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2016 (5) TMI 1082

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..... Sh Surender Khandhar could not be offered for cross examination by the assessee , his statement cannot be used against the assessee. The said Shri Surendra Khandhar did not appear before the Revenue also. The A.O. also failed to make verification and enquiries on merits with respect to the loan raised by the assessee. The assessee, on the other hand, produced the copies of promissory note/hundi as loan confirmations. In the immediately preceding assessment year 1997- 98, the Tribunal in the second round of litigation deleted the addition with a direction to the A.O. to verify the contentions of the assessee regarding repayment of loan With respect to additions made on account of interest on these loans, we find that the AO has made additions based on notional interest being paid/payable by the assessee on these loans, we did not find any basis/justification for the same as per the facts emanating from the records. This issue is also set-aside to the file of the AO to be decided based on merits after bringing on record cogent material/basis for the said interest to be brought to tax as income of the assessee. - Decided in favour of assessee for statistical purpose. - I.T.A. No. .....

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..... on the facts and circumstances, the learned CIT(A) ought to have appreciated that Your Appellant had discharged initial onus by giving particulars of transactions like address, name of the lenders with PAN of the parties. (6) On the facts and circumstances, Your Appellant prays that the impugned assessment order may be quashed. (7) Alternatively, Your Appellant prays that a specific direction may be given to the learned A.O. for giving opportunity to crossexamine Mr. Khandar, particularly, if he has to solely rely upon his statement. (ll) ON ADDITION OF ₹ 4,00,000/- ON A/c OF INTEREST - (1) The learned CIT(A) erred in confirming the alleged addition of ₹ 4,00,000/- on a/c. of interest on the alleged loans merely because the additions on a/c of alleged hawala loans were confirmed by him. (2) The learned CIT(A) ought to have appreciated that the learned A.O. made the alleged addition without any finding/discussion despite of specific submission that no interest was claimed on the alleged loans. (3) On the facts circumstances Your Appellant prays that the alleged additions may be deleted. 3. The Brief facts of the case are that assessment in this case w .....

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..... s to said Shri Surendra Khandhar as per details in assessment order dated 31.12.2009, said Mr Surender Khandhar did not appear before the A.O. . Penalty notices were also issued u/s 272A(i)(e) of the Act to said Mr. Surender Khandhar but the same also returned back . The Inspector was deputed who served the same at residence of said Sh Surender Khandar . The assessee was also asked to produce said Sh Surender Khandar . Later the Inspector personally served the summons to Shri Surendra Khandhar and the Inspector reported that Mrs. Bharati Khandhar, wife of Shri Surendra Khandhar refused to accept the summons dated 24.12.09 and 29.12.2009 and the summons were served by affixture on 29.12.2009 in presence of watchman of the building. Due to non-compliance by Shri Surendra Khandhar, the cross examination of Shri Surendra Khandhar by the assessee could not taken place. The assessee submitted before the A.O. that the assessee has received loan of ₹ 45,50,000/- from various firms during the instant assessment year and also repaid the loan fully by A/c payee cheques. The assessee also submitted that it has given the confirmation with the PAN of the firms from whom loans were borrowed .....

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..... ans are merely accommodation entries , it was held by the AO that there is no iota of doubt that the assessee has introduced his undisclosed cash under the garb of accommodation loan and accordingly a sum of ₹ 45,50,000/- plus interest ₹ 4,00,000 totaling to ₹ 49,50,000/- is treated as undisclosed income and added to the income of the assessee after rejecting the submissions of the assessee by the AO vide assessment orders dated 31.12.2009 u/s. 143(3) read with section 254 of the Act. 4. Aggrieved by the assessment order dated 31.12.2009 passed by the A.O. u/s. 143(3) read with Section 254 of the Act, the assessee preferred an appeal before the CIT(A). 5. Before the CIT(A) , the assessee reiterated the submissions what were submitted before the A.O. and submitted that the A.O. should have provided the cross examination of Shri Surendra Khandhar to the assesse as directed by the Tribunal in first round of litigation vide orders dated 23.07.2008 but no opportunity has been given to the assessee and hence no adverse inference can be taken against the assessee with respect to the statement given by Shri Surendra Khandhar. The assessee submitted that the evidence .....

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..... oan entries to various persons which included the assessee also , the said statement of Sh Surender Khandhar was recorded by the Revenue at the back of the assessee and hence the same cannot be used against the assessee until it has stood scrutiny by way of cross examination of said Sh Surender Khandhar by the assessee. The cross examination of Shri Surendra Khandhar by the assessee has not taken place. Summons u/s 131 of the Act and show cause notices were issued by the Revenue to Shri Surendra Khandhar but he did not comply with the said summons/show cause notices. The confirmations were filed before the A.O. in the form of Hundi/Promissory Note s. The ld. Counsel submitted that in the immediately preceding assessment year 1997-98, the matter went up to the Tribunal in the second round of litigation whereby the Tribunal on identical facts and grounds in ITA No.5849/Mum/2011 vide orders dated 06.09.2013, has ordered deletion of addition after verification by the AO , with respect to the loan raised by the assessee in the assessment year 1997-98 as the assessee has claimed to have duly repaid the said loans by banking channel. In support, the ld. Counsel relied on the decision of H .....

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..... ction to re-verify the loan transactions as per provisions of the Act after affording opportunity to the assessee, the Tribunal also holding that since Sh Surender Khandhar could not be offered for cross examination by the assessee , his statement cannot be used against the assessee. The said Shri Surendra Khandhar did not appear before the Revenue also. The A.O. also failed to make verification and enquiries on merits with respect to the loan raised by the assessee. The assessee, on the other hand, produced the copies of promissory note/hundi as loan confirmations. In the immediately preceding assessment year 1997- 98, the Tribunal in the second round of litigation deleted the addition with a direction to the A.O. to verify the contentions of the assessee regarding repayment of loan in ITA No. 5849/Mum/2011 for assessment year 1997-98 vide orders dated 6th September, 2013, the said directions of the Tribunal are reproduced below:- We have considered the rival submissions and carefully perused the relevant material on record. In the earlier round of litigation this Tribunal has remanded the matter to the record of the Assessing Officer vide order dated 11-9-2009 in para 5 and .....

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..... assessee. We note that in the assessment order passed in pursuant to the directions of this Tribunal, the AO has repeated the addition in para 10-12 as under: 10. In view of the above, it can be seen that there is no change in the facts and circumstances of the case. Under the circumstances, there is no alternative than to pass the order with the materials available on record. The details and facts of the case are elaborately discussed in the original order passed on 31.3.2005 by the erstwhile Assessing Officer. Hence they are not repeated here again. 11. I do not find that the submission made by the authorised representative has any materials to serve his purpose. Considering the statement on oath provided by the lender of the loan; there is no iota of doubt that the assessee has introduced his undisclosed cash under the garb of accommodation loan. In the circumstances, the loan so received are unexplained cash credit u/s 68 of the I. T. Act 1961 and same are brought to tax. Accordingly, a sum of ₹ 55,25,000/- is assessed as undisclosed income of the assessee for the year. Penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are initiated separately. Subject .....

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..... e to show that the loans in question raised during the instant assessment year of ₹ 45,50,000/- have been repaid by the assessee. The AO to decide the issue in terms of our above observations .With respect to additions made on account of interest of ₹ 4,00,000/- on these loans, we find that the AO has made additions based on notional interest being paid/payable by the assessee on these loans, we did not find any basis/justification for the same as per the facts emanating from the records. This issue is also set-aside to the file of the AO to be decided based on merits after bringing on record cogent material/basis for the said interest to be brought to tax as income of the assessee. Needless to say proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law and the assessee shall be allowed to produce evidences/explanations in its defense which shall be admitted and considered by the AO on merits. We order accordingly. 10. In the result, appeal of the assessee in ITA No. 7007/Mum/2011 for the assessment year 1998-99 is treated as allowed for statistical purpose. .....

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