Asst. Commissioner of Income tax, Central Circle -, Belgaum v. Shri. Nagappa D. Waddar, Belgaum

ITA 67/PAN/2013 | 2010-2011
Pronouncement Date: 17-11-2014 | Result: Dismissed

Appeal Details

RSA Number 6724114 RSA 2013
Assessee PAN ABEPN0127G
Bench Panaji
Appeal Number ITA 67/PAN/2013
Duration Of Justice 1 year(s) 7 month(s) 12 day(s)
Appellant Asst. Commissioner of Income tax, Central Circle -, Belgaum
Respondent Shri. Nagappa D. Waddar, Belgaum
Appeal Type Income Tax Appeal
Pronouncement Date 17-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 17-10-2014
Date Of Final Hearing 11-08-2014
Next Hearing Date 11-08-2014
Assessment Year 2010-2011
Appeal Filed On 04-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI P. K. BANSAL HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER ITA NOS.203 & 204/ BANG /201 3 (ASSESSMENT YEAR 2009 - 10 & 2010 - 11) S H RI NAGAPPA D. WADDAR ANJANEYA NILYA AT POST; VAJJAL TALUK SURPUR YADGIR DISTRICT - 585 215. VS. THE JOINT COMMISSIONER OF INCOME TAX [OSD] CENTRAL CIRCLE - 1 BELGAUM. (RESPONDENT) PAN:ABEPN 0127G (APPELLANT) ITA NO S .66 & 67 /PNJ/201 3 (ASSESSMENT YEAR 2009 - 10 & 2010 - 11 ) THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 1 BELGAUM. (APPELLANT) VS. S H RI NAGAPPA D. WADDAR CLASS - 1 CONTRACT FRIENDS COLONY LINGSUGUR - 584122 DIST: - RAICHUR KARNATAKA STATE. PAN:ABEPN0127G (RESPONDENT) APPELLANT BY : SHRI VENKETESWAN CA. RESPONDENT BY : SMT. AHSA DESAI LD. DR. DATE OF HEARING : 11/08/2014 D ATE OF PRONOUNCEMENT: 17 /10 /2014 O R D E R PER: D.T. GARASIA THE ABOVE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORDER OF CIT(A) - BANGALORE DATED 18 TH JANUARY 2013 FOR THE A.Y. 2009 - 10 & 2011 . 2 . THE FOLLOWING GROUNDS HA VE BEEN RAISE D BY THE ASSESSEE IN ITA NO. 203/PNJ/2013 FOR A.Y.2009 - 10. 1. T HE ORDERS OF THE AUTHORITIES BEL OW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW EQUITY WEIGHT OF EVIDENCE PROBABILITIES FACTS AND CIRCUMSTANCES OF THE CASE. 2 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) 2. THE APPELLANT DENIES HIMSELF LIABL E TO BE ASSESSED U/S.153C OF THE ACT IN AS MUCH AS THERE WAS NO VALID SEARCH IN THE HANDS OF SRI MANAPPA D.VAJJAT IN TERMS OF SECTION 132[1] OF THE ACT AND FURTHER AS SUMPTION OF JURISDICTION BY INVOKING THE PROVISIONS OF SECTION 1 53C OF THE ACT IS BAD IN LAW AS THE ONLY ASSET SEIZED WAS CASH AND THE SAME WAS DEPOSITED IN THE PD ACCOUNT OF THE CIT AND N O OTHER DOCUMENT WERE SEIZED BEL ONGING TO THE APPELLANT AND THESE W ERE NOT HANDED OVER TO THE LEARNED A.O. TO ASSUME JURISDICTION U/S.153C OF THE ACT AND CONSEQUENTIAL ASSESSMENT REQUIRES TO BE ANNULLED. 3. THE SEARCH INITIATED AND CONDUCTED IN THE CASE OF THE APPELLANTS BROTHER SRI MANAPPA D.VAJJAL IS ULTRA - VIRES THE P ROVISIONS OF SECTION 132[1][AJ [B] AND [C] OF THE AC T AND ISSUING THE WARRANT IS ILLEGAL AND THE SEIZURE OF THE ASSET BELONGING TO A THIRD PERSON FROM HIM WHICH IS ADMITTEDLY NOT A U NDISCLOSED INCOME BEING THE FUNDS DRAWN FROM THE APPELLANTS BANK ACCOU NT IS ALSO ILLEGAL AND THEREFORE HAVING REGARD TO THE PARITY OF THE RATIO OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF AJITH JAIN REPORTED IN 260 ITR 80 AND THE JURISDICTION HIGH COURT IN THE CASE OF SRI C.RAMAIAH REDDY REPORTED IN 339 ITR 210 CONSEQUENT ASSESSMENT MADE BY INVOKING THE PROVISIONS OF SECTION 153C IN THE HANDS OF THE APPELLANT IS ALSO BAD IN LAW AND CONSEQUENTIAL ASSESSMENT REQUIRES TO BE ANNULLED. 4. WITHOUT PREJUDICE TO THE ABOVE THE TRANSFER OF THE CASE FROM THE DCI C IRC LE - 1 GU LBARGA TO ACIT CENTRAL CIRCLE - 1 BELGAUM IS ULTRA - VIRES THE PROVISIONS OF SECTION 127 OF THE ACT AND THE VALID REASONS FOR THIS TRANSFER HAVE BEEN STATED IN THE NOTIFICATION OF TRANSFER AN D CONSEQUENTLY THERE WAS NO VALID TRANSFE R FOR THE ACIT C ENTRAL CIRCLE - 1 BELGAUM TO PROCESS THE ASSESSMENT AND AT ANY RATE THE ASSESSMENT FINALLY COMPLE TED BY THE JCIT [OSD] IS ALSO ILL EGAL AND THE LEARNED A.O. HAS NOT BEEN VALIDLY VESTED WITH THE JURISDICTION TO COMPLETE THE ASSESSMENT AND THE LEARNED JCIT WH O COMPLETED THE ASSESSMENT FINALLY AND WHO PASSED THE ASSESSMENT AND HAS NOT ISSUED THE NOTICE IN ACCORDANCE WITH SECTION 129 OF THE ACT ON THE CHANGE IN THE INCUMBENT IN THE OFFICE OF THE ACIT CENTRAL CIRCLE - I BELGAUM AND CONSEQUENTLY THE ASSESSMENT MA DE IS ILLEGAL AND LIABLE TO BE ANNULLED. 5. THE L EARNED A.O HAS ERRED IN COMPLETING THE ASSESSMENT U/S.144 OF THE ACT AS THERE HAS BEEN NO FAILURE TO FILE THE RETURN AND THE APPELLANT HAS PARTICIPATED IN THE PROCEEDINGS OF COURSE A LWAYS CONTENDING ABOUT T HE INVAL IDITY OF THE PROCEEDINGS AND THEREFORE THE ORDER PASSED U/S.144 OF THE ACT REQUIRES TO BE CANCELLED UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 6. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAI NING A SUM OF RS.93 883/ - IN RESPECT OF ACCRUED INTEREST ON FIXED DEPOSITS WHICH IS NOT DUE AND RECEIVED IN THAT THE SAME IS NOT CREDITED TO THE BANK ACCOUNT OF THE APPELLANT TO CONSTITUTE RECEIPT WHICH IS THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 3 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) 6.1 THE ADDITION IS PURELY ON ASSUMP TIONS AND PRESUMPTIONS SUSPICIONS AND SURMISE AND BY REJECTING THE EXPLANATION S UNREASONABLY AND CONSEQUENT ADDITION REQUIRES TO BE DELETED. 7. THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF A SUM OF RS.1 84 76 400/ - U/S.40A[3] OF THE ACT WHICH IS ONLY ON SUSPICION AND SURMISE AND ASSUMPTIONS AND PRESUMPTION THAT THE AMOUNTS DRAWN BY SELF CHEQUE S AND BY EMPLOYEES OF THE APPELL ANT CONSTITUTED PAYMENTS MADE IN VIOLATION OF SECTION 40A[3] OF THE ACT TO THEM IN THE FIRST INSTANCE AND CLAIMED AS EXPENDITURE AND FURT HER SUCH AMOUNTS DRAWN WERE UTILIZED TO DISCHARGE THE LIABIL ITIES TAKEN OVER ON 01/04/2008 OF THE PREDECESSOR FIR M IN RESPECT OF WHICH THE APPELL ANT WAS NOT GIVEN ANY DEDUCTION TO WARRANT INVOCATION OF SECTION 40A[3] OF THE A CT EVEN IN EXTREME CASE OF SUSPICION AND SURMISE THE DISALLOWANCE IS C ONTRARY TO SELF - EVIDENT MATERIAL BORNE BY RECORDS AND DISALL OWANCE IS MISCONCEIVED AND ERRONEOUS APPRECIATION OF FACTS AND EVIDENCE ON RECORD AND REQUIRES TO BE VACATED UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLA NTS CASE. 8[A]. THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAINING A SUM OF RS.7 25 07 652/ - AS AGAINST A SUM OF RS.16 94 88 229/ - MADE BY THE A.O. AS UNEXPLAINED CREDITS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF T HE APPELL ANTS CASE. 8[B]. THE ABOVE ADDITION IS MADE PUREL Y ON ASSUMPTIONS AND PRESUMPTIONS SUSPICIONS AND SURMISE AND BY REJECTING THE EXPLANATIONS UNREASONABLY AND CONSEQ UENT ADDITION REQUIRES TO BE DEL ETED. 9. THE LEARNED AUTHORITIES BEL OW ARE NOT JUS TIFIED IN SUSTAINING A SUM OF RS.41 11 200/ - OFFERED TO TAX AS UNDISCLOSED INCOME ON THE BASIS OF AN UNDERTAKING GIVEN TO THE DDIT UNIT - II[1] BANGAL ORE TO BRING AN EARLY END TO POST THE SEARCH PROCEEDINGS THAT SINCE HE PURCHASES ITEMS LIKE SAND STONES MURRAM ETC. FROM PERSON IN VILLAGES AND FAR OFF PLACES WHO DO NOT GIVE ANY B ILL S WHATSOEVER AND CONSEQUENTLY MAY NOT TURN UP TO CONFIRM THE BALANCES AND SINCE THE LEARNED A.O. HAS EXAMINED ALL OF THEM DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND CON FIRMATION LETTERS HAVE ALSO BEEN FILED THE GROUND ON WHICH THE UNDERTAKING WAS GIVEN AND LATER ACTED UPON DID NOT EXIST IN AS MUCH AS THE LEARNED A.O. MADE THOROUGH ENQUIRY AND CONFIRMATION LETTERS HAVE BEEN FILED AND IT IS PROVED THAT THE CREDITORS ARE ALL GENUINE NO ADDITION IS WARRANTED AND THE INCOME OFFERED ERRONEOUSLY UNDER SOME APPREHENSIONS REQUIRES TO BE DELETED AS THE APPELLANT IS ENTITLED TO BE ASSESSED IN ACCORDANCE WITH LAW IGNORING THE UNDERTAKING GIVEN. 10 [A]. THE LEARNED CIT[A] IS NOT JU STIFIED IN SUSTAINING THE DISALLOWANCE OF A SUM OF RS.92 73 315/ - U/S.40[A][IA] OF THE ACT ON THE GROUND THAT THE PIECE WORKERS AND SUPPLIERS OF MATERIALS ARE SUB - CONTRACTORS AND THEREFORE SECTION 194C IS APPLICABLE AND SINCE THE TDS IS NOT M ADE THEY REQ UIRE TO BE DISALLOWANCE U/S.40A[IA] OF THE ACT OVERLOOKING THE FACT THEY ARE NOT SUB - CONTRACTORS IN STRICT TECHNICAL AND LEGAL SENSE OF THE TERMS AND NO TDS IS DEDUCTIBLE AND TH E APPELLANT TO AVOID LITIGATION PAID THE SUM 4 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) IN ADDITION TO WHAT IS PAID OR PAYABLE AND THEREFORE NO DISALLOWANCE OUGHT TO HAVE BEEN MADE UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 10 [B]. THE ABOVE ADDITION/DISALLOWANCE ARE MADE PURELY ON ASSUMPTIONS AND PRESUMPTIONS SUSPICIONS AND SURMISE AND BY REJECTING THE EXPLANATIONS UNREASONABLY AND CONSEQUENT ADDITION REQUIRES TO BE DELETED. 11. WITHOUT PREJUDICE TO THE RIGH T TO SEEK WAIVER WITH THE HONBL E CCIT/DG THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGED TO INTEREST U/S 234 - A 234 - B AND 234 - C OF THE ACT WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE DESERVES TO BE CANCELLED AS THE ENTIRE RECEIPTS FROM BUSINESS ARE FROM CONTRACTS AND TDS IS MADE BY THE CONTRACTEE. 12. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 2.1. WHEREI N THE FOLLOWING GROUNDS HAS RAISED BY THE DEPARTMENT. GROUND NO.1 THE LEARNED CIT(A) ERRED IN LAW AND IN FACT IN DELETING THE ADDITION OF RS 8 77 18 177/ - MADE U/S 41(1) OF THE INCOME - TAX ACT ON ACCOUNT OF THE CREDIT SQUARED UP DURING THE YEAR EVEN THOUGH THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE CREDITS SQUARED UP DURING THE YEAR. GROUND NO.2 THE LEARNED CIT(A) ERRED IN LAW AND IN F ACT IN GIVING THE RELIEF OF RS. 8 77 18 177/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT DISCHARGED HIS ONUS OF PROVING THE CREDITS EITHER BEFOR E THE ASSESSING OFFICER OR THE L EARNED CIT(A). GROUND NO.3 THE LEARNED CIT(A) ERRED IN LAW AND IN FA CT IN GIVING THE ABOVE RELIEF BY HOLDING THAT ADDITION CAN ONLY BE MADE ON THE CLOSING BALANCE OF SUNDRY CREDITS WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS FAILED TO PRODUCE THE EVIDENCE IN RESPECT OF DISCHARGE OF CREDIT BALANCES DURING THE FINAN CIAL YEAR AMOUNTING TO RS. 8 77 18 177/ - 2.2 . THE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE IN ITA NO. 204/PNJ/2014 FOR A.Y. 2010 - 11. 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW EQUITY WEIGHT OF EVIDENCE PROBABILITIES FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPELLANT DENIES HIMSELF LIABLE TO BE ASSESSED U/S.153C OF THE ACT IN AS MUCH AS THERE WAS NO VALID SEARCH IN THE HANDS OF SRI MANAPPA D.VAJJAT IN TERMS OF SECTION 132[1] OF TH E ACT AND FURTHER ASSUMPTION OF JURISDICTION BY INVOKING THE 5 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) PROVISIONS OF SECTION 1 53C OF THE ACT IS BAD IN LAW AS THE ONLY ASSET SEIZED WAS CASH AND THE SAME WAS DEPOSITED IN THE PD ACCOUNT OF THE CIT AND NO OTHER DOCUMENT WERE SEIZED BELONGING TO THE A PPELLANT AND THESE WERE NOT HANDED OVER TO THE LEARNED A.O. TO ASSUME JURISDICTION U/S.153C OF THE ACT AND CONSEQUENTIAL ASSESSMENT REQUIRES TO BE ANNULLED. 3. THE SEARCH INITIATED AND CONDUCTED IN THE CASE OF THE APPELLANTS BROTHER SRI MANAPPA D.VAJJAL IS ULTRA - VIRES THE PROVISIONS OF SECTION 132[1][AJ [B] AND [C] OF THE ACT AND ISSUING THE WARRANT IS ILLEGAL AND THE SEIZURE OF THE ASSET BELONGING TO A THIRD PERSON FROM HIM WHICH IS ADMITTEDLY NOT A UNDISCLOSED INCOME BEING THE FUNDS DRAWN FROM THE AP PELLANTS BANK ACCOUNT IS ALSO ILLEGAL AND THEREFORE HAVING REGARD TO THE PARITY OF THE RATIO OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF AJITH JAIN REPORTED IN 260 ITR 80 AND THE JURISDICTION HIGH COURT IN THE CASE OF SRI C.RAMAIAH REDDY REPORTED IN 339 ITR 210 CONSEQUENT ASSESSMENT MADE BY INVOKING THE PROVISIONS OF SECTION 153C IN THE HANDS OF THE APPELLANT IS ALSO BAD IN LAW AND CONSEQUENTIAL ASSESSMENT REQUIRES TO BE ANNULLED. 4. WITHOUT PREJUDICE TO THE ABOVE THE TRANSFER OF THE CA SE FROM THE DCI CIRCLE - 1 GULBARGA TO ACIT CENTRAL CIRCLE - 1 BELGAUM IS ULTRA - VIRES THE PROVISIONS OF SECTION 127 OF THE ACT AND THE VALID REASONS FOR THIS TRANSFER HAVE BEEN STATED IN THE NOTIFICATION OF TRANSFER AND CONSEQUENTLY THERE WAS NO VALID TRAN SFER FOR THE ACIT CENTRAL CIRCLE - 1 BELGAUM TO PROCESS THE ASSESSMENT AND AT ANY RATE THE ASSESSMENT FINALLY COMPLETED BY THE JCIT [OSD] IS ALSO ILLEGAL AND THE LEARNED A.O. HAS NOT BEEN VALIDLY VESTED WITH THE JURISDICTION TO COMPLETE THE ASSESSMENT AND THE LEARNED JCIT WHO COMPLETED THE ASSESSMENT FINALLY AND WHO PASSED THE ASSESSMENT AND HAS NOT ISSUED THE NOTICE IN ACCORDANCE WITH SECTION 129 OF THE ACT ON THE CHANGE IN THE INCUMBENT IN THE OFFICE OF THE ACIT CENTRAL CIRCLE - I BELGAUM AND CONSEQUENTL Y THE ASSESSMENT MADE IS ILLEGAL AND LIABLE TO BE ANNULLED. 5. THE LEARNED A.O HAS ERRED IN COMPLETING THE ASSESSMENT U/S.144 OF THE ACT AS THERE HAS BEEN NO FAILURE TO FILE THE RETURN AND THE APPELLANT HAS PARTICIPATED IN THE PROCEEDINGS OF COURSE ALWAY S CONTENDING ABOUT THE INVALIDITY OF THE PROCEEDINGS AND THEREFORE THE ORDER PASSED U/S.144 OF THE ACT REQUIRES TO BE CANCELLED UNDER THE FACTS IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 6. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT[A] IS NOT JU STIFIED IN SUSTAINING A SUM OF RS.45 597/ - AS EXCESS BANK BALANCE UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 8. THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF A SUM OF RS.7 15 98 9301 - U/S.40A[3] OF THE ACT WHICH IS ONLY ON SUSPICION AND SURMISE AND ASSUMPTIONS AND PRESUMPTION THAT THE AMOUNTS DRAWN BY SELF - CHEQUES AND BY EMPLOYEES OF THE APPELLANT CONSTITUTED PAYMENTS MADE IN VIOLATION OF SECTION 40A[3] OF THE ACT TO THEM IN THE FIRST INSTANCE AND CLAIMED A S EXPENDITURE AND FURT HER SUCH AMOUNTS DRAWN WERE UTIL IZED TO DISCHARGE THE LIABILITIES TAKEN OVER ON 01/04/2008 OF 6 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) THE PREDECESSOR FIR M IN RESPECT OF WHICH THE APPELL ANT WAS NOT GIVEN ANY DEDUCTION TO WARRANT INVOCATION OF SECTION 40A[3] OF THE ACT EVEN IN EXTREME CASE OF SUSPICION AND SURMISE THE DISAL LOWANCE IS C ONTRARY TO SELF - EVIDENT MATERIAL BORNE BY RECORDS AND DISALLOWANCE IS MISCONCEIVED AND ERRONEOUS APPRECIATION OF FACTS AND EVIDENCE ON RECORD AND REQUIRES TO BE VACATED UNDER THE FACTS AND IN T HE CIRCUMSTANCES OF THE APPELLANTS CASE. 9[A]. THE LEARNED CIT[A] IS NOT JUS TIFIED IN SUSTAINING A SUM OF RS 49 87 049/ - AS UNEXPLAINED CREDIT UNDER T HE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 9[B]. THE ABOVE ADDITION IS MADE PURELY ON AS SUMPTIONS AND PRESUMPTIONS SUSPICIONS AND SURMISE AND BY REJECTI NG THE EXPLANATIONS UNREAASONABLY AND CONSEQUENT ADDITION REQUIRES TO BE DELETED. 11. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HONBLE CCIT/DG TH E APPELLANT DENIES HIMSELF LIAB L E TO BE CHARGED TO INTEREST U/S 234 - A AND 234 - B OF THE ACT WHICH UNDER THE FACTS AND I N THE CIRCUMSTANCES OF THE APPEL LANTS CASE DESERVES TO BE CANCELLED AS THE ENTIRE RECEIPTS FROM BUSINESS ARE FROM CONTRACTS AND TDS IS MADE BY THE CONTRACTEE. 12. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HE ARING OF THE APPEAL YOUR APPELL ANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALL OWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REF UND OF THE INSTITUTION FEES AS PART OF THE COSTS. 2.3. WHEREIN THE FOLLOWING GROUND HAS BEEN RAISED BY THE DEPARTMENT. GROUND NO. 1: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 22 00 000/ - WHICH THE AO HAD MADE ON ACCOUNT OF UNEXPLAINED INVESTMENTS MADE BY THE ASSESSEE IN CONSTRUCTING THE HOUSE. GROUND NO 2: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CT(A) HAS ERRED WITHOUT GIVING THE ABOVE RELIEF WITHOU T GOING INTO THE FACTS OR MERITS OF THE CASE AFTER MERELY HOLDING THAT ADDITIONS MADE ON OTHER ISSUES WILL MAKE UP FOR THE UNEXPLAINED INVESTMENTS MADE IN CONSTRUCTION OF HOUSE. 3. ALL THESE APPEALS RELATE TO ONE ASSESSEE . I N A.Y. 2009 - 10 T HE ASSESSEE A ND D EPARTMENT HA VE FILED THE CROSS APPEALS SIMILARLY IN A.Y 2010 - 11 B OTH DEPARTMENT AND ASSESSEE HAVE FILED THESE APPEALS THEREFORE DISPOSED BY THIS COMMON ORDER. 4. DURING THE COURSE OF HEARING LD AR FAIRLY CONCEDED THAT GROUND NO. 1. TO 6.1 ARE COVERED AGAINST THE ASSESSEE IN ITA NO. 2 0 2 / BANG/2013 AND GROUND NO. 7 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) 1 TO 6 IN ITA NO. 204/BANG/2013 RESPECTIVELY. WE FIND THAT IN ASSESSES OWN CASE THE TRIBUNAL HAS HELD AS UNDER 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THERE HAD BEEN NO SEARCH IN THE CASE OF THE ASSESSEE. THE SEARCH HAD BEEN IN THE CASE OF THE ASSESSEES BROTHER. THE LD. AR DID NOT FURNISH ANY EVIDENCE THAT THE ASSESSEES BROTHER HAS CHALLENGED THE VALIDITY OF THE SEARCH OR SEAR CH HAS BEEN HELD TO BE INVALID IN HIS CASE. SINCE THE SEARCH WAS NOT HELD TO BE INVALID IN THE CASE OF MANAPPA D. VAJJAL WE THEREFORE CANNOT HOLD THAT THE PROCEEDINGS INITIATED IN THE CASE OF THE ASSESSEE U/S 153C ARE INVALID. SECTION 153C IS APPLICAB LE ONLY IF THE AO IS SATISFIED THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONGED TO A PERSON OTHER THAN THE PERSON REFERRED TO U/S 153A. THIS SECTION NOWHERE REQUIRES CONDUCTING OF SEARCH IN THE CASE OF THE ASSESSEE. SINCE THERE WAS NO SEARCH IN THE CASE OF THE ASSESSEE THEREFORE THE GROUND TAKEN BY THE ASSESSEE ABOUT THE VALIDITY OF THE SEARCH IN THE CASE OF MANAPPA D. VAJJAL WILL NOT ASSIST THE ASSESSEE. IN OUR OPINION THE GROUND ABOUT THE VALIDITY OF THE SEARCH DOES NOT ARISE IN THE CASE OF THE ASSESSEE. FOR READY REFERENCE PROVISIONS OF SEC. 153C ARE REPRODUCED AS UNDER : 153C. [(1)]NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139 SECTION 147 SECTION 148 SECTION 149 SECTION 151 AND SECTION 153 WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A :] [ PROVIDED THAT IN C ASE OF SUCH OTHER PERSON THE REFERENCE TO THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A IN THE SECOND PROVISO TO [SUB - SECTION (1) OF] SECTION 153A SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF RECEIVIN G THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON :] [ PROVIDED FURTHER THAT THE CENTRAL GOVERNMENT MAY BY RULES MADE BY IT AND PUBLISHED IN THE OFFICIAL GAZETTE SPECI FY THE CLASS OR CLASSES OF CASES IN RESPECT OF SUCH OTHER PERSON IN WHICH THE ASSESSING OFFICER SHALL NOT BE REQUIRED TO ISSUE NOTICE FOR ASSESSING OR REASSESSING THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION IS MADE EXCEPT IN CASES WHERE ANY ASSESSMENT OR REASSESSMENT HAS ABATED.] 8 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) [(2) WHERE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED AS REFERRED TO IN SUB - SECTION (1) HAS OR HAVE BEEN RECEIVED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AFTER THE DUE DATE FOR FURNISHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED UNDER SECTION 132 OR REQUISITI ON IS MADE UNDER SECTION 132A AND IN RESPECT OF SUCH ASSESSMENT YEAR (A) NO RETURN OF INCOME HAS BEEN FURNISHED BY SUCH OTHER PERSON AND NO NOTICE UNDER SUB - SECTION (1) OF SECTION 142 HAS BEEN ISSUED TO HIM OR (B) A RETURN OF INCOME HAS BEEN FURNISHED BY SUCH OTHER PERSON BUT NO NOTICE UNDER SUB - SECTION (2) OF SECTION 143 HAS BEEN SERVED AND LIMITATION OF SERVING THE NOTICE UNDER SUB - SECTION (2) OF SECTION 143 HAS EXPIRED OR (C) ASSESSMENT OR REASSESSMENT IF ANY HAS BEEN MADE BEFORE THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON SUCH ASSESSING OFFICER SHALL ISSUE THE NOTICE AND ASSESS OR REASSESS TOTAL INCOME OF SUCH OTHER PERSON OF SUC H ASSESSMENT YEAR IN THE MANNER PROVIDED IN SECTION 153A.] 4.3.1 AS PER THE FINANCE ACT 2003 NEW PROCEDURE FOR ASSESSMENT RE - ASSESSMENT WAS INTRODUCED. THE SAID PROCEDURE FOR ASSESSMENT RE - ASSESSMENT OF PRECEDING 6 YEARS OF THE YEAR OF SEARCH IN THE CASE OF ANY OTHER PERSON WAS INTRODUCED BY INCORPORATING SEC. 153C. FOR THE APPLICABILITY OF THE PROVISIONS OF SEC. 153C THE FOLLOWING CONDITIONS ARE REQUIRED TO BE FULFILLED : 1) THE AO HAS TO BE SATISFIED THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUAB LE ARTICLES OR THINGS OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONGED TO A PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM THE SEARCH HAS BEEN INITIATED. 2) THE BOOKS OF ACCOUNTS DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHA LL BE HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON. 3) THAT THE AO SHALL PROCEED AGAINST EACH SUCH OTHER PERSON IN THE SAME MANNER AS THE PERSON SEARCHED TO MAKE ASSESSMENT OR RE - ASSESSMENT IN ACCORDANCE WITH THE PROVISIONS OF SEC. 153A. THIS IMPLIES THAT SUCH OTHER PERSON SHALL ALSO BE ASSESSED OR RE - ASSESSED FOR THE YEAR OF SEARCH AND FOR PRECEDING 6 YEARS. THE RATIONALE OF THIS PROVISION IS THAT THE UNDISCLOSED INCOME IS TO BE ASSESSED IN THE HANDS OF THE PERSON WHO IS THE ACTUAL OWNER OF THE ASSET OR WHO HAS EARNED THE UNDISCLOSED INCOME. THEREFORE SEC. 153C REQUIRES THAT IF ANY INCRIMINATING MATERIAL OR UNDISCLOSED ASSETS ARE SEIZED IN THE COURSE OF SEARCH BELONGING TO SOME OTHER PERSON SAME SHALL BE HANDED OVER TO THE AO HAVING JU RISDICTION OVER THE OTHER PERSON FOR MAKING THE ASSESSMENT OF SUCH 9 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) OTHER PERSON. WE NOTED THAT THE ASSESSMENT IN THE CASE OF MANAPPA D. VAJJAL AND THAT OF THE ASSESSEE HAS BEEN MADE BY THE JT. COMMISSIONER OF INCOME TAX (OSD) CENTRAL CIRCLE - 1 BELGAUM I. E. THE SAME AO. IN THIS CASE CASH OF RS.21 30 000/ - WAS FOUND FROM THE POSSESSION OF MANAPPA D. VAJJAL WHO STATED THAT THE AMOUNT BELONGED TO THE ASSESSEE WHO IS HIS BROTHER. THEREFORE PROCEEDINGS WERE INITIATED U/S 153C IN THE CASE OF THE ASSESSEE. T HE LD. AR DID NOT DENY THAT THE CASH BELONGED TO THE ASSESSEE. SINCE THE MONEY SEIZED BELONGED TO THE ASSESSEE I.E. THE OTHER PERSON WITH RESPECT TO WHOM THE SEARCH HAS BEEN INITIATED THEREFORE IN OUR OPINION THIS SATISFIES THE CONDITION ABOUT THE SATI SFACTION OF THE AO. THE MAIN OBJECTION RAISED BY THE LD. AR IS THAT THE CASH HAS NOT BEEN HANDED OVER BY THE AO OF THE BROTHER OF THE ASSESSEE TO THE AO WHO HAS JURISDICTION OVER THE ASSESSEE. IN OUR OPINION HANDING OVER IS A PHYSICAL ACT AND IT IMPLIES THAT THE SEIZED MATERIAL BELONGING TO THE OTHER PERSON SHOULD BE PHYSICALLY HANDED OVER TO THE AO OF SUCH OTHER PERSON. HANDING OVER CAN BE ACTUAL PHYSICAL HANDING OVER OR CONSTRUCTIVE HANDING OVER. WE NOTED THAT IN THIS CASE THE JURISDICTION OF BOTH TH E ASSESSEE AS WELL AS ASSESSEES BROTHER IS TRANSFERRED TO THE SAME AO. THE ASSESSMENT ORDER IN BOTH THE CASES HAS BEEN PASSED BY THE JT. COMMISSIONER OF INCOME TAX (OSD) CENTRAL CIRCLE - 1 BELGAUM. SINCE THE ASSESSMENT HAS BEEN TRANSFERRED TO THE SAME A O AND THE SAME AO HAS MADE THE ASSESSMENT IN BOTH THE CASES I.E. IN THE CASE OF THE ASSESSEE AS WELL AS IN THE CASE OF ASSESSEES BROTHER THEREFORE IN OUR OPINION NO PHYSICAL HANDING OVER IS REQUIRED. OTHERWISE ALSO WE NOTED THAT WHENEVER CASH IS SEIZ ED IT IS DEPOSITED IN PD ACCOUNT OF THE COMMISSIONER OF INCOME TAX. THE LD. AR WAS FAIR ENOUGH TO CONCEDE THAT THE SAME CIT WAS HAVING JURISDICTION ON BOTH THE ASSESSEES. THE CASH SEIZED SINCE HAS REMAINED WITH THE CIT UNDER THE PD ACCOUNT ONLY IT CANN OT REMAIN WITH THE AO. THEREFORE EVEN IF THE AOS ARE DIFFERENT AND THEY ARE UNDER THE JURISDICTION OF THE SAME CIT IN OUR OPINION IT WILL NOT REQUIRE ANY PHYSICAL HANDING OVER OF THE CASH. ON THIS BASIS WE DISMISS THE PLEA OF THE LD. AR. 4.3.2 WE HAV E GONE THROUGH THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF C. RAMIAH REDDY VS. ACIT 339 ITR 210 (SUPRA) ON WHICH THE LD. AR HAS RELIED A COPY OF WHICH WAS FILED BEFORE US. IN THIS CASE WE NOTED THAT THE ISSUE RELATES TO WHETHER THE VALIDITY OF THE SEARCH CAN BE CHALLENGED IN APPEAL. WHILE DEALING WITH THIS ISSUE THE HON'BLE KARNATAKA HIGH COURT HAS HELD THAT THE TRIBUNAL HAS THE POWER TO LOOK INTO ALL THE ASPECTS OF THE SEARCH AND A VALID SEARCH IS SINE QUA 10 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) NON FOR INITIATING BLOC K ASSESSMENT. IN THE CASE OF THE ASSESSEE AS WE HAVE OBSERVED EARLIER THERE HAD BEEN NO SEARCH. THE SEARCH HAS TAKEN PLACE IN THE PLACE OF THE ASSESSEES BROTHER. THE LEGAL REQUIREMENT CONTEMPLATED U/S 132(1)(A) TO 132(1)(C) HAS TO BE COMPLIED WITH IN THE CASE OF THE ASSESSEES BROTHER AND THOSE CONDITIONS HAVE TO BE LOOKED INTO IN HIS CASE. THE LD. AR BEFORE US CONFESSED THAT THE SEARCH WAS NOT HELD INVALID IN THE CASE OF THE ASSESSEES BROTHER. WE THEREFORE ARE OF THE VIEW THAT GROUND NOS. 2 & 3 TAKEN BY THE ASSESSEE DOES NOT HAVE ANY LEG TO STAND. ACCORDINGLY WE DISMISS THE SAME. 5. GROUND NO. 4 RELATES TO THE VALIDITY OF THE TRANSFER OF THE JURISDICTION U/S 127 OF THE INCOME TAX ACT. 5.1 THE LD. AR BEFORE US STATED THAT BEFORE THE TRANSFER THE COMMISSIONER HAS GIVEN OPPORTUNITY TO THE ASSESSEE BUT THE ASSESSEE COULD NOT FILE ANY OBJECTION CHALLENGING THE TRANSFER. HE CONTENDED THAT THE CIT WAS BOUND TO RECORD THE REASONS AND STILL GIVE OPPORTUNITY TO THE ASSESSEE. TRANSFERRING THE JURISDICTION FOR CO - ORDINATING INVESTIGATION CANNOT BE A VALID GROUND FOR TRANSFERRING JURISDICTION. NO DOCUMENT FOR THE IMPUGNED ASSESSMENT WAS FOUND DURING THE COURSE OF THE SEARCH. THEREFORE THE ASSESSME NT FOR THE IMPUGNED ASSESSMENT YEAR SHOULD HAVE NOT BEEN TRANSFERRED. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : I) AJANTHA INDUSTRIES. V. CENTRAL BOARD OF DIRECT TAXES 102 ITR 281 (SC) II) GLOBAL ENERGY PVT. LTD. VS. CIT 89 DTR 194 5.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT U/S 127 OF THE INCOME TAX ACT THE COMMISSIONER OF INCOME TAX HAS TO GIVE AN OPPORTUNITY TO THE ASSESSEE BEFORE TRANSFERRING THE CASE AND HAS ALSO TO RECORD THE REASONS FOR TRAN SFERRING THE CASE. IN THIS CASE WE NOTED AND AS CONFESSED BY THE LD. AR THAT THE LETTER WAS ISSUED TO THE ASSESSEE FOR INVITING OBJECTION FOR THE TRANSFER OF THE JURISDICTION BUT THE ASSESSEE DID NOT FILE ANY REPLY. EVEN THE COPY OF ANY REPLY IS NOT A VAILABLE ON RECORD. THEREFORE IT IS NOT A CASE WHERE OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE. THE CIT ALSO NOTED THE REASONS THAT THE TRANSFER OF THE JURISDICTION HAS BEEN DONE FOR CO - ORDINATING INVESTIGATION. WE HAVE GONE THROUGH THE DECISIONS AS CI TED BY THE LD. AR. WE NOTED THAT IN THE CASE OF AJANTHA INDUSTRIES. V. CENTRAL BOARD OF DIRECT TAXES 102 ITR 281 (SC) (SUPRA) 11 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) JURISDICTION HAS BEEN CHALLENGED BY WAY OF A WRIT AND THE ORDER WAS HELD TO BE INVALID AS THE CIT HAD NOT COMMUNICATED THE REASO NS IN THE ORDER PASSED U/S 127(1) OF THE INCOME TAX ACT. SIMILARLY WE NOTED THAT IN THE CASE OF GLOBAL ENERGY PVT. LTD. VS. CIT 89 DTR 194 (SUPRA) THE TRANSFER OF THE JURISDICTION WAS CHALLENGED BY WAY OF A WRIT AND IN THAT CASE THE HON'BLE HIGH COURT H AS HELD THAT THE CIT OUGHT TO HAVE GIVEN REASONS WHY CO - ORDINATION INVESTIGATION IS NECESSARY AND IN THE ABSENCE OF THIS REASON THE MATTER WAS REMANDED BACK TO THE CIT WHO SHALL PASS FRESH ORDER AFTER GIVING OPPORTUNITY TO THE ASSESSEE. WE NOTED THAT NO APPEAL HAS BEEN PRESCRIBED AGAINST THE ORDER OF CIT PASSED U/S 127(1) BEFORE THE TRIBUNAL. THE ORDER PASSED U/S 127(1) COULD HAVE BEEN CHALLENGED BY THE ASSESSEE ONLY BY WAY OF A WRIT BEFORE THE HON'BLE HIGH COURT/SUPREME COURT OF COMPETENT JURISDICTION. THE ASSESSEE HAS NOT CHALLENGED THE ORDER PASSED BY THE CIT U/S 127(1). THIS TRIBUNAL HAS LIMITED JURISDICTION ONLY IN RESPECT OF THE ORDERS WHICH ARE APPEALABLE BEFORE THIS TRIBUNAL. SINCE THE ORDER PASSED U/S 127(1) IS NOT APPEALABLE THEREFORE THIS TRIBUNAL CANNOT LOOK INTO THE VALIDITY OF THE ORDER PASSED U/S 127(1). THUS GROUND NO. 4 TAKEN BY THE ASSESSEE STANDS DISMISSED. 6. GROUND NO. 5 RELATES TO THE COMPLETION OF THE ASSESSMENT U/S 144. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONS IDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. IT IS NOT DENIED BY THE LD. AR THAT IN THIS CASE THE AO HAS ISSUED NOTICE TO THE ASSESSEE U/S 142(1) WHICH HAS NOT BEEN COMPLIED WITH BY THE ASSESSEE. SINCE THE NOTICE U/S 142(1) ASKING TH E ASSESSEE TO SUBMIT THE DETAILS OF THE ASSETS AND LIABILITIES WAS NOT COMPLIED WITH THEREFORE IN OUR OPINION THERE IS NO ILLEGALITY IN PASSING THE ORDER U/S 144 BY THE AO. SECTION 144(1) EMPOWERS THE AO IN CASE THE ASSESSEE FAILS TO COMPLY WITH THE NO TICE ISSUED U/S 142(1) TO PASS AN ORDER U/S 144. AS PER THE SECOND PROVISO OF SEC. 144 IT IS ALSO NOT NECESSARY FOR THE AO TO GIVE OPPORTUNITY TO THE ASSESSEE IN THIS REGARD BEFORE APPLYING THE PROVISIONS OF SEC. 144. WE THEREFORE DISMISS THIS GROUND. 7. GROUND NO. 6 RELATES TO THE ADDITION MADE IN RESPECT OF INTEREST ACCRUED ON THE FIXED DEPOSIT. 7.1 THE LD. AR BEFORE US VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS RETURNED THE INTEREST INCOME ON RECEIPT BASIS. THE INTEREST HAS BEEN RECEIVED IN THE NEXT YEAR THEREFORE THE SAME HAS BEEN RETURNED IN THE NEXT YEAR. 12 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) 7.2 THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 7.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE AO VIDE NO TICE DT. 22.11.2011 ISSUED U/S 142(1) ASKED THE ASSESSEE TO FILE THE EXTRACTS OF THE BANK ACCOUNT AND DETAILS OF FIXED DEPOSIT MADE AND THE INTEREST ACCRUED THEREON. THE AO COMPUTED THE INTEREST ON THE MATURITY OF FIXED DEPOSITS AS PER THE RECORD OF KARNA TAKA BANK HUNSAGI. ACCORDING TO THE AO 3 FIXED DEPOSIT RECEIPTS DT. 25.4.2006 25.7.2006 AND 27.5.2006 OF RS. 73 000/ - RS. 5 33 734/ - AND RS. 4 26 987/ - RESPECTIVELY HAVE BEEN WITHDRAWN BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR I.E. ON 25.4.2 007 27.5.2007 AND 27.5.2007. THEREFORE THE INTEREST ON THESE FIXED DEPOSITS TO THE EXTENT OF RS.78 968/ - HAS BEEN RECEIVED BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR. IT IS NOT A CASE WHERE THE AO HAS ASSESSED THE INCOME ON FIXED DEPOSITS ON A CCRUAL BASIS. THE LD. AR EVEN THOUGH VEHEMENTLY CONTENDED BUT HAS NOT PRODUCED ANY EVIDENCE REGARDING HOW THE INTEREST ON THESE FIXED DEPOSITS WAS RECEIVED BY THE ASSESSEE IN THE SUBSEQUENT YEAR WHEN THE FIXED DEPOSITS HAVE MATURED DURING THE YEAR. FROM THE ASSESSMENT ORDER IT IS APPARENT THAT THE INTEREST HAS NOT BEEN ASSESSED BY THE AO ON ACCRUED BASIS. WE DO AGREE THAT U/S 145 OF THE INCOME TAX ACT THE ASSESSEE HAS AN OPTION TO CHOOSE EITHER THE CASH SYSTEM OF ACCOUNTING OR MERCANTILE SYSTEM OF ACCOU NTING FOR COMPUTING INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES BUT WHATEVER METHOD IS ADOPTED BY THE ASSESSEE SAME METHOD HAS TO BE REGULARLY AND CONSISTENTLY ADOPTED. UNDER THESE CIRCUMSTANCES WE DO NOT FIND ANY MERIT IN THE SUBMISSION MADE BY T HE LD. AR BUT IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES WE DIRECT THE AO THAT HE SHOULD LOOK INTO THE ISSUE WHETHER INTEREST HAS BEEN ASSESSED ON THE BASIS OF THE FIXED DEPOSITS BEING MATURED DURING THE YEAR AND THIS INTEREST HAS NOT BE EN AGAIN ASSESSED IN THE SUBSEQUENT YEAR. IF THE INTEREST HAS BEEN ASSESSED IN THE SUBSEQUENT YEAR THE AO SHOULD REDUCE THE SUM FROM THE INCOME OF THE SUBSEQUENT YEAR. THUS THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. W E RESPECTFULLY FOLLOWING THE SAME WE DISMISSED THE APPEAL OF THE ASSESSEE ON GROUND NO. 1 TO 5 AND GROUND NO. 6 AND 6.1 IS ALLOWED FOR STATISTICAL PURPOSE. 13 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) GROUND NO. 7 OF ITA - 203/PNJ/2013 AND GROUND NO 8 OF ITA - 204/PNJ/2013. 5 . THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE HAILS FROM THE VILLAGE CALLED VAJJAL IN SURPUR TALUK OF YADAGIRI DISTRICT OF KARNATAKA STA TE. THE ASSESSEE WAS FORMERLY A PARTNER IN THE FIRM OF M/S. M.D.WADDAR A COMPANY WHICH WAS CARRYING ON THE BUSINESS OF PWD CONTRACTORS AT THE AFORESAID VILLAGE VAJJAL . THE SAID PARTNERSHIP FIRM CAME TO BE DISSOLVED ON AND W.E.F. 01/04/2008 AND THE APPELLANT HAS TAKEN OVER THE BUSINESS COMPRISING OF THE ASSETS AND LIABILITIES AS A GOING CONCERN AND HAS CONTINUED TO CARRY ON THE BUSINESS AS PWD CONTRACTORS IN HIS INDIVID UAL CAPACITY. THE ASSESSEE HAS FILED REGULAR RETURN OF INCOME ON 30 TH SEPTEMBER 2009 AND ORIGINAL RETURN WAS FILED. THEREAFTER ASSESSEES BROTHER WHO WAS SITTING ML A HE WAS CARRYING OUT SOME CASH AMOUNT THEREFORE HE WAS CAUGHT HANDILY AT THE AIRPORT AT HYDERABAD TO BOARD A FLIGHT TO BANGALORE . THE CASH WAS CARRIED OUT BY ASSESSEES BROTHER IN HIS LUGGAGE WHISH WAS NOTICED AND THEREAFTER DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS ADMITTED THE CASH BELONGING TO THIS ASSESSEE. BUT THIS ASSESSMENT WA S REOPENED A N D ASSESSEE WAS DIRECTED TO FILE THE RETURN U/S. 153(C) OF THE ACT. 5 .1. DURING THE COURSE OF PROCEEDING IT WAS FOUND THAT AS PER THE PROFIT AND LOSS ACCOUNT THE EXPENDITURE WAS AS UNDER 1. SUB - CONTRACT PAYMENTS RS. 92 73 315/ - 2 TIPPER HIRE CHARGES RS. 9 43 040/ - 3. MATERIAL PURCHASED RS. 2 90 96 570/ - 4. LABOUR WELFARE EXPENSES RS. 16 75 250/ - 5. VEHICLE MAINTENANCE RS. 78 04 213/ - T HE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT THEREFORE ASSESSMENT WAS MADE U/S. 1 53 R.W. 144 OF THE ACT. THE ASSESSEE HAS COLLECTED THE DETAILS OF PAYMEN TS MADE BY BEARER CHEQUES FROM HIS BANK ACCOUNT WITH KARNATAKA BANK 14 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) HUNSAGI IN OD A/C 106 &137 OF M/S. M.D. WADDAR & CO. AND KARNATAKA BANK DAVANGERE ACCOUNT NO. 1902000100046601 IN THE NAME OF M/S. NAGGAPA D WADDAR. THE ASSESSING OFFICER HAS IDENTIFIED SUCH PAYMENT AS WERE MADE IN EXCESS OF RS. 20 000/ - BY CHEQUE OTHER THAN CROSSED CHEQUES I.E. BEARER CHEQUES. THIS PAYMENT HAS HAVE BEEN DE ALT IN THE ASSESSMENT ORDER AND THE TOTAL AMO UNT OF SUCH PAYMENTS ARE AS UNDER: - KARNATAKA BANK HUNSAGI O.D. A/C NO. 106 & 137 - M/S M D WADDAR & CO. DETAILS OF PAYMENTS ABOVE RS. 20 000/ - F.Y.2008 - 09 A.Y.2009 - 10 S.NO. DATE OF PAYMENT NAME OF THE PERSON TO WHOM PAYMENTS WAS MADE AMOUNT 1 4.4.08 TO AYYANAG 931300 2 4.4.08 TO RAMANNA 400000 3 4.4.08 TO RAMANNA 400000 4 8.4.08 TO. G.C.PAT 430000 TOTAL 11226400 KARNATAKA BANK DAVANGERE 1902000100046601 M/S M D WADDAR & CO. DETAILS OF PAYMENTS ABOVE RS. 20 000/ - F.Y.2008 - 09 A.Y.2009 - 10 S.NO. DATE OF PAYMENT NAME OF THE PERSON TO WHOM PAYMENTS WAS MADE AMOUNT 1 13.11.08 160512 TO DAVARAJ SAJJAN 1000 00 2 19.11.08 160521 TO VASUDEVA K PATIL 650000 TOTAL 7250000 GRAND TOTAL 18476400 THE ASSESSING OFFICER ASKED TO EXPLAINED WHY THE SAID AMOUNT SHOULD BE DISALLOWED U/S. 40A(3) OF THE INCOME TAX ACT. AFTER TAKING INTO ACCOUNT THE REPLY OF THE ASSESSEE THAT HE WAS INVOLVED IN CANALS WORKS CONNECTING DAMS AND ALLIED WORK SUCH AS CONSTRUCTION OF SIDE ROADS PASSAGE AND CANAL BRIDGES. THE WORK SPOT IS FAR AWAY FROM TOWN AREA AND IT IS IN AGRICULTURAL AREA OR EVEN FOREST 15 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) AREAS. IT IS NOT EASY TO MOBILIZE LABO U R FORCE AND OTHER INFRASTRUCTURE FACILITIES IN SUCH A JUNGLE AREA. THE WORK HAS TO BE EXECUTED BY EMPLOYING SKILLED AND UNSKILLED LABOUR FORCE WHI CH ARE PREDOMINANTLY ILLITERATE LABOUR S FAMILIES CONSISTING OF MEN WOMEN AND YOUNG CHILDREN FROM FAR OFF VILLAGES. THE WORK FORCE WAS BROUGHT FROM FAR OFF VILLAGES AND THEY HAVE TO LIVE AND STAY IN THE WORK SPOT IN A TEMPORAR Y SHEDS CONSTRUCTED BY THEM THEREAFTER THEY WORKINGS FROM ONE CAMP T O ANOTHER AND THE ASSESSEE HAS ARRANGE D THE FOOD AND WATER ETC TO THESE LABOURERS AND OTHER CONNECTED PERSONS BY OPENING KITCHEN YARDS (MESS) IN EVER Y CAMP AND EMPLOY COOKS AND ALL THE FACILITIES WERE PROVIDED. THE ASSESSEE HAS NOT PAID THIS AMOUNT TO ANY PERSON BUT THE HEAD OF THE EMPLOYEE WHOSE WERE PAID THIS AMOUNT AND SUM OF THE PAYMENTS WERE MADE TO THE SUPERVISOR AND THEY WERE KEEPING IN BOOKS. THEREFORE ASSESSEE COULD NOT PRODUCE THE VOUCHERS TO ALL THESE LABOURERS. THEREFORE THE ASSESSEE IS BOOKS WERE AUDITED BUT ASSESSEE COULD NOT PRODUCE THE VOUCHERS BEFORE THE AO. THE ASSESSING OFFICER THEREFORE DISALLOWED SUCH PAYMENT U/S. 40A(3) OF THE ACT. SIMILARLY IN A.Y. 2010 - 11 THE ASSESSING OFFICER HAS MADE DISALLOWANCE U/S. 40A(3) OF THE EXTENT OF RS .7 15 98 930/ - . FOR THIS YEAR ASSESSEE DID NOT GIVE THE DETAILS AND ASSESSING OFFICER HAS COLLECTED DETAILS FROM BANKS WITH REGARDS TO WITHDRAWAL MADE BY THE ASSESSEE IN EXCESS OF RS.20 000/ - VIDE BEARER CHEQUES TOTALLING TO RS.7 15 98 930/ - . THE AMOUNTS I N RESPECT OF SUCH BANKS ACCOUNT ARE AS UNDER: - KARNATAKA BANK HUNSAGI O.D.A/C NO.106 & 137 M/S M D WADDAR & CO. DETAILS OF PAYMENTS ABOVE RS 20 0001 - F.Y. 2009 - 10 A.Y. 2010 - 11 TOTAL 35668000 KARNATAKA BANK DAVANGERE A/C NO.1902000100046601 M/ S NAGAPPA D WADDAR DETAILS OF PAYMENTS ABOVE RS 20 000/ - F.Y. 2009 - 10 A.Y. 2010 - 11 16 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) TOTAL 19624980 STATE BANK OF MYSORE DAVANGERE A/ C N.64023439003 M/S NAGAPPA D WADDAR DETAILS OF PAYMENTS ABOVE RS 20 000/ - F.Y. 2009 - 10 A.Y. 2010 - 11 TOTAL 262000 STATE BANK OF HYDERABAD SINDHANOOR A/C NO.62105576371 - M/S NAGAPPA D WADDAR DETAILS OF PAYMENTS ABOVE RS 20 000/ - F.Y. 2009 - 10 A.Y. 2010 - 11 TOTAL 11 171950 AXIS BANK RAICHUR 10200001861 M/S NAGAPPA D WADDAR DETAILS PAYMENTS ABOVE RS 20 000! - F.Y. 2009 - 10 A.Y.2010 - 11 TOTAL 2122000 KARNATAKA BANK LTD ATHANI CA - 100011201 - SRI NAGGAPPA D WADAR PAYMENT EXCEEDING RS.20 000/ - F.Y.2009 - 10 A.Y.2010 - 11 TOTAL 2750000 THE ASSESSING OFFICER HAS MADE THIS PAYMENT IN CONTRAVENTION OF SECTION 40A(3) AND ADDITION OF RS. 184 76 400/ - AND RS. 7 1 5 98 930/ - U/S. 40A(3) WAS MADE IN A.Y. 20 09 - 10 & 2010 - 11 RESPECTIVELY. 5. 2 THE LEARNED AR SUBMITTED THAT IN A.Y. 2009 - 10 A SSESSEE HAS PAID RS. 112 26 400/ - FROM KARNATAKA BANK HUNSAGI AND IN KARNAT A KA BANK DEVANGERE THE ASSESSEE HAS PAID RS. 72 50 000/ - TO VARIOUS PARTIES. THE ASSESSING OFFICER HAS MADE THE ADDITION REFERRING TO THE COPIES OF CHEQUE S OBTAINED FROM THE BANK WHERE T HE NAME OF ENCASHER OF THE CHEQUE IS FOUND WRITTEN. THESE PAYMENTS MADE TO THE ENCASHERS OF THE CHEQUE T HE AO CONSIDERED THEM TO BE PAYMENT MADE TO THE CREDITORS FOR SUPPLIES PAYMENT TO CONTRACTS EXPENDITURE 17 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) INCURRED AND CLAIM AS A DEDUCTION IN P&L ACCO UNT ON SUCH ERRONEOUS INFERENCE HE DISALLOWED U/S. 40A(3) OF THE ACT BY REJECTING THE EXPLANATION. IT IS EXPLAINED THAT THE ENCAHSERS OF THE CHEQUE ARE THE EMPLOYEE/WORK HEADS WHO WENT TO THE BANKS TO DRAW THE MONIES FOR SUBSEQUENT DISBURSEMENT THEREF ORE TH EIR NAMES ARE FOUND WRITTEN. THE AMOUNTS EN - CASHED BY THE EMPLOYEES WERE NOT TOWARDS THEIR OWN SALARIES OR REMUNERATION AND CLAIMED AS AN ITEM OF EXPENDITURE TO WARRANT DISALLOWANCE U/S. 40A(3) OF THE ACT. THESE CASHERS HAVE DRAWN THE MONEY TO DISBURSE AT THE SITES / CAMPS BY WAY OF SALARY/WAGES TO LABOURERS AND P AYMENTS TO SUPPLIERS AND CREDITORS TAKEN OVER FROM THE PREDECESSOR FIRM ETC. THE NAMES OF THE EMPLOYEES THEIR DESIGNATION AND SALARIES PAID TO THEM ARE FURNISHED DURING THE COURSE OF ASSESSMENT AND THEY ARE PLACED IN THE PAPER BOOK. THE NAME OF THE ENCASHERS AT ASSESSMENT ORDER IS COMPARED WITH THE NAMES OF THE ENCAHSERS WHICH EXERCISED HAS BEEN DONE AND SUBMITTED FOR DEMONSTRATION OF IT IS SEEN THAT BARRING THE AMOUNTS DRA WN BY THE STAFF ALL THE OTHER PAYMENTS ARE TOWARDS (I) METAL AND STONE SUPPLIES OF RS. 34 50 000/ - AND SAND SUPPLIES OF RS. 2 46 73 461/ - . IN M ANY OF THE CASES THE AMOUNTS PAID WAS WHAT WAS DUE TO THEM BY THE PREDECESSOR FIRM AND THE AMOUNTS ARE NOT TO DI SCHARGE ANY LIABILITY IN RESPECT OF WHICH NO DEDUCTION WAS GIVEN TO THE ASSESSEE TO WARRANT DISALLOWANCE U/S. 40A(3) OF THE ACT. FURTHER A SUM OF RS. 92 73 314/ - IS DISALLOWED AS PAYMENT MADE TO SUB - CONTRACTORS ON THE GROUND THAT NO TDS IS MADE. THE PAYM ENTS MADE TO SUB - CONTRACTORS ALSO FIGURES IN THE DISALLOWANCE MADE/ U/S.40A(3) OF THE ACT BY WAY OF AMOUNTS DRAWN IN EXCESS OF RS.20 000/ - . THUS THE DISALLOWANCE IS DUPLICATED. 5.2.1 THE LEARNED AR SUBMITTED THAT THE ONLY DISALLOWANCE CAN BE MADE OF UNT RACEABLE ITEMS I.E. RS. 27 60 000/ - + R S. 4 50 000/ - TOTALLING TO RS. 32 10 000/ - . 5. 2.2 THE LEARNED AR FURTHER SUBMITTED THAT THE CREDITORS ON THE BEGINNING OF THE YEAR 1.4.2000 ARE THE CREDITORS OF M/S. M.D WADDAR & CO. NO DOUBT MANY 18 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) OF THESE CREDITOR S WERE FOR THE SUPPLY OF THE MATERIALS PURCHASED AND HAVE BEEN GIVEN A DEDUCTION WHILE COMPUTING THE PROFITS OF M/S. M.D. WADDAR & CO. PAYMENTS MADE TO CREDITORS TAKEN OVER BY THE APPELLANT WOULD NOT BE DISALLOWABLE IN THE HANDS OF THE APPELLANT ASSUMING E VEN IF THERE IS A VIOLATION BECAUSE LIABILITY TO THE CREDITORS TAKEN OVER WERE NOT ALLOWED AS DEDUCTION WHILE COMPUTING THE PROFITS OF THE ASSESSEE FOR ANY PREVIOUS YEARS AND SECTION 40A(3A) WILL NOT BE APPLY. IT IS ONLY IN THE CASES WHERE A DEDUCTION IS G IVEN TO THE ASSESSEE HIMSELF PAYMENT OR SUBSEQUENT PAYMENT BY CASH IN VIOLATION OF SECTION 40A(3) WARRANTS DISALLOWANCE U/S. 40A[3A] OF THE ACT NOT FOR THE LIABILITIES WITH THE REFERENCE CREDITORS TAKEN OVER EVEN ASSUMING FOR ARGUMENTS SAKE THESE PAYM ENTS ARE TO THOSE CREDITORS THE DISALLOWANCE U/S.40A[3A] OF THE ACT CONTRARY TO LAW AND DESERVE TO BE DISMISSED. 5. 2.3 THE LEARNED AR FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED THE NAME OF PERSONS TO WHOM SALARY HAS BEEN PAID DURING HIS ASSESSMENT PROCEEDING AND THE ASSESSEE HAS ALSO FILED THE SUNDRY CREDITORS WHICH HAVE BEEN TAKEN OVER ON 1.4.2008 THUS THE PAYMENT HAVE BEEN MADE BY SELF CHEQUE FOR A.Y. 2009 - 10 AND 2010 - 11. THE AMOUNTS WHICH WAS D RAWN ARE PAYMENTS MADE TOWARDS THE EXPENDITURE AND ARE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. THE SELF CHEQUES WITHDRAWN BY EMPLOYEE ARE CONCERNED THEY ARE NOT TOWARDS THEIR SALARIES AS THE DETAILS OF SALARY ARE SEPARATELY SHOWN AND TH IS AMOUNT DRAWN FOR THE PURPOSES OF MAKING DISBURSEMENT TO SUNDRY CREDITORS AS WELL AS OTHER EXPENSES IN CONNECTION WITH THE CONTRACT BUSINESS. THE SELF CHEQUE MADE TO SUNDRY CREDITORS ARE CONCERNED IT COULD NOT BE INFERRED THEY ARE WITH REFERENCE TO THE E XPENDITURE CLAIMED BY THE ASSESSEE. THESE ARE ALL OPENING BALANCES IN THE ACCOUNTS OF THE CREDITORS I.E. CREDITORS TAKEN OVER FROM PREDECESSOR FIRM AND SECTION 40A[3]OF THE ACT WOULD NOT APPLY. THEREFORE IT SHOULD BE VACATED. 5.3 ON THE OTHER HAND L EARNED DR RELIED UPON ORDER OF REVENUE AUTHORITIES. 19 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) 5.4 WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE CREDITORS AT THE BEGINNING OF YEAR 1.4. 2008 ARE THE CREDITORS OF M/S. M.D WADDAR & CO. NO DOUBT MANY OF THESE CREDITORS WERE FOR THE SUPPLY OF THE MATERIALS PURCHASED AND HAVE BEEN GIVEN A DEDUCTION WHILE COMPUTING THE PROFITS OF M/S. M.D. WADDAR & CO. PAYMENTS WERE MADE TO CREDITORS TAKEN OVER BY THE ASSESSEE WOULD NOT BE DIS ALLOWABLE IN THE HANDS OF THE ASSESSEE BECAUSE ASSESSEE HAS NOT MADE ANY PAYMENT IN VIOLATION. IT IS RECORDED THAT LIABILITIES TO THE CREDITORS ARE TAKEN OVER FROM THE PREDECESSORS FIRM. WE ALSO NOTED THAT IN A.Y. 2008 - 09 AND WE HAD HAVE ALREADY HELD IN I TA NO. 92 & 181 WHEREIN THE WE HAVE HELD THAT THE REOPENING IS BAD IN LAW THEREFORE WE HAVE ACCEPTED THE RETURN FILED U/S. 143(3) WHICH WAS ACCEPTED BY US. THEREFORE ALL THE CREDITORS WERE ACCEPTED AND THEY WERE TAKEN INTO CONSIDERATION AND ALL THE PAYM ENTS MADE BY M/S. M.D. WADDAR & CO. HAS BEEN ACCEPTED BY AO AND BY THE TRIBUNAL. FOR THE READY REFERENCE WE SAY THAT THE A.Y. 2008 - 09 HAS BEEN ACCEPTED BY US WHICH WAS MADE U/S. 143(3) OF THE ACT ON 29.12.2010. THEREFORE WE ARE OF THE VIEW THAT ANY PAYME NT MADE TO CREDITORS TAKEN OVER BY THE ASSESSEE WOULD NOT DISALLOWABL E IN THE HANDS OF THE ASSESSEE. EVEN IF THERE IS A VIOLATION BECAUSE THE DEDUCTION WAS ALLOWED TO M/S. M.D. WADDAR & CO. WE FIND THAT THE AO HAS NO POWER TO DISALLOW THE PREVIOUS LIABILIT Y U/S. 40A(3A) WHILE COMPUTING THE PROFIT OF THE ASSESSEE. WE FIND THAT IF THE ANY PAYMENT MADE BY THE ASSESSEE IN VIOLATION OF SECTION 40A(3) WARRANTS DISALLOWANCE U/S. 40A(3) AND WE ARE OF THE VIEW THAT ANY LIABILITIES TAKEN OVER BY THE ASSESSEE TO THOSE CREDITORS THE DISALLOWANCE U/S. 40A(3) IS DELETED. WE FIND THAT THE ASSESSEE HAS GIVEN A DETAIL OF THE NAMES OF PERSONS AND SALARY PAID TO HIS EMPLOYEES DURING THE ASSESSMENT PROCEEDINGS AND SIMILARLY THE ASSESSEE HAS ALSO FILED THE DETAIL OF SUNDRY CREDI TORS FOR SUPPLY MADE WHICH HAVE BEEN TAKEN OVER ON 1.4.2008. WE FIND THAT THE ASSESSEE HAS MADE SELF CHEQUE BY THE EMPLOYEE AND THEY ARE NOT TOWARDS THEIR SALARIES AND THEY ARE THE AMOUNT IS DRAWN FOR THE DISALLOWANCE OF SUNDRY CREDITORS AS WELL AS 20 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) EXPENSE S IN CONNECTION WITH THE CONTRACT BUSINESS THEREFORE WE ARE OF THE VIEW THAT AO HAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF ALL THE OPENING BALANCES IN THE ACCOUNTS OF THE CREDITORS I.E. CREDITORS TAKEN OVER FROM THE PREDECESSOR FIRM AND WE ARE OF T HE VIEW THAT SECTION 40A[3] OF THE ACT WOULD NOT APPLY. WE FIND THAT THE AO AND CIT(A) IS NOT JUSTIFIED IN DISALLOWING THE TOTAL DEDUCTION OF RS. 1 84 76 400/ - . DURING THE ASSESSMENT PROCEEDING WE HAVE ALSO VERIFIED THE AMOUNT DRAWN FROM KARNATKAKA BANK HUNSAGI AND IN KARNAT A KA BANK DEVANGERE WHEREIN THE FOLLOWING EXPENDITURE H AS BEEN SHOWN ON PAGE 193 OF THE PAPER B OOK WHICH READ AS UNDER: [A]. KARNATAKA BANK HUNSAGI S . NO. DRAWN BY AMOUNT [RS.] NOS. 1. EMPLOYEES 24 30 000 7 2. SUB - CONTRACTORS & LABOUR CONTRACTS 27 81 300 8 3. CREDITORS 32 55 100 9 4. UNTRACEABLE ITEMS 27 60 000 5 TOTAL[A] 1 12 26 400 29 [ B ]. KARNATAKA BANK DAVANGERE S . NO. DRAWN BY AMOUNT[RS.] NOS. 1. EMPLOYEES 3 30 000 2 2. SUB - CONTRACTORS & LABOUR CONTRACTS 8 50 000 5 3. CREDITORS 56 20 000 15 4. UNTRACEABLE ITEMS 4 50 000 2 TOTAL[A] 72 50 000 24 TOTAL OF [A]+[B]= RS.112 26 400 + 72 50 000= RS. 1 84 76 400/ - TOTAL OF UNTRACEABLE ITEMS RS. 27 60 000+ 4 50 000= RS.32 10 000/ - FROM THE ABOVE ANALYSIS WE ARE OF THE VIEW THAT O NLY UNTRACEABLE ITEMS I.E. RS. 27 60 000/ - IN THE CASE OF KARNATAKA BANK HUNSAGI AND RS.4 50 000/ - IN THE CASE OF KARNATAKA BANK DAVANGERE BOTH TOTALLING OF RS.32 10 000/ - IS DISALLOWED U/S. 40A(3). HENCE WE ALLOW THE APPEAL OF THE ASSESSEE AND OUT OF TOTAL RS.1 84 76 400/ - - RS.32 10 0 00/ - = RS. 1 52 66 400 / - I S DELETED AND 21 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) RS. 32 10 000/ - IS CONFIRM IN A.Y. - 2009 - 2010. WE DELETE THE ADDITION OF RS. 7 15 98 930/ - IN A.Y - 2010 - 11. IN TH E RESULT THIS GROUND OF THE A SSESSEES APPEAL IS PARTLY ALLOWED . 6 . GROUND NO. 8 OF A SSESSEES APPEAL IN ITA NO. 203/PNJ/2013 FO R A.Y. 2009 - 10 AND GROUND NO. 1 OF DEP ARTMENTS APPEAL IN ITA NO. 66/PNJ/2013 FOR A.Y 2009 - 10 AND GROUND NO. 9 IN ITA NO. 204/PNJ/2013 ARE COMMON GROUNDS THEREFORE IT IS DISPOSED BY THIS COMMON ORDER. 6 .1 . DURING THE COURSE OF HEARING THE ASSESSING OFFICER HAS FOUND THE NAME OF CREDITORS WHICH AS UNDER: S.NO. NAME OF THE CREDITOR BALANCE AMOUNT AS ON 31.3.2010 * 1. MALLAYYA NARAKALDINI 14 6120O 2. NINGANGOUDA NAGARAL 13 57 600 3. RUDRAGOUDA RODAL BAN DA 11 12 600 4. SHANKARAYYA LINGASUGUR 17 48 400 5. ANWAR PASHA LINGASUGUR 14 13 600 6. DEVARAJ LING ASUGUR 14 05 200 7. CHANNAPPA GOUDA KARADAKAL 21 92 000 8. CHANDRAKANT SWAMY MASARKAL 25 59 400 9. GUNDAYYA KARADAKAL 13 57 600 10. PRABHURAJ LINGASUGUR 19 78 400 11. SHIVANAND AIDANAL 18 75 215 12. Y.S.PRASANNA KUMAR KAKARGOL 14 43 300 13. B.S.AJJAPP DAVANGERE 18 90 000 14. N.LOKESH NAIK ALURHATTI 14 83 300 15. S.K.BASAVARAJ MAYAKONDA 14 86 700 16. K.S.SHIVAKUMAR BEVINHALLI 18 55 500 17. MALLIKARJUN SHAMNUR 18 22 000 18. N.S.BASAVARAJAPPA ANAJI 19 92 000 19. SEVA NAIK DAVANGERE 7 02 100 THE ASSESSEE HAS FILED THE CONFIRMATION LETTERS FROM FOLLOWING CREDITORS WHOSE BALANCE W ERE AS ON ( 31.3.20 09 AND 31.3.2010 ) IS GIVEN TO THEM. THE ASSESSING OFFICER HAS VERIFIED THE CONFIRMATION LETTER AND ALL THE CONFIRMATION LETTER SHOW THE NAME AMOUNT AND DATES OF ADVANCES ARE MENTIONED IN THE SAME HANDWRITING AND SIGNATURE HAVE BEEN OBTAINED FROM EACH SHEET. THE ASSESSEE D ID NOT PRODUCE BRIEF OF IDENTITY OF THE PERSONS INVOLVED IN IT. THE ASSESSING OFFICER HAS ISSUED 22 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) SUMMONS TO ALL THESE CREDITORS. THE ASSESSEE EXPLAINED THAT THESE ALL THE CREDITORS ARE NOT CHEQUE BEARER AND THEY ARE ILLITERATE DEALERS AND ALSO ARE SCARED O F HARASSMENT TO THEM IF APPEARED BEFORE INCOME TAX AUTHORITIES AND THE ASSESSEE HAS ALREADY APPEARED BEFORE THE DEPARTMENT THAT THEY WILL BE HARASSED BY THE DEPARTMENT THEREFORE SAME OF THE CREDITORS HAD REMAIN PRESENT. THE ASSESSING OFFICER WAS OF TH E VIEW THAT THE ASSESSEE HAS NOT PRODUCED TH E CR EDITORS THEREFORE GENUINENESS OF THE CREDITORS CANNOT BE ACCEPTED AND AFTER CONSIDERING THE BALANCE SHE ET OF EARLIER YEAR AND THIS ASSESSMENT YEAR THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SUFFICIENT BALANCE IN BANK ACCOUNT TO SETTLE THE CREDITS. INSTEAD THE ASSESSEE CHOOSE TO DIVERT THE FUNDS BY ISSUING THE BEARER CHEQUE S IN THE NAME OF VARIOUS PERSONS AND MAKING THE DEPOSI T S IN THE BANK ACCOUNT AND EARNED THE INTEREST. THE FUNDS FRO M THE BANK ACCOUNT OF THE ASSESSEE WERE NOT APPLIED TO SETTLE THE CREDITS . THEREFORE THE ASSESSEE HAS PRESUMED THE ASSE S SING O FFICER HAS PRESUMED THAT ALLIED CRE DITORS DID NOT PRODUCE BY THE ASSESSEE THOUGH MUCH OPPORTUNITY WERE GIVEN TO PROVE THEIR CAPAC ITY . THEREFORE ASSESSING OFFICER HAS ADDED UNEXPLAINED CREDIT OF RS. 16 94 88 229/ - IN THE HAND OF THE ASSESSEE. 6 .2 . THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS PARTLY ALLOWED THE APPEAL BY OBSERVING AS U NDER: THE ASSESSING OFFICER HAS MADE AN ADDITION RS. 16 94 88 229/ - ON ACCOUNT OF UNEXPLAINED CREDIT BALANCE. THE APPELLANT HAD TAKEN OVER ASSETS AND LIABILITIES OF THE ERSTWHILE PARTNERSHIP FIRM M/S M. D. WADDAR & CO. WHEREIN THERE WAS AN OUTSTANDING LIABILIT Y OF RS. 17 87 50 629/ - UNDER THE HEAD CURRENT LIABILITIES DATED 31.03.2008. THE ASSESSING OFFICER CONDUCTED ENQUIRIES AND FOUND THAT IN RESPECT OF A NUMBER OF CREDITORS THE APPELLANT COULD NOT CONFIRM THE CREDITS SHOWN. THE APPELLANT HAD DURING THE CO URSE OF ENQUIRIES BY THE I NVESTIGATION WING ACCEPTED RS. 40 11 200/ - OUT OF THE EXISTING LIABILITIES OF 8.17 CRORES AS AN ADDITION TO HIS TAXABLE INCOME. FURTHER ENQUIRIES WERE CONDUCTED BY THE ASSESSING OFFI CER AND IT WAS FOUND THAT RS. 16 94 88 229/ - REM AINED UNEXPLAINED CREDIT AS UNDER : - 1. OPENING BALANCE RS 17 87 50 629 LESS: CREDIT ALREADY ADMITTED RS 40 11 200 23 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) CREDITS TOTALLY CONFIRMED RS 40 42 700 CREDITS PARTLY CONFIRMED RS 12 08 500 RS 92 62 400 BALANCE UNEXPLAINED CREDIT RS 16 94 8 8 229 THE APPELLANT WAS UNABLE TO GIVE ANY DETAIL OR EXPLANATION TO THE SATISFACTION OF THE ASSESSING OFFICER THEREFORE THIS UNEXPLAINED CREDIT OF RS. 16 94 88 229/ - WAS ADDED TO THE TOTAL INCOME. DURING THE COURSE OF APPEAL THE APPELLANT HAS POINTED O UT THAT SINCE HE HAS TAKEN OVER THE ASSETS AND LIABILITIES OF THE FIRM M/S M D WADDAR & CO AS ON 01.042008 A NY ADDITION ON ACCOUNT OF UNEXPLAINED LIABILITIES SHOULD BE WITH RESPECT TO THE CLOSING BALANCE I.E. 8.17 CRORES AND NOT WITH REG ARD TO THE OPENING BALANCE OF RS.17 87 50 629/ . HOWEVER EVEN BEFORE ME NEITHER ANY EXPLANATION HAS BEEN GIVEN WITH REGARD TO THE CREDITORS NOR ANY CONFIRMATION OR EVIDENCE HAS BEEN FURNISHED. NO BOOKS OF ACCOUNTS HAS BEEN PRODUCED FOR VERIFICATION. THE APPELLANT HAS ALSO NOT PRODUCED ANY VERIFIABLE DETAILS WHICH COULD BE VERIFIED BY ME OR BY THE ASSESSING OFFICER THROUGH A REMAND REPORT. THEREFORE WITH REGARD TO THE DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER IT IS CLEAR THAT NO FURTHER EXPLANATION HAS BEEN FORWARDED BY THE APPELLAN T. HOWEVER I AGREE WITH THE CONTENTION OF TH E APPELLANT THAT THE DISALLOWANC ES HAVE TO BE MADE WITH REGARD TO THE CLOSING BALANCE IN THE BOOKS OF THE APPELLANT AND NOT WITH REGARD T O THE OPENING BALANCE WHICH IS CARRIED FORWARD FROM THE ERSTWH ILE FIRM M/S M D WADDAR & CO...THEREFORE THE DIS ALLOWANCE IS RE - WORKED AS UNDER : - - TOTAL CREDITORS AS ON RS 8 17 70 052 31.03.2008 LESS: I CREDIT ALREADY ADMITTED RS 40 11 200 CREDI TS TOTALLY CONFIRMED RS 40 42 7 00 CREDITS PARTLY CONFIRMED RS 12 08 500 RS 92 62 400 BALANCE UNEXPLAINED CREDIT RS 7 25 07 652 THE DISALLOWANCE UNDER THIS HEAD IS THEREFORE RESTRICTED TO RS. 7 25 07 652/ - . FOR A.Y. 2 010 - 11 ON SIMILAR GROUNDS AN ADDITION OF RS 4 49 87 049/ - FOR A.Y. 2010 - 11 HAS BEEN MADE. FOR THE SAME REASONS AS FOR A.Y. 2009 - 10 AS THE APPELLANT IS UNABLE TO GIVE ANY DETAILS OR SUBSTANTIATE THE SAID CREDITORS EITHER BEFORE THE ASSESSING OFFICER OR DURING THE COURSE OF APPEAL BEFORE ME THE A DDITION MADE ON THIS GROUND IS JUSTIFIED AND IS UPHELD. 11. INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE. FOR A.Y 2010 - 11 AN ADDITION OF RS 22 LAKHS HAS BEEN MADE AS INVESTMENT MADE IN CONSTRUCTION OF HOUSE OUT OF UNEXPLAINED FUNDS. I FIND THAT THIS ADD ITION IS NOT SUBSTANTIATED BY ANY FACTS OR EVIDENCE. THE ADDITION MADE THEREFORE IS DELETED. MOREOVER THE ADDITION MADE WITH REGARD TO TOTAL INCOME ON OTHER ISSUES WOULD ANY WAY MAKE UP FOR ANY INVESTMENT CONSTRUCTION OF HOUSE WHICH IS OTHERWISE NOT EXPLA INABLE. 12. UNEXPLAINED CASH FOUND DURING SEARCH. FOR A.Y. 2010 - 11 24 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) OF THE RS 21.30 IAKHS CASH FOUND WITH THE ASSESSEES BROTHER AND STATED BY HIM TO BE BELONGING TO THE APPELLANT ONLY A SUM OF RS 20 LAKHS WAS OFFERED BY THE APPELLANT AS ADDITIONAL INCOME. WITH REGARD TO THE BALANCE AMOUNT OF RS 1.3 LAKHS SUBSTANTIVE ADDITION HAS BEEN MADE IN THE HANDS OF THE APPELLANTS BROTHER SRI MANAPPA D WADDAR. THEREFORE ADDITION MADE IN THE HANDS OF THE APPELLANT FOR RS 1.3 LAKHS ON THIS ACCOUNT IS DELETED. 13. EXCESS BANK BALANCE FOR A.Y. 2009 - 10 THE ASSESSING OFFICER FOUND THAT THE BANK BALANCE OF THE APPELLANT WAS IN EXCESS BY RS 45 597/ - OVER THE DECLARED BALANCE IN HIS ACCOUNTS. FOR WHICH AN ADDITION OF RS 45 597/ - WAS MADE TO THE TOTAL INCOME. THIS EXCESS BANK. BALANCE IS CLEARLY AN UNEXPLAINED ASSET OF THE APPELLANT WHICH IS LIABLE FOR TAX. HOWEVER CONSIDERING THAT SUBSTANTIAL ADDITIONS TO TOTAL INCOME HAS ALREADY BEEN MADE AND UPHELD VIDE THIS ORDER NO FURTHER ADDITION OF THIS AMOUNT NEED BE MADE IN TH E HANDS OF THE APPELLANT AS THE SOURCE WOULD CLEARLY BE THE INCOME NOT DECLARED AND BEING BROUGHT TO TAX ACCORDINGLY. 14. CREDIT FOR TAX PAID OF RS 1 LAKH FOR A.Y. 2008 - 09 THE APPE LLANT HAS NOT ELABORATED THIS GR OUND OF APPEAL. IN ANY CASE ALL TAXES PAID ARE TO BE GIVEN CREDIT IN WORKING OUT THE TAX PAYABLE BY THE APPELLANT AS PER LAW. 15. TDS LIABILITY FOR A.Y. 2009 - 10 A SUM OF RS 92 73 315/ - WAS DISALLOWED AS TDSTO THAT EXTENT ON SUB CONTRACT PAYMENT HAD NOT BEEN PAID BEFORE THE DUE DATE FOR FILING RETU RN OF INCOME. THIS IS NOT DISPUTED. THEREFORE DISALLOWANCE ON THIS COUNT IS UPHELD AS IT IS AS PER LAW. HOWEVER CREDIT MAY BE GIVEN ON ACCOUNT OF PAYMENT BY ALLOWING THE SAME IN THE F.Y. RELEVANT TO THE A.Y.IN WHICH PAYMENT IS ACTUALLY MADE. 16. CHARGING OF INTEREST U/S 234A 234B & 234C OF INCOME TAX ACT. THE CHARGING OF INTEREST UNDER SECTION 234A 234B & 234C OF INCOME TAX ACT IS MANDATORY AS PER LAW AND AS UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ANJUMAN H GHASWALA & ORS (SC) 252 ITR 1. HOWEVER THE ASSESSING OFFICER IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT TO THE COMPUTATION OF INTEREST IN THE ABOVE SECTIONS. 17. IN THE RESULT THE APPEALS FOR THE ASSESSMENT YEARS IN QUESTION ARE DECIDED ACCORDINGLY AND TREATED AS PARTLY ALLOWED. 6 .3 THE LEARNED AR SUBMITTED THAT ASSESSEE HIMSELF HAS ADMITTED THAT HE HAS DISCHARGE OUT OF TOTAL LIABILITY OF RS.16 94 88 229/ - . THE ASSESSEE HAS DISCHARGE 25 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) THE LIABILITY OF RS.9 69 80 577/ - OUT OF HIS RESOURCES AVAILABLE IN THE FORM OF OPENING CASH AND BALANCES AND CONTRACT RECEIPTS RECEIVED DURING THE YEAR AND THE FINAL BALANCE OF CREDITORS IS ONLY RS. 8 17 70 052/ - AS ON 31.03.2009. WHEN THAT IS THE CASE IF AT ALL ANY ADDITION IS TO BE MADE IT COULD BE AT BEST TO THE EXTENT OF THE CREDITORS A S ON 31.03.2009 THEREFORE THE CIT(A) HAS DELETED THIS ADDITION. 6 .3.1 THE LEARNED AR SUBMITTED SOME OF THE OLD CREDITORS ARE FROM THE A.Y.2008 - 09 THEREFORE WHEN THEY ARE THE OLD CREDITORS FOR A.Y.2008 - 09 THEY CANNOT BE MADE THE ADDITION AND IT MAY B E NOTED. DURING THE SOLEMNLY STATEMENT THE ASSESSEE HAS ADMITTED A SUM O RS. 4 11 200/ - AS ADDITIONAL INCOME ON THE SPECIFIC GROUND THAT MANY OF THE SUPPLIERS OF METAL MURRAM SAND ETC. COMING FROM THE RURAL AREAS WHO DO NOT GIVE BILLS AND INVOICE S MIGH T NOT CONFIRM THE BALANCE. THEREAFTER THE ASSESSING OFFICER HAS MADE THE ADDITION. THE LEARNED AR SUBMITTED THAT ALL THE CREDITORS ARE STANDING IN THE BOOKS OF ACCOUNTS. THE LIABILITY IS STANDING IN THE NAME OF THE CREDITORS AND WHEN THE LIABILITY IS STAN DING IN THE BALANCE SHEET. THE ASSESSING OFFICER CANNOT MAKE THE ADDITION ON THIS ACCOUNT. 6 .3.2 THE LEARNED AR SUBMITTED THAT THE ASSESSEES BOOKS WERE AUDITED AND THE BOOKS WERE PRODUCED BEFORE AUDIT AND AUDIT REPORT WAS SUBMITTED ALONG WITH THE RETURN AND TO AUDITORS HAVE CERTIFIED THE ACCOUNTS AND WHEN ALL THESE ACCOUNTS ARE STANDING IN THE NAME OF THESE CREDITORS AND WHEN IT IS NOT DISCHARGE THE AO CANNOT MADE THE ADDITION. 6 . 4 THE LEARNED DR RELIED UPON THE ORDER OF AO. 6 .5 WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIN D FROM THE CIT(A)S ORDERS TH A T CIT(A) IN HIS HE HAS VERIFIED THE AUDIT REPORT AND AFTER VERIFICATION OF THE AUDIT REPORT. THE CIT(A) HAS VERIFIED THE AUDIT REP ORT AND AFTER VERIFICATION OF THE 26 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) AUDIT REPORT HE WAS OF THE VIEW THAT RS. 8 17 70 052/ - IS LIABILITY OF M/S. M.D. WADDAR & CO. THEREFORE HE HAS DELETED THIS ADDITION THEREFORE WE DISMISSED THE DEPARTMENT APPEAL. THEREFORE OUR INTER FERENCES ARE NOT REQUI RED. DEPARTMENTAL APPEAL NO. ITA - 66/PNJ/2013 IS DISMISSED. 6 .5.1 WE FIND THAT THE OUTSTANDING LIABILITY ON 31.03.2009 WAS RS. 8 17 70 052.35 AND SIMILARLY THE CASH AND BANK BALANCE IS RS. 3 52 24 696/ - AND FOR THE YEAR ENDED 31.03.2010 THE OUTSTANDING RS. 12 50 93 061.65 WAS IN THE BOOK OF THE ACCOUNT OF THE ASSESSEE. THE BOOKS OF THE ACCOUNT ARE AUDITED UNDER SECTION 44AB OF THE ACT. THE INCOME FROM BUSINESS AND TRADING RESULTS HAVE BEEN ACCEPTED. THE ASSESSEE HAD CASH AND BANK BALANCE TO THE EXTEND OF RS. 12 46 73 090/ - UP TO 31.03.2008. THE RECEIPT OF RS. 6 56 74 267/ - ARE SUFFICIENT TO DISCHARGE THE LIABILITY. THE CIT(A) HAS ACCEPTED THE FACT THAT OUT OF OUTSTANDING LIABILITY OF RS. 16 94 88 229 HAS ON ACCOUNT OF UN EXPLAINED CREDIT BUT THE LIA BILITY WAS OF MR. M D WADDAR AND COMPAY THEREFORE HE HAS RESTRICTED THE OUTSTAND LIABILITY OF RS. 7 25 07 652/ - . WE FIND THAT ASSESSORS BOOKS OF ACCOUNT WERE SUBJECTED TO AUDIT AND ASSESSEE HAS SHOWN THIS LIABILITY IN HIS BOOKS OF ACCOUNT. THIS CREDITS ARE STANDING IN THE BALANCE AMOUNT ON 31.03.2010. WE FIND THAT THE ASSESSEE HAS SUBMITTED THE CONFIRMATION LETTER OF HIS ALL THE CREDITS. WE FIND THAT WHEN THE ALL THE CREDITS ARE SHOWN IN THE BALANCE SHEET NO ADDITION CAN BE MADE UNDER SEC 41(1) OF THE ACT. SECTION 41(1) OF THE INCOME TAX ACT 1961 1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST - MENTIONED PE RSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR A. THE FIRST - MENTIONED PERSON HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY O F REMISSION OR CESSATION THEREOF THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME - TAX AS THE INCOME OF THAT PREVIOUS YEAR WHE THER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR 27 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) B. THE SUCCESSOR IN BUSINESS HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF WHIC H LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST - MENTIONED PERSON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRED TO IN CLAUSE (A) BY WAY OF REMISSION OR CESSATION THEREOF THE AMOUNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFI T ACCRUING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME - TAX AS THE INCOME OF THAT PREVIOUS YEAR. EXPLANATION 1 - FOR THE PURPOSES OF THIS SUBSECTION THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUC CESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB - SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. EXPLANATION 2 - FOR THE PURPOSES OF THIS SUBSECTION 'SUCCESSOR IN BUSINESS' MEANS I. WHERE THERE HAS BEEN AN AMALGAMATION OF A COMPANY WITH ANO THER COMPANY THE AMALGAMATED COMPANY; II. WHERE THE FIRST - MENTIONED PERSON IS SUCCEEDED BY ANY OTHER PERSON IN THAT BUSINESS OR PROFESSION THE OTHER PERSON; III. WHERE A FIRM CARRYING ON A BUSINESS OR PROFESSION IS SUCCEEDED BY ANOTHER FIRM THE OTHER FI RM; IV. WHERE THERE HAS BEEN A DEMERGER THE RESULTING COMPANY. IN THE CASE OF THE COMMISSIONER OF INCOME TAX - III SHRI VARDHMAN OVERSEAS LTD ITA NO.774/2009 DATE OF DECISION: 23.12.2011 DIVISION BENCH OF HON'BLE HIGH COURT OF DELHI MADE THE FOLLOWING OBSERVATION WITH REGARDS TO SECTION 41(1): 'THE PROVISIONS OF SECTION 41(1) HAVE BEEN SPECIFICALLY INCORPORATED IN THE ACT TO COVER A PARTICULAR FACT SITUATION. THE SECTION APPLIES WHERE A TRADING LIABILITY WAS ALLO WED AS A DEDUCTION IN AN EARLIER YEAR IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE AND THE ASSESSEE HAS OBTAINED A BENEFIT IN RESPECT OF SUCH TRADING LIABILITY IN A LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY. IN SUCH A CASE THE SECTIO N SAYS THAT WHATEVER BENEFIT HAS ARISEN TO THE ASSESSEE IN THE LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY WILL BE BROUGHT TO TAX IN THAT YEAR. THE PRINCIPLE BEHIND THE SECTION IS SIMPLE. IT IS A PROVISION INTENDED TO ENSURE THAT THE ASSES SEE DOES NOT GET AWAY WITH A DOUBLE BENEFIT ONCE BY WAY OF DEDUCTION IN AN EARLIER ASSESSMENT YEAR AND AGAIN BY NOT BEING TAXED ON THE BENEFIT RECEIVED BY HIM IN A LATER YEAR WITH REFERENCE TO THE LIABILITY EARLIER ALLOWED AS A DEDUCTION.' LIABILITY IS BAR RED BY LIMITATION BUT THERE ARE CASES WHERE A LIABILITY IS BEING CARRIED FORWARD FOR YEARS IN THE BOOKS OF ASSESSEE. IN SUCH CASES THE INCOME TAX AUTHORITIES HAVE CONSIDERED THE LIABILITY AS CEASED/NON EXISTENT BECAUSE OF THE FACT THAT THE LIABILITY IS B EING SHOWN OUTSTANDING FOR MANY YEARS AND THE ASSESSEE HAS NOT PROVIDED CONFIRMATIONS FROM THE CREDITORS OR HAS FAILED TO PROVIDE NECESSARY DETAILS LIKE PAN/ADDRESS OF THE CREDITORS OR THERE IS NO POSSIBILITY OF THE CREDITORS CLAIMING THEIR DEBTS IN FUTURE AND APPLIED SECTION 41(1) OF THE INCOME TAX ACT 1961 BY ADDING THE LIABILITY TO THE TAXABLE INCOME OF THE DEBTOR. HOWEVER THE JUDICIAL FORA HAS CONSISTENTLY HELD THAT A LIABILITY CANNOT BE TREATED AS CEASED MERELY 28 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) BECAUSE OF THE FACT THAT THE LIABILITY IS BEING CARRIED FORWARD FOR YEARS AND THE ASSESSEE IS NOT COMPLETELY ABLE TO PROVE THE GENUINENESS OF THE TRADING LIABILITY AT THE TIME OF APPLICATION OF SECTION 41(1) BY THE INCOME TAX AUTHORITIES. IN A RECENT CASE1 DECIDED BY DIVISION BENCH OF HON'BLE DELHI HIGH COURT THE FOLLOWING OBSERVATION WAS MADE WITH REGARDS TO CESSATION OF LIABILITY UNDER SECTION 41(1) OF THE INCOME TAX ACT 1961. 'IT IS WELL SETTLED THAT REFLECTING AN AMOUNT AS OUTSTANDING IN THE BALANCE SHEET BY A COMPANY AMOUNTS TO THE COMPA NY ACKNOWLEDGING THE DEBT FOR THE PURPOSES OF SECTION 18 OF THE LIMITATION ACT 1963 AND THUS THE CLAIM BY M/S ELEPHANTA OIL & VANASPATI LTD. CAN ALSO NOT BE CONSIDERED AS TIME BARRED AS THE PERIOD OF LIMITATION WOULD STAND EXTENDED. .................. I T IS WELL SETTLED THAT IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 41(1) OF THE ACT THERE SHOULD HAVE BEEN AN IRREVOCABLE CESSION OF LIABILITY WITHOUT ANY POSSIBILITY OF THE SAME BEING REVIVED. THE ASSESSEE COMPANY HAVING ACKNOWLEDGED ITS LIABILITY SUCC ESSIVELY OVER THE YEARS WOULD NOT BE IN A POSITION TO DEFEND ANY CLAIM THAT MAY BE MADE ON BEHALF OF THE LIQUIDATOR FOR CREDIT OF THE SAID AMOUNT REFLECTED BY THE ASSESSEE AS PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. WE MAY ALSO ADD THAT ADMITTEDLY N O CREDIT ENTRY HAS BEEN MADE IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2008 - 2009. THE OUTSTANDING BALANCES REFLECTED AS PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. ARE THE OPENING BALANCES WHICH ARE BEING CARRIED FORWARD FOR SEVERAL YEARS. THE ISSUE AS TO THE GENUINENESS OF A CREDIT ENTRY THUS DOES NOT ARISE IN THE CURRENT YEAR AND THIS ISSUE COULD ONLY BE EXAMINED IN THE YEAR WHEN THE LIABILITY WAS RECORDED AS HAVING ARISEN THAT IS IN THE YEAR 1984 - 1985. THE DE PARTMENT HAVING ACCEPTED THE BALANCES OUTSTANDING OVER SEVERAL YEARS IT WAS NOT OPEN FOR THE CIT (APPEALS) TO CONFIRM THE ADDITION OF THE AMOUNT OF 1 53 48 850/ - ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE SUFFICIENT EVIDENCE TO PROVE THE GENUINENES S OF THE TRANSACTIONS WHICH WERE UNDERTAKEN IN THE YEAR 1984 - 85.' IN ANOTHER CASE2 DECIDED BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH THE FOLLOWING OBSERVATION WAS MADE WITH REGARDS TO CESSATION OF LIABILITY UNDER SECTION 41(1) OF THE INCOME TAX ACT 1961. 'CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE IT IS CLEAR THAT THE ASSESSEE HAD CONTINUED TO SHOW THE ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEET. THE LIABILITIES REFLECTED IN THE BALANCE SHEET CANNOT BE TREATED AS CESSATION OF LIABILITIES. MERELY BECAUSE THE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS IT CANNOT BE INFERRED THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. IT IS ALSO A FACT THAT THE ASSESSEE HAS NOT WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNT AND THE OUTSTANDING LIABILITIES ARE STILL IN EXISTENCE WOULD PROVE THAT THE ASSESSEE ACKNOW LEDGED HIS LIABILITIES AS PER THE BOOKS OF ACCOUNT. SECTION 41(1) OF THE IT ACT IS ATTRACTED WHEN THERE IS CESSATION OR REMISSION OF A TRADING LIABILITY. THE AO SHALL HAVE TO PROVE THAT THE ASSESSEE HAS OBTAINED THE BENEFITS IN RESPECT OF SUCH TRADING LIAB ILITIES BY WAY OF REMISSION OR CESSATION THEREOF. MERELY BECAUSE THE ASSESSEE OBTAINED BENEFIT OF DEDUCTION IN THE EARLIER YEARS AND BALANCES ARE CARRIED FORWARD IN THE SUBSEQUENT YEAR WOULD NOT PROVE THAT THE TRADING LIABILITIES OF THE ASSESSEE HAVE BECO ME NON - EXISTENT. IT MAY ALSO BE NOTED HERE THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF THE EXPENDITURE IN ALL THE ASSESSMENT YEARS UNDER APPEAL.' 29 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) IN THE YEAR UNDER CONSIDERATION FOR THE A.Y - 2009 - 10 & 2010 - 11 THE ASSESSING OFFICER MADE THE ADDITION ON THE GROUND THAT ASSESSING OF HAS VERIFYING THE BALANCE SHEET OF THE EARLIER AND AND THIS ASSESSMENT YEAR REVEALS THAT THE ASSESSEE HAS SUFFICIENT BANK BALANCE TO SETTLE THE CREDIT. INSTEAD OF SETTLING THE CREDIT HE HAS MADE THE DEPOSIT IN THE BANK. T HE ASSESSE DID NOT PRODUCE THE CREDIT TOR S THEREFORE THE AO HAS MADE THE ADDITION OF RS. 16 94 88 229/ - A.Y. - 2009 - 10 AND CIT (A) HAS REDUCED TO RS. 72507652/ - IN A.Y UNDER CONSIDERATION. IN A.Y 2010 - 11 THE AO HAS MADE THE ADDITION OF RS. 4 49 87 049/ - UN EXPLAINED CREDIT UNDER SECTION 41(2) OF IT ACT. WE DELETE THE ADDITION OF THIS TRADING LIABILITY IN BOTH THE YEARS. IF A TRADING LIABILITY IS BEING SHOWN BY AN ASSESSEE IN HIS BOOKS FOR YEARS IT CANNOT BE CONSIDERED AS CEASED MERELY BECAUSE OF THE FACTS THAT IT IS BEING SHOWN FOR YEARS AND THE ASSESSEE IS UNABLE TO PROVIDE CONFIRMATION FROM THE EDITORS OR OTHER DETAILS FROM THE CREDITORS OR THE POSSIBILITY OF CREDITORS DEMANDING THEIR MONEY BACK IS MINIMAL. THE GENUINENESS OF THE LIABILITY IF NOT QUESTIO NED BY THE INCOME TAX AUTHORITIES IN THE ASSESSMENT YEAR IN WHICH THE LIABILITY INCURRED BY THE ASSESSEE CAME UP FOR SCRUTINY THEN IT CANNOT BE QUESTIONED AT THE TIME OF APPLYING SECTION 41(1) BY THE INCOME TAX AUTHORITIES. HENCE AS LONG AS THE AMOUNT OF THE LIABILITY IS NOT WRITTEN OFF IN THE BOOKS BY THE ASSESSEE OR THERE IS SOME BENEFIT DERIVED TO THE ASSESSEE BY WAY OF REMISSION OR CESSATION IT CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT 1 961. 6 .5.2 W E FIND IN THE AUDIT REPORT THE ASSESSEE HAS SHOWN THIS LIABILITY IS STANDING IN THE NAME OF ASSESSEE THEREFORE WHEN THE ASSESSEE HAS SHOWN THIS LIABILITY IN HIS BOOKS OF ACCOUNT IT CANNOT BE INFERRED THAT THIS LIABILITY IS BOGUS ONE THEREFORE W E ARE OF THE VIEW THAT WHEN THE ASSESSEE HAS FILED TO AUDIT REPORT S . WE THEREFORE DELETE THE ADDITION OF RS. 72507652/ - A.Y 2009 - 10 & RS . 44987049/ - IN A.Y. 2010 - 11. IN THE RESULT OF THE APPEAL FOR BOTH THE YEARS ARE ALLOWED. 7 . GROUND NO. 9 : - SHORT FACTS OF THE CASE ARE THAT THERE WAS SEARCH IN THE CASE OF HIS BROTHER AND THE EXEMPTION OF THE JURISDICTION UNDER SECTION 153C WAS ILLEGAL. THE ASSESSEE HAS FILED THE RETURN OF INCOME IN RESPONSE TO NOTICE UNDER SECTION 153 - C. THE ASSESSEE HAS OFFERED A SUM OF RS. 4011200/ - HAS UN - DISCLOSED INCOME DURING THE COURSE OF S EA RCH PROCEEDING TO DDIT BANGALORE. THE ASSESSEE NOT IN POSITION TO SUSTAINED THE CLAIM IN RESPECT OF THE PARTIES WHO SUPPLIED MATERIALS MORUM AND STONE THE MOST OF SUPPLIERS ARE FROM RURAL AREA HENCE ASSESSEE HAS OFFERED THIS UNDISCLOSED INCOME. THE ADDITIONAL INCOME WAS OFFERED TO CLOSE THE SUCH PROCEEDINGS AS THE ASSESSEE WAS SICK. THE ASSESSEE WAS AGREED THIS AMOUNT IN RESPECT OF CREDITOR THROUGH IN HIS BALANCE 30 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) SHEET HANDED 31.03.2009. THE AO ADDED THIS AMOUNT AS UNDISCLOSED INCOME. CIT (A) CONFIRM THE SAME. 7 .1 LD AR SUBMITTED THAT TH E ASSESSEE HAS AGREED TO OFFER A SUM OF RS. 4011200/ - AS UNDISCLOSED INCOME IN RESPECT OF CREDITORS SHOWN IN BALANCE SHEET FOR THE YEAR ENDED 31.03.2009. THEREFORE HE HAS REQUESTED TO DELETE THE SAME. LTD. DR RELIED UPON THE ORDER OF LOWER AUTHORITY . 7 .2 WE HAVE HEARD RIVAL CONTENTION OF THE BOTH THE PARTIES. WHETHER THE ASSESSEE HAS OFFERED A SUM OF RS. 4011200/ - AS UNDISCLOSED INCOME IN RESPECT OF CREDITOR SHOWN IN THE BALANCE SHEET OR THE YEAR ENDED 31.03.2009. WE THEREFORE RESTORE THIS MATTER TO T HE FILE OF AO TO VERIFY WHETHER THE ASSESSEE HAS OFFERED THIS UNDISBURSED INCOME IN RESPECT OF CREDITOR SHOWN IN THE BALANCE SHEET FOR THE YEAR ENDED 31.03.2009. IF THE AO FOUND THAT THIS CREDITORS ARE SHOWN IN THE BALANCE SHEET AS CLAIM BY THE ASSESSEE T HE N IT MAY BE DECIDED AS PER LAW AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. APPEAL IS ALLOWED STATISTICAL PURPOSE. 8 . GROUND NO. 10 : - SHORT FACTS ARE AS UNDER: 8 .1 AS PER THE P&L A/C FOR THE A.Y. 2009 - 10 THE ASSESSEE CLAIMED SUB - CONTRACT PAYMENT OF RS. 92 73 315/ - . VIDE THIS OFFICE LETTER DATED 16.09.2011 IT WAS BROUGHT TO HIS NOTICE THAT THERE WAS AN ELEMENT OF CONTRACT IN RESPECT OF PAYMENTS RELATING TO PURCHASE OF MATERIALS AND THAT THE PROVISIONS OF SEC. 194C ARE APPLICABLE. THE ASSESSEE PRODUCED A CHALLAN FOR PAYMENT OF A SUM OF RS. 92 730/ - ON 17.10.2011. HOWEVER THE LAW RELATING TO AMOUNTS PAYABLE TO CONTRACTOR OR SUB - CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK IS GOVERNED BY THE PROVISIONS OF SEC. 4 0 (A) (IA). IT SAYS THAT THE AMOUNT RELATING TO SUMS PAYABLE TO SUMS PAYABLE TO CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS 31 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) OR PROFESSION UNLESS THE TAX DEDUCTIBLE AT SOURCE UNDER CHAPTE R XVII - B AND SUCH TAX HAS BEEN DEDUCTED OR AFTER DEDUCTION HAS BEEN PAID ON OR BEFORE THE DUE DATE U/S 139(1). THE ASSESSEE MADE THE PAYMENT AFTER THE FINANCIAL YEAR IS OVER AND AFTER THE DUE DATE FOR FILING THE RETURN OF INCOME U/S. 139(1) IS OVER. EVE N THE RETURN OF INCOME U/S. 153 C WAS FILED ONLY ON 28.09.2011. IT IS ALSO PERTINENT TO POINT OUT THAT HE HAS SIMPLY PAID THE SUM WITHOUT FURNISHING THE TDS RETURNS AS REQUIRED UNDER THE LAW (AS PER HIS LETTER DATED 07.12.2011). HENCE THE SUB - CONTRACT PAY MENT OF RS. 92 73 315/ - IS NOT ALLOWED TO BE DEDUCTED AS CLAIMED BY THE ASSESSEE IN HIS P&L A/C AND THE SAME IS BROUGHT TO TAX. MATTER CARRIED TO CIT (A) THE CIT (A) CONFIRMS THE ADDITION. 8 .2 LD AR SUBMITTED THAT ASSESSEE IS A CONTRACTOR GOT CERTAIN WOR KS DONE ON PIECE - WORKS BASIS FROM SOME PERSONS. THESE ARE NOT SUB - CONTRACT WORK IN THE STRICT SENSE BUT PAYMENTS MADE TOWARDS CERTAIN WORKS DONE ON PIECE WORK BASIS. THE PAYMENT MADE ON PIECE - WORK IS DEBITED IN THE BOOKS AS SUB - CONTRACT TO THE EXTENT OF RS. 92 73 315/ - . AS A MATTER OF CAUTION ABUNDANT TDS WAS DEDUCTED AT THE YEAREND AND PAYMENT WAS ALSO MADE BEFORE THE DUE DATE FOR FILING THE RETURN WHICH IN THE APPELLANTS CASE IS 30/09/2009. BUT IN THE CHALLAN PRODUCED THE EXACT DATE AND YEAR IS NOT V ISIBLE AND THE A.A. THOUGH THAT THE PAYMENT WAS MADE IN THE NEXT YEAR AND THEREFORE UNREASONABLY WITHOUT EVEN VERIFYING FROM THE BANK AS TO WHEN THE PAYMENT WAS EXACTLY MADE THE DISALLOWANCE WAS MADE. THE APPELLANT CRAVES LEAVE FOR FILING THE BANKERS CE RTIFICATE BEFORE OR AT THE TIME OF HEARING OF THE APPEAL IN SUBSTANTIATION THAT THE PAYMENT FOR THE YEAREND DEDUCTION WAS MADE WELL BEFORE THE DUE DATE FOR FILING THE RETURN U/S. 139(1) OF THE ACT WHICH WAS 30 TH SEPTEMBER. THUS DISALLOWANCE MADE IS ON ER RONEOUS APPRECIATION OF FACTS AND DESERVES TO BE DELETED. LD AR SUBMITTED THAT THIS PAYMENT OF RS. 92 73 314/ - IS DISALLOWED AS PAYMENT MADE TO SUB - CONTRACTOR ON THE GROUND THAT NO TDS IS MADE. THE PAYMENT MADE BY THE SUB - CONTRACTOR ALSO 32 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) FIGURES DISALLOW ANCE MADE UNDER SECTION 40(A)(3) OF THE ACT. THUS THESE ALLOWANCES IS DUPLICATED. LD DR RELIED UPON THE ORDER OF REVENUE AUTHORITY. 8 . 3 WE HAVE HEARD THE RIVAL CONTENTION BOTH THE PARTIES. DURING THE COURSE OF HEARING LD AR SUBMITTED THAT ASSESSEE HAS ALREADY PAID THE TAX BEFORE DUE DATE. THE ASSESSING OFFICER NOT VERIFIED WHETHER THE TDS IS MADE BEFORE DUE DATE OF FILING OF THE RETURN OR NOT THEREFORE WE RE - STORE THESE FILE TO AO TO VERIFY WHETHER THE ASSESSEE HAS PAID THE TAX BEFORE DUE DATE OR NOT AFTER VERIFYING THE FACTS. AO IS DIRECTED TO PASS THE ORDER AS PER LAW. 8 .3.1 THE ASSESSEE IS ALSO SUBMITTED THAT THE FOLLOWING BEFORE US WHEREIN HE IS STATED THAT THE AMOUNT IN QUESTION IS PAYMENT TO CONTRACTORS OF THE LIABILITY OF THE EARLIER FIRM OF M D WADDAR AND COMPANY (DISSOLVED). THEREFORE THESE AMOUNT CANNOT BE ADD IN THE CASE OF ASSESSEE. THE PAYMENT TO SUB - CONTRACTOR ARE FIGURES IN THE BANK WHICH ARE AS UNDER: - (A). KARNATAKA BANK HUNSAGI S.NO DRAWN BY AMOUNT [RS.] NOS 1. EMPLOYEES 24 30 000 7 2. SUB - CONTRACTORS & LABOUR C ONTRACTORS 27 81 300 8 3. CREDITORS 32 55 100 9 4. UNTRACEABLE ITEMS 27 60 000 5 TOTAL [A] 1 12 26 400 29 ( B ). KARNATAKA BANK DAVANGERE S.NO DRAWN BY AMOUNT [RS.] NOS 1. EMPLOYEES 3 30 000 2 2. SUB - CONTRACTORS & LABOUR CONTRACTORS 8 50 000 5 3. CREDITORS 56 20 000 15 4. UNTRACEABLE ITEMS 4 50 000 2 TOTAL [B] 72 50 000 24 TOTAL OF [A] + [B] = RS. 112 26 400 + 72 50 000 = RS. 1 84 76 400/ - 33 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) FROM THE ABOVE CHART IT CAN BE SEEN THAT SUM OF THE PAYMENT WAS MADE TO CONTRACTORS ARE REFLECTING IN THE ABOVE PAYMENT THEREFORE AO IS DIRECTED TO VERIFY WHETHER THE PAYMENT MADE TO THE CONTRACTOR ARE SHOWN IN THIS AMOUNT DUPLICATE OR NOT. IF THESE PAYMENTS ARE DUPLICATE THEN IT MAY BE DELETED. AO IS DIR ECTED TO GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE. AO IS DIRECTED TO PASS THE ORDER AS PER LAW. THIS GROUND IS ALLOWED OR STATISTICAL PURPOSE. 9. THE INTEREST UNDER SECTION 234 - A 234 - B AND 234 - C ARE CONSEQUENTIAL. THE CHARGING OF INTEREST UNDER SECTION 234A 234B & 234C OF INCOME TAX ACT IS MANDATORY AS PER LAW AND AS UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ANJUMAN H GHASWALA & O RS (SC) 252 ITR 1. HOWEVER THE ASSESSING OFFICER IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT TO THE COMPUTATION OF INTEREST IN THE ABOVE SECTIONS. 1 0 . IN THE RESULT ITA NO. 203/PNJ/2013 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED AND ITA NO. 66/PNJ/2013 OF D EPARTMENTS APPEAL IS DISMISSED. ITA NO. 204/PNJ/2013 & 67/PNJ/2013 FOR A.Y.2010 - 11 1 1 . GROUND NO.1: - THE ASSESSING OFFICER HAS FOUND THAT THE BANK BALANCE OF THE ASSESSEE WAS IN EXCESS BY RS . 45 597/ - OVER THE DECLARED BALANCE IN HIS ACCOUNTS FOR WHICH AN ADDITION OF RS. 54 597/ - WAS MADE TO THE TOTAL INCOME. THIS EXCESS BANK BALANCE IS CLEARLY AN UNEXPLAINED ASSET OF THE ASSESSEE WHICH IS LIABLE FOR TAX. HOWEVER CONSIDERING THAT SUBSTANTIA L ADDITIONS TO TOTAL INCOME HAS ALREADY BEEN MADE AND UPHELD VIDE THIS ORDER NO FURTHER ADDITION OF THIS AMOUNT NEED BE MADE IN THE HANDS OF THE APPELLANT AS THE SOURCE WOULD CLEARLY BE THE INCOME NOT DECLARED AND BEING BROUGHT TO TAX ACCORDINGLY. THE ASS ESSING OFFICER HAS VERIFIED THE VARIOUS BANK ACCOUNTS OF THE FAMILY MEMBERS AND DETAIL ACCOUNTS COLLECTED AND ASSESSING OFFICER HAS FOUND THAT IN EXCESS OF RS. 45 597/ - WHICH WAS SHOWN IN THE KARNATAKA BANK SHAHAPUR KARNATAKA BANK 34 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) ATHANI TOTAL RS. 45 59 7/ - WAS SHOWN IN THE BALANCE SHEET THEREFORE IT WAS ADDED TO THE INCOME OF THE ASSESSEE. 1 1 .1 . THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS CONFIRMED THIS ADDITION. 1 1 .2 . DURING THE COURSE OF HEARING T HE LEARNED AR HAS NOT PRESSED ON THIS GROUND THER E FORE WE DISMISS THE GROUND AND CONFIRM THE ADDITION. 1 2 . GROUND NO.8: - THIS GROUND RELATES TO THE ADDITION OF RS.7 15 98 930/ - U/S. 40A[3] AS WE HAVE ALREADY PASSED THE COMMON ORDER IN ITA NO. 203 /PNJ/201 4 & 66 /PNJ/2014 FOR A.Y.200 9 - 1 0 THEREFORE ON THE SAME REASON THIS GROUND OF APPEAL IS ALLOWED. 1 3 . GROUND NO. 9: - THIS GROUND RELATES TO A SUM OF RS.4 49 87 049/ - AS UNEXPLAINED CREDIT. AS WE HAVE ALREADY DECIDED IN THIS APPEAL ITA NO. 203 /PNJ/2014 & 66 /PNJ/2014 FOR A.Y.200 9 - 1 0 . ON THE SAME REASON THIS APPEAL IS ALLOWED. ITA NO. 67/PNJ/2013 1 4 . THE ONLY GROUND IN THIS APPEAL IS DELETING THE ADDITION OF RS.22 00 000/ - IT WAS FOUND THAT ASSESSEE HAS INVESTED A SUM OF RS. 7 .78 CRORES FOR CONSTRUCTION OF A HOUSE MEASURING 16 660 SFT (THR EE FLOORS) WITH HELIPAD AND PROVISIONS FOR GUARD ROOM. THE ENTIRE FLOOR IS LAID WITH ITALIAN MARBLE. THE COST OF CONSTRUCTION IS AS PER HIS VALUATION RS.7 78 10 250/ - A REFERENCE IS ALREADY MADE TO THE VALUATION OFFICER AND HE HAS MADE THE ADDITION OF RS.2 2 00 000/ - AS THE INVESTMENT IN CONSTRUCTION OF THE HOUSE. 1 4 .1. THE MATTER CARRIED TO CIT ( A) AND THE CIT ( A) HAS DELETED BY OBSERVING AS UNDER: AN ADDITION OF RS.22 LAKHS HAS BEEN MADE AS INVESTMENT MADE IN CONSTRUCTION OF HOUSE OUT OF UNEXPLAINED FUNDS. I FIND THAT THIS ADDITION IS NOT SUBSTANTIATED BY ANY FACTS OR EVIDENCE. THE ADDITION MADE THEREFORE IS DELETED. MOREOVER THE ADDITION 35 . ITA NOS. 203 204/BANG/2013 & 66 67/PNJ/2013 (A.Y.2009 - 10 & 2010 - 11) MADE WITH REGARD TO TOTAL INCOME ON OTHER ISSUES WOULD ANY WAY MAKE UP FOR ANY INVESTMENT IN CONSTRUCTION OF HOUSE WHICH IS OTHERWISE NOT EXPLA INABLE . 1 4 .2. HAVING HEARD BOT H THE PARTIES WE FIND THAT THE CIT(A) HAS HELD THIS ADDITION IS NOT SUBSTANTIAL BY ANY FACTS OR EVIDENCE. THE AO HAS NOT BROUGHT OUT ANY RECORD THEREFORE HE HAS DELETED THIS ADDITION AND OUR INTERFERENCE IS NOT REQUIRED. IN THE RESULT THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. 15 . THE INTEREST UNDER SECTION 234 - A 234 - B AND 234 - C ARE CONSEQUENTIAL. THE CHARGING OF INTEREST UNDER SECTION 234A 234B & 234C OF INCOME TAX ACT IS MANDATORY AS PER LAW AND AS UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ANJUMAN H GHASWALA & O RS (SC) 252 ITR 1. HOWEVER THE ASSESSING OFFICER IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT TO THE COMPUTATION OF INTEREST IN THE ABOVE SECTIONS. 1 6 . IN THE RESULT APPEAL S FI LE D BY THE ASSESSEE ARE PARTLY ALLOWED AND D EPARTMENTS APPEALS ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 17 .10.2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 17 .10.2014 P.S. - *PK* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY BY ORDER