SUN STAR GEMS P.LTD,MUMBAI vs. ITO 5(3)(4), MUMBAI

सुनवाई क� तार�ख /Date of Hearing : 09-03-2016 घोषणा क� तार�ख /Date of Pronouncement :07-06-2016 आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member

This appeal, filed by the assessee company, being 15-02-2012 passed by learned Commissioner of Income Tax (Appeals)- 9, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2008-09, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 29-12-2010 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called “the Act”).

ITA 3074/Mum/2012 2

“On the facts and circumstances of the case and in law, the Ld Commissioner Income Tax (Appeals) - 9, Mumbai, erred in confirming the following additions made by the Income Tax Officer 5(3)(4): i. Confirming the addition of Rs. 37,32,531/- u/s 41(1) being the sums payable to M/s Liber and Solow, New York for the purchase of diamonds, without appreciating that s.41(1) is attracted only when the liability has been finally ceased. ii. Confirming the addition of Rs. 7,09,256/- u/s 41(1) as "bogus liability" being the sums payable to M/s Star Rough BVBA, Belgium for the purchase of diamonds, , without appreciating that s.41(1) is attracted only when the liability has been finally ceased. iii. Confirming the addition u/s 41(1) of Rs. 1,00,000/- made on the grounds that the assessee had failed to establish the identity and credit-worthiness of the Creditor Mr. Madarsingh Waghela, and the genuineness of the Sundry Creditor for Expenses, although the PAN of the Creditor was given to the AO albeit with a typographical error of one letter. iv. Confirming the addition of Rs. 1,05,474/- as unexplained credit in the name of Shri Rashmikant Gopani, made solely on the basis of his statement recorded without it being put to the test of cross-examination by the assessee. v. Confirming the addition of Rs. 80,000/- u/s 69C in the name of Shri Rashmikant Gopani, made solely on the basis of his statement recorded without it being put to the test of cross-examination by the assessee. vi. Confirming the addition of Rs. 2,00,000/- u/s 68 of loan given by Mrs. Taruna Navnit Parikh, a Share Holder of the assessee- company, on the ground that there is cash deposited of Rs.2,00,000/- in her account on the date of her advancing Rs.2,00,000/- to the assessee , without appreciating that the assessee is not expected to explain the source of the source. vii. Confirming the addition of Rs. 7,17,500/- u/s 68 of loan given by Mr. Navnit Parikh, a Director-Shareholder in the assessee-company, on the ground that the said Director failed “to explain the source of the ITA 3074/Mum/2012 3 aforesaid disputed cash credit of Rs.7,17,500/-“ without appreciating that the assessee is not expected to explain the source of source. viii. Confirming the above additions although these transactions/entries were already disclosed in the income tax returns of the earlier years, many of whose assessments were made u/s 143(3).”

Sl No. Name of the party Amount(In Rs.) 1 Liber & Solow Co. 37,32,531/- New York 2 Starough BVBA Belgium 7,09,256/- ITA 3074/Mum/2012 4

