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Before: SHRI SAKTIJIT DEY & SHRI ASHWANI TANEJA ( ACCOUNT MEMBER)
Date of hearing 17.04.2017 Date of order 26 .04.2017
O R D E R Per Ashwani Taneja, AM:-
2 Deccan Enterprises These cross appeals pertain to same assessee involving common and overlapping issues, therefore, these were heard together and are being disposed of by this common order.
These appeals are arising on account of appeal effect orders passed in the second round by the AO, as a result of issues set aside by the ITAT to the file of AO in the second round of litigation. In the first round, two separate orders were passed by the Tribunal for disposing of revenue’s appeal and assessee’s appeal. The revenue’s appeal was disposed of by the Tribunal vide order dated 03-02-2009 in whereas assessee’s appeal was disposed of by the Tribunal vide order dated 14-02-2010 in ITA No.4112/Mum/2005. In pursuance to these orders two separate orders were passed by the AO giving effect to the orders passed by the Tribunal. It is noted by us that overlapping has been done by the AO while passing appeal effect orders. Therefore, lot of confusion had arisen while appreciating the facts involved in the aforesaid three appeals before us. However, with the assistance of the counsels of both the sides required facts have been retrieved and these appeals have been adjudicated as under:-
First we shall take up appeal in filed on the following grounds:-
“1. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal.
On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal and that too without giving full and proper opportunity of being heard in the matter.
2. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in dismissing the appeal and that too without
3 Deccan Enterprises fully and properly appreciating the facts of the case.
3. On the facts and in the circumstances. of the case and in law, the learned C.I.T. (A) erred in upholding the addition made by the A.O. of Rs.32,55,100/- as 'gross pfit from advances'.
On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in upholding the addition made by the A.O. of Rs. 10,00,000/- as 'income from other sources'.
On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in upholding the action of the A.O. in disallowing interest expense amounting to Rs. I,80,000/- 6. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in not dealing with the ground of appeal no. 8 of the appeal.”
4. Grounds 1, 2, 3 & 7 are general and nothing has been argued before us with regard to these grounds, therefore, these are dismissed.
5. Ground 4 : In this ground, the assessee is aggrieved by the action of the lower authorities in making addition of Rs.32,55,100 by estimating the income of the assessee. It is noted that in the first round, this issue was sent back to the file of the AO by the Tribunal vide its order dated 03-02-2009 by making following observations:-
“16. We are unable to agree with the above findings for the simple reason that once the basic cost involved in any project is recovered the surplus would be automatically income which is to be taxed as such. Moreover, the findings of the Ld. CIT(A) is not according to any principles of accounting. We do not agree with the observations of the Ld. CIT(A) made above while deleting the addition. However, as such from the record the assessee has not explained any of the aspects before the A.O. and as seen from the order there is non furnishing of information before the AO. Consequently he resorted to estimation of income. In the interest of justice we are of the opinion that this issue also can be restored back to the AO to consider the matter afresh by giving 4 Deccan Enterprises adequate opportunity to the assessee to explain its stand on method of accounting and how incomes have been offered. Accordingly the ground is considered allowed and the matter is restored back to the AO to consider is afresh. Needless to say that assessee should be given adequate opportunity to substantiate its claims. Grounds are treated as allowed.”
In pursuance to the above said order, the AO passed order u/s 144 r.w.s. 254 dated 29-12-2009. It is noted that the AO decided this issue exparte repeating the addition made in the first round without bringing any fresh material on record or without making any detailed reasoning at all. Being aggrieved, assessee filed appeal before Ld.CIT(A) and Ld. CIT(A) also upheld the order of the AO without giving any proper reasoning. It was brought to our notice by the Ld. Counsel that in the first round Ld. CIT(A) had decided this issue in favour of the assessee, on merits. In addition to that when the third order was passed by Ld.CIT(A) vide order dated 19-02-2013, while disposing of the appeal against the second appeal effect order passed by the AO u/s 144 r.w.s. 254 of the Act dated 29-12-2011, Ld.CIT(A) decided this issue in favour of the assessee. But here also, no proper reasoning has been given as to why relief was given by the Ld. CIT(A) in two different orders passed on the same issue. However, the common thing between these orders has been that no proper reasoning has been given and no factual material has been brought on record to decide this issue properly. Thus, the directions given by the Tribunal in its order while sending this issue back to the file of AO has not been followed in true spirit. Therefore, in the interest of justice and fairness we find it appropriate to send this issue back to the file of the AO with the direction to give adequate opportunity of hearing to the assessee to file necessary details and documentary evidences. The assessee shall extend requisite cooperation to the AO and shall file all necessary details and documentary evidences in support of its claim. The AO shall justify his action of estimating the income of 5 Deccan Enterprises the assessee. In case assessee is following a particular method of accounting consistently, then the action of estimating the income shall be resorted to only when method of accounting followed by the assessee is rejected due to some cogent reasons. In case method of accounting followed by the assessee is found to be acceptable in view of consistency or due to any other reason, then the AO shall have no powers to compute the income of the assessee by way of estimation. In any case, the issue shall be decided by the AO after considering the submissions of the material of the assessee on objective basis. With these directions, this issue is sent back to the file of the AO and be treated as allowed, for statistical purposes.
Grounds 5 & 6 : In these grounds the assessee is aggrieved with the action of Ld.CIT(A) in confirming the addition made by the AO on account of loans aggregating to Rs.10 lakhs and corresponding amount of interest amounting to Rs.1,80,000.
The brief background is that this issue was also sent back by the Tribunal to the file of the AO for fresh adjudication. In the second round, the AO made the addition on the ground that sufficient evidences have not been brought on record to prove creditworthiness of the lenders. In the appeal before Ld. CIT(A) also, the addition made by the AO was confirmed with following observations:
6.5 I have carefully gone through the assessment order, submissions made by the A.R. of the appellant and the facts of the case. In this case, the appellant has not produced any loan creditors for verification. However, he had produced the bank passbook of Ms. Amina S. Merchant. As stated above, the appellant has neither produced the parties from whom loans alleged to have been received during the relevant period under consideration, nor furnished bank pass book or any other evidences to prove the creditworthiness and genuineness. It will be worthwhile to discuss individually the creditworthiness of the lenders:
(i) Amina S. Merchant - Rs.1,00,000/- : The creditworthiness of the lender have not been proved. (ii) H.U. Merchant & K.H. Merchant – Rs.2,00,000/- and Rs.3,00,000/- respectively : Creditworthiness of the lenders have not been proved. The creditors were not produced before the A.O. for verification / examination. (iii) Arif Freed – 2,00,000/- : Creditworthiness of the lender has not been established. (iv) Suverna R Paranjape – Rs.2,00,000/- : Creditworthiness has not been proved.
6.6 From the above, it can be seen that the appellant has not discharged the onus cast upon the capacity, creditworthiness and genuineness of the lenders. Therefore it is held that the creditworthiness of the lenders has not been proved and therefore the addition made by the A.O. of Rs.10 lakhs under the head ‘Income from other sources’ is accordingly confirmed. Since the addition for the loan amount of Rs.10 lakhs has been confirmed the interest @18% which works out to Rs.1,80,000/- is also confirmed. This takes care of ground No.5 of the grounds of appeal. Therefore, both the grounds of appeal i.e. Ground No.5 & 7 are dismissed.
During the hearing before us also, Ld.Counsel contested the addition vehemently. However, he was not able to draw our attention on any evidence in support of these loans. It is the case where the assessee has not been able to substantiate these loans and thus assessee failed in discharging its burden u/s 68 of the Act. Under these circumstances, we find that the order passed by the Ld.CIT(A) does not call for any interference and thus, ground 5 & 6 are dismissed.
As a result, this appeal is partly is allowed.
Now we shall take up appeal filed by the revenue in on the following grounds:-
(1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the following additions without appreciating the facts that from the series of event as discussed in the assessment order, it is evident that assessee failed to avail the opportunities provided for furnishing the details along with documentary evidences in support of loan transactions and as such the Assessing Officer has correctly made the additions respectfully following the directions of the Hon'ble ITAT Restricted the addition to Rs.13,50,000/- as against of (a) Rs.47,60,000/- made by the A.O. on account of unproved loan and thereby directing to recompute the interest disallowance on basis of addition to income corresponding to non genuine unsecured loans confirmed. Deleted the addition of Rs.32,55,100/- being gross (b) profit from advances @10%.
12. Ground 1 is general and no arguments were made by the Ld.DR and, therefore,dismissed.
13. In ground 1(a), the revenue is aggrieved with the action of Ld.CIT(A) in restricting the addition made by the AO on account of loan of Rs.13,50,000/- as against Rs.47,60,000/-.
14. The brief background is that in the first round, AO made aggregate addition of Rs.47,60,000/- on account of loans received by the assessee. In the appeals filed before the Tribunal, the issue was sent back to the file of the AO pertaining to Rs.13,50,000/- only. However, in the appeal effect order passed by the AO wrongly made addition of Rs.47,60,000/-. In appeal before Ld. CIT(A), the addition was confirmed to the extent of Rs.13,50,000/- on the ground that the AO could not have repeated the entire addition of Rs.47,60,000/- since the issue sent back by the ITAT to the file of the AO was confined to only a sum of Rs.13,50,000/-. Therefore, we uphold the action of Ld. CIT(A) in restricting the addition of Rs.13,50,000/-. Thus, ground 1(a) of revenue’s appeal is dismissed.
15. In ground 1(b), the revenue is aggrieved by the action of Ld. CIT(A) in deleting the addition o Rs.32,55,100/-. We have already decided this issue in wherein this issue has been sent back to the file of the AO. Therefore, following our order in ITA No.3153/Mum/2011, ground 1(b) of revenue’s appeal is allowed, for statistical purpose and this issue is sent back to the file of the AO to be decided afresh in view of directions given above.
16. Other grounds are general and do not require any specific adjudication and, therefore, dismissed. 17. Às a result, appeal of the revenue is partly allowed.
Now we shall take up appeal filed by the assessee in ITA No.3610/Mum/2013 on the following grounds:- “
1. On the facts and in the circumstances of the cue and in law, the learned CIT(A) has erred in upholding the assessment order passed u/s 144 of the I.T. Act, which is invalid and bad in law.
2. On the facts and in the circumstances of the cue and in law, the learned CIT(A) has erred in upholding the addition of unapproved loans of Rs.13,50,000/-.”
19. The only effective ground in this appeal is with regard to addition made on account of loans of Rs.13,50,000/-. In the first round, this issue was sent back by the Tribunal to the file of the AO for giving opportunity to the assessee to file requisite evidences to substantiate these loans. In the second round also, the assessee was not able to submit requisite evidences, therefore, addition was again made by the AO and confirmed by Ld. CIT(A) also.
20. During the course of hearing before us also though Ld. Counsel vehemently contested this addition, he was not able to submit sufficient evidences to substantiate the loan in view of the onus as has been cast by section 68 of the Act. Therefore, in absence of requisite evidences, we have no other option but to confirm the action of making addition by the AO and confirmed by Ld.CIT(A). No interference is called for in the order of Ld.CIT(A) on this issue. Under these circumstances, order passed by Ld.CIT(A) is upheld and grounds raised by the assessee is dismissed.
21. As a result, this appeal of the assessee is dismissed.
22. In the result, appeal in ITA No. 3153/Mum/2011 is partly allowed, appeal in ITA No. 3610/Mum/2013 is dismissed and appeal in is partly allowed. Order was pronounced in the open court on this 26th day of April, 2017.