M/s Ankita Electronics Pvt. Ltd.,, Bangalore v. ACIT, Bangalore

ITA 996/BANG/2010 | 2001-2002
Pronouncement Date: 18-03-2011 | Result: Dismissed

Appeal Details

RSA Number 99621114 RSA 2010
Bench Bangalore
Appeal Number ITA 996/BANG/2010
Duration Of Justice 7 month(s)
Appellant M/s Ankita Electronics Pvt. Ltd.,, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 18-03-2011
Date Of Final Hearing 28-07-2011
Next Hearing Date 28-07-2011
Assessment Year 2001-2002
Appeal Filed On 17-08-2010
Judgment Text
ITA.996/BANG/2010 P AGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A' BANGALORE BEFORE DR. O. K. NARAYANAN VICE PRESIDENT AND SMT. P. MADHAVI DEVI JUDICIAL MEMBER I.T.A NO.996/BANG/2010 (ASSESSMENT YEAR : 2001-02) M/S. ANKITA ELECTRONICS PVT.LTD. NO.7/4 ANKITA HOUSE MOUNT JOY ROAD OPP.BULL TEMPLE HANUMATHANAGAR BANGALORE 560 019 .. APPELLANT V. ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE - 11(1) BANGALORE .. RESPONDENT APPELLANT BY : SHRI. V. SRINIVASAN CA RESPONDENT BY : SHRI. G. V. GOPALA RAO COMMISSION ER OF INCOME-TAX-I O R D E R PER DR. O. K. NARAYANAN VICE PRESIDENT : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVAN T ASSESSMENT YEAR IS 2001-02. THE APPEAL IS DIRECTED AGAINST TH E DISMISSAL ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-I AT BANGALORE D ATED.30.06.2010 AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S.143( 3) R.W.S.147 OF THE INCOME-TAX ACT 1961. 02. THE ASSESSEE COMPANY IS DEALING IN COMPUTER CON SUMABLES PERIPHERALS AND ACCESSORIES. THE COMPANY FILED ITS RETURN OF INCOME ITA.996/BANG/2010 P AGE - 2 FOR THE IMPUGNED ASSESSMENT YEAR ON 31.07.2001 DEC LARING A TOTAL INCOME OF ` .10 38 197/-. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE C OMPANY HAS CLAIMED INADMISSIBLE EXPENSES IN COMPUTING ITS TAXA BLE INCOME. THE ASSESSEE HAS CLAIMED A DEDUCTION OF ` .3 60 000/- TOWARDS SALARY PAID TO TWO LADY DIRECTORS OF THE ASSESSEE COMPANY AT TH E RATE OF ` .1 80 000/- PER YEAR PER HEAD. THE ASSESSING OFFI CER FOUND THAT THESE LADY DIRECTORS HAVE NOT PARTICIPATED IN ANY O F THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY AND THERE IS NO JUSTIFICATION IN PAYING REMUNERATION TO THEM. ACCORDINGLY HE DISALL OWED THE CLAIM OF ` .3 60 000/- U/S.40A(2) OF THE INCOME-TAX ACT 1961. 03. LIKEWISE THE ASSESSEE HAS CLAIMED A DEDUCTION OF ` .66 000/- AS PAID TO MS. NAMRATHA G. PATEL TOWARDS SALARY. THIS PAYMENT WAS ALSO DISALLOWED BY THE ASSESSING OFFICER FOR WANT OF CRE DIBLE EVIDENCE. THE BOOKS OF ACCOUNT OF THE ASSESSEE SHOWED A TOTAL AMOUNT OF ` .26 LAKHS AS LOANS AVAILED FROM VARIOUS PERSONS RESIDIN G IN GUJARAT. THE ASSESSING OFFICER TREATED THE SAID SUM OF ` .26 LAKHS AS UNEXPLAINED CREDITS VIDE SECTION 68 AND ADDED THE AMOUNT TO THE INCOME OF THE ASSESSEE. A CONSEQUENTIAL DISALLOWANCE AND ADDITIO N WAS MADE OF ` .3 64 940/- BEING INTEREST PAID TO THE LOAN CREDITO RS. ITA.996/BANG/2010 P AGE - 3 04. THUS THE ASSESSING OFFICER MADE A TOTAL ADDITIO N OF ` .33 19 940/- AND DETERMINED THE TOTAL TAXABLE INCOM E AT ` .44 19 137/- . 05. THE ASSESSMENT WAS TAKEN IN FIRST APPEAL. THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE NOTICE U/S.143(2) WAS ISSUED TO THE ASSESSEE AFTER EXPIRY OF 12 MONTHS FROM THE DATE ON WHICH THE RETURN OF INCOME WAS FILED BY THE ASSESSEE. THE COMMISSIO NER OF INCOME- TAX(A) REFERRED TO THE DECISION OF ITAT SPECIAL BE NCH DATED.21.01.2005 RENDERED IN THE CASE OF RAJ KUMAR CHAWLA V. ITO IN (2005) 94 ITD 1 (SB) WHERE IT HAS BEEN HELD THAT N O ASSESSMENT CAN BE MADE IF NO NOTICE U/S.143(2) WAS NOT SERVED WITH IN THE PERIOD PRESCRIBED BY THE PROVISO TO SECTION 143(2). THE T RIBUNAL HAS ALSO HELD THAT THE ASSESSING OFFICER HAS NO POWER TO MAK E AN ASSESSMENT U/S.143(3) UNLESS A NOTICE IS ISSUED WITHIN THE PRE SCRIBED TIME. ON THE ABOVE GROUND THE COMMISSIONER OF INCOME-TAX(A) ACCE PTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE ASSESS MENT WAS LIABLE TO BE SET ASIDE. 06. AFTER UPHOLDING THE INVALIDITY OF THE ASSESSMEN T THE COMMISSIONER OF INCOME-TAX(A) FURTHER EXAMINED THE MERIT OF THE OTHER GROUNDS RAISED BY THE ASSESSEE IN RESPECT OF THE ADDITIONS MADE BY THE ASSESSING AUTHORITY. THE COMMISSIONER OF IN COME-TAX(A) ITA.996/BANG/2010 P AGE - 4 AGREED WITH THE ASSESSING AUTHORITY THAT THE LADY D IRECTORS HAVE NOT PERFORMED ANY DUTIES IN CARRYING ON THE BUSINESS OF THE ASSESSEE COMPANY AND THERE WAS NO JUSTIFICATION IN PAYING A SALARY OF ` .3 60 000/- TO THEM. REGARDING THE AMOUNT OF SALAR Y PAID TO MS. NAMRATHA G. PATEL THE COMMISSIONER OF INCOME-TAX(A ) OBSERVED THAT NO EVIDENCE WAS PRODUCED BY THE ASSESSEE AND THERE FORE THE DISALLOWANCE WAS JUSTIFIED. REGARDING THE MATTER OF ADDITION MADE U/S.68 AMOUNTING TO ` .26 LAKHS THE COMMISSIONER OF INCOME-TAX(A) OBSERVED THAT THE PARTICULARS FURNISHED BY THE ASSE SSEE SUCH AS THE NAME AND ADDRESS OF THE CREDITORS ALONG WITH COPIES OF VOTER'S IDENTITY CARDS ETC. WERE NOT SUFFICIENT TO SUPPORT THE ARGU MENT OF THE ASSESSEE THAT THE AMOUNTS WERE ACTUALLY RECEIVED BY THEM BY WAY OF LOANS. THIS IS BECAUSE ACCORDING TO THE COMMISSIONER OF I NCOME-TAX(A) THOSE PERSONS DO NOT HAVE EXPLAINABLE SOURCES SO AS TO GENERATE FUNDS IN THEIR HANDS TO ADVANCE LOANS TO THE ASSESSEE COM PANY. HE FOUND THAT ALL THE CREDITS REFLECTED IN THEIR BANK ACCOUN TS WERE MADE BY CASH DEPOSITS AND THE TRANSACTIONS BETWEEN THE CREDITORS AND THE ASSESSEE COMPANY ALONE WERE TRANSACTED BY CHEQUES AND THEREF ORE THE ORIGINAL SOURCE OF THE CREDITS STOOD UNEXPLAINED. HE FURTHE R OBSERVED THAT THE EXPLANATIONS OF THE CREDITORS REGARDING THE SOURCE OF THE FUNDS ARE STEREO-TYPE ANSWERS LIKE GIFTS RECEIVED FROM RELATI VES AGRICULTURAL INCOME ETC. THE CREDITORS HAVE NOT BROUGHT ON REC ORD ANY CREDIT- ITA.996/BANG/2010 P AGE - 5 WORTHY EVIDENCE TO UPHOLD THEIR ARGUMENTS REGARDING INDEPENDENT SOURCE OF INCOME IN THEIR HANDS. THEREFORE HE HELD THAT THE ASSESSING OFFICER HAS RIGHTLY TREATED ` .26 LAKHS AS THE INCOME OF THE ASSESSEE BY WAY OF UNEXPLAINED CREDITS. AS THE DISALLOWANCE OF INTEREST WAS JUST CONSEQUENTIAL THE SAID DISALLOWANCE WAS ALSO CONFI RMED BY THE COMMISSIONER OF INCOME-TAX(A). 07. EVENTHOUGH THE COMMISSIONER OF INCOME-TAX(A) HA S UPHELD ALL THE FOUR ADDITIONS MADE BY THE ASSESSING AUTHORITY HE KNOCKED DOWN THE ASSESSMENT ORDER FOR WANT OF NOTICE U/S.143(2) OF THE ACT. 08. THEREAFTER THE ASSESSING OFFICER ISSUED NOTICE U/S.148 AND REOPENED THE ASSESSMENT AND REPEATED THE ADDITIONS IN THE INCOME- ESCAPING ASSESSMENT AND DETERMINED THE SAME INCOME WHICH WAS DETERMINED IN THE ORIGINAL ASSESSMENT COMPLETED U/S .143(3). THIS INCOME-ESCAPING ASSESSMENT WAS TAKEN IN APPEAL BEFO RE THE COMMISSIONER OF INCOME-TAX(A). THE COMMISSIONER OF INCOME- TAX(A) UPHELD ALL THE FOUR ADDITIONS FOR THE VERY S AME REASONS CONSIDERED BY THE COMMISSIONER OF INCOME-TAX(A ) IN THE EARLIER ROUND OF APPEAL. HE ALSO FOUND THAT THE REASSESSMENT WAS JUSTIFIED IN LAW AS THE ASSESSING OFFICER HAS C OMPLIED WITH ALL THE PROCEDURES PRESCRIBED BY LAW IN ISSUING NOTICE U/S. 148 AND REJECTED THE ITA.996/BANG/2010 P AGE - 6 CONTENTIONS OF THE ASSESSEE REGARDING THE LEGALITY OF THE REASSESSMENT. THE COMMISSIONER OF INCOME-TAX(A) ACCORDINGLY UPHEL D THE ASSESSMENT WITH ALL THE ADDITIONS. 09. THE ASSESSEE IS AGGRIEVED AND THEREFORE THE SEC OND APPEAL BEFORE US. 10. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPE AL READ AS BELOW: '2. THE ORDER OF REASSESSMENT IS BAD IN LAW AND VOI D-AB- INITIO FOR WANT OF REQUISITE JURISDICTION ESPECIALL Y THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION U/S.1 48 OF THE ACT DID NOT EXIST AND HAVE NOT BEEN COMPLIED WITH A ND CONSEQUENTLY THE REASSESSMENT REQUIRES TO BE CANCE LLED. 2.1 THE LEARNED COMMISSIONER OF INCOME-TAX(A) IS NO T JUSTIFIED IN REFUSING TO ENTERTAINING THE GROUND RE LATING TO THE VALIDITY OF REOPENING OF THE ASSESSMENT HOLDING THA T THE APPELLANT HAD NOT SOUGHT FOR REASONS BEFORE THE LEA RNED ASSESSING OFFICER AND CONSEQUENTLY THE SAME CANNOT BE CHALLENGED BEFORE THE LEARNED COMMISSIONER OF INCOM E- TAX(A). 3. WITHOUT PREJUDICE TO THE ABOVE THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DISALLOWING A SUM OF ` .1 80 000/- PAID TO EACH ONE OF THE 2 LADY DIRECTORS NAMELY SMT. KAMINI N. PATEL AND SMT. CHANDRIKA A. PATEL BY INVOKING THE PROVISIONS OF SE CTION 40(A)(2) OF THE ACT. THEY FAILED TO APPRECIATE THA T THE ABOVE TWO DIRECTORS HAVE RENDERED SERVICES TO THE COMPANY AND THE SALARIES PAID TO THEM ARE SUPPORTED BY RESOLUTIONS AND THE ITA.996/BANG/2010 P AGE - 7 FINDING THAT THEY HAVE NOT RENDERED ANY SERVICES IS PURELY ON SUSPICION AND SURMISE ASSUMPTIONS AND PRESUMPTIONS AND LIABLE TO BE VACATED. 4. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DISAL LOWING THE SALARY PAID TO MS. NAMRATHA G. PATEL UNDER THE FAC TS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. THE DIS ALLOWANCE IS PURELY ON SUSPICION AND SURMISE ASSUMPTIONS AND PRESUMPTIONS AND LIABLE TO BE VACATED. 5. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN ASSES SING A SUM OF ` .26 000/- AS UNEXPLAINED CASH CREDITS UNDER THE FAC TS AND CIRCUMSTANCES OF THE APPELLANT'S CASE EVENTHOUGH TH E APPELLANT HAS DISCHARGED THE BURDEN OF ESTABLISHING THE IDENT ITY CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS AND THERE IS NO DENIAL BY ANY OF THE CREDITORS ABOUT THE FACTUM OF ADVANCE. 6. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DISAL LOWING A SUM OF ` .3 64 940/- BEING THE INTEREST PAYABLE TO THE CREDI TORS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANT'S CASE. 7. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WI TH THE HON'BLE CCIT/DG THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S.234B 234C AND 234D OF THE ACT WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANT'S CASE AND THE LEVY DESERVES TO BE CANCELLED.' 11. WE HEARD SHRI. V. SRINIVASAN THE LEARNED CHART ERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND SHRI. G. V. GOPALA R AO THE LEARNED COMMISSIONER OF INCOME-TAX I APPEARING FOR THE RE VENUE. THE FIRST SET OF GROUNDS IN PARAGRAPH 2 RELATING TO THE CONTE NTIONS OF THE ITA.996/BANG/2010 P AGE - 8 ASSESSEE AGAINST THE REASSESSMENT ORDER PASSED BY T HE ASSESSING AUTHORITY. THIS ISSUE HAS BEEN DISCUSSED BY THE CO MMISSIONER OF INCOME-TAX(A) IN A DETAILED MANNER IN THE ORDER PAS SED BY HIM. WE EXAMINED THE ISSUE. THE NOTICE U/S.148 WAS ISSUED WITHIN THE PRESCRIBED TIME BY LAW. THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION IN THE FILES BEFORE ISSUING NOTICE U/S .148 TO THE EFFECT THAT THERE IS A CASE OF ESCAPEMENT OF INCOME IN THE FILE OF THE ASSESSEE. ANY FURTHER ARGUMENTS ON THE NATURE OF SATISFACTION ARE ONLY ACADEMIC. THIS IS BECAUSE IN THE FIRST ROUND OF HIS ORDER TH E COMMISSIONER OF INCOME-TAX(A) HAS UPHELD ALL THE ADDITIONS ON THEIR MERITS EVEN THOUGH THE ASSESSMENT WAS ANNULLED FOR WANT OF PROPER NOTI CE. THEREFORE THE FINDINGS ARRIVED AT BY THE COMMISSIONER OF INCOME-T AX(A) IN HIS EARLIER ORDER ON THE MERITS OF THE ADDITIONS MADE B Y THE ASSESSING OFFICER THEMSELVES ARE VALID REASONS WHICH JUSTIFI ED THE ISSUE OF NOTICE U/S.148. THIS SATISFACTION HAS ALREADY BEEN CONVEYED TO THE ASSESSEE AND EVEN OTHERWISE WRIT LARGE ON THE RECOR DS OF THE CASE. THEREFORE THE LONG AND UNWINDING ARGUMENTS OF THE ASSESSEE REGARDING THE VALIDITY OF THE INCOME-ESCAPING ASSES SMENT ARE NOT SUSTAINABLE IN LAW. WE AGREE WITH THE COMMISSIONER OF INCOME- TAX(A) AND UPHOLD THE VALIDITY OF THE ASSESSMENT CO MPLETED U/S.143(3) R.W.S.147 OF THE IT ACT 1961. ITA.996/BANG/2010 P AGE - 9 12. THE NEXT POINT TO BE CONSIDERED IS THE DISALLOW ANCE OF ` .3 60 000/- MADE BY THE ASSESSING AUTHORITY U/S.40A (2) OF THE ACT. THE ASSESSEE HAS CLAIMED SALARY EXPENDITURE OF ` .3 60 000/- BEING THE AMOUNTS PAID TO LADY DIRECTORS OF THE ASSESSEE COMP ANY AT THE RATE OF ` .1 80 000/- PER ANNUM PER HEAD. THE LADY DIRECTOR S MRS. KAMINI N. PATEL AND SMT. CHANDRIKA A. PATEL ARE THE WIVES OF THE TWO DIRECTORS OF THE ASSESSEE COMPANY. WHEN THE ASSESSEE COMPANY WAS ASKED TO EXPLAIN THE NATURE OF SERVICES RENDERED BY THE LADY DIRECTORS IN RUNNING THE AFFAIRS OF THE ASSESSEE COMPANY THE FO LLOWING REPLY WAS FILED BEFORE THE COMMISSIONER OF INCOME-TAX(A) WHEN THE PROCEEDING WAS CONCLUDED BEFORE HIM AGAINST THE ORIGINAL ASSES SMENT : 'VIDE REPLY DATED.12/3/04 THE APPELLANT SUBMITT ED THAT BOTH THE DIRECTORS HAVE INVESTED IN THE COMPANY BY WAY OF SUBSCRIPTION IN SHARES. THOUGH THE LADIES ALWAYS S HY TO GO IN PUBLIC DUE TO SECURITY REASON THEY DO SHARE THE WO RK O THE COMPANY IN MANY RESPECTS. IT WAS POINTED OUT THAT WHEN MR. NALIN PATEL (DIRECTOR) RECEIVED MAJOR INJURY THE O THER DIRECTORS CONTRIBUTED TO THEIR MAXIMUM. IT WAS ALS O POINTED OUT THAT THE COMPANY IS HOUSED IN THE DIRECTORS' RE SIDENCE AND THUS BOTH THE DIRECTORS DO PARTICIPATE MAINLY IN MA NAGING THE STOCK AT FIRST FLOOR OF THE PREMISES. IT WAS SUBMI TTED IN THE APPELLANT'S BUSINESS CONTROL OF STOCK IS VERY IMPO RTANT. THE VERY PRESENCE OF THE DIRECTORS IN THE PREMISES ITSE LF IS A CONTRIBUTORY FACTOR TO THE GROWTH OF THE COMPANY. IT WAS ALSO POINTED OUT THAT SALARY PAID TO THE DIRECTORS ARE L ESS THAN PAID TO THE MALE DIRECTORS.' ITA.996/BANG/2010 P AGE - 10 13. THE ABOVE OBSERVATION OF THE COMMISSIONER OF IN COME-TAX(A) IN HIS ORDER SPEAK A LOT ABOUT THE HOLLOWNESS OF TH E EXPLANATIONS OFFERED BY THE ASSESSEE COMPANY. THE ASSESSEE COMP ANY IS DEALING IN COMPUTER PERIPHERALS AND OTHER RELATED ITEMS. THE LADY DIRECTORS WHEN EXAMINED BY THE ASSESSING OFFICER COULD NOT EX PLAIN ANYTHING ON THE NATURE OF THESE ITEMS TRADED BY THE ASSESSEE COMPANY. IT IS THE CASE ASSESSEE COMPANY THAT THE LADY DIRECTORS ARE TAKING CONTROL OF THE INVENTORY STOCK STORED IN THE SECOND FLOOR OF T HE HOUSE. IF THE LADY DIRECTORS WERE ACTUALLY MANAGING THE TRADING STOCK OF THE ASSESSEE COMPANY THEY WOULD HAVE BEEN IN A POSITION TO ANSW ER AT LEAST GENERAL QUESTIONS IN THIS REGARD. IN FACT THE LADY DIRECTORS BEFORE THE ASSESSING OFFICER FAILED TO ANSWER ANY OF THE QUEST IONS EVEN REGARDING THE REMOTE FACTORS ABOUT THE BUSINESS CARRIED ON BY THE ASSESSEE. THE TONE OF THE ENTIRE EXPLANATION OFFERED BY THE ASSES SEE BEFORE THE ASSESSING OFFICER WAS IN A GENERAL NATURE WITHOUT P OINTING OUT ANY SPECIFIC SERVICE EXPECTED TO BE RENDERED BY THE LAD Y DIRECTORS. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE A SSESSEE COMPANY HAS FAILED IN ESTABLISHING ANY NEXUS BETWEEN THE SA LARY PAID TO THE LADY DIRECTORS AND THE SERVICES RENDERED BY THEM TO THE BUSINESS CARRIED ON BY THE ASSESSEE COMPANY. WE HAVE NO HESITATION TO STATE THAT ALL THE EXPLANATIONS OFFERED BY THE ASSESSEE COMPANY IN THI S REGARD ARE JUST ITA.996/BANG/2010 P AGE - 11 SELF-SERVING PLEADINGS WITHOUT ANY SUBSTANCE. THER EFORE WE HOLD THE VIEW THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIG HTLY CONFIRMED THE DISALLOWANCE OF ` .3 60 000/- U/S.40A(2) OF THE ACT. 14. REGARDING THE DISALLOWANCE OF ` .66 000/- BEING THE SALARY PAID TO MS. NAMRATHA G. PATEL THE ASSESSEE COMPANY COUL D NOT PRODUCE ANY EVIDENCE BEFORE THE LOWER AUTHORITIES. THE ASS ESSEE COMPANY COULD PRODUCE NEITHER THE AQUITTANCE REGISTER OR TH E SALARY REGISTER TO PROVE THE REGULAR EMPLOYMENT OF MS. NAMRATHA ON THE ROLLS OF THE ASSESSEE COMPANY. ON THE SERVICES STATED TO BE REN DERED BY MS. NAMRATHA THE VAGUE ANSWER WAS GIVEN BY THE ASSESSE E COMPANY WAS THAT THE SHE WAS INVOLVED IN THE MARKETING OF PRODU CTS. THESE ARE ALL NOTHING BUT LAME ARGUMENTS. WE ARE UNABLE TO ACCEP T THIS KIND OF SUPERFLUOUS PLEADINGS AS SUBSTITUTE FOR GOOD EVIDEN CE. ACCORDINGLY WE CONFIRM THE SAID DISALLOWANCE OF ` .66 000/-. 15. THE NEXT ISSUE IS THAT OF THE ADDITION OF ` .26 LAKHS BEING THE ADDITION MADE U/S.68. THE DETAILS OF THE LOAN CRED ITORS ARE AS FOLLOWS: SL. NO. NAME AMOUNT DISALLOWED ` 1. MS. NAMRATHA G. PATEL 2 50 000 2. SMT. PRAVEENABEN G. PATEL & HER TWO CHILDREN 6 50 000 3. SHRI. MANHARBHAI PATEL HIS WIFE AND TWO CHILDREN 8 50 000 4. SMT. SHANTABEN N. PATEL & HER SON SRI. KIREETBHAI N. PATEL & HIS TWO CHILDREN 8 50 000 TOTAL 26 00 000 ITA.996/BANG/2010 P AGE - 12 IT IS TRUE THAT THE CREDITS WERE ACCEPTED AND AMOUN TS WERE REPAID AND THE INTERESTS WERE PAID BY WAY OF CHEQUES. THE ASS ESSEE HAS FURNISHED THE ADDRESSES OF THE CREDITORS AND IN SOME CASES CO PIES OF THE VOTER'S ID CARD. THEY HAVE FURNISHED THE DETAILS OF CHEQU E NUMBER AMOUNT DATE OF CHEQUE ETC. 16. BUT WHEN WE PROCEED FURTHER AND GO TO THE PITH AND SUBSTANCE OF THE ISSUE WE FIND THAT ALL THE ABOVE FORMALITIE S ARE SKIN DEEP. THE REAL QUESTION ASKED TO THE ASSESSEE COMPANY WAS ON THE SOURCE OF FUNDS AVAILABLE IN THE HANDS OF ALL THE CREDITORS. IN ALL CASES THE CREDITORS HAVE STATED THAT THEY ADVANCED MONEY TO T HE ASSESSEE COMPANY OUT OF THEIR AGRICULTURAL INCOME AND/OR GIF TS RECEIVED FROM PARENTS AND RELATIVE. 17. EVEN THOUGH THEY HAVE MENTIONED THE SOURCES AVA ILABLE WITH THEM THEY HAVE NOT FURNISHED ANY FURTHER EXPLANATI ON IN THE NATURE OF EVIDENCES OR IN THE NATURE OF PARTICULARS. THE CRE DITORS HAVE NOT FURNISHED THE DETAILS OF THE AGRICULTURAL HOLDINGS HELD BY THEM ; THEY HAVE NOT EXPLAINED THE NATURE OF CROPS AND THEY HAV E NOT FURNISHED THE DETAILS OF THE COMPUTATION OF AGRICULTURAL INCOME I N THEIR HANDS. IN ADDITION TO THAT THE CREDITORS ALSO COULD NOT PROD UCE ANY EVIDENCE IN THE FORM OF CERTIFICATES FROM THE LAND REVENUE AUTH ORITIES TO SUPPORT ITA.996/BANG/2010 P AGE - 13 THEIR CASE THAT THEY WERE EARNING REGULAR AGRICULTU RAL INCOME FROM PROPERTIES HELD BY THEM. ALL THE CREDITORS ARE RES IDING IN GUJARAT. BY JUST STATING THAT THEY EARNED THE INCOME OUT OF AGR ICULTURE SITTING FAR AWAY AT GUJARAT IS NOT SUFFICIENT FOR THE ASSESSING OFFICER TO ACCEPT THE EXPLANATIONS AT THE FACE VALUE. THE CREDITORS SHOU LD FURNISH THE ESSENTIAL DETAILS OF THEIR AGRICULTURAL ACTIVITIES AND THE METHOD OF ESTIMATING THEIR AGRICULTURAL INCOME. IN THE ABSEN CE OF ANY SUCH PLAUSIBLE EXPLANATION IT IS VERY UNCHARITABLE TO IN SIST THAT THE ASSESSING OFFICER SHOULD ACCEPT THE EXPLANATIONS OFFERED BY T HE CREDITORS REGARDING THEIR SOURCE OF INCOME. LIKEWISE WHEN TH E CREDITORS HAVE TAKEN SHELTER UNDER THE ARGUMENT OF GIFTS RECEIVED FROM PARENTS AND RELATIVES NO SUPPORTING DETAILS WERE FURNISHED LI KE WHEN THE GIFT WAS RECEIVED ; FROM WHOM IT WAS RECEIVED ; WHAT WAS THE AMOUNT OF GIFT ; AND HOW IT WAS UTILIZED ? NO SUCH USEFUL AND NECES SARY INFORMATION WERE EXPLAINED BY THEM. 18. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF TH E CASE THE FEEBLE EXPLANATIONS OFFERED BY THE CREDITORS DO NOT DESERV E TO BE ACCEPTED FOR THE PURPOSE OF ASSESSMENT. THIS POSITION IS FURTHE R STRENGTHENED BY THE FACT THAT RELEVANT CREDITS REFLECTED IN THE BANK AC COUNT OF THE CREDITORS WERE BY WAY OF CASH DEPOSITS AND NOT BY WAY OF CHEQ UES OR OTHER INSTRUMENTS. THEREFORE AS A WHOLE WHEN WE EXAMIN E THE ISSUE IN THE ITA.996/BANG/2010 P AGE - 14 RIGHT PERSPECTIVE WE FIND THAT THE ASSESSEE HAS FA ILED TO REASONABLY EXPLAIN THE CREDIT WORTHINESS OF THE PERSONS WHOSE NAMES ARE REFLECTED IN THE BOOKS OF ACCOUNT AS CREDITORS. MERE FURNISH ING OF THE NAMES OF THE CREDITORS THE FACT THAT THE TRANSACTIONS WERE ROUTED THROUGH BANKS THE FACT THAT THERE WERE STEREO-TYPE CONFIRMATION L ETTERS DO NOT ADVANCE THE CASE OF THE ASSESSEE. THE CRUCIAL QUES TION TO BE CONSIDERED IS WHETHER THE PERSONS IDENTIFIED AS CRE DITORS DID HAVE REASONABLE SOURCE OF INCOME TO ADVANCE MONIES TO TH E ASSESSEE. ON THIS POINT THE ANSWER IS THAT THE ASSESSEE HAS NOT PROVED ANYTHING TO ITS CREDIT. 19. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE HOLD THAT THE COMMISSIONER OF INCOME-TAX(A) IS JUSTIFIED IN CONFI RMING THE DISALLOWANCE OF ` .26 LAKHS. 20. THE LAST ISSUE IS THE DISALLOWANCE OF ` .3 64 940/- TOWARDS INTEREST. THE INTEREST HAS BEEN CLAIMED AS A DEDUC TION HAVING BEEN PAID TO THE LOAN CREDITORS CONSIDERED IN PARAGRAPH ABOVE. ONCE THE LOANS ARE TREATED AS NOT-GENUINE CONSEQUENTLY THE CORRESPONDING INTEREST ALSO WOULD NOT BE TREATED AS GENUINE. THE REFORE THE DISALLOWANCE OF INTEREST IS CONSEQUENTIAL AND JUSTI FIED. ITA.996/BANG/2010 P AGE - 15 21. IN RESULT THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY THE 18TH DAY OF MARCH 2011 AT BANGALORE. SD/- SD/- (SMT. P. MADHAVI DEVI) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT