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 All India Federation of Tax Practitioners vs. ITO (ITAT Mumbai)
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Income Tax Officer 22(1)(4), 4 th Floor, Tower 6, Vashi Rly. Stn. Bldg., Vashi, Navi Mumbai-400 703 Vs. Laxman D. Senghani 8, Nilkanth Shopping Centre, Navfroj Lane, Ghatkopar (W), Mumbai-400 086
April, 29th 2014

      . . ,        ,                                                             

                    ./I.T.A. No. 4172/Mum/2011
                   (   / Assessment Year: 2001-02)
Income Tax Officer ­ 22(1)(4),                   Laxman D. Senghani
4th Floor, Tower 6, Vashi Rly. Stn.     /        8, Nilkanth Shopping Centre,
Bldg., Vashi, Navi Mumbai-400 703       Vs.      Navfroj Lane, Ghatkopar (W),
                                                 Mumbai-400 086
     . /  . /PAN/GIR No. AADPS 0506 J
        ( /Appellant)                      :            (     / Respondent)

         / Appellant by                    :    Shri M. L. Perumal

          /Respondent by                   :    None

                         /                 :    26.02.2014
                   Date of Hearing
                                           :    25.04.2014
           Date of Pronouncement

                                   / O R D E R
Per Sanjay Arora, A. M.:

      This is an Appeal by the Revenue directed against the Order by the Commissioner
of Income Tax (Appeals)-33, Mumbai (`CIT(A)' for short) dated 14.03.2011, partly
allowing the assessee's appeal contesting its assessment u/s.143(3) r.w.s 254 of the
Income Tax Act, 1961 (`the Act' hereinafter) for the assessment year (A.Y.) 2001-02
vide order dated 29.12.2009.

2.    None appeared for and on behalf of the assessee when the appeal was called out
for hearing, nor any adjournment application stands received. The hearing having been
                                                         ITA No. 4172/Mum/2011 (A.Y. 2001-02)
                                                                   ITO vs. Laxman D. Senghani

already adjourned on two occasions previously at the request of the assessee's counsel,
posting the hearing for dates agreeable to him, we only consider it fit and proper to
proceed to decide this appeal after hearing the party before us.

3.     Briefly stated, the facts of the case as follows. The assessment in the first instance
was framed u/s.144 of the Act on 30.01.2004 at a total income of Rs.65,82,270/-, i.e., as
against the returned income of Rs.4,22,544/-. The assessment was finally set aside by the
tribunal for being made afresh. The assessee not extending co-operation in the set aside
proceeding as well, the assessment was finally framed at an income of Rs.49,15,268/- by
taking into account the material brought on record by the assessee. The assessee
producing some additional evidence/s in appeal, a remand report from the Assessing
Officer (A.O.) was called for and relief allowed on that basis. Aggrieved, the Revenue is
in appeal.

4.     We have heard the parties, and perused the material on record.
4.1    We shall proceed ground-wise. Ground Nos. 1 & 2 raise a common issue, being in
respect of additions u/s.68 qua cash credits for Rs.5,05,000/- and Rs.8,08,000/- assumed
by the assessee-individual, a builder and developer, in his two proprietary concerns,
namely, M/s. Annappi Construction and Shree Siddhivinayak Construction (Mulund)
respectively, in the absence of even the confirmations being furnished by the assessee.
The assessee produced loan confirmations for Rs.4.63 lacs in the appellate proceedings.
However, as no other material was adduced by the assessee to prove the creditworthiness
of the creditors or the genuineness of the loans to that extent and, further, no confirmation
furnished for the balance credits for Rs.3.45 lacs, the entire credit was considered as
unproved by the A.O. per his remand report dated 15.02.2011, reproduced at pgs. 2, 3 of
the impugned order. The ld. CIT(A) decided the matter thus, on not receiving any reply
from the assessee upon being furnished a copy of the said remand report:

       `4.3 The Assessing Officer has commented that against the amount
       Rs.5,05,000/- and Rs.8,08,000/- added u/s.68 the appellant did not produce
       confirmations of Rs.3,00,000/- and Rs.3,45,000/- respectively. Since
                                                          ITA No. 4172/Mum/2011 (A.Y. 2001-02)
                                                                    ITO vs. Laxman D. Senghani

       appellant has nothing further to add to Assessing Officer's comment I am
       convinced that having failed to produce confirmations even during original
       assessment proceedings, appellate proceedings earlier before CIT(A) and
       again during the set aside assessment proceeding and finally in remand
       proceeding, the addition for the amount of Rs.3,00,000/- and Rs.3,45,000/-
       are totally justified and hence are confirmed. Ground Nos. 2 and 3 are

       The Revenue per its ground nos. 1 & 2 states that the part relief of Rs.2,05,000/-
(out of Rs.5,05,000/-) and Rs.4,63,000/- (out of Rs.8,08,000/-) was not warranted in the
facts and circumstances of the case.

4.2    We observe that though the ld. CIT(A), has though seemingly allowed part relief
on the basis that the loan confirmations (for Rs.2.05 lacs and Rs.4.63 lacs for the two
firms respectively) as having been furnished, he has not given any finding to that effect,
as apparent from the reading of para 4.3 (supra), which is the operative part of his order.
All he has said thereby is that the addition for the balance amount of Rs.3 lacs and
Rs.3.45 lacs, i.e., for which no confirmations stood received, is totally justified and
confirmed, which must be read in conjunction with the discussion being made, which is
in the context of the confirmations furnished. In fact, the assessee had produced loan
confirmations for a total of Rs.4.63 lacs across both the firms, as apparent from the names
for which these stood furnished (at para 2 of the remand report), when compared with the
names/details for the total loan creditors, i.e., the firm-wise, appearing at para 7 (pg. 4) of
the assessment order, and not for a total of Rs.6.68 lacs (Rs.2.05 lacs + Rs.4.63 lacs).
Further, admittedly no material to prove the credits to that extent, i.e., Rs.4.63 lacs, on the
parameters of capacity and genuineness, stood furnished even in the remand proceedings
or before the ld. CIT(A). An absence therefore of a categorical finding qua the amount
for which no loan confirmations stand filed (i.e., Rs.8.50 lacs) by the ld. CIT(A), cannot
be interpreted to mean an acceptance by him of the same as explained and, thus, allowed.
In fact, the assessee's ground nos. 2 & 3 before him, challenging the addition for Rs.5.05
lacs and Rs.8.08 lacs respectively, stand dismissed. We, accordingly, while endorsing his
order, so that the entire addition of Rs.13.13 lacs stood confirmed by the ld. CIT(A),
                                                        ITA No. 4172/Mum/2011 (A.Y. 2001-02)
                                                                  ITO vs. Laxman D. Senghani

clarify that no case for grievance as projected by the Revenue's ground nos. 1 & 2 is
under the circumstances called for. We decide accordingly.

5.     Coming to the facts of the Revenue's surviving ground no. 3, the assessee was
found to have obtained unsecured loans at Rs.213.47 lacs, including for Rs.193.10 lacs
through his proprietary concern Shree Siddhivinayak Construction (Mulund). Interest was
paid and claimed as expenditure at Rs.38,66,020/-. The assessee had, however, advanced
sums (for Rs.17.65 lacs) to various outside parties, including to Shree Siddhivinayak
Construction (Thakurli), in which the assessee is a partner. No business purpose for the
said interest-free advances being established, proportionate interest, worked out at
Rs.31,79,724/- , was disallowed u/s.36(1)(iii). In the remand proceedings, the assessee
was able to satisfy the A.O. with regard to an advance of Rs.26,14,598/- to one,
Bappanard Narshima, as to its business purpose, so that he deserved part relief. The ld.
CIT(A), accepting the A.O.'s case; the assessee having not rebutted the A.O.'s findings in
any other manner, allowed part relief to the assessee, working the same though to
Rs.18,72,124/-, as under (refer para 4.4 of the impugned order):

       `4.4 Regarding ground No. 4 the Assessing Officer has accepted the
       appellant's contention that against total unsecured loan on which appellant
       paid Rs.38,68,020/- as interest and then an amount of Rs.26,14,598/- given
       to Bappanard Narshima is in form of business advance and only the balance
       Rs.72,16,338/- is unsecured loan given interest free. In view of this
       proportionate interest [Rs.38,68,020 x Rs.72,16,338 / Rs.21,34,668] =
       Rs.13,07,600/- is sustained out of addition made of Rs.31,79,724/-. Ground
       No.4 is partly allowed.'

6.     We have heard the party before us, and perused the material on record. The ld.
CIT(A) has, again, though decided the issue correctly, erred in computing the part relief
exigible to the assessee. In fact, the working was not required to be done, so that he could
have given appropriate direction/s to the A.O. The only relief recommended by the A.O.
and confirmed by the ld. CIT(A) is in respect of advance of Rs.26.15 lacs to Bappanard
Narshima, since considered as a business advance. The disallowance of interest having
been worked out by applying interest rate at 18% p.a., the assessee is without doubt
                                                         ITA No. 4172/Mum/2011 (A.Y. 2001-02)
                                                                   ITO vs. Laxman D. Senghani

entitled to relief at the same rate. As such, even assuming the amount as being constantly
held throughout the year, the same would work to a maximum of Rs.4,70,627/- only, i.e.,
Rs.26,14,598/- @ 18%, even is being contended by the Revenue per its ground # 3. The
ld. CIT(A) has once again while deciding the issue correctly, so that his order warrants
being upheld in principle, erred on specifics. His order is, therefore, directed to be
modified accordingly and, therefore, his findings to the extent inconsistent are liable to be
and are directed to be vacated, and which would be valid for his adjudication of the
assessee's ground nos. 1 & 2 before his as well. The Revenue accordingly gets relief to
the extent of Rs.14,01,497/- (Rs.18,72,124 ­ Rs.4,70,627). We decide accordingly.

7.     In the result, the Revenue's appeal is allowed on the afore-said terms.
                  Order pronounced in the open court on April 25, 2014

           Sd/-                                          Sd/-
      (I. P. Bansal)                                 (Sanjay Arora)
         / Judicial Member                             / Accountant Member
  Mumbai;  Dated : 25.04.2014

. ../Roshani, Sr. PS

         /Copy of the Order forwarded to :
1.  / The Appellant
2.  / The Respondent
3.     () / The CIT(A)
4.      / CIT - concerned
5.                 ,     ,  / DR, ITAT, Mumbai
6.     / Guard File
                                                      / BY ORDER,

                                              /  (Dy./Asstt. Registrar)
                                          ,  / ITAT, Mumbai
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