IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NOS. 7217, 7218, 7219, 7220, & 7221/M/08 ASSESSMENT YEARS: 2001-02, 2002-03, 2003-04, 2004-0 5, & 2005-06 SHRI DINESH V. PATEL, APPELLANT PLOT NO. 12, OPP. GOLD MIST BLDG, 1 ST GULMOHAR ROAD, JVPD SCHEME, MUMBAI 400 049 (PAN AADPP7504P) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CENTRAL CIRCLE 24, MUMBAI. APPELLANT BY : MR. VIJAY MEHTA RESPONDENT BY : L.K. AGRAWAL O R D E R PER A.L. GELHOT, A.M.: ALL THESE APPEALS FILED BY SAME ASSESSEE ARE DIREC TED AGAINST THE ORDERS OF CIT(A), CENTRAL IV, MUMBAI PASSED ON 28.08.2008. SINCE THE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED F OR THE SAKE OF CONVENIENCE. 2. THESE APPEALS FILED BELATEDLY BY 43 DAYS. THE AS SESSEE WHILE FILING CONDO NATION APPLICATION, AN AFFIDAVIT HAS B EEN ENCLOSED THEREWITH WHEREIN IT WAS STATED THAT THE NECESSARY PAPERS WERE GIVEN TO C.A. BUT DUE TO ILLNESS OF C.A.S FATHER, THESE APPEALS COULD NOT BE FILED IN TIME. AFTER HEARING THE LEARNED DR, IN THE INTEREST OF JUSTICE, WE CONDONE THE DELAY AND ADMITTED THE APPEALS FOR A DJUDICATION. ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 2 3. 1 ST COMMON GROUND RAISED IN THESE APPEALS IS IN RESPEC T OF DISALLOWANCE OF TELEPHONE EXPENSES, THE DETAILS OF EXPENSES IN DIFFERENT YEARS ARE AS UNDER:- AY DISALLOWANCE 2001-02 36,796/- 2002-03 1,12,058/- 2003-04 23,631/- 2004-05 21,750/- 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A DIRECTOR IN M/S PATEL ENGINEERING LTD. THE ASSESSEE CLAIMED THE ABOVE EXPENDITURE ON ACCOUNT OF TELEPHONE ETC. AGAINST TH E DIRECTORS REMUNERATION, WHICH HAS BEEN SHOWN AND ASSESSED AS INCOME FROM OTHER SOURCES. THE AO DISALLOWED THE SAID EXPENDIT URE, WHICH HAS BEEN CONFIRMED BY THE CIT (A) ON THE GROUND THAT TH ESE EXPENSES WERE NOT INCURRED TO EARN DIRECTORS REMUNERATION. 5. THE LEARNED AR REITERATED THE SUBMISSIONS, WHICH WERE MADE BEFORE THE REVENUE AUTHORITIES AND SUBMITTED THAT T HE ASSESSEE IS AN INDEPENDENT DIRECTOR ON THE BOARD OF DIRECTORS OF P ATEL ENGINEERING LTD. AND HE WAS RECEIVING AMOUNTS TOWARDS DIRECTORS SITTING FEES, FOR ATTENDING MEETINGS OF THE BOARD OF DIRECTORS. THE L EARNED AR SUBMITTED THAT 15% OF THE SAID INCOME HAS BEEN CLAI MED TOWARDS THE EXPENSES TO EARN THAT DIRECTORS REMUNERATION AND FE ES. HE FURTHER SUBMITTED THAT THE DIRECTORS REMUNERATION RECEIVED BY THE ASSESSEE HAS BEEN ASSESSED AS INCOME FROM OTHER SOURCES, T HEREFORE, SUCH EXPENDITURE IS ALLOWABLE U/S 57(III) OF THE ACT. 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE ISSUE IS TO BE EXAMINED IN THE CASE UNDER ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 3 CONSIDERATION, WHETHER THE ASSESSEE IS ENTITLE DEDU CTION OF EXPENDITURES AGAINST DIRECTORS REMUNERATION WHICH HAS BEEN ASSESSED AS INCOME FROM OTHER SOURCES. SUCH DEDUCTI ON IS ALLOWABLE IN SECTION 57(III) WHICH READS AS UNDER:- 57. THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAM ELY : (I) ***** (IA) ***** (IIA) ***** (III) ANY OTHER EXPENDITURE (NOT BEING IN THE NATU RE OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. 