TaxTMI 
TaxTMI 
1997 (2) TMI 578
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....e applied to the facts of the case. 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 Rs. 19,60,000 added as unexplained cash credits in the assessment as also against disallowance of interest of Rs. 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 ....
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....ion or brokerage has been received by the assessee. The income declared only 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 Rs. 1,65,570 Assessment year 1985-86 Loss Rs. 81,040 Assessment year 1986-87 Loss Rs. 8,03,060 Assessment year 1987-88 Loss Rs. 2,42,096 Assessment year 1988-89 Loss Rs. 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 Rs. 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 Rs. 19,60,000 and,....
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....ibunal Rules, 1963 for the reasons given against the respective items : Sr. No. in the Index of Paperbook Description Page No. of Paper book Reasons (1) (2) (3) (4) 28. Accounts 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....
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....essed for the same in other way vide an application dated 23-7-1993 under rule 29 of the Appellate Tribunal Rules. Because both these actions on the part of the assessee are somewhat contradic- tory. The appellate order does not make any mention in connection with the request of the assessee for filing of the additional paperbook. It appears the assessee has also not made 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 t....
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....ers before the CIT(A). 16. On verification of the said papers, it was found that all these papers which were sought to be admitted were part and parcel of a letter dated 17-2-1992. However, the Assessing Officer said that there was no reply to his letter dated 23-1-1992 but it becomes clear that the letter bearing date 17-2-1992 was filed. It was vehemently submitted in this 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....
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..... Thus, the whole assessment was completed within 2 months of its commencement. As it is already mentioned above, that the assessee could not file confirmatory letters before the Assessing Officer and by letter dated 17-2-1992, assessee sent enclosing hundi khokhas for verification. A bank file was also produced for verification as this fact bore from page 105 of 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 Rs. 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 i....
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....pace booked, whereas the assessee is obliged to keep security deposit up to Rs. 20,00,000 which is to carry interest at 18%. Right from assessment year 1984-85, the assessee has been making continuous losses. Besides these two agreements, the assessee-firm has not undertaken any transac-tion 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. 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 satis....
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....t 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 the absence of necessary details, regarding utilisation of the borrowed funds in the context of disparity as pointed out earlier between the 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 acti....
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....ommission of Rs. 1,94,520 @ 2 per cent on the sales of Rs. 97,26,000 in Rayala Commercial Complex from M/s. Vira Properties (Madras) Pvt. Ltd. The contents of page 107 of the paperbook clarify this fact. 12. The assessee filed its return of income for assessment year 1987-88 on 30-11-1986 declaring an income from commission of Rs. 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 Rs. 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.....
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....of borrowed funds but it was in the nature of security deposits. The assessee had to do so to carry on its business. Therefore, it would be too much to say that the assessee acted as a conduit pipe to obtain loans by its sister concerns. They are two legal and different entities which are entitled to carry 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....
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....he partnership firm. In January 1984, the company appointed the partnership firm as one of the selling agents for Bombay, Madras and Bangalore for its Rayala Commercial Complex at Madras. By letter of appointment, the assessee is entitled to 2 per cent commission in respect of the space booked by the firm, i.e., the assessee. The assessee is required to deposit up to Rs. 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 Rs. 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 o....
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....then the disparity between the two amounts remains unexplained. He has noted that the assessee has not made interest income from any other party except on security deposits. Apart from the interest, the assessee had also incurred expenditure by way of discount of Rs. 1,97,000 plus as also brokerage of Rs. 57,000 plus. The net loss of Rs. 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 utili....
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....ing Officer was not justified in making the disallowance and the CIT (Appeals) was right in deleting the disallowance made. 9. The submissions of the assessee were opposed by the learned representative for the revenue. He has submitted that the CIT (Appeals) has not cared to look into 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 bu....
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.... "Whether, on the facts and in the circumstances of the appeal, the assessee is entitled for admission of additional evidence and the claim of interest, brokerage and discount ?" 12. The above question has two limbs, namely, (1) whether the assessee is entitled for admission of additional 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 Rs. 19,60,000, being unexplained cash credits and had disallowed the payment of interest amounting to Rs. 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 app....
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....he assessee before the CIT (Appeals) and that during the course of appeal hearing he had presented a bunch of papers bearing page Nos. 123 to 180 of Volume II of the paper book to the CIT (Appeals), which she refused to accept for reasons best known to her. 14. The application for admission of additional evidence was objected to on behalf of the revenue. The learned Accountant Member was of the opinion that since the assessee did not press ground No. 1 of the appeal, it ought not to have subsequently pressed for the same in other way vide application 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 a....
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....hat these papers were filed before any of the authorities below. In case these papers had been filed before any of the authorities, it was argued that the concerned authority must have dealt with the evidence and there is no reason why the concerned authority would refuse to accept the evidence presented before it. It was also highlighted that before the CIT (Appeals) representation was made by Shri A.G. Joshi, a Chartered Accountant, but he has not filed any affidavit to say that these papers were filed before the CIT (Appeals). It was also submitted 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 evid....