1 ITA No. 2050 & C.O477.Del.12
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `E' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
AND
SHRI B. C. MEENA, ACCOUNTANT MEMBER
I.T.A .No. 2050 /Del/2012
(ASSESSMENT YEAR-2006-07)
ITO vs Mahender Pal Paliwal
Ward-25(4), 304-D, 1058-B,
rd
3 Floor, Vikas Bhawan Najafgarh
New Delhi New Delhi
PAN-AAEPP0579P
(APPELLANT) (RESPONDENT)
C.O-477/Del/2012
Mahender Pal Paliwal vs ITO
1058-B,Najafgarh, New Delhi Ward-25(4), 304-D,
PAN-AAEPP0579P 3rd Floor, Vikas Bhawan
(APPELLANT) New Delhi
(RESPONDENT)
Appellant by Sh.Ved Jain (C.A)
Respondent by Sh. Keyur Patel (Sr. DR)
ORDER
PER DIVA SINGH, JM
This is an appeal filed by the Revenue against the order dated 8/2/2012 of
CIT(A) XXIV, New Delhi pertaining to 2006-07 assessment year on the following
grounds:-
".1 In deleting the addition of Rs.75,000/- made by the AO on account of depreciation
of car, violating the Rule 46A of the Income tax as the additional evidence were
filed by the assessee before the Appellate Authority which were never submitted
before the AO during assessment proceedings.
2. In deleting the addition of Rs. 3,47,428/- made by the AO on account of
disallowance of interest paid, violating the Rule 46A of the Income tax as the
2 ITA No. 2050 & C.O477.Del.12
Additional evidence were filed by the assessee before the Appellate Authority which
were never submitted before the AO during assessment proceedings.
3. In deleting the addition of Rs.1,08,42,500/- made by the AO on account of
unexplained investment in property, violating the Rule 46A of the Income Tax as the
Additional evidence were filed by the assessee before the Appellate Authority which
were never submitted before the AO during assessment proceedings.
4. In directing the AO to treat the income of Rs.95,000/- as agriculture income violating
the Rule 46A of the Income tax as the Additional evidence were filed by the assessee
before the Appellate Authority which were never submitted before the AO during
assessment proceedings.
5. In accepting the sweeping submissions of the assessee which does not stand
supported by evidence on record of the Assessing Officer, and in accepting self
serving documents not corroborated or examined during assessment proceedings the
thus denying opportunity of holistic examination to the AO, during assessment
proceedings.
6. Set aside the order of the CIT(A) and restore the matter beck to the AO to re-examine
fresh evidence in a holistic manner."
2. The assessee in support of the impugned order has also filed cross-objection
on the following grounds:-
"1. On the facts and circumstances of the case, the Commissioner of Income Ta
x(Appeals) [CIT(A)] has erred, both on facts and in law, in not quashing the
reassessment order made by A.O as the same were in gross violation of procedure
prescribed u/s 147 read with Section 148 of the Act.
2. On the facts and circumstances of the case, the CIT(A) has erred both on facts
and in law in not appreciating the fact that the reopening cannot be done for
verification.
3. On the facts and circumstances of the case, the CIT(A) has erred both on facts
and in law in not quashing the reassessment order made by the A.O as the same is
bad in law being made on the basis of vague reasons.
4. That the appellant craves leave to add, amend or alter any of the grounds of
cross-objection.
3. A perusal of the record shows that as a result of information available with
the Department that the assessee had invested an amount of Rs. 99 lacs for
purchase of property received from Sub-Registrar Kapashara, New Delhi the
assessment was reopened after recording of reasons u/s 147 and issuance of notice
u/s 148 dated 29/1/2010. In response to the notice received the assessee furnished
a copy of the return vide letter dated 22/2/2010. A perusal of the assessment order
3 ITA No. 2050 & C.O477.Del.12
passed u/s 144/147 shows that the A.O makes the following observations on
appraising the facts:-
" On going through the return of income it is noticed that Shri Mahender Pal
Paliwal, furnished a belated return on 31/3/2008 by declaring Rs.3,28,230/- plus
an agricultural income of Rs.95,000/- and claimed a refund of Rs. 960/- out to
TDS of Rs.24,239/-. The return was processed u/s 143(1).
The AR of the assessee submitted letter dated 21/1/2009 addressed to the ITO
Ward-25(4), New Delhi which is reproduced.
" The assessee had already filed a letter dated on 21/1/2009 in response to AIR
information required in this case for the A.Y 2006-07. Copy of the letter is
enclosed herewith. But this reply is not correct, as the computation attached with
the return was not accompanied by P &L Account, Balance Sheet, TDS
Certificate (Copy Annexed).
3.1. The record further shows that despite opportunity nothing was placed on
behalf of the assessee. Accordingly as opposed to the returned income of
Rs.3,28,230/-, the income was assessed at 1,17,84,630/- by an order passed u/s
144/147 of the Income Tax Act, 1961.
4. Being aggrieved by the said action the assessee challenged the same in
appeal before the CIT(A). Before the CIT(A) it was canvassed on behalf of the
assessee that he could not be represented before the AO on account of illness of
his ITP/Accountant. Accordingly petition for admission for fresh evidence
relatable to the additions was moved. The CIT(A) admitted the said evidence
after obtaining a Remand Report from the AO. Considering the evidence most of
the additions made were deleted by the First Appellate Authority barring the
addition made on account of deductions claimed under Chapter VIA resulting in
confirming the denial of benefit of Rs.96,463/- which was directed to be verified
based on the evidence to be produced by the assessee before the AO.
5. Aggrieved by this the Revenue is in appeal on the above mentioned
grounds. Since, in the CO filed by the assessee the challenge is posed to the re-
opening it was a common stand of the parties that this may be first addressed at the
outset.
4 ITA No. 2050 & C.O477.Del.12
5.1. In terms of the above stand of the parties, Ld. AR leading the arguments
invited attention to copy of the reasons recorded placed at Paper Book page 16.
The same is extracted hereunder for ready-reference:-
" Information in respect of investment amounting to Rs.99,00,000/- for purchase of
property (office of Sub-Registrar-Kapashera-Delhi) during the F.Y 2005-06
corresponding to A.Y 2006-07 was received in the form of AIR information (without
PAN).
A letter was sent on 16/1/2008 to the assessee for sub. Of copy of the return for A.Y 2006-
07.
In response to this letter assessee submitted copy of ITR for the A.Y 06-07 where his total
income is shown at Rs.3,28,234/-. From the scrutiny of the copy of ITR, source of
investment is not commensurate with investment made.
In view of the above, there is reason to believe that above said investment of
Rs.99,00,000/-chargebale to tax for A.Y 2006-07 was escaped assessment. Accordingly
notice u/s 148 is being issued."
5.2. Based on the above it was his submission that the reasons recorded are
vague and not based on any sound belief which can be understood as "reason to
believe". It was his argument that it is a settled legal position that reason to believe
and not reason to doubt is a sine qua non for proceeding u/s 147 and it was his
vehement stand that if re-opening is permitted in the light of the above reasons
then each and every case can be re-opened by the department as that way based on
the perception that any person can be doubted by the department as having less
income relatable to his investment and re-opening will become a norm instead of
an exception. It was his argument that any person then can be visited by re-
opening a concluded assessment on the mere notice that a car of Rs.5 lakh has
been purchased by a person having income of Rs.3 lakh. It was his submission that
the re-opening of concluded assessment should be based on sound reasons and this
is a settled legal principle and if every time based on some information in the form
of AIR the AO concludes that the returned income is less and not commensurate
with investment the reopening would become a compulsory consequence. It was
his submission that it is a matter of fact that there is no column to declare the assets
5 ITA No. 2050 & C.O477.Del.12
and hypothetically if a person purchases a car of about 5 lacs and his returned
income is 2 lacs then the Assessing Officer will feel justified in re-opening the
assessment based on the AIR information that investment to the tune of 5 lacs has
been made and if such an action is permitted it would amount to harassment of the
public at large. Inviting attention to paper book page no. 8 wherein the Assessing
Officer required the assessee to furnish a copy of the return within 7 days, the
assessee it was stated filed a copy of return on 21st January 2009 copy of the same
was placed before the Court. However, before proceeding further it was stated on
his own that in all fairness he was duty bound to inform the Court that the assessee
had not filed any objections either before the A.O nor before the CIT(A) on the re-
opening.
6. In the said background, the Ld. Sr. DR stated that in the face of the stated
stand of the assessee the CO can be treated as supportive as once no grievance is
posed in the assessment proceedings and also before the CIT(A) and here also the
ground is argued and then given up as such he would rely on the orders and state
that the assessee having participated all along before the CIT(A) without voicing
his grievance the cross objection should be dismissed.
6.1. Qua the departmental grounds it was his vehement plea that how is it
possible that the assessee could file nothing before the AO supposedly on account
of Neurological illness of his accountant. It was his submission that it cannot and
should not be believed that simply because one employee was not well
consequently the assessee was rendered in capable of giving any information to the
AO. It was his submission that nothing stopped the assessee to ask his Chartered
Accountant to clarify the position and there must be other employees also who
could have assisted the assessee. In the light of the arguments advanced about the
number of employees at assessee's command by the Ld. Sr. DR he was required to
address the nature of the assessee's business warranting such a presumption. In
6 ITA No. 2050 & C.O477.Del.12
response thereto the Ld. Sr. DR considering the record available modified his
submissions stating that probably the assessee did not have any large business and
may have been purchasing or selling some property for himself only. The Ld. SR.
DR was required to elaborate as to how and why the assessee who is stated as per
the Department not to have any serious business should maintain sufficient staff
who could have assisted the assessee as the assessee's accountant was not well.
Addressing the illness of the concerned person, the Ld. Sr. DR inviting attention to
pages 42 to 62 stated that a perusal of the medical evidence filed before the CIT(A)
would show that as per the Doctor's prescription dated 22nd April 2010 some
investigation was being done and medication and tests etc. were prescribed for
fever. Similarly page 44 would show that it pertains to some chest x-ray. These
documents it was argued no doubt show that he was ill in 2010, however, it was his
submission that what stopped the assessee to explain the same in January 2010.
6.2. It was his submission that the fresh evidence admitted by the CIT(A) firstly
should not been admitted and if at all it had to be admitted it had to be restored to
the file of the A.O in terms of the mandate of the Jurisdiction High Court in the
case of Manish Build Well.
6.3. The Ld. Sr. DR was requires to address the departmental grievance against
the reasoning of the CIT(A) set out in Para 4.2 wherein the reason for admission
of additional evidence have been discussed. For ready reference the same is
extracted hereunder:-
"4.2 The appellant submitted an application under Rule 46A of the Income Tax Rules
for filing of additional evidence on the grounds that some of the details could not
be submitted by the appellant during assessment proceedings since, his
ITP/Accountant Sh. J. K. Jain was seriously ill. However, most of the
information, as per the appellant, is available in the assessment record. The
appellant submitted that Sh. J. K. Jain was looking after all his accounts and due
to his suffering from a neurological disease, he could not prepare the relevant
documents for the submission before the A.O. The medical records of Sh. J. K.
Jain have been placed by the appellant in the paper book. In the light of the
7 ITA No. 2050 & C.O477.Del.12
submissions made by the appellant, I am of the opinion that the appellant was
prevented by sufficient cause from submitting certain crucial evidences before the
A.O during assessment stage. An affidavit of the appellant in this regard has also
been placed on record. Accordingly, the admission of additional evidence at
appellate stage is allowed."
6.4. The Sr. DR was also required to read out Para 4.3 of the impugned order to
show as to how and why the issue should be restored as Remand Reports
apparently have been obtained by the CIT(A) himself. The said para is also
extracted hereunder for ready reference:-
"4.3 A Remand Report was called for from the AO vide letter dated 28/3/2011. The
Remand Report was received from the AO vide his letter dated 5/8/2011, in which
he basically objected to the admission of additional evidence on various grounds.
Since, it was decided to admit the additional evidence, the AO was directed vice
letter dated 1/11/2011 to submit his comments on the documents placed on record
by the appellant as additional evidence. Vide his letter dated 3/11/2011, the AO
requested for three month's time to submit his Remand Report on merits. This
Remand Report was received on 18/1/2012. ON a perusal of the Remand Report,
it is seen that the AO has merely reiterated the stand taken by him on each issues
in the assessment order. The fresh evidence submitted by the appellant has either
not been considered, or has not been commented upon at all and the AO has
restricted himself to the same stand as taken while passing the assessment order ,
despite, having taken three month's to produce the Remand Report."
6.5. In the above factual background the Ld. Sr. DR summarized, arguments qua
the departmental stand that qua Ground Nos.- 1 to 4 grievance is posed to
admission of fresh evidences and it is also been addressed in Ground No. 5. The
argument advanced for seeking a direction that the issue should be restored to the
AO for fresh examination in holistic manner is advanced in terms of Ground No-6
raised in the present proceedings. On the query whether there is still any other
grievance qua the grounds the ld. Sr. DR stated that the stand of the Department
was that the departmental objection in sum & substance is that the argument that
Accountant was ill is not a good enough reason to admit fresh evidence and even if
despite that the evidence considered had to be admitted it should be restored to the
8 ITA No. 2050 & C.O477.Del.12
AO for verification and this would be the sum and substance of the departmental
stand.
7.1. In the above background, the Ld. AR addressing his C.O stated that the re-
opening is bad in law as re-opening can only be upheld if it is on any material
which leads to the conclusion that there is reason to believe that income has
escaped assessment and the Courts have repeatedly held that re-opening cannot be
sustained on the basis of reason to doubt based on suspicions and surmises..
7.2. Addressing the admission of fresh evidence it was his submission that this
aspect has been a subject matter of consideration in the case of a relative of the
assessee which has travelled to the ITAT and the same is addressed by the said
order dated 31/10/2013 in ITA 2051/Del/12 in the case of ITO Ward-25 (4) vs.
Mrs. Pushplata Paliwal wherein identical grounds have been raised by the Revenue
assailing the action of the CIT(A) in deleting the additions based on additional
evidences and even the wordings of Ground No. 5 is identically worded as would
be evident from page 2 & 3 of the said order. It was submitted that a perusal of
these would show that the arguments advanced on behalf of the Department therein
were also identically worded. Inviting attention to copy available on record. For
ready reference, we reproduce the same from the said order:-
5. " The main grievance of the Revenue is that Ld. CITA() has accepted the additional
evidences in violation of Rule 46A. Hence, it has been pleaded by the Ld.
Departmental Representative that the matter be remitted to the file of the Ld. AO to
re-examine the fresh evidence. Ld. DR further relied upon the decision of Manish
Buildwell 245 CTR 397 and Modern Charitable Foundation 335 ITR 105."
7.3. Inviting attention to the said order it was submitted that considering the
identical plea the departmental objections were rejected. For ready reference we
reproduce the relevant paras:-
"5.1 On the other hand, Ld. Counsel of the assessee has submitted that assessee has
properly filed the additional evidences which has also been sent by the Ld. CIT(A)
to the Ld. AO for the Remand Report. He submitted that the Ld. AO has also
9 ITA No. 2050 & C.O477.Del.12
submitted the Remand Report which has been duly considered by the Ld. CIT(A).
Hence, he submitted that there is no case of violation of Rule 46A.
6. We have carefully considered the submissions and perused the records. We find
that Ld. CIT(A) has noted that the assessee has submitted application under Rule
46A requesting for submission of additional evidences on the ground that the ITP/
Accountant of the assessee Sh. S. K. Jain who is severe diabetic patient, started to
suffer from Neurology disorder, as a result, he could not speak or write properly.
He submitted that because of this, she could not submit the documents to the Ld.
A.O in time. Thus, she submitted that she was prevented by reasonable cause
from attending before the Ld. AO and making necessary compliance. Ld. CIT(A)
accepted the additional evidences, and these evidences were remanded to the Ld.
AO. Ld. AO objected to the admission of the same. But, Ld. CIT(A) accepted the
submission that assessee was prevented by CIT(A) accepted the additional
evidences and required the Ld. AO to submit his comments on the merits of the
additional evidences. Ld. AO asked for three months time for preparation of
Remand Report. Ultimately the Remand Report was submitted by the Ld. AO on
18/1/2013 in which the Ld. A.O merely reiterated the stand taken at the
assessment stage on each issue. Instead of analyzing the issue in light of fresh
evidences submitted by the assessee. Ld. CIT(A) noted that despite seeking time
of almost three months for the preparation of the Remand Report, the ld. AD did
not comment on the merits of the additional evidence at all.
7. In light of the above discussion, we find that Ld. CIT(A) has correctly accepted
the additional evidences. It cannot be said that Ld. A.O was denied any
opportunity to go through the additional evidences. Ld. AO has asked three
months time, for submission of the Remand Report, Ld. CIT(A) has dulygiven
the time. Thereafter, the Ld. AO did not analyze the additional evidences
properly. Thereafter, ld. CIT(A) evaluated the additional evidences and gave a
very cogent and speaking order on all issues concerned. In these circumstances,
we find that the allegation by the Revenue that Ld. CIT(A) has deleted the
addition in violation of Rule 46A is devoid of cogency. Under the circumstances,
we hold that Ld. A.O has been given proper opportunity by the Ld. CIT(A) to
examine the additional evidence. Hence, Ld. CIT(A)'s order on this account
cannot be said to be suffering from any shortcoming. The case law relied upon by
the Ld. Departmental Representative are not applicable on the facts of the case as
the Ld. AO in this case has been given adequate opportunity to examine the
additional evidences."
7.4. It was his submission that the arguments on behalf of the Department that
the A.O shall now once again look at the evidences cannot be allowed as when the
higher authority duly exercising the powers vested upon it by the Statute admits
additional evidence in terms of Rule 46A and seeks a remand report specifically on
the evidences filed the AO cannot seek to relook at the evidences repeatedly
which were made available to him as additional evidence. It was submitted the said
10 ITA No. 2050 & C.O477.Del.12
stand cannot be accepted. Inviting attention to the impugned order it was pointed
out that when the A.O objects to the admission of additional evidence the CIT(A)
specifically restored these evidences against overruling the AO's objection to their
admissions requiring him to address the veracity of the evidence. Referring to the
record it was submitted the Assessing Officer thereafter seeks 3 months time to
carry out the necessary exercise and thereafter he only reiterates that the evidence
was not filed at the assessment stage and does not care to assail the same and even
today it was contended that no effort has been made by the department to assail the
evidences filed before the CIT(A) and remitted to the AO repeatedly which are
contained in the 351 pages paper book available on record and the only argument
advanced was assailing the claim of illness of Sh. J. K. Jain, the Accountant who
had complete knowledge of assessee's affairs which has been stated so in the
affidavit filed by the assessee placed at pages 63 to 65 which document has also
not been assailed by any evidence let alone any argument. The request of the Sr.
DR to merely seek that the issue be restored only to satisfy the whims of the
Department it was stated would not be in accordance with law and as such was
strongly opposed.
7.5. Referring to the affidavit available on record it was stated that Shri. J. K.
Jain had been Assessee's Accountant for the last 20 years and he was a chronic
diabetes patient and also found to be suffering from Neurological problems which
incapacitated him for quiet some time and since the assessee's family was entirely
dependent upon him the relevant evidences could not be placed before the AO.
Referring to the evidences considered and available on record duly confronted to
the AO also it was his submission that it is a matter of record that the assessee has
been regularly earning agricultural income from Tehsil Hamirpur and Gajrola and
the properties purchased have been from the funds advanced by the various family
members who have received award of compensation for agriculture land belonging
11 ITA No. 2050 & C.O477.Del.12
to Mahendra Pal (HUF) and assessee's own receipts from the said award which
were all through regular banking channels.
7.6. Addressing Ground No. 1-4 of the department it was submitted that although
qua the ground the department has challenged the action of the CIT(A) in
admitting fresh evidences and also the deletion of the addition made in the AO on
merits also and qua Ground No.-5 the deletion on merits has been challenged and
although on merits no specific arguments have been advanced by the department
however for the sake of completeness he would want his arguments to be
specifically taken note of even on merit.
7.7. In the said background elaborating his argument attention qua Ground No-1
was invited to the facts found recorded in para 4.5 of the impugned order. The
same it was submitted are supported by paper book page no. 66 which is copy of
the ledger account of car purchase. The said page it was submitted is the ledger
account addressing the claim of depreciation thereon. Attention was invited to
paper book page no. 68 which is a copy of the RC which would show that the car
was registered on 28th September 1999 as such it was argued there can be no
question of it not having been put to use. Inviting attention to the copy of the
ledger paper book page 60 it was his submission that it would shows that there is
an opening balance in this account on which the depreciation at the prescribed rate
has been charged and none of these documents it was submitted have been
assailed by the Revenue.
7.8. Addressing the facts on merits qua Ground No. 2 it was submitted that these
are found discussed in Para 4.6 by the CIT(A). Relying on the same it was his
submission that from the computation of income it can be seen that interest on loan
amounting to 3,46,428/-had been charged which was disallowed for want of
evidence. The relevant details it was his submission are found at page 70 which
would show that the interest is overdraft on the amount borrowed from the banks
12 ITA No. 2050 & C.O477.Del.12
against fixed deposits. It was his submission that the amounts borrowed from the
banks against the FDRS have been utilized for giving loans on which interest has
been charged and there is a direct nexus between interest earned on loans given
and interest paid on loans taken. These facts are demonstrated from copy of bank
statements found at pages 71 to 75 of the paper book which also has been
confronted to the AO and not assailed by the Revenue in the present proceedings
as such the matter should not be allowed to be restored again to the AO for the
mere asking as arguments in support of the said request should be considered.
7.9. Addressing the Ground No.3 of the Department, the facts qua which it was
submitted are found discussed in para 4.7 & 4.8 of the impugned order, it was his
submission that the assessee has purchased plots in Delhi for a sum of Rs.48 lacs
and 51 lacs totaling an amount of Rs.99 lacs. Copy of the sale deed it was
submitted is placed at pages 77 to 138 of the paper book wherein the entire
particulars qua the parties and the amounts are disclosed and evidenced. The
source of the money it was submitted has been explained to be coming to the
account of the assessee from the account of Shri Mahender Pal Paliwal, HUF.
These evidences it was submitted have not been assailed. Referring to pages 146 to
175 it was his submission that the money received by Shri Mahender Pal Paliwal,
HUF has come from the award of compensation received by Gopal Das, Rajeev
Lochan, Satish Kumar, Madho Prasad and Girish Kumar.
7.9.1. Addressing the receipt of compensation from Gopal Das it was his
submission that paper book page no. 176 to 177 is a copy of the confirmation filed
by Gopal Das and he has accepted that he has given a sum of Rs.35 lacs to Shri
Mahender Pal Paliwal, HUF vide specific Cheque No. from specific bank account
which came as a result of award of compensation for land acquired duly
supported by the payment certificate. Copy of the land acquisition certificate it
was submitted is at page no. 178 and copy of the bank passbook is placed at pages
13 ITA No. 2050 & C.O477.Del.12
179 & 180 pages 181 to 188. Copy of the reference before the Deputy
Commissioner against the award of compensation and copy of the judgment of
District Judge Dwarka Court, New Delhi is at pages 189 to 198 of the paper book
and affidavit of Sh.Gopal Das in support of the confirmation and the evidences
filed are available at Page 200. None of these documents it was submitted have
been assailed and they all have been confronted to the AO.
7.9.2. Similarly, in the case of Satish Kumar, it was his submission that the receipt
of 16 lacs is duly confirmed by way of a confirmation letter. Herein also it was
submitted that land acquisition payment certificate is placed at pages 205.
Similarly, copy of bank passbook, identity proof , copy of cheque receipt is placed
at pages 203 to 229 alongwith affidavit of Sh. Satish Kumar. None of these
documents also it was argued have been assailed.
7.9.3. Addressing the facts of Sh. Rajeev Vohra it was submitted that the
documents qua the loan of 14 lacs from the land acquisition payment along with
copy of bank passbook, identity proof, affidavit, copy of cheque etc. documents are
all filed at pages 230 to 235 which stand unrebutted by the Revenue.
7.9.4.Inviting attention to the sum of Rs.23 lac by Shri Madho Prasad it was
submitted it has been duly confirmed by him as being sourced from land
acquisition receipts along with evidences of bank account copy of reference before
DC against the acquisition, copy of the judgment of the District Judge, Dwarka
Court affidavit and identity proof of Shri Madho Prasad placed at page 256 to 283.
These documents too it was stated stand unrebutted by the Revenue
7.9.5. Inviting attention to the facts of Shri Girish Kumar who accepts that Rs.17
lac was given by him to Shri. Mahender pal Paliwal, HUF it was submitted that the
record would show that it was sourced from his land acquisition receipts duly
supported by copy of bank passbook, copy of reference before Deputy
Commissioner against the award acquisition copy of the judgment, identity proof,
14 ITA No. 2050 & C.O477.Del.12
affidavit etc along with copy of cheque receipts it was submitted is placed at 284 to
306 which has not been assailed by the department.
7.10. Addressing the facts qua the fourth ground raised by this revenue relying on
the impugned order attention was invited to the relevant documents taken into
consideration made available in the remand proceedings to the AO. The facts it
was submitted are found discussed in para 4.9 of the impugned order. These
findings it was submitted are found supported by copy of Khata Khatauni copy
placed at pages 307 to 309; copy of the acknowledgement of the income tax return
for 2002-03 to 2005-06 assessment year showing agricultural income available in
the paper book at pages 310 to 313.
7.11. For the sake of completeness, again attention was invited to copy of the
remand report dated 3/8/2011 and 18/1/2012 placed at pages 314 to 316 and 332 to
334 respectively and copy of the rejoinder to the Remand Reports it was submitted
are placed at pages 317 to 331 and 335 to 351 of the paper book. On the basis of
the same it was vehemently submitted that in the absence of assailing the evidence
on record the issue cannot be remanded accordingly it was argued that even
Ground No-5 and 6 of the Revenue should be rejected.
8. The Ld. DR in reply reiterated the submissions advance made at the outset.
Distinction from the order of the Co-ordinate Bench was sought to be drawn on the
ground that it pertains to facts relevant for 2008-09 assessment year as such qua
the issue of illness of Shri J. K. Jain it was argued that it has no relevance in the
present proceedings which are considering the facts of 2006-07 Assessment Year.
9. We have heard the rival submissions and perused the material available on
record. On a careful consideration of the same addressing the grievance of the
Revenue in admitting fresh evidence at the stage of the First Appellate Authority,
we find that the AO issued questionnaire to the assessee on 03.06.2010 which was
not responded to. Thereafter further opportunities were given to the assessee which
15 ITA No. 2050 & C.O477.Del.12
were not availed of and these resulted in passing of the order u/s 144/147. In
appeal before the First Appellate Authority, the assessee as per record has pleaded
that on account of the serious illness of his Accountant/ITP Sh. J.K.Jain, the
relevant documents could not be submitted. Considering the relevant pages of the
Paper Book, specific pages 42-62, it is seen that medical evidence of illness dated
22.04.2010 of some treatment on account of fever wherein various tests and
medication are prescribed are followed by supporting evidence of some chest X-
ray dated 23.05.2010 with various follow up treatment /investigation upto
29.01.2011 supported by an affidavit of the assessee placed at pages 63-65 of the
paper book which states that the relevant information could not be provided to the
CA as his ITP/Accountant handling his account & taxation for the last 20 years
was seriously ill. The concerned employee has been described as a chronic
diabetes patient at that point of time who was also having some Neuro problem
which continued for months together. On the basis of this plea duly supported by
affidavit and petition for admission of relevant documents was made. These
arguments advanced are found discussed in para 4.2 of the impugned order have
been addressed in detail on behalf of the Revenue and the Ld. AR and have been
extracted in the earlier part of this order. A perusal of the same would show that a
speaking order for admission of this evidence has been passed by the CIT(A) in
para 4.3 which also has been extracted in the earlier part of this order. Apart from
that it is also seen that these arguments in the case of a family member have also
been considered by a Co-ordinate Bench vide their order dated 31.10.2013. Copy
of the same has been placed by the Ld. AR on record. A perusal of the said order
in ITA No-2051/Del/2012 in the case of ITO, Ward-25(4), New Delhi vs Mrs.
Pushplata Paliwal, Najafgarh, New Delhi for 2008-09 assessment years shows that
the action of the CIT(A) in admitting fresh evidence questioned by the Revenue
has been upheld by the Co-ordinate Bench rejecting the departmental grounds. A
16 ITA No. 2050 & C.O477.Del.12
perusal of the said order relevant portion of which has been extracted in the earlier
part of this order would show that therein also the AO made a plea after the
CIT(A) over-ruled the AO's Report seeking a dismissal of fresh evidence sought to
be admitted and again directed the AO to consider the fresh evidence on merits
wherein also the AO sought 3 months time for preparing a Remand Report. The
arguments of the Ld. Sr. DR that this finding would not be relevant in the year
under consideration as it pertains to the facts in 2006-07 assessment years on
consideration of the specific facts mentioned in the assessment order namely June
2010 makes it fully applicable as no doubt the assessment year is 2006-07 the
relevant dates in the re-opening make a mention of January 2010 and June 2010.
We reproduce the relevant portion of the AO :-
"Subsequently, after recording the reasons u/s 147 of Income tax Act notice u/s 148
dated 29.1.2010 was issued and served upon the assessee. In response to Shri Mahesh
Khatter Chartered Accountant submitted power of attorney and letter dated 22.2.2010
has furnished copy of return of income for assessment year 2006-07 and also submitted
that the return already filed may be treated in response to notice u/s 148.
On going through the return of income it is noticed that Shri Mahender Pal Paliwal,
furnished a belated return on 31.03.2008 by declaring Rs.3,28,230/- plus an agricultural
income of rs.95,000/- and claimed a refund of rs.960/- out to TDS of rs.24,239/-. The
return was processed u/s 143(1).
The A.R. of the assessee submitted letter dated 21.01.2009 addressed to the ITO Ward-
25(4), New Delhi which is reproduced.
"The assessee had already filed a letter dated on 21.01.2009 in response to AIR
information required in this case for the A.Y.2006-07. Copy of the letter is enclosed
herewith. But this reply is not correct, as the computation attached with the return was
not accompanied by P&L Account, Balance sheet, TDS Certificate (Copy Annexed).
A detailed questionnaire No.-1 dated 03.06.2010 alongwtih notice u/s 142(1) was
issued and served. Since the assessee did not respond to the notice a 2nd questionnaire
dated 16.08.2010 alongwith notice u/s 142(1) was also issued and served. The
questionnaire is reproduced.
In spite of since there was no appearance. This resulted in the issue of a further
notice u/s 142(1) dated 29.09.2010 marked as final opportunity. The date given was
13.10.2010.
This notice also remained uncomplied. A show cause notice u/s 271(1)(b) dated
10.11.2010 was issued for compliance of 17.11.2010.
This show cause notice also remained uncomplied. This proved that he had is not
interested in finalizing his assessment since he did not have any explanation about the
investment, in the property business etc. I am no other alternative to complete the
17 ITA No. 2050 & C.O477.Del.12
assessment as ex-parte u/s 144 of Income Tax Act on the basis of material available in
the file, as the assessment is barred by limitation."
9.1. Accordingly in the afore-mentioned peculiar facts where the hearings were
fixed in 2010 for assessment year 2006-07 the facts qua the illness of the very
same accountant in the case of a family member of the assessee in the order
pertaining to 2008-08 Assessment Year cannot be brushed aside as irrelevant and it
further fortifies the view of the CIT(A) in the present proceedings as such his
action in admitting fresh evidence cannot be faulted with and the same is upheld.
9.2. Addressing the remaining grievance posed by the Revenue qua Ground No-
1 to 4 and Ground No-5 that opportunity of holistic examination was denied to the
AO as considering the fresh evidence, the additions made by the AO were deleted
by the CIT(A) as such in terms of the prayer in Ground No-6, the matter be
restored back. We find that the said request cannot be accepted. We have already
brought out in detail the arguments advanced on behalf of the parties before the
Bench. It may not be out of place to extract the findings under challenge. These
are found discussed in paras 4.5 to 4.9. The same are reproduced hereunder for
ready-reference:-
"4.6 In Ground No.4, the appellant has impugned the decision of the AO in not
allowing interest paid amounting to Rs.3,47,428/- under the head Income from Other
Sources. In the Remand Report dated 18.01.2012, the AO submitted that this amount
was not allowed in the absence of any details and confirmations from people to whom
loans were given. However, on examining the documents furnished under Rule 46A, it
was observed that the appellant had paid interest on OD account which was not
reflected in the P&L A/c. or the B/S. Thus, the AO submitted that since, the OD was
not used for business purposes, the interest paid thereon amounting to Rs.3,47,428/- is
not allowable. On the other hand, the appellant has claimed that this interest has been
paid to the banks on his borrowings from the bank against fixed deposits. The
appellant has claimed that the. amount borrowed from the banks against FDRs has
been utilized for giving loans on which interest has been earned. The appellant
submitted that there is a direct nexus between interest earned on loans given and
interest paid on loans taken. He submitted that he had given loans out of bank loans
taken, on which he had earned interest of Rs.2,70,000/- and therefore, the interest paid
should be allowed as a legitimate expenditure. I have carefully considered
the submissions made by both the AO in the Remand Report as well as the
18 ITA No. 2050 & C.O477.Del.12
appellant in the Rejoinder to the Remand Report. There is merit in the argument
of the appellant that he has taken loans from the bank against FDRs on
which he has paid interest, and he has utilized these funds to give loans on which he
has earned interest. Therefore, if his interest earned on loans is taken as income under
the head Income from Other Sources, he should also be allowed the expenditure of
interest paid thereon under the same head. Therefore, the AO is hereby directed to
allow interest paid by the appellant on his borrowings from the bank against FDRs.
4.7. In Ground Nos. 5, 6 & 7, the appellant has impugned the addition of
Rs.l,08,42,500/- to his income as unexplained investment in property, out of which
Rs.99 lacs is the purchase price of property, Rs.7,42,500/- is stamp duty charges
thereon and Rs.2 lacs as brokerage paid on the same. On perusal of the Remand
Report dated 18.01.2012, it is seen that the AO has simply dismissed the claim of the
appellant on the ground that the PAN number AACHM1387C on page No..1.6/PB is
invalid and does not belong to Mahender Pal Paliwal (HUF) as claimed by the
appellant, and therefore, the loan cannot be verified. The appellant submitted that due
to a typographical error, the PAN number of Mahender Pal Paliwal (HUF) was
mentioned as AACHM1387C, instead of AACHM1327C. The appellant further
submitted that Mahender Pal Paliwal (HUF) is assessed to tax for many years and
that the AO could easily trace the current PAN through the database. Further, the AO
never bothered to clarify this mistake from Mahender Pal Paliwal (HUF) who is also
his own assessee. As regards the investment in property, the appellant has submitted
that he purchased two plots at Delhi for
a
sum of Rs.48 lacs and Rs.51 lacs totaling Rs.99 lacs and this amount was paid by
him to Sh. Narender Kumar Jain through various demand drafts numbers
726476 to 726487 on 06.05.2005. It has further been submitted that the money for
purchase of plots has been borrowed by the appellant from his HUF, who, as
mentioned earlier, is also assessed to tax with the same AO. All the details regarding
confirmations and sources etc. have been submitted and these
documents are filed on pages 4.1 to 4.6/PB. The appellant has also explained the
source of source by giving loan confirmations of various persons who have
advanced loans to Mahender Pal Paliwal (HUF). All these persons have received
compensation from Land Acquisition Department for acquisition of land for
metro project. Their confirmations, bank statements, affidavits, photocopies of
cheques received as compensation, documentary evidence regarding
compensation, PAN numbers and other ID proofs have been submitted by the
appellant and placed on record in the Paper Book. As regards stamp duty paid
by the appellant, it has been submitted that this expenditure has been incurred
from the regular books of accounts of the appellant out of loans taken by him
from his HUF. As regards brokerage paid of Rs.2 lacs, the appellant has
submitted that this being a direct transaction, no brokerage has been paid by him
on purchase of plots of land and the AO has assumed that the appellant might
have paid brokerage on this transaction. The appellant submitted that this
addition has been made without any evidence and purely on suspicion.
4.8 I have given careful consideration to the assessment order, the Remand Report and
the plethora of evidence placed on record by the appellant. In the light of the
19 ITA No. 2050 & C.O477.Del.12
overwhelming evidence regarding investment in property made by the appellant and
his explanations with documents regarding the source of such investment as well as
the source of source thereof, there is no doubt that no addition can be made to the
income of the appellant on these issues since, these investments no more remain
unexplained. Ample explanations regarding the investment as well as its sources have
been placed on record by the appellant. In view of these evidences, the addition made
to the income of the appellant by the AO us unexplained investment in property
amounting to Rs.l,08,42,500/- stands deleted.
4.9 In the eight ground of appeal, the appellant has impugned the decision of the AO
to treat his agricultural income as Income from Other Sources. The AO has
mentioned in the Remand Report that this has been done in view of the fact that no
details regarding Khasra/Khatauni, Jama Bandi and details of expenses incurred for
earning agricultural income had been filed by the appellant. On the other hand, the
appellant has submitted that he is a landlord, owning approximately 17 acres of
agricultural land in Tehsil Hamirpur and Gajrola and is having regular agricultural
income from the said property. The documents regarding ownership of land and
earning of agricultural income in the form of Khasra/Khatauni etc. have been placed
on record at page nos. 7.1 to 7.2/PB. The appellant has been earning agricultural
income regularly for the past many years and has been declaring the same in his
returns of income for A.Ys. 2003-04, 2004-05 and 2005-06. Copies of ITRs for these
years have been placed on record. I have considered the issue in detail and have also
perused the documentary evidence submitted by the appellant. I have also seen the
ITRs submitted by the appellant for earlier years. I am of the opinion that enough
documentary evidence regarding ownership of agricultural land and income
therefrom has been placed on record by the appellant. Furthermore. in my opinion,
the AO should have been consistent in his approach in the light of the fact that
agricultural income has been accepted by him in the appellant's case in earlier years.
Although, the principle of res-judicata does not hold good for taxation matters. yet, its
imperative that where facts remain the same, consistency of approach should be
followed. Therefore, the AO is directed to treat Rs.95,000/- as agricultural income
and not as Income from Other Sources."
9.3. In the light of the above peculiar facts and circumstances and taking into
consideration copies of both the Remand Reports available on record alongwith
the Re-joinders filed by the assessee thereto before the CIT(A) also available in
the paper book we are not inclined to accept the arguments on behalf of the
Revenue seeking a remand for a re-consideration of the additional evidence once
again. It is a matter of record that fresh evidence has been confronted to the AO by
the CIT(A) as per the requirements under law. It is also evidenced by the impugned
order itself that after receiving the objections of the AO who opposed the
20 ITA No. 2050 & C.O477.Del.12
admission of fresh evidence, the CIT(A) exercising the powers vested in him over-
ruled the objections of the AO and held that the assessee was prevented by a
sufficient cause in placing the evidence before the AO. The neurological illness of
a chronic diabetic person who was acting as ITP/ Accountant for the assessee and
its family members was accepted as a sufficient cause. This finding of the CIT(A)
has been upheld by us in the earlier part of this order and is part of this order and is
found supported by a finding by the order of a Co-ordinate Bench. However
reverting back to the issue at hand it is seen that after admitting the fresh evidence
the CIT(A) directed the AO vide letter dated 01.11.2011 to submit his comments
on the evidence submitted as the evidence over-ruling the AO's objection was
admitted by him. The record shows that considering the CIT(A)'s decision the AO
sought three months time to submit his Remand Report on merits. The said Report
was made available on 18.01.2012, copy which is available on record. A perusal of
the same shows that the AO merely reiterates the stand taken originally. The
evidences available were not assailed. These facts are found recorded in para 4.3
of the impugned order which also has been extracted in the earlier part of this
order.In the light of these facts alone the case of the Revenue could have been
dismissed, however going further it is further seen on a perusal of paras 4.5 to 4.9
which also has been extracted by us in the earlier part of this order that the
evidences taken into consideration by the CIT(A) have not been assailed. The
findings under challenge as discussed elaborately in the earlier part of this order
are duly supported by the relevant pages in the paper book which also have been
referred to in the course of the arguments by the Ld. AR while placing reliance
upon the impugned order. Thus considering the departmental request wherein no
effort has been made to assail the finding arrived at, we find no merit in accepting
the request for restoring the issue yet again to the AO for his consideration.It is
seen that the relevant documents have been looked into by the CIT(A) and on being
21 ITA No. 2050 & C.O477.Del.12
satisfied by the correctness of the claim deletion has been ordered. The reasoning
of the CIT(A) on examination cannot be faulted with and it is not a case that
deletion has been ordered merely because no negative comment is made by the
AO. We have seen that the CIT(A) has gone on to examine these evidences
himself and only thereafter on satisfying himself on the basis of the documents qua
the depreciation on car or the interest income by way of documents that amounts
borrowed from the banks against FDRs has been utilized for giving loans on which
interest has been earned and thereafter a finding arrived at that there was a direct
nexus with expenditure of interest paid on his borrowing from FDRs. Similarly the
investment in property supported by receipt of award of compensation by various
members of Mahendra Pal Paliwal HUF and Mahendra Pal Paliwal himself
alongwith evidences of agricultural income in the year under consideration
wherein such income was being claimed over the years. Thus, we find in the
absence of any cogent argument in impeaching the authenticity of the documents
relied upon the request for remand merely for the sake of asking cannot be acceded
to. Before a remand is warranted the party seeking a remand must atleast make an
effort to demonstrate that a remand is warranted in order to meet the ends of justice
which exercise has not been attempted. In the facts of the present case as far as
the Revenue is concerned the CIT(A) has been completely fair in confronting the
AO with the evidence once again after communicating that the fresh evidence
despite the objection of the AO are being entertained. The AO has sought
specifically three months to make a Remand Report on merit as observed and after
this in the absence of any rebuttal on any document taking into consideration by
the CIT(A) to grant relief we donot find any merit in the arguments of the Sr. DR
that even now a Remand is warranted as the AO has not looked into the documents
holistically. Such facile casual and careless exercise of power on the part of the
AO cannot be contemplated and cannot be given a judicial sanction. The request
22 ITA No. 2050 & C.O477.Del.12
made whimsically if granted would amount to abuse of the procedures which
cannot be allowed.
10. Accordingly being satisfied by the reasoning and finding arrived at in the
impugned order, the departmental grounds are dismissed. Since the departmental
appeal is dismissed the C.O. filed by the assessee is dismissed as non maintainable.
11. In the result the appeal of the Revenue and C.O. is dismissed.
The order is pronounced in the open court on 26th March 2014.
Sd/- Sd/-
(B. C. MEENA) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 26 /03/2014
*R. Naheed/Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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