7.1 IN ORDER TO EARN THE DEDUCTION FROM INCOME F ROM OTHER SOURCES CONTEMPLATED BY SECTION 57(III) OF THE INCOME-TAX A CT, 1961, THE ASSESSEE HAS TO PROVE TWO THINGS, NAMELY, (A) THAT THE EXPENSES IN QUESTION WERE INCURRED FO R THE PURPOSE OF EARNING THE INCOME SOUGHT TO BE TAXED, AND (B) THAT SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE SAID PURPOSE; 7.2 THAT THE LEGISLATURE HAS MADE SIMILAR PROVIS ION FOR DEDUCTION OF THE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINES S OR PROFESSION IN SECTION 37. BUT THE EXPRESSION FOR THE PURPOSE OF BUSINESS OR PROFESSION HAS WIDER IMPLICATIONS THAN THE EXPRESS ION FOR THE PURPOSE OF MAKING OR EARNING INCOME USED IN SECTIO N 57(III). THE PURPOSE CONTEMPLATED BY SECTION 57(III) IS MORE SPE CIFIC IN CHARACTER INASMUCH AS IT POINTS TO A PRECISE AND SPECIFIC OBJ ECT OF MAKING OR EARNING INCOME. MOTIVE WITH WHICH THE EXPENDITURE I S INCURRED IS IRRELEVANT UNDER THIS SECTION, THAT THE OTHER REQUI REMENT OF SECTION 57(III) IS THAT THE EXPENDITURE SHOULD BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INCOME. IF THE PURPOSE OF EARNING INCOME IS COUPLED WITH SOME OTHER EXTRANEOU S PURPOSE IT WILL NOT BE POSSIBLE TO SAY THAT THE DEDUCTION UNDER SEC TION 57(III) IS EARNED BY THE ASSESSEE. ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 4 7.3 ON AN ANALYSIS OF THE STATUTORY LANGUAGE AND PRINCIPLES LAID DOWN IN THE DECIDED CASES, THE FOLLOWING PROPOSITIO NS CLEARLY EMERGE AS NOTED IN THE CASE OF MT. CIT VS. SARDAR SAROVAL NARMADA NIGAM LTD. (AHD.) 93 ITD 321 (AHD.) [ PAGES 370 & 371) ( I) IN ORDER TO DECIDE WHETHER AN EXPENDITURE IS A P ERMISSIBLE DEDUCTION UNDER SECTION 57(III) THE NATURE OF THE E XPENDITURE MUST BE EXAMINED; (II) THE EXPENDITURE MUST NOT BE IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE; (III) THE EXPENDITURE MUST HAVE BEEN LAID OUT OR EX PENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNIN G INCOME FROM OTHER SOURCES; (IV) THE PURPOSE OF MAKING OR EARNING SUCH INCOME M UST BE THE SOLE PURPOSE FOR WHICH THE EXPENDITURE MUST HAVE BEEN IN CURRED, THAT IS TO SAY, THE EXPENDITURE SHOULD NOT HAVE BEE N INCURRED FOR SUCH PURPOSE AS ALSO FOR ANOTHER PURPOSE, OR FO R A MIXED PURPOSE; (V) THE DISTINCTION BETWEEN PURPOSE AND MOTIVE MUS T ALWAYS BE BORNE IN MIND IN THIS CONNECTION, FOR, WHAT IS RELE VANT IS THE MANIFEST AND IMMEDIATE PURPOSE AND NOT THE MOTIVE O R PERSONAL CONSIDERATION WEIGHING IN THE MIND OF THE ASSESSEE IN INCURRING THE EXPENDITURE; (VI) IF THE ASSESSEE HAS NO OPTION EXCEPT TO INCUR THE EXPENDITURE IN ORDER TO MAKE THE EARNING OF THE INCOME POSSIBLE, S UCH AS WHEN HE HAS TO INCUR LEGAL EXPENSES FOR PRESERVING AND MAINTAINING THE SOURCES OF INCOME, THEN, UNDOUBTEDL Y, SUCH EXPENDITURE WOULD BE AN ALLOWABLE DEDUCTION; HOWEVE R, WHERE THE ASSESSEE