABHU KUNJ AND OTHER RESIDENTIAL AND BUSINESS UNITS. THE ASSESSING OFFIC ER AFTER EXAMINING ALL THE FACTS OF THE CASE HAS HELD THAT T HE ASSESSEE/APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/ S. 54F OF 10 THE ACT AND ACCORDINGLY THE LTCG TO THE EXTENT OF RS.10 40 590/- IS TAXABLE UNDER THE LONG TERM CAPIT AL GAIN WHICH WAS NEVER DISCLOSED BY THE ASSESSEE/APPELLANT IN THE RETURN OF INCOME. THE FACTS OF THE CASE HAVE BE EN DISCUSSED IN DETAIL IN THE ORDER AND I AGREE WITH T HE CONTENTIONS OF THE ASSESSING OFFICER THAT THE ASSESSEE/APPELLANT HAS TAXABLE LTCG TO THE EXTENT O F RS.10 40 590/- AND NO DEDUCTION U/S. 54F IS AVAILAB LE TO THE ASSESSEE/APPELLANT. THE RELIANCE BY THE ASSESSEE/APPELLANT ON THE CASE DECIDED BY THE HONB LE HYDERABAD BENCH OF THE ITAT IS MISPLACED AS FACTS A RE DISTINGUISHABLE AND CLEARLY DIFFERENT FROM THE INST ANT CASE OF THE ASSESSEE/APPELLANT. THE CASE DECIDED BY THE HONBLE ITAT HYDERABAD BENCH WAS ABOUT PURCHASE OF CONTIGUOUS FLATS IN SAME BUILDING BUT IN THE CASE O F THE ASSESSEE/APPELLANT CONSTRUCTION OF INDEPENDENT UNI TS COMPRISING OF GROUND + SEVEN FLOORS HAS TAKEN PLACE WHICH ARE MEANT FOR SALE AND ENTIRELY NOT FOR THE PURPOSE OF RESIDENTIAL HOUSE OF THE ASSESSEE/APPELLANT. THE FA CTS OF THE CASE AS RELIED UPON BY THE ASSESSEE/APPELLANT A RE DIFFERENT FROM THE FACTS OF THE ASSESSEE/APPELLANT S CASE AND THEREFORE RELIANCE IS COMPLETELY MISPLACED. IN THE RESULT THE ADDITION MADE BY THE ASSESSING OFFICER AS LTCG OF RS.10 40 590/- IS CONFIRMED. THE GROUND OF APPEA L IS DISMISSED. 21. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) ASSESSEE IS IN APPEAL BEFORE US. WE HAVE HEARD THE LEARNED COUN SEL APPEARING ON BEHALF OF THE ASSESSEE AS WELL AS THE LEARNED DR IN THIS REGARD AND CAREFULLY PERUSED THE RECORD. 22. GROUND NO.1 IS WITH REGARD TO CONFIRMATION OF THE ADDITION OF RS.17 30 528/- OUT OF WHICH ADDITION OF RS.8 86 141/- (REFERABLE TO THE SUNDRY CREDITORS WHOSE NAMES WERE NOT FURNISHED BY THE ASSESSEE) 11 WAS NOT PRESSED BY THE LEARNED COUNSEL AND ACCORDIN GLY THE SAME IS DISMISSED. 23. AS REGARDS THE BALANCE AMOUNT THE CASE OF THE ASSESSEE IS THAT THESE ARE BROUGHT FORWARD BALANCES AND THEREFO RE SECTION 41 (1) OF THE ACT WAS WRONGLY INVOKED BY THE ASSESSING OFF ICER. HOWEVER ON CAREFUL PERUSAL OF THE ORDERS OF THE ASSESSING OFFI CER AS WELL AS THE LEARNED CIT(A) INDICATE THAT THE ASSESSEE HAS NOT C OOPERATED WITH THE DEPARTMENTAL AUTHORITIES IN FURNISHING PROPER DETAI LS. WITH REGARD TO M/S. ASIA THRONICS-OLD ASSESSEE FILED CONFIRMATION LETTER STATED TO HAVE BEEN SIGNED BY MS. JAYALAXMI GARODIA BUT ADDR ESS OR PA NO. OF THE CREDITOR WAS GIVEN SO AS TO CROSS-VERIFY THE GE NUINENESS OF THE TRANSACTION. SIMILARLY CREDIT IN THE NAME OF M/S. ASIA THRONICS-NEW WAS ALSO NOT CROSS-VERIFIABLE SINCE THE ASSESSEE HA S FILED A COPY OF THE ACCOUNT STATED TO HAVE BEEN SIGNED BY SOME PERSON W HOSE NAME IS NOT IDENTIFIABLE AND NO OTHER INFORMATION IS SUPPLI ED BY THE ASSESSEE. EVEN WITH REGARD TO THE CREDITS IN THE NAME OF POWE R THRONICS AND S.P.ASSOCIATES AND SPECTRUM PLAST THE ASSESSEE DID NOT CHOOSE TO FURNISH NAME AND ADDRESS OF THE PARTIES AND CONFIRM ATION LETTERS SO AS TO CROSS-VERIFY AS TO WHETHER THE CREDITS ARE ST ILL OUTSTANDING OR NOT. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED IN AFFIRMING THE A CTION OF THE ASSESSING OFFICER. IN OTHERWORDS SECTION 41 OF THE ACT WAS CORRECTLY INVOKED IN THE PECULIAR CIRCUMSTANCES OF THE CASE. WE THEREFORE REJECT THE CONTENTION OF THE ASSESSEE. 24. AS REGARD GROUND NO.2 REFERABLE TO ADHOC DISA LLOWANCE OF RS.2 59 766/- THE CASE OF THE REVENUE IS THAT BASI C PARTICULARS WERE NOT FURNISHED EXCEPT BROAD HEAD-WISE DETAILS OF TH E EXPENDITURE. ON THE OTHER HAND LEARNED COUNSEL SUBMITTED THAT KEEPI NG IN MIND THE NATURE OF THE EXPENDITURE DISALLOWANCE AT 20% OF T HE TOTAL CLAIM IS EXCESSIVE. LEARNED COUNSEL ADVERTED OUR ATTENTION TO CERTAIN EXPENDITURE TO THE TUNE OF RS.7 81 640/- TO HIGHLIG HT THAT AN ADHOC DISALLOWANCE WAS MADE EVEN WITH REGARD TO CLAIM OF DEPRECIATION. 12 HOWEVER EVEN BEFORE US NO EVIDENCE WAS FURNISHED T O SHOW THE AVAILABILITY OF THE ASSETS (FOR PROVING CORRECTNES S OF CLAIM OF DEPRECIATION) AND BUSINESS NECESSITY TO INCUR SUCH EXPENDITURE. UNDER THESE CIRCUMSTANCES WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LEARNED CIT(A) AND THEREFORE REJECT GROUND NO. 3 OF THE ASSESSEE. 25. GROUND NO. 4 IS WITH REGARD TO CONFIRMATION OF ADDITION OF RS.1 10 000/- UNDER SECTION 68 OF THE ACT. OUT OF R S.1 10 000/- SOURCE OF A SUM OF RS.80 000/- WAS NOT ESTABLISHED BY THE ASSESSEE. IN OTHERWORDS CONFIRMATION LETTERS WERE ALSO NOT F ILED. IN FACT THE ASSESSEE DID NOT SERIOUSLY PRESS FOR CONSIDERATION THE ADDITION OF RS.80 000/-. THUS WE AFFIRM THE ADDITION OF RS. 80 000/-. HOWEVER AS REGARDS LOANS IN THE NAME OF MS. NISHA MEHTA (RS.1 5 000/-) AND SHRI JITENDRA ACHARYA (RS.15 000/-) IT WAS CONTENDED THA T CONFIRMATION LETTERS WERE FILED BEFORE THE CIT(A) WHO OUGHT TO H AVE ADMITTED THE SAME. LEARNED COUNSEL HAS ALSO SUBMITTED THAT IF AN OPPORTUNITY IS GIVEN ASSESSEE CAN PROVE THE IDENTITY AND CREDITWO RTHINESS OF THE PARTIES. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE ISSUE REQUIRES TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WHO IS DIRECTED TO TAKE INTO CONSIDERATION THE CONFIRMATION LETTERS FILED BEFORE THE CIT(A) AND TO RECONSIDER T HE SAME IN ACCORDANCE WITH LAW. 26. GROUND NO. 5 IN ASSESSEES APPEAL IS WITH REGA RD TO CORRECTNESS OF THE ADDITION OF RS.10 40 590/- MADE BY THE ASSESSING OFFICER. THE CASE OF THE ASSESSEE WAS THAT THOUGH A SPECIFIC CLAIM WAS NOT MADE BEFORE THE ASSESSING OFFICER IN THE EVENT OF UTILISATION OF SALE PROCEEDS FOR CONSTRUCTION OF ANOTHER RESIDENTI AL UNIT ASSESSEE WOULD AUTOMATICALLY BE ENTITLED TO EXEMPTION UNDER SECTION 54F OF THE ACT. CONSTRUCTION OF GROUND PLUS SEVEN STOREYED BUI LDING WAS INTENDED FOR RESIDENTIAL USE AND THEREFORE ASSESSE E IS ENTITLED TO EXEMPTION FROM CAPITAL GAINS. ON THIS ISSUE ALSO LE ARNED CIT(A) AS WELL AS ASSESSING OFFICER HAVE ANALYSED THE ASPECT THORO UGHLY WHILE 13 COMING TO THE CONCLUSION THAT THE SO-CALLED 1+7 STO REYED RESIDENTIAL BUILDING CANNOT BE TREATED AS ONE RESIDENTIAL UNIT AND IT CAN AT BEST BE CONSIDERED AS MULTIPLE RESIDENTIAL FLATS MEANT FOR SALE ON WHICH ASSESSEE IS NOT ENTITLED TO EXEMPTION UNDER SECTION 54F OF THE ACT PARTICULARLY BECAUSE THE ASSESSEE HAS NEVER MADE SU CH CLAIM BEFORE THE ASSESSING OFFICER AND THE ASSESSEE HAS NOT FURN ISHED NECESSARY DETAILS TO CONTRADICT THE FINDINGS OF THE ASSESSING OFFICER THAT THE ASSESSEE WAS NOT OWNING MORE THAN ONE PROPERTY AND OTHER THAN THE MULTIPLE RESIDENTIAL FLATS. THEREFORE WE DO NOT FI ND ANY INFIRMITY IN THE ORDER PASSED BY THE ASSESSING OFFICER ON THIS ISSUE . 27. VIDE GROUND NO.6 THE ASSESSEE CONTENDS THAT SU FFICIENT OPPORTUNITY WAS NOT GIVEN BY THE TAX AUTHORITIES WH ILE COMPLETING THE ASSESSMENT. APART FROM THE FACT THAT THE TAX AUTHOR ITIES HAVE CONSIDERED THIS ASPECT IN DETAIL LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS NOT PRESSED THIS GROUND BY FURN ISHING ANY EVIDENCE TO CONTRADICT THE FINDINGS OF THE TAX AUTH ORITIES. THEREFORE GROUND NO.6 IS HEREBY REJECTED. 28. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF JANUARY 2011. SD/- SD/- (PRAMOD KUMAR) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATE 28 TH JANUARY 2011. VBP/- 14 COPY TO : 1. KIRIT D. MEHTA C-101 BONANZA INDUSTRIAL ESTATE CHAKRAVARTI ASHOK ROAD KANOIVALI (E) MUMBAI 400 101 PAN AADPM 5167H 2. INCOME TAX OFFICER 25(3)(2) MUMBAI. 3. CIT (APPEALS)-XXVI MUMBAI 4. CIT-25 MUMBAI. 5. DR A BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI