M/s. Endress + Hauser Flowtec (India) P.Ltd., Aurangabad V. Deputu Commissioner of Income-tax,Circle -1, Aurangabad

CO 09/PUN/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3813 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-02-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 01-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Rejection of books of accounts; Capital asset; Business income; Principle of natural justice; Wrong claim
• Section: 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.949/PUN/2016 / ASSESSMENT YEAR : 2010-11 DCIT, CIRCLE-1, AURANGABAD . /APPELLANT VS. M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., P.NO.M-171 TO 176, MIDC, WALUJ, AURANGABAD PAN : AAACE4919M . / RESPONDENT . / ITA NO.995/PUN/2016 / ASSESSMENT YEAR : 2008-09 M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., P.NO.M-171 TO 176, MIDC, WALUJ, AURANGABAD PAN : AAACE4919M . /APPELLANT VS. ACIT, CIRCLE-1, AURANGABAD . / RESPONDENT . / ITA NO.996/PUN/2016 / ASSESSMENT YEAR : 2010-11 M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., P.NO.M-171 TO 176, MIDC, WALUJ, AURANGABAD PAN : AAACE4919M . /APPELLANT VS. JCIT, RANGE-1, AURANGABAD . / RESPONDENT C.O.NO.09/PUN/2018 (ARISING OUT OF ITA NO.949/PUN/2016) (A.Y. 2010-11) M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., P.NO.M-171 TO 176, MIDC, WALUJ, AURANGABAD PAN : AAACE4919M . /APPELLANT 2 VS. DCIT, CIRCLE-1, AURANGABAD . / RESPONDENT ASSESSEE BY : SHRI ABHAY AVCHAT REVENUE BY : SHRI MUKESH JHA, JCIT / DATE OF HEARING : 03.05.2018 / DATE OF PRONOUNCEMENT: 23.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE THREE APPEALS AND ONE CROSS OBJECTION UNDER CONSIDERATION. THE APPEALS ITA NO.995 AND 996/PUN/2016 ARE FILED BY THE ASSESSEE INVOLVING A.YRS. 2008-09 AND 2010-11. THE AP PEAL ITA NO.949/PUN/2016 IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-I, AURANGABAD, DATED 25-02-2016. ASSESSEE HAS ALSO FILED C.O.NO.09/PUN/2018 AGAINST THE SAID APPEAL OF THE REVENUE. CONSIDERING THE COMMONALITY OF THE ISSUES IN THESE APPEALS , WE PROCEED TO ADJUDICATE THESE APPEALS IN THIS COMPOSITE ORDER. WE SHALL FIRST TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2008-09. ITA NO.995/PUN/2016 BY ASSESSEE A.Y. 2008-09 2. ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, 1. WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.AO HAS ERRED IN LEVYING THE PENALTY U/S.271(1)(C ) OF THE ACT AND THE CIT(A)-1, AURANGABAD HAS ERRED IN RETAINING THE PEN ALTY TO THE EXTENT OF RS.5,65,685/-. 2. WITHOUT CONSIDERING FACTS AND CIRCUMSTANCES OF T HE CASE AND THE LAW OBTAINING, THE AO HAS ERRED IN LEVYING THE PENA LTY U/S.271(1)(C) OF THE ACT AND THE LD.CIT(A)-1, AURANGABAD HAS ERRED IN NO T DELETING THE ENTIRE PENALTY. 3. THE PENALTY OF RS.5,65,685/- U/S.271(1)(C) OF TH E INCOME TAX ACT, 1961 IMPOSED ON THE ASSESSEE IS BAD IN LAW. 3 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. FROM THE ABOVE GROUNDS, IT IS EVIDENT THAT ALL THE GROUND S REVOLVE AROUND THE PENALTY LEVIED BY THE AO U/S.271(1)(C) OF THE A CT FOR THE A.Y. 2008-09. 3. BRIEFLY STATED RELEVANT FACT ARE THAT THE ASSESSEE IS A COMPANY A ND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FLOW MEASURING INSTRUMENTS, COMPONENTS, PARTS AND ACCESSORIE S. ASSESSEE FILED THE RETURN OF INCOME ON 02-09-2009. DURING THE ASS ESSMENT PROCEEDINGS, AO MADE ADDITION OF RS.4,74,100/- AN EXPENDITUR E DEBITED TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF INCREASING THE AUTHORISED CAPITAL FROM RS.13.50 CRORES TO RS.20.26 CRORES. FURTHER, AO ALSO MADE ADDITION OF RS.55,96,427 U/S.10B OF THE ACT. THUS, AT THE EN D OF ASSESSMENT PROCEEDINGS, THE AO DETERMINED THE ASSESSED INCOME AT RS.10,84,48,957/-. PENALTY PROCEEDINGS U/S.271(1)(C) ARE ALSO IN ITIATED SEPARATELY FOR CONCEALMENT OF PARTICULARS OF INCOME AND LEVIED PENALTY OF RS.17,23,306/- @100% OF TAX SOUGHT TO BE EVADED. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) RESTRICTE D THE PENALTY TO RS.5,65,685/- BY HOLDING AS UNDER : 5.1 . . . . . . .THE PENALTY PROVISION WAS TO PROV IDE REMEDY FOR LOSS OF REVENUE FOR WHICH THE ELEMENT OF WILFUL CONCEALME NT WAS NOT ESSENTIAL. IT IS CRYSTAL CLEAR THAT THE APPELLANT COMPANY HAD ACTED IN A MALAFIDE WAY AND HAD FILED RETURN OF INCOME SHOWING INACCURATE PARTICULARS OF INCOME. IF ITS CASE HAD NOT BEEN SELECTED UNDER SCRUTINY , IT WOULD HAVE ESCAPED AWAY WITH EVASION OF TAX. IN VIEW OF THE A BOVE FACTS, I HOLD THAT THE AO WAS RIGHT IN LEVYING PENALTY U/S.271(1)(C) O F THE I.T. ACT IN RESPECT OF EXCESSIVE CLAIM U/S.10B ON INCOME FROM OTHER SOU RCES. HOWEVER, THE MINIMUM PENALTY @100% OF TAX SOUGHT TO BE EVADED WI TH REFERENCE TO FALSE CLAIM OF RS.16,63,780/- U/S.10B WORKS OUT TO RS.5,65,685/-. I THEREFORE DIRECT THE AO TO REDUCE THE QUANTUM OF PE NALTY FROM RS.17,23,306/- TO RS.5,65,685/- . THE FIRST AND TH IRD GROUNDS OF APPEAL ARE THEREFORE PARTLY ALLOWED. THE THIRD GROUND OF APPEAL PERTAINING TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE DOES NOT APPEAR TO BE OF ANY CONSEQUENCE AS THE APPELLANT HAS BEEN PROVIDED SUFF ICIENT OPPORTUNITY BY THE CIT(A) AND HONBLE PUNE TRIBUNAL. THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 4 5. AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE IS IN AP PEAL BEFORE THE TRIBUNAL WITH THE AFORESAID GROUNDS. 6. BEFORE US, ON THE ISSUE OF RECORDING OF SATISFACTION BY T HE AO, LD. COUNSEL FOR THE ASSESSEE RAISED AN ORAL GROUND (LEGAL ISSU E) AND SUBMITTED THAT THE AO INITIATED THE PENALTY PROCEEDINGS O N ONE LIMB AND LEVIED THE PENALTY ON ANOTHER LIMB OF SECTION 271(1)(C) OF THE ACT. LD. COUNSEL SUBMITTED THAT SUCH PENALTY IS NOT SUSTAINABLE IN LAW AND THEREFORE, PRAYED FOR QUASHING THE PENALTY ORDER. IN SUP PORT OF THIS LEGAL GROUND, HE RELIED ON VARIOUS DECISIONS OF PUNE BENCH ES OF THE TRIBUNAL AND THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS. SHRI SAMSON PERINCHERY AS WELL AS THE JUD GMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJU NATHA COTTON AND GINNING FACTORY. 7. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDER O THE AO. 8. WE HEARD BOTH THE SIDES ON THIS ISSUE AND PERUSED T HE ORDERS OF THE REVENUE AND CONSIDERED THE DECISIONS RELIED ON BY TH E LD. COUNSEL FOR THE ASSESSEE. WE FIND THE AO VIDE ASSESSMENT ORDER DATED 27-12-2011 HAS INITIATED THE PENALTY PROCEEDINGS HOLDING AS UNDER : 5. . . . . . . . . . THEREFORE, PENALTY PROCEEDINGS U/S.271(1)(C) ARE IN ITIATED SEPARATELY FOR CONCEALMENT OF PARTICULARS OF INCOME. FURTHER, THE AO VIDE PENALTY ORDER DATED 24-03-2014 HAS LEVIED THE PENALTY RECORDING THE FOLLOWING SATISFACT ION: 9. I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND MADE ITSELF LIABLE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT, 1961. ACCORDINGLY, ORDER U/S.271(1)(C) OF THE I.T. ACT, 1961, LEVYING PENALTY OF RS.17,23,306/- IS PAS SED. 5 THEREFORE, ON THE ISSUE OF SATISFACTION OF THE AO, WE FIND TH E AO DID NOT HAVE CLARITY OF THOUGHT AND AO SUFFERED FROM AMBIG UITY IN HIS MIND WITH REGARD TO THE APPLICABLE LIMB OF CLAUSE (C) OF SECTIO N 271(1) OF THE ACT TO THE FACTS OF THE CASE. THEREFORE, WE FIND T HE PENALTY ORDER OF THE AO FALLS SHORT OF LEGAL REQUIREMENT ON THE ISSUE OF REC ORDING OF SATISFACTION. THIS VIEW WAS ALREADY TAKEN BY THE PUNE BEN CH IN A SERIES OF CASES. THE MANNER OF INITIATING AND LEVYING OF PENALTY WIT HOUT MAKING REFERENCE TO THE SPECIFIC LIMB OF CLAUSE (C) IS UNSUSTA INED. AO IS UNDER OBLIGATION TO SPECIFY THE CORRECT LIMB AT THE TIME O F INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. THEREFORE, THE PENAL TY LEVIED BY THE AO IS UNSUSTAINABLE ON TECHNICAL GROUNDS. THIS VIEW O F OURS GET STRENGTH BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS. SHRI SAMSON PERINCHERY AS WELL AS THE JUD GMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJU NATHA COTTON AND GINNING FACTORY (SUPRA). 9. FURTHER, WE FIND, IN A RECENT CASE, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SACHIN MANOHAR DESHMUKH VS. ACIT ITA NO.3767/MUM/2016, DATED 23-03-2018 HAS DEALT WITH AN IDE NTICAL ISSUE AND QUASHED THE PENALTY ORDER OF THE AO. THE OP ERATIONAL PARA NO.12 OF THE ORDER OF THE TRIBUNAL IS EXTRACTED HERE AS UNDER : 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO T HE ISSUE BEFORE US, AND AFTER DELIBERATING ON THE FACTS ARE OF THE CONS IDERED VIEW THAT NOW WHEN THE A.O AFTER RECORDING HIS SATISFACTION HAD I NITIATED THE PENALTY PROCEEDINGS IN THE BODY OF THE ASSESSMENT ORDER FOR FURNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INCOME, THEREFORE, P UTTING THE ASSESSEE TO NOTICE AND CALLING UPON HIM TO EXPLAIN AS TO WHY PE NALTY MAY NOT BE IMPOSED ON HIM UNDER SEC. 271(1)(C) FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, FOL LOWED BY IMPOSING OF PENALTY UNDER SEC. 271(1)(C) IN HIS HANDS FOR FURN ISHING OF INACCURATE PARTICULARS OF INCOME , CAN IN NO WAY BE CONSTRUED AS HAVING FAIRLY PUT THE ASSESSEE TO NOTICE AS REGARDS THE DEFAULT/DEFAU LTS FOR WHICH PENALTY WAS SOUGHT TO BE IMPOSED IN HIS HANDS. WE ARE OF TH E CONSIDERED VIEW THAT A FAILURE ON THE PART OF THE A.O TO CLEARLY PUT THE A SSESSEE TO NOTICE AS REGARDS THE DEFAULT/DEFAULTS FOR WHICH PE NALTY UNDER SEC. 271(1)(C) IS SOUGHT TO BE TO BE IMPOSED ON HIM , HAS TO BE VISITED WITH AND ACCORDED THE SAME TREATMENT AS IN A CASE W HERE THE A.O HAD FAILED TO STRIKE OFF THE IRRELEVANT DEFAULT IN THE SHOW CAUSE NOTICE, 6 BECAUSE, IN BOTH THE SITUATIONS THE ASSESSEE IS NOT INFORMED AND RATHER IS LEFT GUESSING OF THE DEFAULT/DEFAULTS FOR WHICH HE IS BEING PROCEEDED AGAINST FOR. WE THUS IN THE BACKDROP OF OUR AFORESA ID OBSERVATIONS ARE OF A STRONG CONVICTION THAT AS THE A.O HAD CLEARLY FAILED TO DISCHARGE HIS STATUTORY OBLIGATION OF FAIRLY PUTTING THE ASSESSEE TO NOTICE AS REGARDS THE DEFAULT/DEFAULTS FOR WHICH HE WAS BEING PROCEEDED AGAINST, THEREFORE, ARE OF THE CONSIDERED VIEW THAT THE PEN ALTY UNDER SEC. 271(1)(C) OF RS.12,14,140/- IMPOSED BY THE A.O IN CLEAR VIOLATION OF THE MANDATE OF SEC. 274(1) OF THE ACT, CANNOT BE SUSTAINED. WE THUS NOT ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE IMPOSITION OF PENALTY BY THE A.O, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) WHO HAD UPHELD THE SAME. THE PENALTY OF RS.12,14,140/-IMPOSED BY THE A.O UNDER SEC.271(1)(C) IS QUASHED IN TERMS OF OUR AFORESAID OBSERVATIONS. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE ORDER S OF AO/ CIT(A) ARE REQUIRED TO BE SET-ASIDE ON THE LEGAL GROUND O F RECORDING OF SATISFACTION BY THE AO. WE THEREFORE DIRECT THE AO TO DE LETE THE PENALTY. ACCORDINGLY, ALL THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. C.O.NO.09/PUN/2018 BY ASSESSEE (ARISING OUT OF ITA NO.949/PUN/2016) 11. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ISSUES RAISED BY THE ASSESSEE IN THE CROSS OB JECTION AND THE ISSUES RAISED IN THE APPAL ITA NO.996/PUN/2016 ARE SAME. THEREFORE, ADJUDICATION OF THE CROSS OBJECTION BECOMES AN ACADEMIC EXERCISE. ACCORDINGLY, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS ACADEMIC. 12. IN THE RESULT, THE CROSS OBJECTION IS DISMISSED AS ACADEMIC. WE SHALL NOW TAKE UP THE CROSS APPEALS ON MERITS OF ADD ITIONS FOR THE A.Y. 2010-11. ITA NO.949/PUN/2016 BY REVENUE ITA NO.996/PUN/2016 BY ASSESSEE A.Y. 2010-11 13. THE REVENUE RAISED COUPLE OF GROUNDS IN THIS APPEAL AND THE SAME ARE EXTRACTED HERE AS UNDER : 7 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A), AURANGABAD HAS ERRED IN DELETING THE ADDITION OF RS .5,05,18,770/- MADE ON ACCOUNT OF ADDITIONAL PRODUCTION ALLOWING DEVIAT ION FROM CONSUMPTION OF RAW MATERIAL UPTO 20% FROM MINIMUM RAW MATERIAL CONSUMED IN PRODUCTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A), AURANGABAD HAS ERRED IN STATING THAT THE AO HAS REJ ECTED THE BOOK RESULTS U/S.145(3) OF THE I.T. ACT WITHOUT POINTING OUT ANY MATERIAL DISCREPANCY IN THE BOOKS OF ACCOUNT OR IN THE PURCH ASES AND SALES RECORDED BY THE ASSESSEE OR BROUGHT ANY EVIDENCE ON RECORD TO SUGGEST THAT THE ASSESSEE WAS ACTUALLY INDULGING IN SUPPRES SED SALES, EVEN THOUGH WHEN THE ASSESSEE HAS NOT SUBMITTED ANY DETA ILS TO EXPLAIN THE EXCESS ELECTRICITY CONSUMPTION. 14. ASSESSEE RAISED THE FOLLOWING GROUNDS AND THE SAME ARE EXTRACTED HERE AS UNDER : ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW 1. THE LD. AO HAS ERRED IN MAKING AND THE LD.CIT( A)-1, AURANGABAD HAS ERRED IS UPHOLDING THE DISALLOWANCE OF EXEMPTIO N/DEDUCTION U/S.10B OF THE ACT WITH RESPECT TO CERTAIN BUSINESS INCOME. 