Sri. RAJESH L. DURGANI, MUMBAI v. ACIT CIR. 18(3), MUMBAI

ITA 6797/MUM/2005 | 1999-2000
Pronouncement Date: 30-11-2011 | Result: Allowed

Appeal Details

RSA Number 679719914 RSA 2005
Bench Mumbai
Appeal Number ITA 6797/MUM/2005
Duration Of Justice 6 year(s) 8 day(s)
Appellant Sri. RAJESH L. DURGANI, MUMBAI
Respondent ACIT CIR. 18(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 30-11-2011
Date Of Final Hearing 23-11-2011
Next Hearing Date 23-11-2011
Assessment Year 1999-2000
Appeal Filed On 22-11-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M. JAGRAP A.M. AND SHRI V. DURGA RA O J.M. S.NO. ITA NO. A.Y. APPELLANT RESPONDENT 1 6860/MUM/03 1999-00 RAJESH DURGANI 505 OWNERS INDUSTRIAL ESTATE L.J. ROAD MAHIM MUMBAI 400 016 ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 18(3) MUMBAI. 2 6797/MUM/05 1999-00 -DO- -DO- 3 6902/MUM/05 1999-00 ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 18(3) MUMBAI. RAJESH DURGANI 505 OWNERS INDUSTRIAL ESTATE L.J. ROAD MAHIM MUMBAI 400 016 ASSESSEE BY : MR. VIMAL PUNMIYA RESPONDENT BY : MR. A.K. NAYAK ORDER PER V. DURGA RAO J.M.: THESE APPEALS PERTAIN TO SAME ASSESSEE. THE APPEAL BEING ITA NO. 6860/MUM/03 FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF CIT(A)--XXXVIII MUMBAI PASSED ON 15/07/2003. I TA NO. 6792/MUM/05 BEING THE APPEAL FILED BY THE ASSESSEE & 6902/MUM/05 BEING THE APPEAL FILED BY THE ASESSSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-XXVIII MUMBAI ON 27/09 /05 PASSED IN THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT BY THE AO THE SAID APPEALS ARE PERTAINING TO AY 1999-2000. ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 2 ITA NO. 6860/MUM/2003 2. GROUND NO. 1 IS DIRECTED AGAINST THE ACTION OF T HE CIT(A) IN CONFIRMING THE ADDITION OF RS. 20 LACS ON ACCOUNT O F EXCESS STOCK TO THE INCOME OF THE ASSESSEE. 3. THE FACTS ARE IN BRIEF THAT THE ASSESSEE IS ENGA GED OM THE MANUFACTURE OF COFFEE FILED HIS RETURN OF INCOME D ECLARING TOTAL INCOME OF RS. 11 03 650/-ON 31/12/1999 WHICH WAS P ROCESSED U/S 143(1) ACCEPTING THE RETURNED INCOME. A SURVEY ACTI ON U/S 133A WAS CONDUCTED ON 15/02/1999 WHEREIN IT WAS NOTICED THAT THERE WAS EXCESS STOCK OF RS. 19 98 796/-. THE WORKING OF THE EXCESS STOCK COMPUTED BY THE SURVEY PARTY REPRODUCED BY THE AO A T PAGES 1 & 2 IN ASSESSMENT ORDER. THE AO NOTED THAT IN ACCORDANCE WITH THE STOCK POSITION OF THE ASSESSEE AS ON 31/03/99 AS PER THE BOOKS THE VALUE SHOULD HAVE BEEN OF RS. 70 07 180/- INSTEAD OF TOTA L STOCK FOUND VALUED AT RS. 99 00 564/-. ACCORDINGLY EXCESS STOC K FOUND CALCULATED AT RS. 99 00 564 70 07 180/- = RS. 19 98 796/-. T HE AO AFTER TAKING INTO CONSIDERATION THE ANSWER TO QUESTION NO. 10 & 11 OF THE STATEMENT MADE BY THE ASSESSEE ON THE DATE OF SURVE Y WHICH WAS REPRODUCED BY THE AO IN ASSESSMENT ORDER AT PAGE 2 IN ASSESSMENT ORDER AND TAKING INTO CONSIDERATION THE DISCLOSURE MADE BY THE ASSESSEE OF RS. 20 LAKHAS TOWARDS ADDITIONAL SALES MADE AN ADDITION OF RS. 20 LAKHS AS ADDITIONAL INCOME BY HOLDING THA T THE ASSESSEE NEVER PRODUCED ANY EVIDENCE IN SUPPORT OF HIS CLAIM NOR DID HE PRODUCED BOOKS OF ACCOUNT DURING THE ASSESSMENT PRO CEEDINGS. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 3 4. BEFORE THE CIT(A) IT WAS STATED THAT THE STATEM ENT MADE BY THE ASSESSEE UNDER THE IMPRESSION THAT WOULD HAVE TO DE CLARE ADDITIONAL SALES SINCE IN THE OPINION OF THE SURVEY TEAM THE D IFFERENCE WOULD HAVE BEEN ON ACCOUNT OF UNDISCLOSED SALES. IT WAS F URTHER SUBMITTED THAT ADDITION ONLY ON ACCOUNT OF SUPPRESSED SALES S HOULD HAVE BEEN MADE AND GROSS PROFIT ARISING OUT OF SUPPRESSED SAL ES SHOULD HAVE BEEN ADDED TO THE INCOME OF THE ASSESSEE. AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) CONFIRMED THE ACTION OF THE AO OBSERVING THAT THE ASSESSEE HAD NOT PRODUCED ANY MATERIAL OR EVIDENCE TO SHOW MISTAKE IN THE CALCULATION OF EXCE SS STOCK FOUND DURING THE COURSE OF SURVEY AT RS. 19 98 796/-. STI LL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO WHILE MAKING ASSESSMENT REDUCED THE COST OF EVAPORATION WASTAGE ETC. OF 28083 KGS. AMOUNTING TO RS. 25 27 470/- CANNOT BE EXCLUDED FROM THE VALUATION OF STOCK AS THE AMOUNT HAS TAKEN INTO CONSIDERATION. HE THEREFORE CONTENDED THAT NO ADD ITION IS WARRANTED IN THIS REGARD. 6. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT DURING THE COURSE OF SURVEY PROCEEDINGS THE ASSESSEE HIMSELF ADMITTED THAT THERE IS VARIATION IN STOCK TOTALLING TO RS. 19 98 796/-. HE THEREFORE SUBMITTED THAT BASED ON THE SAID ADMISSION THE AO MADE THE ADDITION. 7. WE HAVE HEARD THE PARTIES PERUSED THE RECORD AN D GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND FROM T HE ASSESSMENT ORDER THAT THE VALUATION OF THE OPENING STOCK WAS TAKEN B Y THE AO AS ON 01/04/1998 IS AT RS. 1 08 78 354/-. AFTER REDUCING THE EVAPORATION ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 4 WASTAGE ETC. OF RS. 25 27 470/- FROM THE SAID OPENI NG STOCK THE AO TOOK THE VALUE AT RS. 83 51 064/-. THE CONTENTION OF THE ASSESSEE IS THAT THE SAID AMOUNT OF RS. 25 27 470/- CANNOT BE E XCLUDED FOR THE PURPOSE OF COMPUTING THE COST OF SALES AS IT VERY M UCH FORMS PART OF THE SAID COST. WE AGREE WITH THIS CONTENTION OF THE ASSESSEE IN PRINCIPLE. HOWEVER IN ORDER TO VERIFY THE STAND OF THE ASSESSEE FROM ACTUAL RECORD WE RESTORE THIS MATTER TO THE FILE O F THE AO WITH A DIRECTION TO EXAMINE AND VERIFY THE RELEVANT WORKIN G AND ALLOW APPROPRIATE RELIEF TO THE ASSESSEE IN ACCORDANCE WI TH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL P URPOSES. 8. GROUND NO. 2 READS AS UNDER:- 1. THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 8 92 950/- TO THE INCOME OF THE ASSESSEE FOR THE FOLLOWING REA SONS: A) THE CIT(A) FAILED TO APPRECIATE THAT THERE WAS I N FACT NO DIVERSION OF FUNDS. B) THE CIT(A) ERRED IN NOT APPRECIATING ON THE FACT S OF THE CASE THE PROVISIONS OF SECTION 14 A DID NOT APPLY. 9. THE ASSESSEE HAD MADE INVESTMENT OF RS 1 99 05 100/-. IT HAD BEEN POINTED OUT BY THE ASSESSEE THAT BESIDES THE CAPITAL THE ASSESSEE WAS HAVING LOANS AND BORROWINGS OF RS. 1 0 9 49 479/- AND DEPOSIT ON LEASE RENT OF RS. 1 15 00 000/-. THE DEP OSIT ON LEASE RENT WAS RECEIVED FROM A SISTER CONCERN M/S ASHRAJ FOODS & BEVERAGES PVT. LTD. THE ASSESSEE HELD THAT THE ASSESSEE HAD INVEST ED IN SHARES OUT OF HIS BORROWINGS AND THEREFORE HE ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF INVESTMENT OF THESE SHARES. AFTER CONSIDE RING THE REPLY FILED BY THE ASSESSSEE DATED 20/03/2002 AND FOLLOWING THE RATIO OF THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF SU JANI TEXTILES PVT. LTD. THE AO HELD THAT INTEREST PAID ON BORROWINGS AND LOANS FOR ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 5 PURCHASING INVESTMENT OF SHARES HAS NOT BEEN HELD T O BE AN ALLOWABLE DEDUCTION U/S 36(1)(III) OF THE ACT. HE FURTHER HEL D THAT ACCORDING TO SECTION 14A NO DEDUCTION WAS PERMISSIBLE IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DID NOT FORM PART OF THE TOTAL INCOME. THE AO WAS OF THE VIEW THAT SI NCE DIVIDEND RECEIVED FROM COMPANIES WERE EXEMPT FROM INCOME-TAX NO PART OF THE INCOME WAS INCLUDED IN THE TOTAL INCOME OF THE ASSE SSEE AND THEREFORE INTEREST ON BORROWED FUND OF RS. 59 53 5 00/- UTILISED FOR PURCHASE OF SHARE WAS NOT ALLOWED. ACCORDINGLY DIS ALLOWANCE WAS CALCULATED @15% OF RS. 59 53 500/- WHICH CAME TO R S. 8 92 950/-. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A). BEFORE THE THE CIT(A) THE ASSESSEE VIDE LETTER DAT ED EXPLAINED THAT M/S ASHRAJ FOODS & BEVERAGES PVT. LTD. IS A COMPANY WHICH IS FULLY CONTROLLED BY THE ASSESSEE AND HIS IMMEDIATE FAMILY MEMBERS AND OUT OF AGGREGATE PAID UP CAPITAL OF RS. 3 10 00 000/- 99.99% SHARES WAS HELD BY THE ASSESSEE HIS WIFE HIS TWO SONS AND HI S MOTHER. THESE HAD BEEN STATED TO HIGHLIGHT THAT THE ASSESSEE HAS CONTROLLING INTEREST IN THE COMPANY AND IT IS NOT FOR EARNING DIVIDEND T HAT A LOAN HAS BEEN GIVEN TO M/S ASHRAJ FOODS & BEVERAGES PVT. LTD. THU S THE ASSESSEE STATED THAT OBJECTIVE OF MAKING SUBSTANTIAL INVESTM ENT WAS NOT TO EARN DIVIDEND BUT RETAIN CONTROL OVER THE COMPANY. IT WA S FURTHER STATED THAT THE TRACK RECORD OF M/S ASHRAJ FOODS & BEVERAG ES PVT. LTD. WOULD SHOW THAT IT HAD NEVER DECLARED DIVIDEND AND THERE FORE QUESTION OF INCURRING EXPENDITURE TO EARN DIVIDEND ALSO DOES NO T ARISE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CI T(A) CONFIRMED THE ACTION OF THE AO OBSERVING THAT DIVIDEND RECEIVED F ROM THE COMPANIES ARE EXEMPT FROM INCOME-TAX AND THEREFORE INTEREST ON BORROWED FUNDS OF RS. 59 53 000/- UTILISED FOR PURCHASE OF SHARE I S NOT ALLOWED AND THEREFORE THE DISALLOWANCE OF INTEREST CALCULATED BY THE AO @15% AMOUNTING TO RS. 8 92 950/- HAS THUS BEEN CORRECTLY MADE AS PER ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 6 STATUTORY PROVISIONS OF SECTION 14A OF THE ACT. ST ILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 10. AT THE TIME OF HEARING BEFORE US THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ & BOYCE CO. LTD. ON THE OTHER HAND THE LEARNED DR SUBMITTED TH AT NEITHER THE AO NOR THE CIT(A) APPLIED RULE 8-D HOWEVER IN PRINC IPLE HE HAS ACCEPTED THAT THE MATTER MAY BE REMITTED BACK TO TH E AO TO DECIDE THE ISSUE AS PER THE JUDGMENT OF THE JURISDICTIONAL HIG H COURT IN THE CASE OF GODREJ AND BOYCE LTD [2010] 328 ITR 81 (BOM.) . 11. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES PERUSING THE RECORD AND GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW WE FIND THAT THE ISSUE IN DISPUTE IS COVERED BY THE DECISION HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ & BOYCE MFG. CO. LTD. [2010] 328 ITR 81 (BOM.) WHEREIN THE HON BLE COURT HELD AS UNDER:- THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH H AVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24 2008 WOULD APP LY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSM ENT YEAR 2008-09 WHEN RULE 8D WAS NOT APPLICABLE THE AO HA D TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. F OR THAT PURPOSE THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE W HICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FA CTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECOR D. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED TO THE AO. THE AO SHOULD DETERMINE AS TO WHETHER TH E ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) I N RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECT ION 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE A PPORTIONMENT. WHILE MAKING THAT DETERMINATION THE AO SHOULD PROV IDE A ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 7 REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING O N THE FACTS AND CIRCUMSTANCES OF THE CASE. 12. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. ( SUPRA) WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SAID JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT AFTER PROVIDING REASONABLE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. 13. GROUND NO. 3 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 12 93 750/- AS NOTIO NAL INCOME FROM HOUSE PROPERTY TO THE INCOME OF THE ASSESSEE. 14. THE FACTS RELATING TO RAISE THIS GROUND IS THAT THE ASSESSEE OWNED CERTAIN GALAS AT KANDIVALI. HE HAD TAKEN LEAS E DEPOSIT OF RS. 1.15 CRORES FROM A SISTER CONCERN M/S ASHRAJ FOODS & BEVERAGES PVT. LTD. THE AO TREATED 15% OF LEASE DEPOSIT RECEIVED F ROM THE SAID SISTER CONCERN AS NOTIONAL RENT AND TAXED THE SAME UNDER T HE HEAD 'INCOME FROM HOUSE PROPERTY'. ON APPEAL THE CIT(A) CONFIRM ED THE ACTION OF THE AO. STILL AGGRIEVED THE ASSESEE IS IN APPEAL B EFORE US. 15. BEFORE US THE LEARNED COUNSEL FOR THE ASSESEE CANVASSED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE ITAT MUMBAI BENCH IN ASSESSEE'S OWN CASE FOR AY 2001-02 IN ITA NO. 9501/ MUM/2004 VIDE ORDER DATED 30 TH SEPTEMBER'2011. A COPY OF THE SAID ORDER IS AVAILA BLE ON RECORD. THE LEARNED DR ON THE OTHER HAND CONCED ED THE SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE ASSE SSEE. ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 8 16. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF A CO-O RDINATE BENCH IN ASSESSEE'S OWN CASE FOR AY 2001-02 (SUPRA) WHEREIN THE CO-ORDINATE BENCH HELD AS UNDER:- 13. WE HAVE HEARD THE PARTIES. WHILE DECIDING THE A SSESSEES APPEAL FOR THE AY 1996-07 WE HAVE DECIDED THE ISSU E OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN THE YEAR THO UGH THE ASSESSEE HAS TAKEN THE STAND THAT THE AMOUNT RECEIVED FROM M /S ASHRAJ FOODS WAS TOWARDS DEPOSIT FOR LEASING OUT THE GALAS TO THE SAID COMPANY TO THE EXTENT OF RS. 1.15 CRORE BUT THE SAM E WAS REJECTED BY THE AO AS WELL BY THE LD. CIT(A) AND WE HAVE ALSO CONFIRMED THE FINDING GIVEN BY THE AUTHORITIES BELO W IN RESPECT OF THE NATURE OF THE ADVANCE AND HELD THAT IT WAS NOT TOWARDS THE DEPOSIT FOR LEASING OUT GALAS/UNITS BUT SIMPLE ADVA NCE. ONCE IT IS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS NO T IN THE NATURE OF THE DEPOSIT FOR LEASING OUT ANY PROPERTY THEN THE SAME CANNOT AT THE FIRST INSTANCE BE CONSIDERED FOR TH E PURPOSE OF COMPUTING THE ANNUAL VALUE ALV U/S 23(1)(A) OF THE ACT. ADMITTEDLY IN THE PRESENT CASE IT IS CLAIMED THAT THE ASSESSEE HAS NOT RECEIVED ANY RENT FROM M/S ASHRAJ FOODS AND HENCE SECTION 23(1)9B) IS NOT APPLICABLE. SO FAR AS SECTI ON 23(1)(A) IS CONCERNED THAT CONTEMPLATES THE FACTUM OF THE PROP ERTY GIVEN ON LEASE/LEAVE AND LICENSE. IT IS CERTAINLY STRANGE TH AT IN THE AY 1996-97 THE AO REJECTED THE CLAIM OF THE ASSESSEE T HAT THE AMOUNT RECEIVED FROM M/S ASHRAJ FOODS WAS TOWARDS D EPOSIT FOR RENTING OUT GALAS/UNITS WHEN ADMITTEDLY IT IS THE S AME AMOUNT WHICH IS CONSIDERED TO BRING TO TAX BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. WE THEREFORE HOLD THA T THE AMOUNT RECEIVED BY THE ASSESSEE IS NOT AT ALL TOWARDS RENT ING OUT OR LEASING OUT ANY PREMISES OR GALAS AND HENCE THE SA ME CANNOT BE CONSIDERED FOR DETERMINING ALV U/S 23(1)(A) OF THE ACT. 13.1 AT THE SAME TIME THE ASSESSEE HIMSELF STATED THAT THE UNITS/GALAS ARE NOT USED FOR HIS BUSINESS HENCE TH E SAME WILL ATTRACT THE PROVISIONS OF SECTION 23(1)(A) OF THE A CT. WE THEREFORE CONSIDER IT FIT TO RESTORE THE ISSUE FOR DETERMININ G THE ALV OF THE GALAS/UNITS TO THE FILE OF THE AO FOR FRESH ADJUDIC ATION. THE AO IS DIRECTED TO DETERMINE THE ALV U/S 23(1)(A) SHOULD B E EQUIVALENT TO STANDARD RENT APPLICABLE TO THE SAID UNITS/GALAS AS PER MAHARASHTRA RENT CONTROL ACT 1999 OR THE MUNICIPAL RATABLE VALUE ( AS PER THE LATEST ASSESSMENT MADE BY THE CO RPORATION) WHICHEVER IS HIGHER. NEEDLESS TO SAY THE AO SHOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 9 ACCORDINGLY RESPECTIVE GROUND OF THE APPEAL IN THE AY 2001-02 IS ALLOWED FOR STATISTICAL PURPOSES. 17. SINCE THE UNDER CONSIDERATION IS MATERIALLY IDE NTICAL TO THAT OF AY 2001-02 WE RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN AY 2001-02 AND IN THE LIGHT OF THAT WE SET ASIDE THE ORDER OF CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE WITH IDENTICAL DIRECTION AS GIVEN BY THE BENC H IN AY 2001-02. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. 18. IN THE RESULT APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 6797 & 6902/MUM/05 19. IN THESE APPEALS THE ASSESSEE IN ITA NO. 6797/ MUM/05 RAISED A GROUND THAT THE CIT(A) ERRED IN CONFIRMING THE PE NALTY TO THE EXTENT OF RS. 5 94 745/- BY INVOKING THE PROVISIONS OF SEC TION 271(1)(C) AND THE REVENUE IN ITA NO. 6902/MUM/05 RAISED A GROUND THAT THE CIT(A) ERRED IN REDUCING THE PENALTY TO RS. 5 94 745/- U/S 271(1)(C) OF THE ACT AS AGAINST THE PENALTY LEVIED BY THE AO AT RS. 12 45 010/-. 