3 Madarsingh Waghela 1,00,000/- 4 Rashmikant Gopani 1,05,474/- In the case of Liber & Solow Co., New York the assessee company was show caused as to why the amount of Rs. 37,32,531/- shown as payable to Liber & Solow Company since 2003 should not be brought to tax u/s 41(1) of the Act as the said payment is outstanding since last more than 6 years. The assessee company submitted that it had imported rough diamond from M/s Liber & Solow Co in 1999 and due to the financial crisis, the said payment is outstanding . In support thereof , the assessee company submitted copies of bills, correspondence with RBI etc. . The A.O. observed that the import purchase bill filed by the assessee company to substantiate the claim of liability of M/s Liber & Solow Co is of period 1991 i.e. 20 years old that too in the name of ‘Vihit Gems P Ltd’ and not in the name of the assessee company. As per the AO , the assessee company earlier had submitted that the said creditor is outstanding since 2002 but subsequently changed its stand and stated that the creditor is outstanding from 1999. As per the A.O. it is outstanding since 1991 and the assesssee company has deliberately tried to mislead the Revenue regarding age of the creditor. The assessee company has filed a copy of application dated 24/02/2003 made with the RBI for permission for making delayed payment for import purchases. Additional documents vide letter dated 5th March 2003 such as C.A Certificate, Reason for such long delay of 12 years, interest waiver certificate from overseas supplier for processing the assessee company's application were sought by the RBI. Nothing has been placed on record by the assessee company regarding the compliance made in pursuance of the directions by the RBI. The A.O. held that the assessee company is not able to substantiate before the RBI even during 2003 that the said amount is payable by them. No communication has been furnished by the assessee company from Liber & Solow Company, New York regarding demand for this money made by them in ITA 3074/Mum/2012 5 last 19 years. Thus, it was held that the liability of Rs. 37,32,531/- has ceased long back and the said amount is not payable by the assessee company and accordingly the said amount was added to the total income of the assessee company u/s 41(1) of the Act by the AO vide assessment orders dated 29/12/2010 passed u/s 143(3) of the Act.

With respect to the Starough BVBA Belgium, an amount of Rs. 7,09,257/- was outstanding since 2002, the assessee company has filed purchase invoice dated 6th September, 2002 and no other document like correspondence with bank, RBI or overseas suppliers were filed to establish their claim that the said amount is still payable after long period of 8 years. No communication from Starough BVBA Belgium regarding demand for this money made by them in last 8 years has been furnished by the assessee company. The A.O. observed that no supplier will leave such a huge amount of money for 8 years. No correspondence has been filed with the said supplier by the assessee company in the last 8 years for the reason for non-payment of the liability, hence, addition of Rs. 7,09,257/- was made and added to the total income of the assessee company u/s 41(1) of the Act by the AO vide assessment orders dated 29/12/2010 passed u/s 143(3) of the Act.

With respect to the dues payable to Mr. Madarsingh Waghela of Rs. 1 lacs which was shown as payable to this party. Notice u/s 133(6) of the Act was issued but no reply was filed by this party regarding the genuineness of the transaction. The assessee company was asked to produce this party along with books of accounts, bank statements etc. for verification but the assessee company failed to produce the party but filed confirmation from this party. The A.O. noticed that the said confirmation is not signed by Sh. Madarsingh Waghela and the PAN was found to be invalid as per AIS of ITD application. Since the assessee company failed to establish the identity and genuineness of the transaction, the amount of Rs. 1 lac was added to the total income of ITA 3074/Mum/2012 6 the assessee company u/s 41(1) of the Act as ceased liability by the AO vide assessment orders dated 29/12/2010 passed u/s 143(3) of the Act.

