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Income Tax Appellate Tribunal, BANGALORE ‘A’ BENCH, BANGALORE
Before: SHRI N.V.VASUDEVAN & SHRI ABRAHAM P GEORGE
PER BENCH:
These are cross appeals filed by the assessee and the revenue directed against orders dated 11-06-2012,12-06-2012 and 13-06-2012 respectively, of CIT(A)-V, Bangalore.
Cross appeals for 1997-98 is taken up first for disposal.
Assessee in its appeal No.1080(B)/12 is aggrieved on an addition of Rs.1.00 lakh disbelieving a loan from one Shri Vyjanath R Patil and an addition of Rs.50,000/- disbelieving one Shri Naganna Swadi which were confirmed by the CIT(A).
As against this, revenue in its appeal is aggrieved that CIT(A)
had deleted an addition of Rs.4,50,000/- made by the AO disbelieving a loan from Shri D.I.Kamalakar and an addition of Rs.4,75,000/- disbelieving a loan from Shri K.I.Raghavendra.
Facts which will encompass all the years under appeal are that the assessee arrack contractor had filed his return for assessment year 1997-98 declaring income of Rs.95,400/- on 27-06-1997. There was a survey u/s 133A of the IT Act, 1961 (in short ‘The Act’) in the premises of the assessee on 29-12-1998. Pursuant to the survey, it seems the assessment proceedings were re-opened by issue of notices u/s 148 of the Act. In the return filed pursuant to such notice also assessee declared the same income as declared in the original return. In the balance sheet filed by the assessee along with the return he had shown certain loans which inter-alia included the following amounts; i) Shri D.I.Kamalakar Rs.4,50,000/- ii) Shri K.I.Raghavendra Rs.4,75,000/- iii) ShriVyjanath R Patil Rs.1,00,000/- iv) Shri Naganna Swadi Rs. 50,000/-
During the course of the assessment proceeding assessee filed confirmations from the above creditors. AO rejected the confirmations on the ground that these were incomplete. As per the AO assessee had investments in a hotel in Gandhinagar, in Ram films and Rambabu films and the loans were shown in order to justify the investments. He disbelieved the loans and made an addition of Rs.10,65,000/-.
Aggrieved assessee moved in appeal before the CIT(A). Argument of the assessee before the CIT(A) was that Shri D.I.Kamalakar, was his Father. According to him, Shri Kamalakar had filed confirmation letter informing the AO that a sum of Rs.4,50,000/-was DD issued by him in favour of Excise Commissioner on behalf of his son, so as to aid him in the bidding process for arrack. Assessee also submitted a VDIS -1997 certificate pertaining to Shri D.I.Kamalakar, which inter-alia reflected the sum of Rs.4,50,000/-advanced by Shri D.I.Kamalakar to the assessee.
Vis-à-vis loan alleged to have been taken from Shri K.I.Raghavendra, assessee submitted before the learned CIT(A) the said Shri K.I.Raghavendra, was his younger brother and was assessed to tax with Pan No.AACP13935Q. According to the assessee the sum of Rs.4,75,000/- was duly reflected in the balance sheet filed by Shri K.I.Raghavendra. Assesee also filed a copy of assessment order of Shri K.I.Raghavendra before the learned CIT(A).
Vis-a-vis the loan of Rs.1,00,000/- from Shri Vyjanath R Patil, argument of the assessee was that Shri Vyjanath R Patil appeared before the AO on 23-01-2012 and confirmed the loan.
Vis-a-vis, the loan from Shri Naganna Swadi, submission of the assessee before the learned CIT(A) was that summons was issued by the AO to the said person also. According to the assessee Shri Naganna Swadi, also had appeared before the AO on 14-02-2012 and confirmed the advance. He had also stated that the source of the advance was his agricultural income.
Learned CIT(A) after considering the records filed by the assessee and submissions made deleted the addition for loans from Shri D.I.Kamalakar and Shri K.I.Raghavendra, while confirming the addition for loans from Shri Vyjanath R Patl and Shri Naganna Swadi.
Learned AR strongly assailing the confirmation of the addition of loans alleged to have been received from Shri Vyjanath R Patiland and Shri Naganna Swadi, submitted that both these persons were summoned and both had confirmed before the AO that they had given the loans. As
per the learned AR Shri Vyjanath R Patil had not only appeared before the AO but also filed RTC for his agricultural holdings. Reliance was placed on the copy of the confirmation filed at paper book pages 10 & 10A.
Similarly, as per the learned AR Shri Naganna Swadi had also appeared before the AO and filed a copy of RTC.
Per contra and in support of its appeal learned DR submitted that assessee did not place any of the record relied on by him, before the AO during the course of assessment proceedings. According to him, learned CIT(A) had accepted the claim of loans from Shri D.I.Kamalakar and K.I.Raghavendra, without giving an opportunity to the AO to examine the evidence submitted by the assessee. According to him, filing a mere confirmation would not wriggle out the assessee from its onus to show the credit worthiness of the creditors. Assessee having failed to do so, as per the learned DR, CIT(A) erred in deleting the addition in respect of the alleged loans from Shri D.I.Kamalakar and K.I.Raghavendra and was justified in confirming the addition for the alleged loans from Shri Vyjananth R Patil and Shri Naganna Swadi.
We have perused the orders and heard the rival contentions.
What we find is that learned CIT(A) had during the course of appeal proceedings before him sought a remand report from the AO. A remand report dated 06-03-2012 was given by the AO. In the said remand report it is stated by the AO that the VDIS declaration given by Shri D.I.Kamalakar was not substantiated. As for Shri K.I.Raghavendra, AO states that the said Shri K.I.Raghavendra had not produced his PAN details. As for the loan from Shri Vyjanath R Patil, AO states the party had indeed appeared before him, but failed to produce copy of assessee’s account in his ledger book. As for the loan from Shri Naganna Swadi, AO stated that the said person failed to produce bank pass book and also failed to adduce evidence for his income. What we notice is that AO had not doubted the VDIS declaration in respect of Shri D.I.Kamalakar. As for Shri K.I.Raghavendra, his only grievance is that bank details were not produced. He has not doubted the credit worthiness of Shri K.I.Raghavendra. In the case of Shri Vyjanath R Patil as well as Shri Naganna Swadi, these persons had appeared before the AO and confirmed the loans. They had also produced evidence for the agricultural land in their possession. In our opinion, such confirmations when read along with the affirmations made before the AO by these creditors on their personal appearance before him could not have been brushed aside.
Assessee in our opinion had discharged his onus, vis-à-vis the loans claimed to have been taken from these 4 persons. These additions therefore, were not called for.
In the result, we confirm the order of the learned CITA) to the extent he deleted the addition for the loans from Shri D.I.Kamalakr and Shri K.I.Raghavendra and set aside his orders in so far it relates to the confirmation of the addition for the loan from Shri Vyjanath R Patil and Shri Naganna Swadi.
Appeal of the assessee for the assessment year 1997-98 is allowed whereas the appeal of the revenue stands dismissed.
Now we take up the cross appeals for the assessment year 1999-2000.
Assessee in its appeal is aggrieved on an addition of Rs.10,00,955/-disbelieving the confirmation filed by one Shri Parakash Kattimani which addition was sustained by the learned CIT(A).
As against, revenue in its appeal is aggrieved that the learned CIT(A) deleted an addition of Rs.9,50,000/- and Rs.4,36,170/- made by the AO, accepting the explanations given by the assessee with regard to the demand drafts deposited with Excise department for the purpose of bidding for arrack ranges
Facts apropos are that assessee as already mentioned by us, was engaged in arrack business. During the relevant assessment year, it had participated for excise bidding for Ron Taluk, among others. A sum of Rs.10,00,955/- was deposited by the assessee since he was successful bidder in the excise bidding. During the course of assessment proceedings assessee was required to explain the source of the deposit. Assessee’s stated that a sum of Rs.5.00 lakhs was given to him by one Shri Dashrath and also filed a confirmation letter dated 15-01-1999 from the said Shri Dashrath. Assessee also furnished a letter from one M/s Amar Trading Co. in which the said concern stated that a sum of Rs.2.5 lakhs was provided by them to the assessee by way of DD. However, the AO did not accept the former confirmation for want of address and latter one for a reason that the distinctive number of the DD mentioned by the party did not tally with the details provided by the Excise Department. He made an addition of Rs.10,00,955/- as income.
AO also noted that assessee had in addition to his successful bidding for Ron Taluk, participated in the bidding process for other Taluks as well. For this purpose he had submitted DD worth Rs.14.00 Lakhs to the excise authorities as earnest money deposits. Explanations were sought on this. As per the assessee the source for the DD’s were as under;
i. Rohit Agencies, Gulbarga Rs.5.5 Lakhs ii. Loan from Sri Basant Kumar Patil Rs.3.00 Lakhs iii. Loan from Smt D.Pushpalatha Rs.2.50 Lakhs iv Loan from Sri M.J.Torgal, Bijapur Rs.2.00 Lakhs Out of the above, AO accepted the confirmation from M/s Rohit Agencies, Gulbarga. According to the AO, for the balance sums, there were no proper evidence submitted by the assessee. He made an addition of Rs.9.5 Lakhs.
In its appeal before the CIT(A), argument of the assessee vis-à- vis first addition of Rs.10,00,955/- was that Ron Taluk, was sub-licensed by him to one Shri Prakash Kattimani, Bijapur. As per the assessee this arrangement was already made prior to the bidding and hence DD for Rs.10,00,955/- was deposited by the said Shri Prakash Kattimani, with the Excise department. Assessee also filed a letter from Shri Prakash Kattimani, wherein he confirmed this. Vis-a-vis the loan from Sri Basant Kumar Patil, argument of the assessee before the learned CIT(A) was that Shri Basant Kumar Patil was assessed to tax with PAN AGAPP5273E. As
per the assessee such loan was shown by the assessee in its balance sheet as a liability. As for the alleged loan from Smt. D.Pushpalatha, assessee filed an affidavit before the learned CIT(A) wherein she confirmed payment of Rs.2.5 Lakhs by DD she also mentioned her PAN. As for Shri M.J.Torgal, claim of the assessee before the CIT(A) was that Shri M.J.Torgal had given DD bearing No.158888 of State Bank of Hyderabad, Sorpur. As per the assessee such DD was returned to Shri M.J.Torgal, since he was unsuccessful in the bidding. Learned CIT(A) sought a remand report from the AO. There were two remand reports furnished by the AO. In the first remand report dated 10-01-2011 the AO stated that assessee had not produced the concerned parties for verification which disabled him from verifying their credit worthiness. In the second remand report dated 06-03-2012 AO stated that assessee did not produce parties concerned nor could prove the identity of the creditors or their capacity to advance the amounts.
Learned CIT(A) after going through the submissions, records and remand reports held that in so far Rs.10,00,955/- was concerned, assessee had given different versions before the AO and before him.
According to learned CIT(A) Shri Prakash Kattimani, could not give his PAN nor his assessment details. However, in so far as loans from Shri Basanth Kumar Patil, Smt D.Pushpalatha and Shri M.J.Torgal, were concerned CIT(A) held that assessee had discharged his onus for proving their identify and credit worthiness. He also noted that the AO had inadvertently added Rs.9.5 lakhs against the actual amount of Rs.8.5 Lakhs. Thus, he confirmed the addition of Rs.10,00,955/- and deleted the addition of Rs.9,50,000/-.
AO had also noted during the course of assessment proceedings that the liability to the extent of Rs.4,36,170/- shown by the assessee in its balance sheet filed along with the revised return against his assets could not be proved by the assessee. According to him, loan of Rs.98,000/- from Shri Chidambara Shetty Rs.28.170/- from Shri Kamalakar and Car loan of Rs.3,10,000/- from M/s Standard Chartered Bank were not substantiated. He made an addition of Rs.4,36,170/-.
On these addition argument of the assessee before the CIT(A)
was that the sum of Rs.4,36,170/- was real liability appearing in his balance sheet. According to the assessee the sum of Rs.3,10,000/-was due to M/s ANZ Grindlays Bank Ltd on purchase of Santro Car. Against this, his father Shri D.I.Kamalakar, had remitted three instalments of Rs.9,390/- each and this was the reason why Rs.28,170/- was shown as due to Shri D.I.Kamalakar. Assessee also stated that a loan of Rs.98,000/- was received from one from Smt Chitra, by way of cheque drawn on Vijaya Bank, Chickpet Branch, Bangalore. On these also the learned CIT(A) had sought a remand report from the AO. However, the AO in his remand report did not offer any comments. Learned CIT(A) considering the explanation of the assessee held that the sum of Rs.4,36,170/- represented actual liability of the assessee as on 31-03- 1999 and deleted the additions.
Now before us learned AR strongly assailing the addition of Rs.10,00,955/- sustained by the CIT(A), submitted that assessee had filed confirmation from Shri Prakash Kattimani on 14-02-2012. According to him, Shri Prakash Kattimani, in the said confirmation had stated that he had sub-licences the Ron Taluk from the assessee, who was allotted the range. He had also filed an affidavit, which gave the details of the challan nos. through which the payments were effected by him to the excise department. According to him, in the face of such evidence, it was not appropriate for the lower authorities to make the addition.
In so far as the deletion of the addition of Rs.9.5 Lakhs, learned AR in support of the order of the CIT(A) submitted that actual amount was only Rs.8.5 lakhs. According to him, AO had refused to consider evidence filed by the assessee during the course of remand proceedings.
As per the learned AR assessee had furnished the Pan No of Shri Basant Kumar Patil as well as Smt.D.Pushpalatha. Assessee had given confirmation for all these parties. Therefore, according to him, CIT(A) as justified in deleting such addition. Continuing his submissions learned AR submitted that CIT(A) was justified in deleting the addition of Rs.4,36,170/- also. This was an actual liability and assessee had given all particulars thereof.
Per contra, and in support of the order of the CIT(A) in so far as it was favourable to the revenue, learned DR submitted that the CIT(A) had fell in error in going by the confirmation of Shri Basant Kumar Patil and Smt.D.Pushpalatha and Shri M.J.Torgal. According to him, confirmation letters ispso facto would not prove the loans. In the case of M.J.Torgal, assessee did not even file a proper confirmation. However, as
per the learned DR the CIT(A) was justified in confirming the addition of Rs.10,00,955/- since assessee had given different versions at different times. According to him, it could not be believed that a person without PAN could have deposited a sum of Rs.10,00,955/- with Excise department for obtaining sub-lease of a range.
We have perused the orders and heard the rival contentions.
First we take up the addition of Rs.10,00,955/- which was confirmed by the CIT(A). It is an admitted position that Shri Prakash Kattimani in his confirmation dated 14-02-2012 had stated that he had no banks statement or books of accounts with him to show the source of the payment. A look at the affidavit of Shri Prakash Kattimani does not prove anything. It simply gives the cheque Nos. through which payment of Rs.10,00,955/- was effected. This would not in any way show that the payments were made by Shri Prakash Kattimani himself. Nor does it show any light of the credit worthiness of Shri Prakash Kattimani.
Further, the assessee had changed his version before the CIT(A). Before the AO it had given in the confirmation letter from one Dasharath and one M/s Amar Trading Co., against the above sum of Rs.10,00,955/-. Before the CIT(A) assessee roped in one Shri Prakash Kattimani as the creditor, to whom he claimed he had given sub-lease of Ron Taluk Range. In the circumstances, we are of the opinion that the lower authorities were justified in disbelieving the version given by the assessee and making addition of Rs.10,00,955/-.
In so far as the addition of Rs.9.5 lakhs is concerned, t is not disputed that the actual amount was only Rs.8.5 Lakhs. Assessee had given the PAN of Shri Basant Kumar Patil and Smt.D.Pushpalatha before the CIT(A). In the remand report AO had made no comments whatsoever on the confirmations. Once the PAN of the creditor is given, the AO could have verified the veracity of the claim of the assessee. It is also a fact that the payments effected to excise department were through DD’s and details of all such DD’s were with the AO. Hence, we are of the opinion that in so far as the loans claimed by the assessee to have taken from Shri Basanth Kumar Patil and Smt D.Pushpalatha are concerned, it requires a fresh verification from the AO. However, in so far as the loan alleged to have been taken from Shri M.J.Torgal, assessee was unable to produce any substantiating evidence or document. Hence, we are of the opinion the addition by the AO to this extent was justified. Thus, we set aside the orders of the CIT(A) on this issue and remit the additions made for loans of Rs.3.00 lakhs and Rs.8.5 Lakhs alleged to have been taken from Shri Basanth Kumar Patil and Smt.D.Pashpalatha back to the file of AO for verification afresh. As for the addition of loan of Rs.2.00 lakhs from Shri M.J.Torgal is concerned, order of the CIT(A) is set aside and the addition is re-instated.
This leaves us with the sum of Rs.4,36,170/- the addition of which was deleted by the CIT(A). It is not disputed that these amounts were appearing in the balance sheet of the assessee filed along with its revised return. In so far as a loan of Rs.3,10,000/-shown as outstanding to Standard Chartered Bank is concerned, the CIT(A) has mentioned that documents were produced before him. AO has not made any comments in the remand report. The amount of Rs.28,170/- shown as due to Shri D.I.Kamalakar, who is assessee’s father, is stated to be three instalments of Rs.9,390/- each paid by Shri D.I.Kamalakar,to M/s ANZ Grindlays Bank, against the Car loan. On this also, AO has not made any comments in his remand report. However, in the Balance sheet a sum of Rs.98,000/- was shown as due to Shri Chidambara Shetty whereas before the CIT(A) assessee had given confirmation from one Smt.D.Chitra, Proprietrix of M/s Chitra Enterprises. Nevertheless, confirmation which stated that the amount was paid by cheque to the assessee was not doubted by the AO in the remand report. We are therefore, of the opinion that CIT(A) was justified in considering the loans of Rs.4,36,170/- appearing in the liability side of the balance sheet of the assessee to be genuine.
In the result, ground no.2 of the revenue is partly allowed for statistical purposes whereas its ground no.3 is dismissed. Other grounds of the revenue are general in nature. Grounds raised by the assessee in its appeal are dismissed.
In the result, appeal of the revenue for AY: 1999-2000 is partly allowed for statistical purposes whereas appeal of the assessee is dismissed.
Now we take up cross appeal of the assessee and revenue for the assessment year 2001-02.
Assessee in its appeal aggrieved in confirmation of an addition of Rs.23.00 lakhs for DDs alleged to have been received from one Shri Thirupathaiah and associates, confirmation of an addition of Rs.14.50 lakhs disbelieving loans from one Shri Govindaiah Goud, addition of Rs.2.00 lakhs disbelieving a loan from one Shri U.A Ballal and addition of Rs.5.00 lakhs disbelieving a loan from Shri M.J.Torgal. As against this revenue in its cross appeal is aggrieved that CIT(A) deleted an addition of Rs.96,99,996/- out of DDs claimed to have been mobilized by the assessee from various persons for aiding in his bidding and deletion of an addition of Rs.1,12,680/- for a loan reflected in the Balance sheet of the assessee.
Facts apropos that AO had information received from income- tax Officer, Survey, Mangalore that assessee had made deposits of huge amounts, with the excise authorities for participating in various excise auctions. Assessee had originally filed return of income declaring an income of Rs.65,800/-. When notice u/s 148 was issued, another return was filed by the assessee declaring the same income. During the course of assessment proceedings AO gave the assessee details of the DDs which were deposited by the assessee as EMD for participating in the bidding process. AO noted that assessee had on various dates deposited demand drafts worth Rs.1,75,69,996/-. Assessee was called upon to explain the source for these DDs. In reply thereof, assessee produced confirmations from one Shri Amaresh, Proprietor of M/s Amar Trading Co. inter-alia confirming that DDs worth Rs.35.00 lakhs were drawn by him in favour of the Excise Commissioner on behalf of the assessee. A confirmation from one Shri Balraj Goud, was also filed in which the said person confirmed having given a DD for Rs.1,20,000/- in favour of the excise department on behalf of the assessee. Since the DD numbers mentioned by these parties matched the DD Nos. as per the list provided by the Survey Officer, the AO accepted source for Rs.36,20,000/-. The balance of Rs.1,39,49,996/- was added since the assessee was unable to explain the source.
In addition to the above, from the balance sheet filed by the assessee, it was noted that the assessee had obtained additional credits of Rs.2.00 lakhs and Rs.1,12,680/- from one Shri U.A.Ballal and his Father Shri D.I.Kamalakar, during the relevant previous year. As per the AO, no confirmations were filed for these. He made an addition of Rs.3,12,680/- on this count also.
Aggrieved assessee moved in appeal before the CIT(A).
Argument of the assessee was that participants in excise bidding for liquor ranges, mobilized EMDs by getting DD’s from friends and relatives in the name of Excise Commissionerate. As per the assessee this was a usual procedure adopted everywhere. Such DD’s deposited with the excise authorities, would be encashed by the excise authorities only in respect of the successful bidder. For the un-successful bidders, DD’s were returned as such by the excise department. As per the assessee, it had mobilized DD’s from the following persons for this purpose. i. Sri Ganapathi Kohli, Bidar Rs. 1,99,996/- ii.Sri Raghavendra Dall Industries Rs.11,00,000/- iii. Sri U.G.Rajput, Hubli Rs. 2,00,000/- iv. Sri S.Govindaiah Goud, Hyderabad Rs.20,00,000/- v. M/s Goverdhan Autofinance, Gulbarga Rs. 8,00,000/- v. M/s Superhit Films, Bangalore Rs. 7,00,000/- vi. Sri D.I.Kamalakar, Bangalore Rs.14,00,000/- vii. Sri Basanth Kumar Patil, Bangalore Rs.13,00,000/- viii. Sri Nagaraj, BIdar Rs. 5,00,000/- x. M/s Sangameshwara Enteprises, Rs. 5,00,000/- Gulbarga x. Sri B.Manik Rao, Bidar Rs. 5,00,000/- xi. Sri N.R.Veerappa, Bangalore Rs. 5,00,000/- Total Rs.96,99,996/- As per the learned CIT(A) assessee filed confirmation letters with the supporting documents before him. Though, the assessee also claimed that a sum of Rs.42,50,000/- out of the total Rs.1,39,49,996/- were DD’s taken on his behalf by one Sri Thirupathaiah and one Sri M.J.Torgal, it seems he could not produce evidence to the satisfaction of the CIT(A). Vis-à-vis addition of Rs.1,12,680/- appearing in the name of his Father in the balance sheet, submission of the assessee was that the said Shri D.I. Kamalakar was assessed to tax and his financial statement reflected the loans given to the assessee.
However, assessee it seems could not produce any evidence with regard to the loans of Rs.2.00 lakhs alleged to have been received from Sri U.A.Ballal.
Learned CIT(A) sought a remand report from the AO. AO gave two remand reports to the CIT(A) one dated 10-01-2011 and another dated 06-03-2012. In the remand report dated 10-01-2011, AO submitted that assessee could not dictate terms as to how an AO should proceed. According to him, assessee could not produce any of the parties for verification nor could he show their credit worthiness. In the remand report dated 06-03-2012 AO submitted that merely by giving names of parties, would not be a proof by itself for having received the loans.
Learned CIT(A) after considering the submissions of the assessee and also remand report of the AO held that assessee could substantiate DD’s received from 12 persons mentioned in the list at para -38 above. However, according to him, for the DD’s worth Rs.42,50,000/- claimed to have been received from Sri Thirupathaiah and Sri M.J.Torgal, assessee was unable to produce any evidence. Vis-à-vis the claim of the assessee that sum of Rs.1,12,680/- appearing in its balance sheet in the name of his Father Sri D.I.Kamalakar, was a genuine loan, learned CIT(A) noted that the financial statement of Sri D.I.Kamalakar did reflect these amounts. However, vis-à-vis the alleged loan of Rs.2.00 lakhs from Sri U.A. Ballal, CIT(A) noted the assessee was unable to produce any confirmation. In the result, out of the total addition of Rs.1,39,49996/- made on account of DD’s deposited for bidding, CIT(A) deleted Rs.96,99,996/- and sustained addition of Rs.42,50,000/-. He also deleted the addition for the loan of Rs.1,12,680/- from Sri D.I.Kamalakar, while confirming the addition of Rs.2.00 lakhs made in respect of alleged loan from Shri U.A.Ballal.
Now before us, learned AR strongly assailing the order of the CIT(A) in so far as he confirmed the addition to the extent of Rs.42,50,000/- and Rs.2.00 lakhs submitted that Sri Thirupathaiah, had appeared before the AO on 05-12-2011 and requested for 30 days time.
As per the learned AR, assessee had obtained letter from Allahabad Bank, Viveknagar Branch, Bangalore giving detals for a sum of Rs.23.00 lakhs.
Placing reliance on paper book page no.4, learned AR submitted that in this letter dated 09-1-2011 issued by M/s Allahabad Bank, gave DD Nos. and the account number from which the money was drawn for issuing the DD’s. Despite such evidence, CIT(A) refused to consider the claim of the assessee. Vis-à-vis the loan from Sri U.A. Ballal, learned AR submitted that it was properly reflected in the balance sheet of the assessee and ought not have been disbelieved. Supporting the order of the CIT(A) in so far as it be deleted the addition to the extent of Rs.96,99,996/-, learned Authorized representative submitted that assessee had produced confirmation letters and supporting evidence. None of these were disputed by the AO in the remand reports. In support the learned AR relied on the confirmation letters from Sri G.Ganapathi Kohli, Sri Nagaraj, Sri D.I.Kamalakar, Sri U.G.Rajput, Sri Basant Kumar Patil, Sri M.B.Babu and Sri N.R.Veerappa placed at paper book pages 12 to 19 in support of his submissions. According to him, all these confirmation clearly mentioned DD numbers taken by the said persons and deposited with the excise department to help the bidding of the assessee. According to him, assessee was not a successful bidder in such bidding and therefore, the DD’s were returned to the respective parties. Therefore, assessee had discharged its onus, vis-à-vis the source of the DD’s and as per the learned AR, CIT(A) rightly deleted the addition to the extent of Rs.96,99,996/-.
Per contra, learned DR submitted that the learned CIT(A) had not verified how the concerned persons could raise money for taking the DD’s. According to learned DR, the confirmation simply mentioned that the concerned persons had given DD’s which were returned by the assessee. According to the learned DR none of these persons were income-tax assesses and did not have means for taking such huge DD’s on behalf of the assessee. According to him, the CIT(A) fell in error in deleting the addition to the extent of Rs.96,99,996/-. Again as per the learned DR, CIT(A) had without verifying the credit worthiness of Shri D.I.Kamalakar, accepted the version of the assessee.
Learned DR supporting the order of the CIT(A) to the extent it was favourable to the revenue submitted that the CIT(A) was justified in rejecting the evidence filed by the assessee with regard to the DD’s given by Sri Thirupathaiah. As per the learned DR, no evidence whatsoever was produced by the assessee with regard to the alleged loan from Sri M.J.Torgal.
We have perused the orders and heard the rival contentions.
Assessee has not disputed that it had participated in the bidding for various excise auctions and for that purpose had deposited DD’s for Rs.1,75,69,996/-. AO had painstakingly analyzed the information received by him from excise department and complied the DD’s which was submitted by the assessee for the purpose of bidding at page-8 of his assessment order. This is reproduced at Annexure-I to this order. Claim of the assesee was that all these amounts were DD’s given by his friends and known people and were returned to such persons, when bidding was over since assessee was unsuccessful. It could be true that excise authorities returned the DD’s to the unsuccessful bidders. It could also true that assessee might have returned the DD’s to these persons who had helped him by taking the DD’s on his behalf. Assessee as per the learned CIT(A) had produced confirmation from 12 persons for a sum of Rs.96,99,996/- out of the total sum of Rs.1,75,69,996/-. AO himself had accepted confirmation letters given by the assessee for DD’s taken for a sum totaling Rs.36,20,000/- from two persons namely Amaresh, Prop: Amar Trading Co., and B.Balraj Goud. Thus, the modus- operandi of obtaining DD’s from different persons for the purpose of bidding was accepted by the AO at least in two cases. In the two remand reports given by the AO, he has not made any comments on the various confirmation filed by the assessee except for stating they were not produced by the assessee and their credit worthiness were not properly demonstrated. Out of the 12 persons given in the list confirmation letters that are available before us are only of seven persons namely, Ganapathy Kohli, Nagaraj, Kamalakar, U.G.Rajput, Sri Basant Kumar Patil Sri N.R.Veerappa and Sri M.B.Babu. Last mentioned party had signed on behalf of one M/s Superhit Films. Sri Ganapathy S.Kohli, in his confirmation letter dated 15-02-2012 has given the DD nos. for four DD’s of Rs.49,999/-each and also furnished his income-tax acknowledgement.
These four DD’s which are of Rs.49,999/- each, do tally with the list given by us at the Annexure to this order. Therefore, acceptance of these credits by the ld. CIT(A) cannot be faulted. However, with regard to Nagaraj, though DD no. is mentioned in the confirmation dated 16-02-2012, nothing has been mentioned as to how the money was raised except for saying it was from a loan from Bidar Branch. With regard to the confirmation letter dated 09-12-2011 from Shri D.I.Kamalakar, it gives his PAN and details of VDIS declaration. Therefore, there is no reason to doubt the confirmation given by D.I.Kamalakar. In respect of U.G.Rajput, confirmation clearly say that he was not an assessee, but was involved in film trade business. No other information is available. In the case of the confirmation dated 07-12-2011 given by Sri Basant Kumar Patil, it has been clearly stated that the money was given out of his SB account with Allahabad Bank. It was also mentioned that the transactions were recorded in his bank statement. In the case of confirmation dated 12-12- 2011 given by M/s Superhit Films, signed by Sri M.B.Babu, he has not given any details as to where the money for the DD was raised. The copy of the confirmation filed in the case of N.R.Veerappa, before us is incomplete. Confirmation dated 11-02-2005 from S.Govindaiah Goud,for DD’s worth Rs.20.00lakhs, though it gives the DD numbers does not carry any detail as to his business source of earning or tax assessment. In the circumstances, the confirmations obtained from Sri Ganapathy Kohli, D.I.Kamalakar and Basant Kumar Patil, in our opinion, were rightly accepted by the CIT(A). These totaling to Rs.28,99,996/-. Confirmation if any received from M/s Raghavendra Dall Industries, Sri Goverdhan Auto Finance, M/s Sangameshwara Enterprises, and Sri B Manik Rao are not before. However, learned CIT(A) does mention that the confirmation of all the 12 persons were available with him. Hence, with respect of the balance of Rs.68,00,000/- we are of the opinion that the matter requires a fresh look by the AO. If the assessee is able to show that the confirmations for the sum of Rs.68,00,000/- had the details of the DD’s, and source for raising the amounts, and if the DD numbers tally, with the list given by the AO at page-8 of his order reproduced by us in the annexure and provide details as to the account from which the money for which the DD’s were drawn, then, in our opinion the additions would not stand. However, we do make a note that it is the onus of the assessee to substantiate its contentions regarding the claim. Thus, against the deletion of Rs.96,96,996/- the order of the CIT(A) is sustained to the extent of Rs.28,99,996/- whereas for the balance of sum of Rs.68 lakhs pertaining to his order is set aside and issues remitted back to the file of the AO for consideration afresh in accordance with law.
Coming to the addition of Rs.1,12,680/- by the learned CIT(A)
admittedly, Sri D.I.Kamalakar, was an assessee and his financial statement reflected the loans given to assessee, who was his son, has not been disputed by the revenue. Hence, we are of the opinion that the CIT(A) justified in deleting this addition.
Coming to the claim of the assessee that the CIT(A) was not justified in sustaining the addition of Rs.23.00 lakhs against DD’s obtained from Thirupathaiah, we find that the assessee had indeed furnished a certificate from Allahabad Bank which clearly gave the DD numbers and the account from which the DD’s were taken. We find that the such DD nos. tallied with the list given by the AO and the Allahabad Bank had certified that the accounts belonged to M/s Kanakadurga Wines owned by Sri Thirupathaiah and Sri B.Venkatesah M. In such circumstances, we are of the opinion out of the total addition of Rs.42,50,000/- sustained by the CIT(A) the addition of Rs.23.00 lakhs was not justified. This addition stands deleted.
Vis-à-vis addition of Rs.14,50,000/-which the assessee claims to have obtained from Sri Govindaiah Goud,, it is an admitted position that confirmation of Sri Govindaiah Goud, itself was only for Rs.20.00 lakhs and not for Rs.34,50,000/-. Similarly, assessee was unable to produce any credible evidence for loan alleged to have been obtained from Sri U.A.Ballal and Sri M.J.Torgal, Rs.2.00 lakhs and 5.00 lakhs respectively. We are therefore, of the opinion the CIT(A) justified in confirming these additions.
Thus, out of grounds 2 & 3 raised by the revenue, ground no.2 is partly allowed for statistical purposes whereas ground no.3 is dismissed. Out of grounds no.2 to 5 in the assessee’s appeal ground no.2 is allowed, whereas ground no.3 to 5 are dismissed. Other grounds in both the appeals are general needing no adjudication.
In the result, appeal of the revenue for the assessment year 2001-02 is partly allowed for statistical purposes whereas appeal of the assessee is partly allowed.
To summarize the results appeal of the assessee for the AY:
1997-98 is allowed whereas appeal of the revenue is dismissed. Appeal of the assessee for AY: 1999-2000 is dismissed whereas that of the revenue is partly allowed for statistical purposes. Finally, appeal of the assessee for AY: 2001-02 is partly allowed whereas that of the revenue is partly allowed for statistical purposes.
Order pronounced in the open Court on the 6th February, 2015.