2. THE LD. AO HAS ERRED IN MAKING AND THE LD.CIT(A) -1, AURANGABAD HAS ERRED IN UPHOLDING THE ADDITION U/S.41(1) OF TH E ACT OF RS.18,20,051/- UNDER THE PRETEXT OF NON-GENUINE CREDITORS. 15. NARRATING THE BRIEF FACTS OF THE CASE RELATING TO GROU ND NO.1 OF APPEAL BY ASSESSEE, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFAC TURING AND TRADING IN FLOW MEASURING INSTRUMENTS, COMPONENTS PARTS AN D ACCESSORIES. ASSESSEE FILED THE RETURN OF INCOME ON 08-10 -2010 DECLARING TOTAL INCOME OF RS.2,56,65,706/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO HELD THAT THE ASSESSEE MADE THE ADDITIONAL PRODUCTION TO THE EXTENT OF 643.02 METRIC TONNES WORTH OF RS.5,05,18,770/-. THE DISCUSSION GIVEN IN PARA NO.3.2 OF THE ASSESSMENT ORDER IS RELEVANT. THUS, THE AO REJECTED TH E BOOKS OF ACCOUNT AND MADE ADDITION OF RS.5.05 CRORES (ROUNDED OFF). F URTHER, THE AO ALSO DENIED THE CLAIM OF DEDUCTION U/S.10B OF THE A CT AMOUNTING TO RS.20,53,859/-. THIS CLAIM RELATES TO RECEIPTS FR OM INTEREST INCOME FROM FIXED DEPOSITS/DEPOSITS, SALE OF SCRAP AND OTHER 8 MISCELLANEOUS BUSINESS RECEIPTS. ASSESSEE TREATED THEM A S BUSINESS RECEIPTS. HOWEVER, THE AO DENIED THE DEDUCTION CLAIMED U /S.10B OF THE ACT ON THESE RECEIPTS. 16. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) DELETED T HE ISSUE RELATING TO ADDITIONAL PRODUCTION WORTH RS.5.05 CRORES (ROUN DED OFF). CIT(A) HELD THAT THE SAID ADDITION CONSTITUTES THE ADDITION MADE ON SURMISES AND ESTIMATIONS AND GRANTED RELIEF TO THE ASSESS EE. FURTHER, ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S.10B OF THE ACT, C IT(A) HELD THAT THE DEDUCTION U/S.10B IS ALLOWABLE IN RESPECT OF SALE OF SCRAP AND OTHER RECEIPTS. HOWEVER, THE CIT(A) UPHELD THE DENIAL OF D EDUCTION U/S.10B IN RESPECT OF INTEREST EARNED FROM FIXED DEPOSITS. 17. AGGRIEVED WITH THE PART RELIEF GRANTED BY THE CIT(A), TH E REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. FURTHER, ASSESSEE IS ALSO AGGRIEVED AGAINST THE FINDING OF CIT(A) WHO CONFIRMED THE AOS ARGUMEN T THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE IS UNSUSTAINABLE. 18. SPECIFIC TO THE RELIEF OF RS.5.05 CRORES (ROUNDED OFF) ON ACC OUNT OF SUPPRESSED/ADDITIONAL PRODUCTION, LD. DR FOR THE REVENUE R ELIED ON THE ORDERS OF THE AO. IN REPLY, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUT RELEVANT FACTS AND SUBMITTED THAT THERE IS NO EVIDENCE W HATSOEVER TO DEMONSTRATE THAT THE ASSESSEE HAS INDULGED IN SUCH ACT IVITY. MENTIONING THAT IT IS ONLY MERE CALCULATIONS AND ESTIMATION S WITHOUT HAVING AN IOTA OF EVIDENCE, LD. COUNSEL BROUGHT OUR ATTENT ION TO THE TABLES MENTIONED BY THE AO IN THE ASSESSMENT ORDER AND SUBMITTED FOR CONFIRMING THE ORDER OF CIT(A). HE ALSO READ OUT THE RELEV ANT LINES FROM THE CONTENTS OF PARA NO.5 OF THE CIT(A) TO DEMONSTRATE THAT IT IS A CASE OF MERE ESTIMATIONS HAVING NO EVIDENCE WHATSOEVER TO DEM ONSTRATE THE ALLEGATION OF UNACCOUNTED PRODUCTION/SALES OUTSIDE THE BO OKS OF ACCOUNT. 9 19. FURTHER, LD. COUNSEL FOR THE ASSESSEE FILED THE WRITTEN SUBMISSIONS ON THIS ISSUE AND THE SAME ARE EXTRACTED HE RE AS UNDER FOR THE SAKE OF COMPLETENESS : (I) THERE I S NO M INA L VAR I A TI O N I N CONSUMPT I O N OF R AW MATER I A L USED I N PRODUCTION OF FIN I SHED GOODS . THE ASSESSEE COMPANY HAS CONSUMED ENTIRE RAW MATERIAL IN PRODUCTION OF FINISHED GOODS AND HAS ACCOUNTED FOR WHOLE OF THE GOODS PRODUCED EITHER AS SALE OR FINIS HED GOODS . (II) FURTHER THE ASSESSEE RESPECTFULLY SUBMITS THAT IT I S A MULTINATIONAL COMPANY OF GOOD REPUTE AND ALL THE TRANSACTIONS ARE RECORDED IN BOOKS OF ACCOUNTS ARE GENUINE AND SUPPORTED WITH DOCUMENTARY EVIDENCES. THE COMPANY HAD CARRIED THE DOCUMENTS ASKED FOR VERIFIC ATION DURING THE COURSE OF SCRUTINY . THE COMPANY HAS CONSUMED ALL THE MATERIAL IN PRODUCTION AND THE SAME IS RECORDED IN BOOKS OF ACC OUNTS , FURTHER AS AND WHEN THE MATERIAL IS DISPATCHED SALES ARE RECORDED IN BOOKS OF ACCOUNTS AND PROFIT IS DETERMINED ACCORDINGLY. (III) THERE I S NO EVIDENCE ON RECORD BROUGHT BY THE ASSESSING OF FICER WHICH PROVES THE FACT OF SUPPRESSION OF SALES OR IN CREASE OF RAW MATERIAL PRICES . (IV) THE ASSESSING OFFICER HAS REJECTED THE BOOKS S IMPLY BASED ON CONSUMPTION FIGURES BEING EXCESSIVE IN CERTAIN MONT HS WITHOUT GOING INTO DEPTH OF THE SAME . NO SPECIFIC DEFECTS HAVING BEEN POINTED OUT IN BOOK S OF ACCOUNT. THE WORKING OF AO IS A HYPOTHETICAL WORKIN G BASED ON ONE MONTH ' S DATA WITHOUT BRINGING ON RECORD ANY DEFECT OR DIS CREPANCY AND WITHOUT ANY BASIS . (V) THE CIT (A) HAS ALLOWED THIS GROUND OF APPEAL. 20. AFTER HEARING BOTH THE PARTIES, WE PERUSED THE ORDER S OF THE REVENUE AND THE CONTENTS OF PARA NO.5 AND FIND THE AO A RRIVED AT THE ADDITIONAL PRODUCTION OF 743.02 MT MERELY BASED ON THE SU RMISES. NO EVIDENCE IS FOUND REGARDING THE PRODUCTION OF RAW-MATERIAL, CONSUMPTION OF ELECTRICITY OR ANY OTHER METHOD TO DEMONS TRATE THE ALLEGATION OF ADDITIONAL PRODUCTION. FURTHER, WE HAVE GONE T HROUGH THE RELEVANT LINES FROM THE SAID PARAGRAPH 5 AND FIND IT RELEVAN T TO EXTRACT THE SAME FOR THE SAKE OF COMPLETENESS : 5. . . . . . . . .ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE, I FIND IT QUITE BAFFLING TO NOTE THAT SUPPRESSED PRODUCTION OF RS.5,05,18,770/- HAS BEEN WORKED OUT BY THE AO WITHOUT CONDUCTING ENQUIRY OF ANY SORT OR BRINGING ANY EVID ENCE ON RECORD THAT THE APPELLANT COMPANY HAD ACTUALLY INDULGED IN SUPP RESSED SALES. IT IS NOT IN DISPUTE THAT THE APPELLANT COMPANY HAS MAINT AINED COMPLETE BOOKS OF ACCOUNT WHICH ARE DULY AUDITED U/S.44AB OF THE INCOME TAX ACT 10 AND TAX AUDIT REPORT IN FORM NO.3CD WAS ALSO FILED. THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THE REGULAR BOOKS OF ACCOUNT INCLUDING PURCHASE REGISTER, SALES REGISTER AND OTHER RECORDS ETC MAINTAINED BY THE APPELLANT COMPANY. AS PER SCHEDULE 15 OF NOTES TO THE AUDITED ACCOUNTS, QUANTITATIVE DETAILS WERE MAINTAINED IN RESPECT OF RAW MATERIALS, FINISHED PRODUCTS & OTHER PRODUCTS. THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN SUCH QUANTITATIVE DETAILS MAINTAINED BY THE APPELLANT COMPANY. IF THE AO WAS OF THE OPINION THAT THERE WA S SUBSTANTIAL CONSUMPTION OF RAW MATERIAL THEN NOTHING STOPPED HI M FOR CONDUCTING ENQUIRIES IN THIS REGARD. SIMILARLY NO A SSESSEE CAN BE EXPECTED TO MAINTAIN THE DAY TO DAY ELECTRICITY CON SUMPTION REGISTER, DAY TO DAY RAW MATERIAL CONSUMPTION REGISTER AND DA Y TO DAY PRODUCTION RECORDS. THE AO HAS WORKED OUT ADDITIONA L PRODUCTION IN METRIC TONNES AS EVIDENT FROM PAGE 4 OF THE ASSESSM ENT ORDER WHEREAS THE APPELLANT COMPANY HAD GIVEN THE FIGURES OF CONSUMPTION AS WELL AS PRODUCTION IN NUMBERS. BY NO STRETCH OF IMAGINATION, THE FLOW-METERS AND RELATED ACCESSORIE S COULD HAVE BEEN MEASURED IN METRIC TONNES AS DONE BY THE AO. T HE APPELLANT COMPANY IS MANUFACTURING THE FLOW METERS AS PER THE REQUIREMENT OF THE CUSTOMERS. THUS THE FINISHED PRODUCTS OF THE AP PELLANT COMPANY ARE CUSTOMIZED OR TAILOR MADE. THE VARIOUS RAW MATE RIALS CONSUMED BY THE APPELLANT COMPANY INCLUDE COVERS, FLOWTUBES, HOUSING, HOUSING POST, METER BODY, SENSORS AND POWER SUPPLY. SIMILARLY THE FINISHED PRODUCTS ARE ALSO OF DIFFERENT TYPES NAMEL Y PROMAG, PROMASS, PROWIRL AND PRO SONIC. SINCE THE FINISHED PRODUCTS ARE TAILOR-MADE, THE CONSUMPTION OF RAW MATERIALS LIKE COVERS, FLOWTUBES, SENSORS ETC. WILL VARY FOR EACH PRODUCT. THERE CANNOT BE FIXED CONSUMPTION OF FLOWTUBES, SENSORS, COVERS FOR VARIO US TYPE OF FLOWMETERS. FOR EXAMPLE IF A CUSTOMER WANTS TO HAVE PROTECTION AGAINST HEAT, CHEMICALS, MOISTURE OR CORROSION THEN NUMBER OF COVERS FOR SUCH A FLOWMETER WILL BE MORE. SIMILARLY IF A F LOWMETER ORDERED BY A CUSTOMER HAS TO RECORD EVEN A MINUTE VARIATION IN FLOW, THEN IT WILL REQUIRE MORE SENSORS. SIMILARLY IF THE FUSE & CIRCUITS ARE ALSO REQUIRED TO BE PROTECTED THEN THE FLOWMETER WILL RE QUIRE MORE COVERS. SOMETIMES IN A FLOWMETER, CERTAIN PARTS ARE NOT REQ UIRED TO BE EXPOSED THEN ALSO IT WILL REQUIRE MORE COVERS. THE FLOWMETERS ARE ALSO OF DIFFERENT TYPES NAMELY ELECTROMAGNETIC, COR IOLIS, VORTEX OR ULTRASONIC EACH WORKING ON DIFFERENT PRINCIPLE. HEN CE THERE CAN'T BE A FIXED CONSUMPTION OF RAW MATERIAL FOR EACH UNIT OF FINAL PRODUCT AS ASSUMED BY THE AO. FURTHER THE APPELLANT HAS MAINTA INED QUANTITATIVE DETAILS IN RESPECT OF VARIOUS RAW MATE RIALS IN NUMBERS. THE AO ON THE CONTRARY HAS WORKED OUT AVERAGE CONSU MPTION OF RAW MATERIALS AT 22.85 PER UNIT WHICH IS NOT POSSIBLE I N SUCH LINE OF BUSINESS WHERE THE FINISHED PRODUCTS HAVE TO BE MAD E AS PER THE REQUIREMENTS OF THE CUSTOMERS I.E. CUSTOMIZED. THE APPELLANT COMPANY HAS BEEN EXPORTING SUCH FLOWMETERS TO SOUTH AFRICA, AUSTRALIA, MALAYSIA AND THAILAND. FURTHER THE DOMES TIC SALES ARE ALSO TO THE GOVERNMENT UNDERTAKINGS SUCH AS HPCL, IOCL, BPC L & NMDC AND TO THE REPUTED COMPANIES NAMELY WOCKHART, CIPLA, RELIA NCE , ASIAN PAINTS, GRASIM, ATUL ETC . THE EXPORTS OF RS . 76,93,29,593/- ARE APPROXIMATELY 70% OF TOTAL SALES THEREBY IMPLYING THAT THE DOMEST IC SALES ARE 30% OF TOTAL SALES. IT IS NOT THE CASE OF THE AO THAT THE SUPPRESSED PRODUCTION WAS ACTUALLY EXPORTED BECAUSE SUCH EXPORTS OUT OF B OOKS OF ACCOUNT ARE NOT RECOGNIZED EITHER BY RBI OR BY CUSTOM AUTHORITI ES. SIMILARLY THE AO HAS NOT GIVEN A CATEGORICAL FINDING THAT SUCH FLOWM ETERS CONSTITUTED A PART OF DOMESTIC SALES. ON THE CONTRARY, THE COUNSE L OF APPELLANT HAS FURNISHED COPY OF VAT RETURN FILED FOR THE YEAR UND ER REFERENCE. IT IS SEEN THAT TOTAL SALES AS PER FORM 704 STOOD AT RS . 112,03,99,069/-. THE SALES AS PER AUDITED ACCOUNTS WERE RS.110,62,38,638/- AFT ER EXCLUDING SALE OF CAPITAL ASSETS, SALE OF SCRAP, CST ON SALES, VAT ON CAPITAL ASSETS, SALES AND SCRAP, OTHER SALES & SERVICE TAX. THE NET SALES AFTER REDUCING EXCISE DUTY OF RS.3,00,84,605/- WERE SHOWN AT RS.107,61,54 ,033/-. OUT OF ABOVE EXPORTS STOOD AT RS . 76,93,29,593/- & DOMESTIC SALES WERE AT RS . 30,68,24 , 440/ - . THE COUNSEL OF APPELLANT HAS ALSO FURNISHED COPIE S OF 11 ORDERS PASSED BY THE DEPUTY COMMISSIONER, AURANGABA D DATED 27.06.201 4 WHEREIN THE SALES DULY RETURNED BY THE APPELLANT HA D BEEN ACCEPTED AND REFUND OF RS.1 . 64 CRORES WAS GRANTED TO IT. THIS BEING THE CASE, THE OTHER GOVERNMENT AUTHORITIES NAMELY VAT O FFICER HAD NOT FOUND ANY DISCREPANCY IN THE SALES RECORDED BY THE APPELL ANT COMPANY. THE AO ON THE OTHER HAND, HAS WORKED OUT SUPPRESSED SALE O N THE BASIS OF MONTH WISE COMPARISON OF RAW MATERIAL CONSUMPTION AND THE N APPLIED A MATHEMATICAL FORMULA TO WORK OUT ADDITIONAL PRODUCT ION. EVEN THE HIGHER CONSUMPTION OF ELECTRICITY COULD NOT BE A BASIS FOR WORKING OUT THE SUPPRESSED PRODUCTION. IT WAS HELD BY THE HON ' BLE PONE TRIBUNAL IN THE CASE OF ITO VS. BALAJI SEEDS & PROCESSING PVT. LTD. IN ITA NO.1182/PN/2010 DATED 26.04.2012 THAT FOR SUPPRESSI ON OF SALES, THERE SHOULD BE SOMETHING ON RECORD TO SUGGEST THAT THE A SSESSEE HAD RECEIVED ANY EXTRA MONEY OVER AND ABOVE WHAT HAD BEEN SHOWN IN THE AUDITED BOOKS OF ACCOUNT. IN THE CITED CASE, THE AO HAD NOT ED THAT THE UNITS OF ELECTRICITY CONSUMED PER TON OF COPRA WERE COMPARAT IVELY HIGHER THAN THAT OF LAST YEAR AND YIELD PERCENTAGE HAD ALSO FAL LEN DOWN. ON THE BASIS OF AN ESTIMATE, SUPPRESSED SALES WERE WORKED OUT AT RS.9,85,800/-. ON THE OTHER HAND, THE ASSESSEE HAD ARGUED THAT MAJOR QUANTITY OF COPRA PURCHASED DURING THE YEAR WAS OF LOW AND INFERIOR Q UALITY. THEREFORE IT TOOK MORE TIME TO EXTRACT THE OIL AND CRUSH THE COP RA. IT WAS HELD THAT THE SUPPRESSED PRODUCTION COULD NOT BE WORKED OUT BY AP PLYING ANY MATHEMATICAL FORMULA AS PER THOUGHT AND MIND OF THE AO. SIMILARLY IN THE CASE OF SRJ PEETY STEEL PVT. LTD. (137 TTJ 627), ON E OF THE REASONS FOR REJECTING THE BOOKS OF ACCOUNT BY THE AO WAS INCONS ISTENT ELECTRICITY CONSUMPTION. IN THIS REGARD, THE STAND OF THE ASSES SEE COMPANY WAS THAT THE AO HAD SIMPLY TAKEN THE LOWEST ELECTRICITY CONS UMPTION FOR A MONTH IN THE WHOLE YEAR AND TREATED THE PRODUCTION IN THAT M ONTH AS THE CORRECT PRODUCTION AND THEN PROCEEDED TO ARRIVE AT THE PROD UCTION FIGURE BY MULTIPLYING THE PRODUCTION IN THE BOOKS BY THE RATI O OF PRODUCTION TO THE ELECTRICITY CONSUMPTION FOR THE MONTH IN WHICH ELEC TRICITY CONSUMPTION WAS MINIMUM. HOWEVER THE METHOD OF COMPUTING THE SO -CALLED SUPPRESSED PRODUCTION WAS NOT BASED ON COGENT REASO NS. THE AO HAD GONE BY SUPPOSITION BUT NOT BY ACTUAL DETECTION WHI CH WAS NOT JUSTIFIED. THE ENTIRE METHOD IN THIS REGARD WAS BASED ON PRE-S UPPOSITION AND LACKED SCIENTIFIC BASIS. THE AO HAD FAILED TO EXAMI NE THE ENTIRE MANUFACTURING PROCESS CARRIED OUT BY THE ASSESSEE C OMPANY. HE HAD NOT GONE INTO THE QUALITY OF RAW MATERIALS, NOR HAD HE BOTHERED TO TAKE THE TYPE OF TECHNOLOGY USED BY THE ASSESSEE COMPANY. TH E AO HAD ALSO NOT TAKEN STRENGTH FROM COMPARABLE CASE OF SIMILARLY PL ACED SITUATION. THEREFORE THE HON'BLE PUNE TRIBUNAL HELD THAT HAVIN G REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR ALL THE YEARS UNDER CONSIDERATION, THE AO DEVISED A STATISTICAL FORMULA ON THE BASIS OF ELECT RICITY CONSUMPTION THAT WAS APPLIED UNIFORMLY IN ORDER TO WORK OUT CERTAIN PRODUCTION AND RESULTANT CONCEALED INCOME FOR EACH YEAR UNDER CONS IDERATION. THE AO COULD NOT SUBSTITUTE THE SAME BY COGENT REASONING. HE HAD SIMPLY TAKEN THE LOWEST ELECTRICITY CONSUMPTION FOR A MONTH IN T HE WHOLE YEAR AND TREATED THE PRODUCTION IN THAT MONTH AS THE CORRECT PRODUCTION AND THEN PROCEEDED TO ARRIVE AT HIS PRODUCTION FIGURE BY MUL TIPLYING THE PRODUCTION IN THE BOOKS BY THE RATIO OF PRODUCTION TO THE ELEC TRICITY CONSUMPTION FOR THE MONTH IN WHICH ELECTRICITY CONSUMPTION WAS MINI MUM. THE METHOD OF COMPUTING THE SO-CALLED SUPPRESSED PRODUCTION WAS N OT JUSTIFIED IN ABSENCE OF SOUND BASIS FOR SAME. THE CONSUMPTION OF THE ELECTRICITY FOR THE MANUFACTURING OF MILD STEEL INGOTS/BILLETS DEPE NDED ON VARIOUS FACTORS LIKE QUALITY OF RAW MATERIAL WHICH WAS THE MAJOR INPUT, VOLTAGE OF THE SUPPLY, POWER INTERRUPTIONS, MECHANICAL AND ELE CTRICAL BREAKDOWNS AND THE CHEMICAL COMPOSITION OF THE LIQUID METAL WH ICH HAD TO BE FINALLY CAST INTO INGOTS/BILLETS. THE AO FAILED TO APPRECIA TE THESE FACTS AND DID NOT ATTEMPT TO ESTABLISH A DIRECT NEXUS BETWEEN THE PRODUCTION AND ELECTRICITY CONSUMED FOR THE MANUFACTURE OF ROUND/T MT BARS AND ARRIVED AT A CONCLUSION THAT THERE WAS AN EXCESS CONSUMPTIO N OF ELECTRICITY RESULTING IN SUPPRESSED PRODUCTION AND ALLEGING THA T THE ASSESSEE COMPANY HAD INDULGED IN UNACCOUNTED PRODUCTION. IT WAS FINALLY HELD THAT EACH YEAR OF THE ASSESSMENT WAS INDEPENDENT AN D EVIDENCES FOUND 12 RELATING TO ASSESSMENT YEAR 2006-07 COULD NOT HAVE AN ADVERSE IMPACT ON THE ASSESSMENTS OF THE ASSESSEE COMPANY FROM THE ASSESSMENT YEARS 2000-01 TO 2005-06. THEREFORE, REJECTION OF BOOKS F OR THESE YEARS PURELY ON THE GROUND THAT THERE HAD BEEN DIVERGENCE IN THE CONSUMPTION OF ELECTRICITY AND APPLICATION OF SECTION 144 WAS NOT AT ALL JUSTIFIED. ACCORDINGLY, THE IMPUGNED ADDITIONS WERE DELETED. THESE DECISIONS ARE SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, I HOLD THAT THE AO HAD ABSOLUTELY NO BASIS TO ADOPT CONSUMPTION OF RAW MAT ERIAL AT 22.85 PER UNIT AND APPLYING THE SAME TO THE VARIOUS MONTHS TO COMPUTE ADDITIONAL PRODUCTION/SUPPRESSED SALES AT RS.5,05,18,770/- FOR THE YEAR UNDER REFERENCE. FURTHER THE APPELLANT COMPANY IS SELLIN G ITS FINAL PRODUCTS THROUGH AN ASSOCIATE CONCERN NAMELY ENDRESS-HAUSER (INDIA) PVT. LTD., BOMBAY AND NO DIRECT SALES ARE BEING MADE. THE VAR IOUS FACTORS AS SUBMITTED BY THE APPELLANT COMPANY DID HAVE AN IMPA CT ON THE PRODUCTION AND COULD NOT BE BRUSHED ASIDE AS DONE B Y THE AO. CONSIDERING THE ELABORATE REASONING GIVEN BY THE CIT(A) ON THIS ISSUE, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) ON TH IS ISSUE IS FAIR AND REASONABLE AND THEREFORE, IT DOES NOT CALL FOR ANY INTE RFERENCE ON THIS ISSUE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVEN UE ARE DISMISSED. 21. CONSEQUENTLY, CONSIDERING THE RELIEF GRANTED BY US IN G ROUND NO.1, WE FIND ADJUDICATION OF LEGAL ISSUE RAISED VIDE GROUND NO.2 BY THE REVENUE BECOMES AN ACADEMIC. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. WE SHALL NOW TAKE UP THE CROSS APPEAL BY THE ASSESSEE. ITA NO.996/PUN/2016 BY ASSESSEE 23. GROUND NO. 1 RELATES TO CONFIRMING OF CLAIM OF DENIAL OF DE DUCTION U/S.10B OF THE ACT IN RESPECT OF INTEREST OF RS.9,70,026/- E ARNED FROM FIXED DEPOSITS AND INTEREST OF RS.1,46,862/- FROM OTHER DE POSITS AND RS.9,36,971/- ON ACCOUNT OF MISCELLANEOUS INCOME. THE ASSES SEE HAS TREATED THE SAID INCOME AS BUSINESS INCOME AND CLAIMED DE DUCTION U/S.10B OF THE ACT. CIT(A) RELYING ON THE JUDGMENT OF AP EX COURT IN THE CASE OF PANDIAN CHEMICALS LTD. 262 ITR 278, LIBERTY INDIA 3 17 ITR 218 13 AND CIT VS. STERLING FOODS 237 ITR 579 DENIED THE CLAIM OF THE ASSESSEE. 24. AGGRIEVED WITH SUCH CONFIRMATION, ASSESSEE FILED THE PRE SENT APPEAL BEFORE THE TRIBUNAL. 25. REGARDING THE ISSUES OF CLAIM OF DEDUCTION U/S.10B OF THE ACT, LD. COUNSEL FOR THE ASSESSEE FILED THE FOLLOWING SUBMISSIONS: THE AO HAS REDUCED FOLLOWING AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS OR PROFESSION : SR.NO. PARTICULARS AMOUNT RS. 1 INTEREST ON BANK DEPOSITS 9,70,026 2 INTEREST ON OTHER DEPOSITS 1,46,862 3 SALE OF SCRAP 9,03,823 4 MISCELLANEOUS BUSINESS INCOME 33,148 TOTAL 20,53,859 THE LAST TWO ITEMS OF RECEIPTS ARE FROM BUSINESS HE NCE CONSIDERED BY CIT APPEAL HOWEVER THE FIRST TWO BEING INTEREST ON DEPO SITS WERE NOT CONSIDERED. TO THAT EXTENT DEDUCTION U/S.10B WAS R ECOMPUTED AND NOT ALLOWED. THE ASSESSEE IN EARLIER TWO YEARS, I.E. A .Y. 2007-08 AND 2008- 09 HAS NOT CONTESTING/NOT PRESSED THE SAME. 26. AFTER HEARING BOTH THE SIDES AND PERUSING THE ORDER OF CIT(A) ON THIS ISSUE, WE FIND THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.1 RAI SED BY THE ASSESSEE IS DISMISSED. 27. GROUND NO.2 RELATES TO ADDITION OF RS.18,20,051/- MADE B Y THE AO INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT IN RES PECT OF BALANCES LYING WITH THE SUNDRY CREDITORS. DURING THE ASS ESSMENT PROCEEDINGS, AO ISSUED NOTICE U/S.133(6) IN RESPECT OF 7 CRE DITORS AND THEIR LETTERS WERE RETURNED UNSERVED. IN VIEW OF THE ASSESSEES FAILURE TO DISCHARGE THE ONUS, AO PROCEEDED TO MAKE THE SAID A DDITIONS. DETAILS ARE DISCUSSED IN THE ORDER OF CIT(A) IN PARA NOS.8 A ND OF HIS ORDER. CIT(A) ALSO CONFIRMED THE SAID ADDITION RELYING ON TH E DECISION IN 14 THE CASE OF ISHRAWATI DEVI VS. ITO 298 ITR AT 313 AND AN OTHER DECISION IN THE CASE OF UPLAKSH METAL INDUSTRIES VS. CIT 177 TAXMAN 298. 28. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE ADDITION MADE BY THE AO IS PREMATURE AS THE AO HAS NOT GRANTED PROPER OPPORTUNITY TO PUT UP HIS CASE PROPERL Y BEFORE THE AO. THEREFORE, LD. COUNSEL FOR THE ASSESSEE PRAYED FOR REMAND ING THIS ISSUE TO THE FILE OF AO. IN THIS REGARD, LD. COUNSEL FILED THE FOLLOWIN G WRITTEN SUBMISSIONS : (1) THE ADDITION HAS BEEN MADE SINCE THE BALANCE C ONFIRMATIONS ARE NOT PRODUCED AND THE CREDITWORTHINESS AND GENUINENE SS COULD NOT BE PROVED. (2) THE LETTER TO PARTIES WAS SENT BY DEPARTMENT FO R BALANCE CONFIRMATION AND WE UNDERSTAND THE NOTICE WENT UNSE RVED. (3) ALL THE PARTIES WHOSE CREDIT BALANCES ARE APPEA RING AND WHICH HAS BEEN CONSIDERED AS INCOME, ARE REGULAR SUPPLIER S OF THE COMPANY. THE CREDITORS BALANCE IS ARISING OUT OF PURCHASE OF CREDIT MATERIALS FROM THESE PARTIES. PURCHASE BILLS HAVE BEEN PRODUCED D URING COURSE OF HEARING. THE ENTIRE PURCHASES HAVE BEEN ACCEPTED I N THE ASSESSMENT. THEREFORE, THE PURCHASE PRICE THAT HAS REMAINED UNP AID AT THE YEAR END CANNOT BE CONSIDERED AS NOT GENUINE. BY SUPPLY OF MATERIAL ITSELF CREDITWORTHINESS OF THE PARTIES STANDS ESTABLISHED. (4) EVEN TODAY THE COMPANY IS DEALING WITH THESE CR EDITORS. (5) THE CIT(A) SUSTAINED THE ADDITION SINCE THE ASS ESSEE COULD NOT RECONCILE THE CLOSING CREDIT BALANCES OF SUCH PARTI ES. 29. AFTER HEARING BOTH THE SIDES, WE FIND THE REQUEST OF TH E LD. COUNSEL FOR THE ASSESSEE FOR REMANDING THE ISSUE TO THE FILE OF AO IS CONSIDERED FAVOURABLY. ASSESSEE IS DIRECTED TO FILE THE RE QUIRED EVIDENCES TO DEMONSTRATE THE CREDIT BALANCES OF THE SUN DRY CREDITORS. IT GOES WITHOUT SAYING THAT AO SHALL GRANT REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 30. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. 15 31. TO SUM UP, ITA NO.995/PUN/2016 FILED BY THE ASSESSEE IS ALLOWED. C.O. NO.09/PUN/2018 FILED BY THE ASSESSEE IS DISMISSE D. ITA NO.949/PUN/2016 FILED BY THE REVENUE IS DISMISSED. ITA NO.996/PUN/2016 FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MAY, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 23 RD MAY, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRIVA TE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-I, AURANGABAD 4. CIT- I, AURANGABAD 5. , , B BENCH PUNE; 6. / GUARD FILE.