Farhat Jahan, Aligarh v. ITO, Aligarh

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.666/AGR/2008 ASST. YEAR: 2001-02 SMT. FARHAT JAHAN VS. THE INCOME-TAX OFFICER KALA MAHAL WARD 4 ALIGARH. JAI GUNJ ALIGARH. (PAN : ADJPJ 2616 B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH ADVOCATE RESPONDENT : SHRI R.C. SHARMA JR. D.R. ORDER PER P.K. BANSAL A.M.: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 26.08.2008 BY TAKING THE FOLLOWING EFFECTIVE GROUND S OF APPEAL :- 1) THAT THE LEARNED LOWER AUTHORITIES WERE WRONG I N FACTS AND IN LAW IN MAKING ADDITIONS U/S 68 OF THE IT ACT 1961 AS INCOM E FROM OTHER SOURCES ON FOLLOWING LOANS: I) 50 000.00 TAUSIF UL HASAN II) 80 000.00 KEHKASHAN MARGHOOB 2) THAT THE LEARNED LOWER AUTHORITIES WERE WRONG IN FACTS AND IN LAW IN NOT ALLOWING INTEREST CLAIM OF RS.37 260.00 WHICH WERE CHARGED ON THE OLD BALANCE OF LOANS OF MR. TAUSIF UL HASAN AND KEHKASHAN MARGHOOB AND NOT ON FRESH LOANS RAISED DURING THE YEAR AS PER EVIDENCES FILED IN TH E ASSESSMENT RECORD. 3) THAT THE LEARNED LOWER AUTHORITIES WERE WRONG IN FACT IN LAW IN ADDING RS.1 00 000.00 IN CONSTRUCTION ACCOUNT AS UNEXPLAIN ED INVESTMENT. 2 4) THAT IT WAS NOT JUSTIFIED IN ISSUING NOTICE U/S 142(2)(II) READ WITH 142(1) AND PASSING ORDER U/S 143(3)/263 OF I.T. ACT 1961 I N PLACE OF PASSING ORDER U/S 143(3)(1) AND ISSUING NOTICE U/S 143(2)(1) OF THE I .T. ACT 1961. 2. THE GROUND NO.1 RELATES TO THE ADDITION OF RS.1 30 000/- UNDER SECTION 68 OF THE INCOME- TAX ACT 1961 (THE ACT HEREINAFTER) IN RESPECT OF LOAN RECEIVED BY THE ASSESSEE FROM FOLLOWING PERSONS:- 1) TAUSIF UL HASAN RS.50 000.00 2) KEHKASHAN MARGHOOB RS.80 000.00 3. THE GROUND NO.2 RELATES TO THE INTEREST BEING DI SALLOWED ON THE SAID LOAN AND THEIR OLD BALANCE AMOUNTING TO RS.1 04 500/- AND RS.1 03 000/ - RESPECTIVELY. THE A.O. ASKED THE ASSESSEE TO PRODUCE THE PERSONS TO PROVE THE CREDITWORTHINES S AND IDENTITY. THE ASSESSEE FURNISHED ONLY THE PERMANENT ACCOUNT NUMBER (PAN) OF THESE TWO PER SONS. THE A.O. THEREFORE TOOK THE VIEW THAT ONLY SUBMISSION OF THE PAN DO NOT PROVE THE CR EDITWORTHINESS AND GENUINENESS OF THE TRANSACTION AND THEREFORE MADE AN ADDITION OF RS. 1 30 000/-. CORRESPONDINGLY INTEREST AMOUNTING TO RS.18 810/- AND RS.18 450/- WAS PAID T O SHRI TAUSIF UL HASAN AND SHRI KEHKASHAN MARGHOOB. WHEN THE MATTER WENT BEFORE THE CIT(A) BEFORE THE CIT(A) ALSO THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE EXCEPT COPY OF THE PAN O F THE DEPOSITORS. HE THEREFORE CONFIRMED THE ADDITION AS WELL AS THE DISALLOWANCE MADE IN RE SPECT OF THE INTEREST. 4. BEFORE US THE LD. A.R. SUBMITTED THE CONFIRMATI ON AS WELL AS COPY OF THEIR BANK ACCOUNT TO PROVE THE IDENTITY AS WELL AS CREDITWORTHINESS A ND GENUINENESS OF THE TRANSACTION. 5. LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER S OF THE AUTHORITIES BELOW. 3 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD ALONGWITH THE ORDERS OF THE TAX AUTHORITIES BELOW. SECTION 68 OF THE ACT LAYS DOWN THE RULE OF EVIDENCE. THE ONUS IS ON THE ASSESSEE TO PROVE THE IDENTITY CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION. IT IS APPARENT FROM THE ORDER OF THE A.O. AS WELL AS THAT OF THE CIT(A) THAT THE ASSESSEE HAS SUBMITTED PAN OF BOTH THE PARTIES FROM WHOM THE ASSESSEE HAS TAKEN THE LOAN. BEYOND THAT THE ASSESSEE HAS NOT SUBMITTED ANY OTHE R EVIDENCE. BEFORE US THE LD. D.R. SUBMITTED COPY OF THE CONFIRMATION AND ALSO COPY OF THEIR RES PECTIVE BANK ACCOUNTS. THE COPY OF PAN NO DOUBT PROVE THE IDENTITY OF THE LENDER BUT DOES NOT PROVE THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION. FROM THE BANK STAT EMENT WE ALSO NOTED THAT IN THE CASE OF SHRI TAUSIF UL HASAN A SUM OF RS.50 000/- WAS TRANSFERR ED IN HIS BANK ACCOUNT ON 24.08.2000 WHILE A CHEQUE OF RS.50 000/- WAS CLEARED ON 29.08.2000. S IMILARLY IN THE CASE OF SHRI KEHKASHAN MARGHOOB A SUM OF RS.80 000/- HAS BEEN TRANSFERRED ON 16.12.2000 JUST PRIOR TO THE CLEARANCE OF RS.80 000/- CHEQUE PAID TO THE ASSESSEE. ALTHOUGH THE ASSESSEE CLAIMED THAT SHRI TAUSIF UL HASAN AND SHRI KEHKASHAN MARGHOOB HAS RESPECTIVELY RECEIVED THE SUM OF RS.50 000/- AND RS.80 000/- THROUGH NRI GIFT BUT NO EVIDENCE IN THI S REGARD WERE PRODUCED BEFORE US OR BEFORE THE AUTHORITIES BELOW. IN OUR OPINION THE ONUS IS ON THE ASSESSEE TO PROVE UNDER SECTION 68 TO THE SATISFACTION OF THE A.O. ALL THE THREE INGREDIE NTS RELATING TO THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. SINCE THE EVIDENCE EXCEPT PAN OF THE LENDERS WERE NOT FILED BEFORE THE AUTHORITIES BELOW WE THEREFORE IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND RESTORE THE ISSUE BACK TO THE FILE OF THE A.O. WITH THE DIRECTION THAT THE A.O. SHALL RE-DECI DE THE ISSUE AFRESH AFTER GIVING THE ASSESSEE FRESH OPPORTUNITY TO FILE THE NECESSARY EVIDENCE AN D IN CASE THE ASSESSEE PROVES THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION THE ADDITION SO MADE BE DELETED. 4 7. SO FAR THE DISALLOWANCE OF INTEREST IS CONCERNED SINCE THIS IS CONSEQUENTIAL IN NATURE WE ACCORDINGLY RESTORE THIS ISSUE ALSO TO THE FILE OF THE A.O. WITH THE DIRECTION THAT HE SHOULD ALSO REEXAMINE THE ISSUE RELATING TO THE DISALLOWANCE OF THE INTEREST BUT TO THE EXTENT THE INTEREST RELATE TO THE OPENING BALANCE STANDING IN THE ACCOUNT OF T HE PARTIES. THE DISALLOWANCE THEREOF STANDS DELETED. 8. THE THIRD GROUND RELATES TO THE ADDITION OF RS.1 00 000/- AS UNEXPLAINED INVESTMENT MADE IN THE CONSTRUCTION OF BUILDING. THE A.O. NOTED TH AT THE ASSESSEE HAD MADE INVESTMENT IN THE CONSTRUCTION OF THE PROPERTY AMOUNTING TO RS.1 00 0 00/- DURING THE YEAR BUT THE ASSESSEE HAS NOT GIVEN ANY DETAILS THEREOF. THEREFORE HE ADDED THE SAID SUM UNDER SECTION 69 OF THE ACT. WHEN THE MATTER WENT BEFORE THE CIT(A) THE CIT(A) CONFI RMED THE ADDITION. 9. BEFORE US THE LD. A.R. VEHEMENTLY CONTENDED THAT THERE WAS OPENING BALANCE IN THE BUILDING ACCOUNT AMOUNTING TO RS.28 74 462/- RS.24 74 462/- AND DURING THE YEAR THE ASSESSEE HAS INVESTED A SUM OF RS.1 00 000/-. THE ASSESSEE SUBMITTED BEFORE THE A.O. THAT THE BALANCE SHEET IN WHICH THE ADDITION OF RS.1 00 000/- IN THE BUILDING ACCOUNT IS DULY SHOWN. IN ADDITION TO THIS A FUND FLOW STATEMENT WAS ALSO FILED BEFORE T HE A.O. SHOWING THE RECEIPT AS WELL AS THE APPLICATION OF THE FUNDS. THE FUND FLOW STATEMENT CLEARLY PROVES THE SOURCE OF INVESTMENT. OUR ATTENTION IN THIS REGARD WAS INVITED TO PAGE NO.16 TO 18 OF THE PAPER BOOK. 10. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ALONGWITH THE MATERIALS FILED BEFORE US. IN OUR VIEW NO ADDITION UNDER SECTION 69 CAN BE MADE AS THE SOURCE OF THE INVESTMENT MADE 5 IN THE CONSTRUCTION OF THE BUILDING AMOUNTING TO RS .1 00 000/- IS APPARENT FROM THE FUND FLOW STATEMENT FILED BY THE ASSESSEE. THE A.O. WE FEEL COULD NOT BE ABLE TO APPRECIATE THE FUND FLOW STATEMENT. WE THEREFORE DELETE THE ADDITION OF R S.1 00 000/-. 12. THE 4 TH GROUND OF APPEAL RELATES TO THE JURISDICTION OF TH E A.O. IN PASSING THE ORDER UNDER SECTION 143(3) IN CONSEQUENCE TO THE ORDER PASSED U NDER SECTION 263 OF THE ACT. 13. LD. A.R. BEFORE US VEHEMENTLY CONTENDED THAT TH E ORIGINAL ASSESSMENT MADE IN THE CASE OF THE ASSESSEE WAS UNDER SECTION 143(3)(I) IN CONSEQU ENCE OF NOTICE ISSUED FOR LIMITED SCRUTINY. THE CIT UNDER SECTION 263 SET ASIDE THE ORDER PASSE D UNDER SECTION 143(3)(I) AND DIRECTED THE A.O. TO FRAME THE FRESH ASSESSMENT. THE A.O. FRAME D THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 143(2)(II). THUS THE A.O. HAS EXCEEDED TH E JURISDICTION. HE SHOULD HAVE ISSUED THE NOTICE UNDER SECTION 143(2)(I) AND THE ASSESSMENT S HOULD HAVE BEEN COMPLETED ONLY UNDER SECTION 143(3)(I). IF AN ASSESSMENT IS SET ASIDE U NDER SECTION 263 OF THE ACT IT DOES NOT EMPOWER THE A.O. TO ENLARGE HIS JURISDICTION. 14. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE NOTED FROM THE RECORD THAT THE ASSESSEE HAS FILE D BEFORE US ONLY COPY OF THE ORDER OF CIT(A) PASSED UNDER SECTION 250 OF THE ACT AND THAT OF THE ASSESSMENT ORDER PASSED BY THE A.O. UNDER SECTION 143(3) READ WITH SECTION 263. COPY OF THE ORDER UNDER SECTION 263 AS WELL AS THE ORIGINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3)(1) AS CLAIMED WERE NOT PLACED BEFORE US TO ASCERTAIN WHETHER THE EARLIER ASSESSMENT ORDER WAS PASSED BY THE A.O. UNDER SECTION 143(3)(I). 6 THIS IS A FACT THAT THE ASSESSEE HAS NOT CHALLENGED THE ORDER PASSED BY THE CIT UNDER SECTION 263 AND IN CONSEQUENCE THEREOF EVEN THE DIRECTIONS OF T HE CIT MAKING FRESH ASSESSMENT REMAINS UNCHALLENGED AND HAD BECOME FINAL. UNDER THESE FAC TS AND CIRCUMSTANCES OF THE CASE WE DO NOT HAVE ANY ALTERNATE EXCEPT TO DISMISS THE PLEA OF TH E ASSESSEE. THUS THIS GROUND STANDS DISMISSED. 16. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.05.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 25 TH MAY 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY