TMI Blog2016 (7) TMI 1618X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. - I.T.A. No. 5850/Mum/2011, I.T.A. No. 5851/Mum/2011 - - - Dated:- 29-7-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For the Assessee : Shri Altaf Ansari For the Revenue : Shri B.S. Bist, Sr. D.R. ORDER PER RAMIT KOCHAR, Accountant Member These two appeals filed by the assessee for the assessment years 1997- 98 and 1998-99 are directed against two separate orders of the learned Commissioner of Income Tax (Appeals)-3, Mumbai (Hereinafter called the CIT(A) ) both dated 30th June, 2011 respectively , the appellate proceedings before the learned CIT(A) arising from the two separate assessment orders again both dated 31-12-2010 respectively passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) read with Section 254 of the Income Tax Act,1961 (Hereinafter called the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be given to the learned A.O. for giving opportunity to cross-examine Mr. Khandar, particularly, if he has to solely rely upon his statement. (II) ON ADDITION OF ₹ 31,250/- ON A/C OF INTEREST- (1) The learned CIT(A) erred in confirming the alleged addition of ₹ 31,250/- on a/c of interest on the alleged loans merely because the additions on a/c. of alleged hawala loans were confirmed by him. 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. On the facts circumstances Your Appellant prays that the alleged additions may be deleted. The assessee has also filed abridged grounds of appeal before the Tribunal which reads as under: On the facts and circumstances of the case and in law the Learned Commissioner of Income Tax(Appeals)-3, Mumbai, erred in i. Confirming the addition of ₹ 20,00,000/- as unexplained cash credit u/s. 68 , ignoring the specific directions of the Hon ble ITAT in ITA no. 6270-6272 dated 11th Sept 2009. ii. Confirming the addition of ₹ 31,250/- as interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icularly, if he has to solely rely upon his statement. The assessee also filed abridged grounds of appeal before the Tribunal which reads as under: On the facts and circumstances of the case and in law the Learned Commissioner of Income Tax(Appeals)-3, Mumbai, erred in i. Confirming the addition of ₹ 30,00,000/- as unexplained cash credit u/s. 68 , ignoring the specific directions of the Hon ble ITAT in ITA no. 6270-6272 dated 11th Sept 2009. 4. First we shall take up the assessee s appeal in ITA no.5850/Mum/2011 for the assessment year 1997-98. The brief facts in this case are that the assessment order u/s 143(3) r.w.s. 147 r.w.s. 144A of the Act was passed by the AO on 31st March, 2005 determining the total income of the assessee at ₹ 20,31,250/- which was based on the intimation received from DDIT (Inv), Unit VIII(4), Mumbai vide letter dated 22nd September, 2003. While finalizing the afore-stated assessment, addition of ₹ 20,31,250/- was made u/s 68 of the Act on the basis of statement given by Shri Surendra Mansukhlal Khandar. The addition made u/s 68 of the Act was challenged by the assessee and the matter reached the Tribunal in the first ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to Shri Surendra Mansukhlal Khandhar and served at the last known address requiring him to appear before the AO with a view to allow the assessee to cross-examine Shri Surendra Mansukhlal Khandhar. The assessee appeared before the A.O. but Shri Surendra Mansukhlal Khandhar failed to appear before the A.O. . Therefore, another summons dated 7th December, 2010 were issued to Shri Surendra Mansukhlal Khandhar and served at the last known address requiring him to appear on 13th December, 2010 before the AO and assessee was also requested to attend for cross-examination of Shri Surendra Mansukhlal Khandhar. Again Shri Surendra Mansukhlal Khandhar failed to comply to the summons issued by the AO. The assessee s representative submitted a written submission before the AO and the relevant portion of the submissions are reproduced below:- The assessee firm had borrowed money on Hundi from various firms during the year. The various Hundi papers submitted to your goodself at the time of the last hearing contains the name and address of the assessee, amount borrowed and the PAN No. of the borrower firm. Thus the assessee firm has discharged the onus of the genuineness of the loan. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r proceedings by the assessee were also not found to be genuine and therefore addition of ₹ 20,31,250/- including interest of ₹ 31,250/- was upheld by the learned CIT(A) in third round of litigation vide appellate orders dated 30-06-2011 passed by the learned CIT(A). 7. Aggrieved by the order of the learned CIT(A) in third round of litigation vide appellate orders dated 30-06-2011 passed by the learned CIT(A), the assessee filed appeal before the Tribunal which are the current proceedings before the Tribunal. 8. Before the Tribunal, the ld. Counsel for the assessee submitted that this case has been set aside twice by the Tribunal earlier for allowing cross examination of Shri Surendra Mansukhlal Khandar but the said cross examination could not take place as the Revenue failed to produce said Shri Surendra Mansukhlal Khandar. It is submitted that the Revenue has mainly relied upon the statement of Shri Surendra Mansukhlal Khandar incriminating the assessee. The Revenue has not produced Shri Surendra Mansukhlal Khandar before the assessee for allowing cross examination and in absence of cross examination of said Mr Surenra Mansukhlal Khandar the said statement canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as the Revenue failed to produce said Mr Surendra Khandhar before the assessee for cross examination and hence the statement of Shri Surendra Mansukhlal Khandhar cannot be used against the assessee until and unless the cross examination of the said Shri Surendra Khandhar by the assessee takes place. The assessee, on the other hand, produced the copies of promissory note/hundi as loan confirmations which carried the name and address of loan creditor as well his income tax particulars such as PAN/GIR/ward number. The Revenue also failed to make verification ,enquiries and examination of the loan creditors on merits with respect to the loan raised by the assessee but instead relied on statement of Shri Surendra Mansukhlal Khandar incriminating assessee. The assessee submitted earlier in the proceedings before the authorities below that the assessee does not know said Shri Surendra Mansukhlal Khandar and hence is not in position to produce said Shri Surendra Mansukhlal Khandar. However, the assessee has claimed that assessee has duly repaid the said loans by account payee cheques through banking channel to the loan creditors. No doubt the primary onus was on the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct against the assessee that he has floated various firms to give accommodation loan entries to various persons which also included the assessee . The said statement of Sh.Surender Khandhar was recorded by the Revenue at the back of the assessee. The said Shri Surendra Khandhar has not been subjected to cross examination by the assessee and hence the statement of Shri Surendra Khandhar cannot be used against the assessee until and unless the cross examination of the said Shri Surendra Khandhar by the assessee takes place. We find that the Tribunal in the first round of litigation, set aside the matter to the file of A.O. with a direction to reverify 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside the orders of the lower authorities and restore the matter to the file of the AO to pass a fresh order as per our above observations. 7. It is clear from the order of this Tribunal that the addition made on the basis of the statement of Mr. Surendra Khandhar without giving an opportunity of cross-examination was held to be not proper and accordingly it was observed that the statement of Mr. Surendra Khandhar cannot be used against the assessee: The AO was directed to decide the issue on merits after affording an opportunity to the assessee to file necessary details in respect of respective loans taken by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the loans raised during the instant year under appeal have also been repaid and claim of the assessee based on records showing the repayment of the loan is required to be verified. In the instant case, the issue and grounds are identical and in the interest of justice, respectfully following the order of the co-ordinate Bench of this Tribunal in ITA No. 5849/Mum/2011 vide orders dated 06-09-2013, the issue is set aside to the file of A.O. on the similar lines as was done by the Tribunal in the immediately preceding assessment year 1997-98 , for the limited purpose of verification by the AO of the fact and the record filed by the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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