With respect to Mr. Rashmikant Gopani, an amount of Rs. 1,05,474/- is shown to be payable to this party. The age of the creditor was not reported by the assessee company inspite of specific query. Summons u/s 131 of the Act was issued to Shri Rashmikant Gopani and statement was recorded u/s 131 of the Act on 2nd December, 2010. It was submitted by Sh. Rashmikant Gopani during the course of recording of the statement that the said party was given rough diamond for the planning and marking and other work which was done by Sh. Rashmikant Gopani. The average rate for the work is around Rs. 25/- per carat for the planning, marking and assortment work and the payment is received by him in cash from the assessee company. It was also stated by Mr. Rashmikant Gopani that he never received any payment in cheque from the assessee company. It was also stated that the quantity of work done is not known and which should be around ‘70,000 to 80,000’ and the entire payment is received in cash. It was stated that the ledger account given by M/s Sunstar Gems P. Ltd. was signed in good faith and he does not have any record to confirm the entries. It was also confronted to Sh. Rashmikant Gopani that as per the ledger account an amount of Rs. 35,000/- and Rs. 55,474/- was received by him in cheques , while he confirmed that no such payments were received by him in cheques. Thus , it was observed by the A.O. that the payments made to the said party is fabricated and as per the statement of Shri Rashmikant Gopani, all the payment were received in cash and the confirmation letter signed by him is in good faith only and the amount of Rs. 1,05,474/- reflected as payable to him in the books of the assessee company is bogus. It was also observed by the A.O. that the assessee company was showing Rs. 850/- per carat for assortment and planning charges whereas as per the statement of Shri Rashmikant Gopani he had received Rs. 25/- per carat for the said work which proves that the ITA 3074/Mum/2012 7 assessee company is indulging in the practice of inflating the expenses by booking bogus expenditure. The assessee company was asked by the AO to produce the books of account. The summons u/s 131 of the Act were also issued by the AO to the Director Mr. Navnit A Parikh but he failed to appear before the AO. Thus, addition of Rs. 1,05,474/- was made by the AO u/s 41(1) of the Act and the amount was added to the income of the assessee company by the AO in the assessment orders dated 29/12/2010 passed u/s 143(3) of the Act as well additions of Rs.80,000/- was made u/s 69C of the Act as unexplained expenditure by the AO vide assessment orders dated 29/12/2010 passed u/s 143(3) of the Act . It was stated by Shri Rasmikant Gopani that he has received around ‘70,000 to 80,000’ for the work carried out during the period relevant to the assessment year 2008-09 but the amount was not reflected in the books of account of the assessee company. The assessee company was asked by the AO to appear before him along with books of accounts but the assessee company failed to produce the books of accounts. The assessee company was issued summons u/s 131 of the Act directing Sh Navnit A Parikh to appear before the AO personally and since no compliance was made by the assessee company against the summons issued u/s 131 of the Act, hence the A.O. added an amount of Rs. 80,000/- as unexplained expenditure u/s 69C of the Act which the assessee company has paid to Sh. Rashmikant Gopani for the work done during the previous year relevant to the assessment year 2008-09.

It was also observed by the A.O. that during the previous year, the assessee company has received unsecured loan of Rs. 2 lacs from Smt. Taruna Navnit Parikh who is having majority shareholding of the assessee company. The assessee company was asked to file the loan confirmation of the lender along with copy of income tax return, bank statement etc. to establish the identity, creditworthiness and genuineness of the loan transaction and accordingly the assessee company filed the loan confirmation, bank statement of the ITA 3074/Mum/2012 8 lender and copy of the Balance Sheet of the lender. From the bank statement, the A.O. observed that Rs. 2 lacs was advanced by Smt. Taruna Navnit Parikh on 20th April, 2007 and on the same day cash of Rs. 2 lacs was deposited in her bank account. From the capital account filed by Smt. Taruna Navnit Parikh, it was observed by the AO that she had only salary income of Rs. 2,40,000/- @ Rs. 20,000/- per month. Summons were issued u/s 131 of the Act to verify the source of cash but she failed to attend for the reasons that she had to visit the hospital. Again opportunity was given but she did not appear before the A.O. to explain the source of money deposited in her bank account which has been advanced as loan to the assessee company of which she is majority shareholder. Thus, the A.O. observed from the statement of Shri Rashmikant Gopani recorded during the assessment proceedings that it is clear that assessee company has some undisclosed source of income which they were paying to get the work done and which is not reflected in the assessee company’s books of accounts. The undisclosed source of money is also introduced by the assessee company in its books of accounts in the disguise of unsecured loan routed through their Shareholders and Directors. The assessee company has to establish the identity, creditworthiness and genuineness of the transaction and then the onus shifts to the Revenue. The AO relied upon the decision of Hon’ble High Court of Calcutta in the case of Bhola Shankar Cold Storage Private Limited v. CIT in 270 ITR 487 and Hon’ble Punjab and Haryana High Court in the case of Raunaq Ram Nandlal v. CIT 254 ITR 617 . Further it was observed by the AO that the assessee company has received unsecured loan of Rs. 7,17,500/- from Shri Navnit A Parikh, Director of the company. The assessee company was asked to file the loan confirmations along with the copy of bank statement but the lender has produced only loan confirmations, but his bank statement evidencing the source of funds was not filed. As per the loan confirmation, It was observed by the AO that the opening balance as on 1st April, 2007 was shown at Rs. 7,30,970.75 whereas in the schedule of ITA 3074/Mum/2012 9 unsecured loan the closing balance as on 31st March, 2007 was shown at Rs. 9,93,471.35, hence, the loan confirmations were not correct. Summons u/s 131 of the Act was issued to Shri Navnit A Parikh to appear before the AO along with the books of accounts , bank statements, copy of income tax return and was asked to explain the source of funds and in response a letter dated 22nd December, 2010 signed by the authorized representative of Shri Navnit A Parikh was received by the AO stating that Shri Navnit A Parikh is not well and advised rest by the doctor, however, no medical certificate was filed in this regard. No documents like bank statement, books of accounts, sources of fund or copy of income tax return were filed to verify the creditworthiness and genuineness of the transactions before the AO. Thus as per the AO , the assessee company failed to prove the genuineness and creditworthiness of the transactions . The assessee company failed to produce its books of accounts , bank statement nor the lenders have filed any details to examine the genuineness of the loan received by the assessee company through the lenders who are Shareholders and Directors of the assessee company , the A.O. made an addition of Rs. 9,17,500/- and added to the total income of the assessee company as cash credit u/s 68 of the Act , vide assessment order dated 29-12-2010 passed by the AO u/s 143(3) of the Act.

5.Aggrieved by the assessment orders dated 29-12-2010 passed u/s 143(3) of the Act by the A.O., the assessee company filed its first appeal before the learned CIT(A).

Regarding, sundry creditors for expenses of Rs. 1 lac in the name of Shri Madarsingh Waghela and Rs. 1,05,474.60 in the name of Sh. Rashmikant Gopani, the assessee company contended that the outstanding labour charges were payable since the year 2006. It was not paid due to financial crisis. Regarding non-matching of PAN, the assessee company explained that the assessee company was not in contact with the said party and hence unable to submit the correct PAN and copy of the correct PAN card. The assessee company submitted by way of additional evidence to prove cash payment of outstanding bills in financial year 2008-09 and requested that the same may be admitted under Rule 46A of Income Tax Rules, 1962. With respect to Shri Rashmikant Gopani also, the assessee company submitted additional evidences and submitted that the said party was not maintaining his books of account.

With respect to addition of cash credits of Rs. 9,17,500/- u/s 68 of the Act , the assessee company contended that the assessee company had received Rs. 7,17,500/- from Director Mr. Navnit A. Parikh and Rs. 2 lacs from the wife of the Director ,Mrs. Taruna Navnit Parikh. The assessee company filed loan confirmation along with balance sheet, copy of income tax return for the ITA 3074/Mum/2012 11 assessment year 2008-09 and also explained the sources of funds. It was submitted by the assessee company that the Identity and creditworthiness of the unsecured loans were also proved. Cash book of Mrs. Taruna Navnit Parikh was also submitted in the form of additional evidence which showed that the said creditor had opening balance of Rs. 13,71,215/- out of which Rs. 2 lakhs was issued in the name of the assessee company. It was also explained that the source of funds in the hands of Mr. Navnit A. Parikh is cash in hand which is generated out of opening balance of Rs. 5,09,624/-. It was also submitted that Mr. Navnit A. Parikh, Director is not maintaining any bank account as on the date of cash credits. He opened his bank account in Bank of India on 18th January, 2008. It was submitted that he deposited cash directly in the assessee company’s bank account. Thus, the assessee company concluded that the assessee company has explained the identity and creditworthiness of the creditors. The assessee company also furnished the copies of ROC and annual return to prove the name of the shareholders as on 31st March, 2008.

With respect to the unexplained expenditure of Rs. 80,000/- made u/s 69-C of the Act, the assessee company submitted that the A.O. examined the witness , Shri Rashmikand Gopani. The witness, Shri Rashmikand Gopani was not maintaining any books of account and he has given statement from his memory. No show cause notice was issued by the AO before making additions. The A.O. should have allowed the cross examination of said Mr Rashmikant Gopani before making addition u/s 69-C of the Act, were the contentions of the assessee company.

The learned CIT(A) observed that his predecessor called for remand report from A.O. for verification of the additional evidences.

ITA 3074/Mum/2012 12 With respect to the import purchase bill filed by the assessee company, it was observed by the AO in remand report proceedings that the claim of liability of M/s Liber & Solow Co. is of period 1991 i.e. 20 years old and was in the name of ‘M/s Vihit Gems P. Ltd.’ and not in the name of the assessee company, whereas the assessee company claimed that the import was made in 1999. The copy of correspondence made with the party through FAX is filed. It was observed by the A.O. that the correspondences were not available at the time of the assessment proceedings but has suddenly appeared at the time of appellate proceedings which indicates that these are after thought and were manufactured by the assesseee company and hence were rejected. There were discrepancies in the FAX copies submitted by the assessee company and the AO held that these are forged documents and hence were rejected. The assessee company placed on record copy of application dated 24/02/2003 filed with RBI for permission for making delayed payment and the RBI sought additional documents from the assessee company to process its application for grant of approval for delayed payment to the overseas supplied. The assessee company was not able to bring on record the documents submitted in compliance with RBI letter to substantiate its claim and to place on record the RBI approval.

The assessee company’s alternative contention before the AO in remand report proceedings that it had made export of the equivalent amount on 27th January, 2011 to associate concern of Liber & Solo Company, New York to establish the genuineness of the creditor was also not accepted by the AO because the export invoice produced before the learned CIT(A) was in the name of Reliance Traders, Hongkong and there was no evidence produced to establish that the said concern is associate of M/s Liber and Solo Company, New York and no permission from RBI to set off export payments against old import payment outstanding were made available before the AO.

ITA 3074/Mum/2012 13 The assessee company’s contention that due to the financial crisis, it was not able to pay the creditor is also rejected by the A.O. because the assessee company has made huge imports subsequent to 1991 and payment to all other parties have been made. Thus, the AO in remand report proceedings held that the assessee company has not filed plausible document on which it could be proved that the liability was payable.

With respect to the Starough BVBA, Belgium, the assessee company only filed copy of purchase invoice dated 6-9-2002 and no other documents were filed. The assessee company filed as additional evidences by way of FAX correspondence with the above party. However, the A.O. in remand report proceedings was surprised that the correspondence which were not available at the time of assessment had suddenly appeared at the time of appellate proceedings before the learned CIT(A) which showed that assessee company had tried to manufacture evidence and is an afterthought . The assessee company did not filed any document before RBI for taking permission for the delayed payment to this creditor. The identity of the person signing the confirmation is not verifiable because it was not affirmed before the Indian Consulate situated at Belgium. In view of the above, the additions made by the A.O. in assessment proceedings are correct , was the contention of the AO in remand report proceedings.

With respect to Sh. Madarsingh Waghela, the confirmation filed by the assessee company was not signed by Sh. Madarsingh Waghela and the PAN is invalid as per AIS of ITD application. The assessee company was not able to establish the genuineness of the creditor and hence the amount of Rs. 1 lac was added by the A.O. Before the ld. CIT(A) , the assessee filed 10 cash vouchers made in the name of Sh. Madarsingh Waghela of Rs. 10,000/- each signed by somebody in Gujarati without any address, PAN etc. These payments were made in financial year 2008-09, thus the identity of the ITA 3074/Mum/2012 14 person signing the cash vouchers were not established by the assessee company. During the assessment proceedings, the assessee company filed confirmation letter dated 6th December, 2010 in respect of Sh Madarsingh Waghela whereby Rs. 1 lac was shown payable as outstanding whereas now the assessee company is filing cash voucher of financial year 2008-09 that the amount has already been paid by the assessee company , was observed by the AO during remand report proceedings. No PAN of the creditor has been submitted by the assessee company. Thus, the addition made by the A.O. is found to be correct was the contention of the AO during remand report proceedings.

Similarly with respect to Mr. Rashmikant Gopani, the assessee company , it was submitted that the statement given by Mr. Rashmikant Gopani was under fear and he was scared. The A.O. rejected the said claim of the assessee company that Mr Rashmikant Gopani was scared and was under fear and held that the AO made the addition which was correct and in accordance with law was the contention of the AO in remand report proceedings.

With respect to the addition of Rs. 2 lacs made u/s 68 of the Act received from Mrs. Taruna Navnit Parikh, the assessee company was asked to file loan confirmation from the lender along with income tax return, bank statement of the lender to establish the identity, credit worthiness and genuineness of the loan . On perusal of the bank statement it is seen that the loan of Rs.2,00,000/- is advanced by Mrs Taruna N Parikh on 20/04/2007 and on the same day cash of Rs 2,00,000/- was deposited in her bank account. The said Mrs. Taruna N Parikh has only salary income of Rs.20000/- per month. The summons were issued to Mrs. Taruna N Parikh u/s 131 of the Act to appear before the AO on 02/12/2010 to examine her but she failed to appear before the AO. One more opportunity was given but again she failed to appear ITA 3074/Mum/2012 15 before the AO. As per the copy of balance sheet of Mrs. Taruna N. Parikh filed by the assessee company during the assessment proceedings, the closing cash in hand was Rs. 2,43,712/- whereas as per the cash book filed before the ld. CIT(A) the closing balance was Rs. 4,82,412/-. Thus as per the AO, it was clear that cash book produced by the assessee company was fabricated. The creditor has no source of income during the year from which she can advance the loan to the assessee company. The assessee company was given sufficient opportunity to establish the creditworthiness which the assessee failed to establish, was the observation of the AO during remand report proceedings.

With respect to the new unsecured loan of Rs. 7,17,500/- from Sh. Navnit A. Parikh, the assessee company was asked to file the loan confirmation along with bank statement etc. but filed only loan confirmation. The loan confirmation was also not correct. Summons were issued u/s 131 of the Act but there was no compliance by Sh. Navnit A Parikh . In the appellate proceedings , the assessee company has claimed that out of loan of Rs. 7,17,500/-, an amount of Rs. 2,62,500/- was provision of Directors Remuneration of earlier year which was converted to loan on 1st April, 2007. As per the A.O., the claim of the assessee company was incorrect because as per the schedule of sundry creditor reflected in the balance sheet by the assessee company as on 31st March, 2007 the name of Mr. Navnit A. Parikh was not appearing there. Regarding the balance amount of Rs. 4,55,000/- , the assessee company submitted that the said amount is given by Shri Navnit A Parikh out of cash available with him. It was observed from the balance sheet of Mr. Navnit A. Parikh during the assessment proceedings that closing balance was Rs. 60,109/- whereas as per the cash book the closing balance was Rs. 39,509/-, hence, it was observed by the AO that the cash book filed to prove the source of loan advanced to the assessee company was fabricated and not reliable. It was also observed that Mr. Navnit A. Parikh was holding ITA 3074/Mum/2012 16 bank OD account and five credit cards, thus it was clear that his claim that he does not have bank account during that period was false. Mr. Navnit A Parikh has given loan during the assessment year 2005-06 to the assessee company through crossed cheque/DD which proves that the assessee company is giving wrong information that he does not have any bank account during that period is false.The auditors have also certified that the loans were given by cheque /DD, therefore the assessee company is giving wrong information that Sh Navnit A Parikh did not have bank account. Thus, the claim of the assessee company was not accepted because the creditworthiness of the creditor has not been established by them.

Similarly, with respect to the unexplained expenditure of Rs. 80,000/- for which the addition were made u/s 69-C of the Act, the same were made after recording the statement of Shri Rashmikant Gopani who had stated that he has received payment in cash from the assessee company which was not recorded in the assessee’s books of account. The assessee company’s claim that the statement was given under fear is false and the statement has not been retracted by Sh Rashmikant Gopani. The assessee company’s claim that A.O. has not given opportunity was also false because the assessee company was asked to appear before the A.O. along with books of account which the assessee company failed to produce. Summons u/s 131 of the Act were issued to two Directors/Sharehoder namely Mr Navnit A Parikh and Mrs Taruna N Parikh to appear before the AO but they failed to appear, in remand report proceedings before the AO.

The assessee company was confronted with the remand report and asked to file rejoinder on the said remand report . The assessee company reiterated its contentions which are not repeated for sake of brevity.

ITA 3074/Mum/2012 17 The learned CIT(A) admitted the additional evidences and dismissed the appeal of the assessee company on all the grounds , whereby the additions made by the AO was confirmed and sustained based on the findings of the AO in the assessment orders as well in the remand report submitted by the AO during remand report proceedings , vide appellate orders dated 15-02-2012 passed by the learned CIT(A) .

With Respect to amount of Rs. 1 lacs payable to Mr. Madarsingh Waghela , it was submitted that payment is made to this party in the subsequent financial year 2008-09. The confirmation was filed with wrong PAN. The said Mr. Madarsingh Waghela died and payment were made to his cousin brother Mr Sardar Singh Laluji Vaghela which are placed in paper book page 36-40, along with death certificate of Mr. Madarsingh Waghela and affidavit of his cousin brother Mr. Sardar Singh Laluji Vaghela which are placed in paper book page 36-38. The affidavit and death certificate are additional evidences ITA 3074/Mum/2012 19 which need to be admitted in the interest of justice was the contention of learned counsel. The copies of vouchers for making cash payments during financial year 2008-09 were also enclosed in paper book at page 41-48 . It was submitted that the statement of Mr. Rashmikant Gopani was recorded, he was doing job work of polishing diamond for the assessee company. The addition of Rs 80000/- u/s 69C of the Act was made based on the statement of Mr. Rashmikant Gopani . The said Rashmikant Gopani was not allowed to be cross examined. The affidavit of said Mr. Rashmikant Gopani is now filed before the Tribunal as an additional evidence. In the said affidavit dated 27- 02-2015 , the said Rashmikant Gopani has confirmed that he has not done any work for the assessee company and no cash was received by him during the previous year relevant to the instant assessment year .The bank statement is produced by the assessee company which evidences that the payments to Mr Rashmikant Gopani were made through cheques on 01-01- 2010 vide cheque no. 145640 of Rs.55,474/- and on 08-12-2009 vide cheque number 145633 of Rs. 35,000/- both debited to the assessee company bank a/c no. 495701010036056 with Union Bank of India Vidhan Sabha Marg Branch, Mumbai .It was submitted that with respect to loans received from Directors/shareholders, the assessee company has explained the sources of the funds but the Revenue is asking to produce source of source. The loan confirmations are placed on record. The AO should have made enquiries in their cases and additions should have been made in their hands but not in the hands of the assessee company.

9.The ld. D.R., on the other hand, supported the order of the ld. CIT(A).

ITA 3074/Mum/2012 21 Earlier the PAN No. was found invalid by the A.O. , but now the correct details are placed on file. The ld. Counsel submitted that Sh. Madarsingh N. Waghela died on 23-09-2005 and the death certificate is now placed on record at paper book page No. 37 and it was submitted that the assessee was not in touch with the said party. The ld. Counsel submitted that due to the death of Sh. Madarsingh N. Vaghela, the payment have been made to his relative being cousin Shri Sardarsingh Laluji Vaghela , whereby affidavit dated 17-12- 2014 to this effect has now been obtained and placed on record confirming that Sh Sardarsingh Laluji Vaghela has received Rs. 1,00,000/- from the assessee company in cash on various dates with respect to old dues payable to Mr Madarsingh Vaghela. These are the additional evidences placed on record in order to prove that payments have been made to the said party although the confirmations have been filed before the ld. CIT(A). Since these additional evidences by way of affidavit etc. needs verification and examination of these additional evidences by the authorities below. We admit these additional evidences in the interest of justice and accordingly set aside and restore this issue to the file of A.O. for de novo re-determination of the matter on merits in the light of these additional evidences. Needless to say the A.O. shall provide proper and sufficient opportunity of being heard to the assessee company in accordance with principles of natural justice in accordance with law and shall admit all relevant evidences and explanation provided by the assessee company in its defense. We Order accordingly.

With respect to the payment of Rs. 1,05,474/- on account of credit balance outstanding in the name of Mr. Rashmikant Gopani whereby vide statement recorded u/s 131 of the Act, he denied to have received any cheque from the assessee company. The assessee company submitted the bank statement whereby an amount of Rs. 35,000/- was paid to Mr. Rashmikant Gopani on 8th December, 2009 and an amount of Rs. 55,474/- was paid to Rashmikant Gopani through cheque payments on 01-01-2010, debited to UBI bank ITA 3074/Mum/2012 22 account of the assessee company. Copy of the assessee company’s bank statements were placed on record vide paper book page No. 49 & 50. The ld. Counsel contended that the authorities below denied cross examination of Shri Rashmikant Gopani by the assessee company. The affidavit from Mr. Rashmikant Gopani dated 27-02-2015 is now placed on record as additional evidence whereby he denied to have worked for the assessee company during the relevant previous year and denied to have received cash from the assessee company . These additional evidences are vital to decide the issue in the instant appeal and these additional evidences need to be admitted in the interest of justice. In our considered view, this matter also needs to be set aside and restored to the file of A.O. for examination and verification of the additional evidences filed by the assessee company and allowing cross examination of Mr. Rashmikant Gopani by the assessee company. Needless to say the A.O. shall provide proper and sufficient opportunity of being heard to the assessee company in accordance with principles of natural justice in accordance with law and shall admit all relevant evidences and explanation provided by the assessee company in its defense. We order accordingly.

With respect to the loan received by the assessee company from Mrs. Taruna N Parikh and Sh. Navnit A. Parikh, Director, we find that summon were issued u/s 131 of the Act but both the afore-stated said directors/shareholders who have given loans to the assessee company failed to appear before the A.O. for their examination despite opportunities given by the AO . The cash was deposited by the said Mrs Taruna N Parikh in her bank account prior to the issue of cheque to the assessee company , for which the assessee company has placed on record the confirmation, bank statement etc.. However, the contention of the Revenue was that the parties had not appeared before the A.O. for examination despite summons issued and hence proper enquiry could not be conducted by the Revenue to establish identity and creditworthiness of the lenders and the genuineness of the loan ITA 3074/Mum/2012 23 transaction. In our considered view, this issue is also to be set aside and restored to the file of the AO for de-novo determination on merits keeping in view the evidences submitted by the party and after recording of the statements and examination of the lenders for which directions are issued to the assessee company to produce the lenders before the Revenue for their examination and to produce all necessary evidences in its support to satisfy the mandate of Section 68 of the Act to establish identity and creditworthiness of the lenders and the establish genuineness of the loan transaction. Needless to say the A.O. shall provide proper and sufficient opportunity of being heard to the assessee company in accordance with principles of natural justice in accordance with law and shall admit all relevant evidences and explanation provided by the assessee company in its defense. We order accordingly.

Order pronounced in the open court on 7th June , 2016. आदेश क� घोषणा खुले �यायालय म� �दनांकः 07-06-2016 को क� गई ।