HAS AN OPTION AND THE OPTION WHICH HE EXERCISES HAS NO CONNECTION WITH THE MAKING OR EARNING OF THE INCOME AND THE OPTION DEPENDS UPON PERSONAL CONSIDERATION OR MOTIVES OF THE ASSESSEE, THE EXPENDITURE INCURRED IN CONSEQ UENCE OF THE EXERCISE OF SUCH OPTION CANNOT BE TREATED AS AN ALL OWABLE DEDUCTION; (VII) IT IS NOT NECESSARY, HOWEVER, THAT THE EXPEND ITURE INCURRED MUST HAVE BEEN OBLIGATORY; IT IS ENOUGH TO SHOW THA T THE MONEY WAS EXPENDED NOT OF NECESSITY AND WITH A VIEW TO AN IMMEDIATE BENEFIT TO THE ASSESSEE BUT VOLUNTARILY AND ON THE GROUND OF COMMERCIAL EXPEDIENCY AND IN ORDER INDIRECTLY TO FA CILITATE THE MAKING OR EARNING OF INCOME; (VIII)IF, THEREFORE, IT IS FOUND ON APPLICATION OF PRINCIPLES OF ORDINARY COMMERCIAL TRADING THAT THERE IS SOME CONNECTION, D IRECT OR ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 5 INDIRECT, BUT NOT REMOTE, BETWEEN THE EXPENDITURE I NCURRED AND THE INCOME EARNED, THE EXPENDITURE MUST BE TREATED AS AN ALLOWABLE DEDUCTION; (IX) IT WOULD NOT, HOWEVER, SUFFICE TO ESTABLISH ME RELY THAT THE EXPENDITURE WAS INCURRED IN ORDER INDIRECTLY TO FAC ILITATE THE CARRYING ON THE ACTIVITY WHICH IS THE SOURCE OF THE INCOME; THE NEXUS MUST NECESSARILY BE BETWEEN THE EXPENDITURE I NCURRED AND THE INCOME EARNED; (X) IT IS NOT NECESSARY TO SHOW THAT THE EXPENDITU RE WAS A PROFITABLE ONE OR THAT IN FACT INCOME WAS EARNED; (XI) THE TEST IS NOT WHETHER THE ASSESSEE BENEFITED THEREBY OR WHETHER IT WAS A PRUDENT EXPENDITURE WHICH RESULTED IN ULTIMATE GAIN TO THE ASSESSEE BUT WHETHER IT WAS IN CURRED LEGITIMATELY AND BONA FIDE FOR MAKING OR EARNING TH E INCOME; ( XII) THE QUESTION WHETHER THE EXPENDITURE WAS LAI D OUT OR EXPENDED FOR MAKING OR EARNING THE INCOME MUST BE D ECIDED ON THE FACTS OF EACH CASE, THE FINAL CONCLUSION BEING ONE OF LAW 7.4 IN THE LIGHT OF ABOVE DISCUSSIONS AND BY A PPLYING THE ABOVE GUIDE LINES WE NOTICED THAT THAT DIRECTORS REMUNER ATION RECEIVED BY THE ASSESSEE HAS BEEN SHOWN AS INCOME FROM OTHER S OURCES. WE FIND THAT THE ASSESSEE HAS FAILED SATISFIED THE BASIC RE QUIREMENT OF THE SECTION THAT SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE SAID PURPOSE. THE PURPOSE OF MAKING OR EARN ING SUCH INCOME MUST BE THE SOLE PURPOSE FOR WHICH THE EXPENDITURE MUST HAVE BEEN INCURRED, THAT IS TO SAY, THE EXPENDITURE SHOULD NO T HAVE BEEN INCURRED FOR SUCH PURPOSE AS ALSO FOR ANOTHER PURPO SE, OR FOR A MIXED PURPOSE. IN THE CASE UNDER CONSIDERATION THE EXPEND ITURES INCURRED FOR THE MIX PURPOSE THEREFORE WE ARE OF THE VIEW T HAT THE ASSESSEE IS NOT ENTITLE ANY DEDUCTION UNDER SECTION 57(III) OF THE ACT. THE ORDER OF THE CIT(A) ON THE ISSUE IS CONFIRMED. 8. 2 ND COMMON GROUND IS IN RESPECT OF AGRICULTURAL INCOME TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE YEAR-WISE BREAK-UP OF THE DETAILS ARE AS UNDER:- AY AGRICULTURAL INCOME 2001-03 1,25,000/- 2002-04 1,25,000/- 2003-05 1,25,000/- ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 6 2004-06 1,20,000/- 2005-06 3,05,000/- 9. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO T REATED THE SAID AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES OBSERVING THAT THIS ISSUE HAS BEEN CONSIDERED IN THE BLOCK ASSESSMENT Y EAR WHEREIN IT WAS HELD THAT THE ASSESSEE HAD FAILED TO PROVE THAT HE HAD ACTUALLY EARNED AGRICULTURAL INCOME. THE CIT(A) WHILE CONFIR MING THE ORDER OF AO HAS FOLLOWED THE FINDING OF BLOCK ASSESSMENT. TH E RELEVANT OF CIT(A) IN THIS REGARD IS COMMON FOR ALL THE YEARS, WHICH IS REPRODUCED FROM AY 2001-02 AS UNDER:- 11. THE ISSUE, WHETHER THE APPELLANT TRULY DERIVED ANY AGRICULTURAL INCOME OR NOT, WAS A SUBJECT MATTER OF ADJUDICATION IN THE APPELLANTS BLOCK ASSESSMENT APPEAL ALSO, WH EREIN, FOR THE FOLLOWING REASONS, IT WAS HELD THAT THE PURPORTED AGRICULTURAL INCOME, CONSTITUTES THE APPELLANTS INCOME FROM O THER SOURCES. A. NO SUITABLE EVIDENCE WAS FURNISHED TO PROVE THA T THE SOURCES OF FUNDS FOR THE ACQUISITION OF AGRICULTURAL LANDS ARE BONAFIDE AND DULY DISCLOSED. B. NO PROOF WAS FURNISHED TO ESTABLISH THAT THE AP PELLANT DID UNDOUBTEDLY DERIVE AGRICULTURAL INCOME FROM LAND PU RPORTEDLY OWNED BY HIM. OWNING OF AGRICULTURAL LAND IS ONE IS SUE, WHILE DERIVING INCOME THEREFROM IS AN ENTIRELY DIFFERENT ONE, WHICH MUST BE PROVED WITH APPROPRIATE EVIDENCE, WHICH HAS NOT BEEN DONE BY THE APPELLANT. C. THE APPELLANT HAS CONSISTENTLY FAILED TO PRODUC E ORDINARY AND CUSTOMARY EVIDENCE TO SUPPORT HIS CLAIM FOR AGRICUL TURAL INCOME AS ALSO THE SOURCES OF BANK DEPOSITS. IN FACT THE S OURCES OF ACQUISITION OF THE VERY AGRICULTURAL LAND FROM WHIC H HE CLAIMS TO HAVE DERIVED AGRICULTURAL INCOME REMAINS UNCLEAR AN D UNPROVEN. D. I HAVE CAREFULLY CONSIDERED AND SUBMISSION OF T HE APPELLANT. FOR DETAILS REASONS GIVEN IN PARA 52 ABOVE, I HAVE HELD THAT THE APPELLANT HAD CONSISTENTLY FAILED TO PRODUCE ORDINA RY AND CUSTOMARY EVIDENCE TO SUPPORT HIS CLAIM FOR AGRICUL TURAL INCOME. IN FACT THE SOURCE OF ACQUISITION OF THE VERY AGRIC ULTURAL LAND FROM WHICH HE CLAIMS TO HAVE DERIVED AGRICULTURAL INCOME REMAINS UNCLEAR AND UNPROVEN. HENCE, I HOLD THAT RS. 1,68,7 04/- CONSTITUTES APPELLANTS UNDISCLOSED INCOME FOR THE BLOCK PERIOD AND I DIRECT THAT THE APPELLANT UNDISCLOSED INCOME TO BE ENHANCED BY A SUM OF RS. 1,68,704/- FOR REASONS STATED ABOVE . PENALTY PROCEEDINGS U/S 158BFA OF IT ACT ARE SEPARATELY INI TIATED. ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 7 12. SINCE THE FACTS OF THE CASE HERE ARE IDENTICAL TO THAT OF THE APPELLANTS BLOCK ASSESSMENT, FOR REASONS STATE D ABOVE, I REJECT THIS GROUND OF APPEAL AND HOLD THAT THE AGRI CULTURAL INCOME OF RS. 1,25,000/- CONSTITUTES THE APPELLANTS INCOM E FROM OTHER SOURCES. IT IS NOT OUT OF PLACE TO MENTION HERE THA T VIDE ORDER SHEET ENTRY DATED 05.12.2006, THE COUNSEL OF THE AP PELLANT HAS ACCEPTED THAT THE APPELLANT DID NOT SHOW ANY AGRICU LTURAL INCOME IN HIS REGULAR RETURNS OF INCOME FILED PRIOR TO THE SEARCH ACTION. HE MAY HAVE OWNED AGRICULTURAL LAND BUT AS PER HIS OWN DECLARATION IN THE RETURNS FILED PRIOR TO THE SEARC H ACTION, HE WAS NOT HAVING ANY AGRICULTURAL INCOME. THUS, I REITERA TE THE STAND I HAVE TAKEN IN THE APPEAL PERTAINING TO BLOCK PERIOD THAT THE APPELLANT HAD FAILED TO PRODUCE ORDINARY AND CUSTOM ARY EVIDENCE TO SUPPORT HIS CLAIM FOR AGRICULTURAL INCOME. THE A OS ACTION IS UPHELD. 10. THE LEARNED AR SUBMITTED THAT IN BLOCK ASSESSME NT, THE ADDITION WAS DELETED ON THE TECHNICAL GROUND THAT N O MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. THE LEARNED AR F URTHER SUBMITTED THAT THE AO & CIT(A) HAD SIMPLY FOLLOWED THEIR FIND ING IN BLOCK ASSESSMENT WITHOUT CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE, WHICH WERE MADE DURING THE ASSESSMENT PROCEEDINGS A ND BEFORE THE CIT(A). THE LEARNED AR REFERRING TO PAGE 1 PAPER BO OK WHERE THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) VIDE L ETTER DATED 19.01.2006, POINTED OUT TO THE CIT(A) THAT AS PER H IS DIRECTIONS ENQUIRIES WERE MADE THROUGH ADIT (INV.) SURAT & JAM NAGAR REGARDING THE AGRICULTURAL LAND OF THE ASSESSEE/FAMILY MEMBER S OF THE ASSESSEE. THE ADITS HAVE CONFIRMED THE OWNERSHIP OF THE LAND AS REFLECTED IN THE 7/12 EXTRACTS. GROUNDNUTS WERE GROWN ON THE LAN D IN JAMNAGAR DIST WHILE GRASS WAS PRODUCED ON THE LAND IN SURAT DISTRICT. THE LEARNED AR FURTHER SUBMITTED THAT THE AT PAGE 76 & 7 OF THE PAPER BOOK WHEREIN DCIT (MUM.) AS WRITTEN A LETTER DATED 11.02.2005, ADDRESSED TO THE DIRECTOR OF INVESTIGATION, JAMNAGA R, GUJARAT. PAGE 7 IS THE COPY OF REMAND REPORT WHEREIN IT HAS BEEN ST ATED THAT THE MATTER WAS ENQUIRED BY THE INSPECTOR WHEREIN THE IN SPECTOR STATED THAT THE LAND IS FERTILE LAND AND USUALLY GROUNDNUT S ARE GROWN ON IT. THERE IS A SUBMERSIBLE BORE WELL FOR IRRIGATION FRO M WHICH COTTON CROPS WERE GROWN. THE LEARNED AR HAS ALSO REFERRED PAGED 11 OF PAPER BOOK ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 8 WHERE IN COPY OF REMAND REPORT STATING THAT THE LAN D BEARING SURVEY NO. 157 ADMEASURING ABOUT 13 ACRES SITUATED AT VILL AGE BANQWELL (REVENUE), TALUKA SONGADH, DIST. SURAT. IN THAT LAN D ONLY GRASS WAS PRODUCED. THE LEARNED AR HAS ALSO REFERRED TO PAGE 12 TO 16 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE FILED AN AFFIDAVIT OF THE CONCERNED PARTIES, WHO WERE CULTIVATED THE ASSESSEE S LAND WITH DETAILS OF AMOUNT RECEIVED. THE LEARNED AR FURTHER SUBMITTED THAT WHEN THE ASSESSEE FURNISHED ALL THE COMPLETE AND SU FFICIENT DETAILS, IF THE AO COULD NOT EXAMINE THE SAME THE CLAIM OF THE ASSESSEE IS TO BE ACCEPTED. HE CONTENDED THAT THE CLAIM OF THE ASSESS EE IS GENUINE. IT IS ALSO THE SUBMITTED THAT THERE IS FAILURE ON THE PAR T OF THE REVENUE THEREFORE, NO FURTHER OPPORTUNITY TO BE GIVEN TO IM PROVE THEIR CASES IN THE PRESENT SCENARIO TO AVOID MULTIPLE LITIGATION. 11. THE LEARNED DR ON THE OTHER HAND RELIED UPON TH E ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT CERTAIN FACTUAL ASPECTS ARE REQUIRED TO BE EXAMINED INDEPENDENTLY DURING THE NO RMAL ASSESSMENT PROCEEDINGS. THE AO AND THE CIT (A) BOTH HAVE RELIE D ON THE INVESTIGATIONS MADE DURING THE BLOCK ASSESSMENT. TH E ITAT HAS DECIDED THE ISSUE ON 9 TH JANUARY08 I.E AFTER THE ORDERS OF THE AO & CIT(A), THEREFORE, THEY COULD NOT GET BENEFIT OF TH E ORDER OF ITAT. THE LEARNED DR SUBMITTED THAT THE MATTER MAY BE SENT BA CK TO THE FILE OF THE AO FOR NECESSARY EXAMINATION AND RECORDING CORR ECT AND COMPLETE FACTS. 12. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. WHATEVER THE DETAILS AND MATERI AL POINTED OUT BY THE LEARNED AR ARE THE DETAILS FURNISHED AT THE TIM E OF BLOCK ASSESSMENT AND NOT DURING THE COURSE OF REGULAR ASS ESSMENT. AS PER THOSE DETAILS FILED BY THE ASSESSEE, WE FIND THAT T HE ASSESSEE HAS AGRICULTURE LAND AT TWO PLACES AT JAMNAGAR AND SURA T DISTRICTS. ON ENQUIRY REGARDING AGRICULTURAL LAND AT JAMNAGAR BY THE INSPECTOR, VIDE HIS REPORT DATED 11.07.2005 SUBMITTED THAT THE LAND IS FERTILE AND ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 9 THERE WAS ALSO THE FACILITY OF SUBMERSIBLE BOREWELL FOR IRRIGATION AND AT THAT TIME CROPS GROWN WERE GROUND NUTS. THERE WAS 6 .5 HECTARES OF LAND UNDER SURVEY NO. 364 IN THE NAME OF TWO BROTHE RS. IT HAS ALSO BEEN POINTED OUT BY THE INSPECTOR THAT THE SAID LAN D WAS SOLD IN MARCH, 2005. ENQUIRY REGARDING AGRICULTURAL LAND AT SURAT DISTRICT WAS ALSO MADE BY THE INSPECTOR AND SUBMITTED HIS RE PORT VIDE REPORT DATED 14.11.2005 WHEREIN HE SATED THAT SURVEY NO. 1 57 ADMEASURING ABOUT 13 ACRES. ONLY GRASS WAS PRODUCED FROM THIS L AND AND NO OTHER CROPS WERE PRODUCED FROM THIS LAND. IT HAS ALSO BEE N NOTICED THAT JAMNAGAR AGRICULTURAL LANDS WERE GIVEN FOR CULTIVAT ION TO MR. DAMJI RAVJI PATEL FOR RS. 80,000/- FROM 31.03.2001 TO 31. 03.2002. AN AFFIDAVIT OF DAMJI RAVJI PATEL HAS ALSO BEEN FILED OF WHICH ENGLISH TRANSLATION OF AFFIDVAT HAS BEEN PLACE AT PAGE 12 O F ASSESSEES PAPER BOOK. THAT SURAT AGRICULTURAL LAND WAS GIVEN TO IND UBHAI R. PATEL FOR THE PERIOD 31.03.2000 TO 31.03.2005 FOR RS. 4,5000/ - PER YEAR. AN AFFIDAVIT OF INDUBHAI R. PATEL HAS BEEN PLACED AT P AGE 15 OF THE PAPER BOOK. ON THE BASIS OF THESE DETAILS FILED AT THE TI ME OF BLOCK ASSESSMENT THE REVENUE AUTHORITIES WERE OF THE VIEW THAT THERE WAS NO AGRICULTURAL INCOME FOR THE ASSESSEE. BUT WE FIND F ROM MATERIAL AVAILABLE ON RECORD THAT THERE MAY BE SOME AGRICULT URAL INCOME AS PER INSPECTORS REPORT REGARDING AGRICULTURAL LAND AT J AMNAGAR. THE SAID AGRICULTURAL LAND IS STATED TO BE IN THE NAME OF TW O BROTHERS. IT IS NOT CLEAR THAT WHAT WAS TOTAL HOLDING OF AGRICULTURAL L AND BY THE ASSESSEE. THE ASSESSEE ALSO DID NOT FILE RELEVANT DETAILS FRO M LAND REVENUE OFFICE. THE AGRICULTURAL INCOME DEPENDS ON AGRICULT URAL LAND CULTIVATED BY THE ASSESSEE AS THESE DETAILS AND REL ATED FACTS ARE NOT ON RECORD. AS REGARDS AGRICULTURAL LAND AT SURAT, I T IS STATED BY THE ASSESSEE THAT THERE WAS ONLY GRASS FROM WHICH ASSES SEE RECEIVED RS. 45,000/- PER YEAR. NORMALLY SUCH INCOME OF RS. 45,0 00/- PER YEAR FROM GRASS IS NOT ACCEPTABLE. THE ASSESSEE IS ALSO REQUIRED TO FURNISH NECESSARY EVIDENCE REGARDING AGRICULTURAL LAND HOLD ING AND YEAR OF CULTIVATION OF LAND AND RELATED CROPS THEREON FROM CONCERNED REVENUE OFFICE. THESE DETAILS NECESSARY FOR DETERMINATION O F AGRICULTURAL ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 10 INCOME, THEREFORE, NO SUCH ESTIMATION OF AGRICULTUR AL INCOME CAN BE MADE AT THIS STAGE. UNDER THESE CIRCUMSTANCES, WE REMIT THIS MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERI FY THE RELEVANT MATERIAL AND PUT THE COMPLETE FACTS ON RECORD AND E STIMATE AGRICULTURAL INCOME, IF ANY, AND PASS A SPEAKING O RDER AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 13. THE OTHER COMMON GROUND IN THESE APPEALS IS IN RESPECT OF CHARGING OF INTEREST U/S 234A, 234B AND 234C, WHICH IS CONSEQUENTIAL IN NATURE. THE AO IS DIRECTED ACCORDINGLY. 14. ONE MORE GROUND IS IN RESPECT OF INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C), WHICH IN OUR VIEW IS PRE MATURE IN NATURE, THEREFORE, NO ADJUDICATION IS REQUIRED FOR THE SAME . 15. IN AY 2003-04 AND 2004-05 THERE IS ONE MORE GRO UND WHICH IS IN RESPECT OF DISALLOWANCE OF INTEREST. 16. THE FACTS NOTED FROM AY 2003-04 ARE THAT THE AS SESSEE HAD DEBITED INTEREST OF RS. 66,875/- AND THE WORK IN PR OGRESS CAPITALIZED DURING THE YEAR IN CONSTRUCTION ACTIVITIES. THE AO NOTED THAT IN BLOCK ASSESSMENT YEAR, THE ASSESSEE HAS FAILED TO PROVE T HE GENUINENESS OF THE LOANS. HOWEVER, IN RESPECT OF NEW LOANS THE AS SESSEE HAS FURNISHED CONFIRMATION LETTERS. ACCORDINGLY, INTERE ST OF RS. 39,375/- IN RESPECT OF OTHER LOANS DISALLOWED AND REDUCED FR OM THE WORK IN PROGRESS. THE AO FURTHER NOTED THAT THIS WILL NOT H AVE BEARING ON THE INCOME IN THE YEAR UNDER CONSIDERATION. THE AMOUNT INVOLVED IN AY 2004-05 IS RS. 52,500/-. 17. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. THESE DISALLOWANCES DEPEND ON THE FINAL OUTCOME OF LOANS WHICH HAS BEEN STATED TO BE ADDED IN BLOCK ASSESSMENT. IF LOANS HAVE BEEN ACCEPTED AS GENUINE LOANS, NO DISAL LOWANCE IS ITA NOS. 7217 TO 7221/MUM/2008 SHRI DINESH V. PATEL 11 WARRANTED. WE, THEREFORE, REMIT THIS MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH FINAL OUTCOME IN RESPECT OF LOANS, FOR WHICH THE ASSESSEE CLAIMED IMPUGNED INTEREST. 18. IN THE RESULT, ALL THESE APPEALS ARE PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 17.12.2009. SD/- SD/- (D. MANMOHAN) (A.L. GEHLOT ) VICE PRESIDENT ACCOUNTAN T MEMBER DATED: 17 TH DECEMBER, 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, D BENCH , I.T.A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTALS 1. DRAFT DICTATED ON 17.11.09 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 18.11.09/ 15.12.09 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER