9911796707
TMI Blog1997 (2) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... For the reasons recorded in our order disposing of the aforesaid appeal, we set aside the appellate order on this ground and restore the issue to the file of the first appellate authority with a direction to reconsider the claim of the assessee after considering full facts of the case and after bringing on record appropriate material and finding after giving reasonable opportunity to the assessee as also to the Assessing Officer. 4. The next ground relates to an addition of ₹ 19,60,000 added as unexplained cash credits in the assessment as also against disallowance of interest of ₹ 8,94,364 on the basis that conditions laid down under section 36(1)(iii) could not be said to have been fulfilled so as to allow the claim of interest on such loans. In this regard it would be appropriate to read the relevant portion of the assessment order extracted below : "As regards the letter filed by the assessee as mentioned above, the assessee has made false statement in writing which stated that local brokers have appeared before me for verification of loans. In fact no one attended before me anytime either in past or in present. This fact has already been told to Shri A.G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly is interest on security deposits from the abovesaid companies. 7. Income declared by the assessee in the last five years is given as under :- Assessment year 1984-85 Loss ₹ 1,65,570 Assessment year 1985-86 Loss ₹ 81,040 Assessment year 1986-87 Loss ₹ 8,03,060 Assessment year 1987-88 Loss ₹ 2,42,096 Assessment year 1988-89 Loss ₹ 7,17,620 The assessee has not been able to prove the purpose for which loan has been taken. In view of this, assessee has failed to prove that the conditions of the provisions of section 36(1)(iii) are fulfilled to claim the interest on such loans. In view of the same, whole interest of ₹ 8,94,364 so claimed is disallowed and added to the total income of the assessee." 5. In appeal, the CIT(A) observed that the assessee had not furnished any evidence in the form of confirmatory letters or other evidence showing the capacity and creditworthiness of the parties from whom the loans were allegedly raised as no evidence whatsoever had been furnished in respect of the amount of ₹ 19,60,000 and, therefore, she confirmed the order of the Assessing Officer on loans as well as on interest. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of individual parties of broker Suchdev & Co. 62-84 29. Accounts of individual parties or broker Sanjay & Co. 85-104 30. Letter dated 17-2-1992 to DC which was possibly not accepted by him. 105-122 Pages 105 to 122 were tendered by the CA to the DC but the same was probably not taken on record. 31. Documents prepared for which were possibly not accepted by him. 123-180 Pages 123 to 180 were tendered by the CA to the CIT(A) but the same was probably not taken on record. 32. Confirmation, suits filed letters, etc., from Hundi parties. 181-264 Pages 181 to 264 are confirmations and notices which have been received from the lenders. (1) (2) (3) (4) 33. Statement of brokerage and interest for loans through M/s. Parasram & Co., Madras. 265-272 Details of brokerage and int. 34. Computation of Income. P & L A/c and Balance Sheet for A.Y. 1992-93. 273-275 Income, profit & loss A/c. and Bal. sheet for A.Y. 1992-93." Place : Bombay Sd/- (Vira constructions Co.) Appellants Dated : 24th July, 1993. 7. The ld. D.R. very strongly objected to the prayer of the assessee regarding admission of the additional evidence highlighting the way in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de any attempt to file the same in tapal together with the prayer in writing for taking on record the additional paperbook. Besides why this evidence could not be filed in office of CIT(A) before the hearing took place is also not explained. Though the representation before the CIT(A) was made by a Chartered Accountant, Shri A.G. Joshi accompanied by Shri Kathuria, the authorised representative of the assessee, an affidavit as per rule 18 of the Appellate Tribunal Rules is filed only of Shri Kathuria and not of the Chartered Accountant, Shri A.G. Joshi. Be that as it may, we would only like to state here that these are the aspects which reflect upon the assessee's prayer. Under rule 29, powers of Appellate Tribunal to admit additional evidence are limited and have to be reasonably exercised and not to allow parties to patch up weak parts or fill up omissions. We do not find that the tax authorities have decided the issue without giving sufficient opportunity to the assessee to adduce evidence. It is pertinent to note that even in application under rule 29, prepared on 23-7-1993, the assessee is not sure if really the CIT(A) refused acceptance of additional paperbook because that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is respect on behalf of the assessee that the said letter was filed on record. According to the assessee, it was filed before the Assessing Officer. Some letter dated 17-2-1992 including details was also tried to be filed before the CIT(A), and the CIT(A) did not accept the same. 17. Thus, the controversy is encircled on the letter dated 17-2-1992. Now if that letter is considered as filed, then there is no fresh evidence sought to be filed before the Tribunal. The assessee has also filed an affidavit of its representative that he did not file all papers before the CIT(A) as they were not accepted by her. All these facts show that if there is a benefit of doubt, it should go to the assessee. If that benefit of doubt is given to the assessee, in that event, we are left with no choice but to admit the evidence and restore the case back to the ITO for fresh consideration on merits. 18. There are no good reasons for us to dismiss the appeal instead of offering an opportunity to the assessee to avoid injustice. Remitting the matter back to the ITO's file would be more better because for assessment year 1990-91, the assessee is on identical footing and there the Assessing Officer on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paperbook. The Assessing Officer did not say whether letter dated 17-2-1992 was considered by him. The assessment order cannot be said to be complete so far this aspect is considered. If letter dated 17-2-1992 is considered, it becomes clear that most of the details were filed. 20. In the light of the above discussed facts and documentary evidence, it would be more appropriate to hold that the CIT(A) was wrong in confirming the addition of ₹ 19,60,000. It would be just and proper to set aside the assessment order in this respect as well as the confirmation of the said addition by the CIT(A). In my opinion, it appears justifiable to remit back the matter to the file of the Assessing Officer for fresh adjudication on merits and according to law after giving an opportunity of being heard to the assessee by allowing it to file all papers that have been filed before the Tribunal. It further appears just and proper to allow the Assessing Officer to pass the orders in accordance with law after considering the evidence filed before the Tribunal. 21. I have examined the facts and documentary evidence as brought on record. I have also considered the arguments advanced on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that though in earlier years the assessee had earned some commission yet in this year there was no income by way of commission. Besides, the assessee had claimed huge amount of expenditure on discount and brokerage as also on interest. Besides, both the projects, for which the assessee-firm had taken agency, had already been started seven to eight years back, but it was not known why the project was not completed or why the assessee had not been able to make any sale of the space because it could not be understood how at the places like Bangalore and Madras the assessee was not able to sell any space. He was, therefore, of the opinion that the assessee-firm was not declaring the true picture of the business other than showing huge loss on account of discount, brokerage and interest and since the assessee had not offered any satisfactory explanation disallowance out of discount and brokerage was made. 3. In appeal, it was explained by the assessee that the business was not discontinued and the brokerage was paid to finance brokers for arranging hundi loans and discount, i.e., interest was paid to such parties. The CIT(A) held that since the business was not discontinued and since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest income and the interest expenditure, the CIT(A) ought not to have granted relief to the assessee as prayed for. In the interest of justice, therefore, we set aside the appellate order and restore the issue to the file of the CIT(A) with a direction to redecide the issue raised before him in appeal by the assessee. While doing so he shall also keep in mind the important findings recorded in the subsequent assessments. It may be stated here that the principal of the assessee-firm is the major partner in the assessee-firm and yet no explanation is given by the assessee about the reasons for delay in the project, whether the project has been completed or not or whether it is abandoned, why the assessee has not been able to book any space, etc. None of the three partners is assessed to tax in Bombay. But to appreciate really the business activities of the firm it will be necessary to consider the business activities as also the accounts of the principal on whose behalf the agency is undertaken and who happens to be a major partner in the assessee-firm. It is pertinent to note that assessee is obliged to keep security deposit up to certain amount and not fixed amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m commission of ₹ 2,60,505 received by it. The contents of pages 104 to 106 of the paperbook clarify this fact. The assessee's explanation was that it could not sell flats or premises subsequently due to the glut in the market. Therefore it did not earn the brokerage or commission, though the assessee did not dis- continue its business. It was submitted that the assessee cannot be denied the treatment by the ITO as earlier. It was also explained that it was a well- known fact that the properties in Madras and Bangalore could not be sold even till today. 13. The assessee subsequently sold some properties in assessment year 1992-93. On such sale of the flats, assessee was entitled to commission of ₹ 3,70,240. The assessee declared this commission income in its return of income for the assessment year 1989-90 and this fact becomes clear from page 274 of the paperbook. 14. Thus, the sequence of events as stated above clearly showed that business was in continuance and it was only on account of glut in the market, that the assessee could not show brokerage in some of its returns of income. On the basis of these facts, it requires to be held that the business was in existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on their own business in their own way and therefore no attribution can be made nor there is anything on record supported by documentary evidence that the assessee acted as a conduit pipe. Another fact is that the security deposit attributed interest @18 per cent. The assessee's sister concern was liable to pay the interest @18 per cent and accordingly it was paid to the assessee and the assessee showed it in its return of income. This fact also disproves the Assessing Officer's claim. The Tribunal is a quasi-judicial body and it has to interpret the evidence brought on record. Something beyond the documentary evidence should not be reflected in the judicial order. 16. I have examined the facts from the documentary evidence as brought on record and I am of the opinion that there are no good grounds to set aside the matter and to remit it back to the file of the CIT(A). For all these reasons, I am of the opinion that the Department has to fail. 17. In the result, the revenue's appeal is dismissed. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961. We, the Members of the Bombay Bench 'C' have taken different views in I.T.A. No. 9900/Bom./1992 in the case of M/s. Vira C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. The assessee is required to deposit up to ₹ 50,00,000 with the company by way of security. Which is to carry interest at the rate of 13 per cent per annum. Similarly, in May 1984, the company appointed the assessee-firm as one of the selling agents in Bombay for sale of flats in Charles Court at Bangalore for which the assessee is to get commission at the rate of 2 per cent in respect of the space booked, whereas the assessee is obliged to keep security deposit up to ₹ 20,00,000, which is to carry interest at 13%. Right from assessment year 1984-85, the assessee has been making continuous losses. Besides these two agreements, the assessee-firm has not undertaken any transaction on behalf of any other outside party. The Assessing Officer found that though in earlier years the assessee had earned some commission, yet in this year there was no income by way of commission. Besides, the assessee had claimed huge amount of expenditure on discount and brokerage as also on interest. That apart, both the projects, for which the assessee-firm had taken agency, had already been started seven to eight years back, but it was not known why the project was not completed or why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57,000 plus. The net loss of ₹ 7,00,000 plus is carried to the balance sheet and added to the loss of the earlier year as shown in the balance sheet. It was also observed that the accounts of the partners are not before the Tribunal and, therefore, he opined that there is some substance in the grievance raised by the Assessing Officer that the real picture of the assessee's business activities is not available from the material and the explanation brought on record. The learned Accountant Member opined that the CIT (Appeals) has not given attention to this approach adopted by the Assessing Officer. He further observed that even if it is assumed that the assessee is carrying on business, yet the expenditure by way of interest, etc., can be allowed only in respect of the borrowings, which are utilised for the purpose of business. In absence of the necessary details regarding utilisation of the borrowed funds in the context of disparity, the CIT (Appeals) ought not to have granted relief to the assessee as prayed. He, therefore, considered it appropriate to set aside the order of the CIT (Appeals) and restore the matter to his file for rehearing and disposal with certain directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto the reasons given by the Assessing Officer for making the disallowance. It was also submitted that the CIT (Appeals) has not looked into the material placed on record and he has allowed relief to the assessee only for the reason that the business has not been discontinued and that the brokerage expenses were allowed in the past. It was also argued that while allowing relief to the assessee, the CIT (Appeals) ought to have examined the details to find out whether the discount and brokerage payment claimed during the year under consideration is allowable. Since this was not done, it was contended that the learned Accountant Member is justified in coming to the conclusion that the matter may be sent back to the CIT (Appeals) for fresh hearing and disposal. 10. I have considered the submissions advanced before me as also the material placed on record. It is the accepted position that there was no business activity during the year under consideration. From the copy of the balance sheet filed by the assessee, it is evident that during the year under consideration the amount of security deposited by the assessee stands reduced. Besides this, the assessee had paid interest on the borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal evidence, and (2) whether the assessee is entitled to claim interest, brokerage and discount. 13. First, I would deal with the first limb of the question, i.e., whether the assessee is entitled for admission of additional evidence. Briefly stated, the Assessing Officer had made an addition of ₹ 19,60,000, being unexplained cash credits and had disallowed the payment of interest amounting to ₹ 8,94,364. The Assessing Officer has noted that no confirmatory letters have been filed and he had concluded that the capacity and creditworthiness of the parties from whom the loans were alleged to have been raised could not be proved. These additions were confirmed in appeal by the CIT (Appeals). In the appeal before the Tribunal, the assessee in the first ground of appeal had stated, inter alia, "CIT(A) erred in not admitting the paper book presented at the time of hearing of the appeal". It appears that when the appeal came up for hearing this ground was not pressed as has been noted by the learned Accountant Member in the order proposed by him. However, the assessee had filed an application dated 23rd July, 1993 for admission of additional evidence. The said app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication dated 23rd July, 1993 and both these actions on the part of the assessee are somewhat contradictory. The learned Accountant Member also observed that the order of the first appellate authority does not make any mention that any request was made for filing of the additional paper book. Besides, it is not explained why this evidence could not be filed in the office of the CIT (Appeals) before the hearing took place. The learned Member further observed that the representation before the CIT (Appeals) was made by Shri A.G. Joshi, a Chartered Accountant, accompanied by Shri Kathuria, the authorised representative of the assessee but no affidavit has been filed by Shri Joshi. Instead an affidavit as per rule 18 of the Appellate Tribunal Rules has been filed by only Shri Kathuria. The learned Accountant Member also mentioned that even in the application filed under rule 29 of the Appellate Tribunal Rules, the assessee is not sure if really the CIT (Appeals) refused acceptance of additional paper book and that is why the word 'probably' has been used in the application at various places. Therefore, he proposed the order dismissing the application. As against this, the learned Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that adequate opportunity had been provided by the revenue authorities to the assessee to prove genuineness of the cash credits but the assessee failed to discharge the onus which lay on it. Thus it was contended that it is not a fit case for admission of additional evidence and the application moved by the assessee deserves dismissal. 17. I have considered the submissions advanced before me. Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 provides for production of additional evidence before the Tribunal. The said rule reads as under :- "The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Judicial Member, for the reasons given by him in the order pertaining to the assessment year 1988-89, has held that the assessee's claim should be allowed. For the reasons already discussed by me in the appeal pertaining to the assessment year 1988-89, I find myself in agreement with the view of the learned Accountant Member. This being so, I am unable to agree with the view that the assessee is entitled to the claim of brokerage and discount. 19. With regard to the claim for interest, the learned representatives of the parties had stated that it is linked with the genuineness of the cash credits and admission of the additional evidence. It was submitted that opinion on the point can be expressed only after a decision is arrived at about admission of additional evidence and genuineness of the cash credits. In the back drop of these facts, it would be premature to express any opinion on the assessee's claim for interest. This being so, I refrain myself from expressing any opinion on this aspect of the matter. 20. In view of the foregoing discussions, hold that the assessee is not entitled for admission of additional evidence and the claim of brokerage and discount. No opi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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