20. THE FACTS ARE IN BRIEF THAT THE ASSESSEE HAD OR IGINALLY FILED THE RETURN OF INCOME DECLARING RS. 11 03 650/- ON 31/12 /1999 FOR THE YEAR UNDER CONSIDERATION. SUBSEQUENTLY THE ASSESSM ENT ORDER U/S 143(3) WAS PASSED ON 28/03/202 DETERMINING THE TOTA L INCOME OF ASSESSEE AT RS. 55 34 880/-. THEREAFTER A SURVEY W AS CARRIED OUT U/S 133A IN THE BUSINESS PREMISES OF THE ASSESSEE. ONE OF THE ISSUE FOR THE ADDITION WAS RS. 19 98 796/- ON ACCOUNT OF EXCE SS STOCK FOUND DURING THE COURSE OF SEARCH ACTION. BASED ON THE EX CESS STOCK FOUND ASSESSEE DECLARED ADDITIONAL INCOME OF RS. 20 LAKHS . IN ADDITION TO ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 10 THE SAID ADDITION DISALLOWANCE OF INTEREST OF RS. 12 93 750/- BEING THE NOTIONAL INTEREST CALCULATED BY THE AO AND RS. 8 92 950/- BEING INTEREST DISALLOWED BY INVOKING THE PROVISIONS OF S ECTION 14A OF THE ACT. THE CIT(A) CONFIRMED THE SAID ADDITIONS. THER EAFTER THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD CONCEALED HIS PARTICULARS OF INCOME. THE EXPLANATION AND THE REASONS GIVEN BY THE ASSESSEE I N THE PENALTY PROCEEDINGS WERE REJECTED BY THE AO AND LEVIED PEN ALTY OF RS. 12 45 010/- AGAINST THE TOTAL ADDITIONS OF RS. 41 8 6 700/-. AGGRIEVED THE ASSESEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CI T(A) SUSTAINED THE PENALTY TO THE EXTENT OF RS. 5 94 745/- AGAINST THE ADDITION OF RS. 20 LAKHS REPRESENTING THE EXCESS STOCK FOUND. THE PENA LTIES LEVIED AGAINST THE ADDITIONS ON ACCOUNT OF NOTIONAL INTERE ST OF RS. 12 93 750/- AND ON ACCOUNT OF ADDITION OF RS. 8 92 950/- MADE U/S 14A WERE CANCELLED BY OBSERVING THAT I AM OF THE C ONSIDERED VIEW THAT BOTH THESE ADDITIONS HAVE BEEN MADE ON DEBATABLE IS SUES. THE APPELLANT HAD NOT CONCEALED ANY PARTICULARS OF INCO ME PERTAINING TO THESE ISSUES. THEREFORE IN THESE CIRCUMSTANCES PEN ALTY CANNOT BE SUSTAINED ON THE SAID TWO ADDITIONS. 21. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US AGAINST SUSTAINING THE PENALTY TO THE EXTENT OF RS. 5 94 745/- AND THE REVENUE IS IN APPEAL AGAINST RESTRICTING THE PE NALTY TO RS. 5 94 745/- AS AGAINST THE PENALTY OF RS. 12 45 010/ - LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 23. WE HAVE HEARD THE BOTH THE PARTIES PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I N THE QUANTUM APPEAL (SUPRA) THE ADDITIONS MADE BY THE AO AND CO NFIRMED BY THE ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 11 CIT(A) HAVE BEEN REMITTED BACK TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH FOR THE REASONS GIVEN ABOVE WHILE DECID ING THE QUANTUM APPEAL (SUPRA). SINCE THE ISSUES PERTAINING TO THE ADDITIONS HAVE BEEN REMITTED BACK TO THE FILE OF THE AO FOR FRESH ADJUD ICATION IN THE QUANTUM OF APPEAL PENALTY LEVIED ON SUCH NON-EXIST ENT ADDITIONS DOES NOT HAVE LEGS TO STAND IN THE EYE OF LAW. THER EFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND CANCEL THE PENALTY SUST AINED BY THE CIT(A). HOWEVER IT IS OPEN TO THE AO TO PROCEED FURTHER AF TER DECIDING THE QUANTUM APPEAL IN ACCORDANCE WITH LAW. ACCORDINGLY THE GROUND RAISED BY THE ASSESEE IS ALLOWED AND GROUND RAISED BY THE REVENUE BECOMES INFRUCTUOUS AND THE SAME IS DISMISSED AS IN FRUCTUOUS. 22. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOVEMBER 2011. SD/- SD/- (P.M. JAGTAP) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 30 TH NOVEMBER 2011. KV ITA NOS. 6860/M/03 6797 & 6902/M/05 RAJESH L. DURGANI 12 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE G BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.