M/s Rama Udyog, Ambala Cantt. V. ITO, Ambala

CO 18/CHANDI/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8094 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 08-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Additional evidence; Tangible material
• Section: 143(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 527/CHD/2011 ASSESSMENT YEAR : 2005-06 ITO, WARD-2, V M/S RAMA UDYOG, AMBALA. 4219, DAL MANDI, AMBALA CANTT. PAN: AABCB-5576G & C.O. 18/CHD/2012 IN ITA 527/CHD/2011 ASSESSMENT YEAR : 2005-06 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K.GOYAL RESPONDENT : SHRI AKHILESH GUPTA DATE OF HEARING : 18.12.2012 DATE OF PRONOUNCEMENT : 26.12.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL, FILED BY THE REVENUE AND THE C O FILED BY THE ASSESSEE, ARE AGAINST THE ORDER OF THE CIT(A) DATED 07.03.2011 PASSED U/S 250(6) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C.I.T (APPEALS) IS RIGHT IN RESTRICTING THE ADDITION MADE AT RS.1,52,170/- ON ACCOUNT OF BARDANA ACCOUNT TO RS.96,310/- BY IGNORI NG THE FACT 'THAT THE ASSESSEE HAS PURCHASED THE BAGS OF BARDANA FROM THE GOVT. @RS. 12.63 PER BAG, WHICH WAS APPLIED FOR CALCULATING THE SALE PRICE OF THE BAGS 2 DECLARED AS SOLD. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C.IT.(APPEAL) IS RIGHT IN DELETING THE ADDITION MAD E AT RS.5,60,000/- ON ACCOUNT OF MILLING CHARGES BY IGNORING THE FACT THA T NO EXPLANATION COULD BE FURNISHED BY THE ASSESSEE REGARDING PAYMENT OF M ILLING CHARGES TO ITS SISTER CONCERN, FOR DIVERTING THE INCOME FOR ULTERI OR MOTIVE. 3. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. C.I.T (APPEAL) IS RIGHT IN RESTRICTING THE DISALLOWANCES MADE OUT OF EXPENSES CLAIMED UNDER THE HEADS 'REPAIR & MAINTENANCE AND M ACHINERY REPAIR 1 ; DIESEL EXPENSES AND 'FREIGHT INWARD, FREIGHT OUTW ARD, WAGES, LABOUR CHARGES AND CONVEYANCE 1 AT RS. 50,000/-, RS. 2,60,015/- AND RS. 3,63,000/- TO 10% OF THE EXPENSES CLAIMED BY IGNORI NG THE FACTS THAT THE EXPENSES CLAIMED ARE NOT FULLY SUPPORTED WITH THE V OUCHERS. 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. C.I.T.(APPEAL) IS RIGHT IN DELETING THE DISALLOWANC ES MADE OUT OF 'MISC. EXPENSES' BY IGNORING THE FACTS THAT THE EXPENSES C LAIMED BY THE ASSESSEE IS ON ACCOUNT OF COST OF RICE SHORT WHICH IS A SORT OF PENALTY AND IS NOT AN ALLOWABLE EXPENDITURE. 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LD. C.L.T. (APPEAL) IS RIGHT IN DELETING THE DISALLOWAN CES MADE OUT OF 'MOISTURE CUT' CLAIMED BY THE ASSESSEE BY IGNORING THE FACTS THAT NO CLARIFICATION COULD BE FURNISHED BY THE ASSESSEE, 6. IT IS PRAYED THAT THE ORDER OF THE LD C.L.T. (APPEAL) BE SET-ASIDE AND THAT OF A.O. BE RESTORED. 7 THE APPELLANT CRAVES LEAVE TO ADD OR AMEND TH E GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. IN CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. BECAUSE THE ACTION FOR UPHOLDING THE ADDITION OF RS.96,310/- IS BEING CHALLENGED ON FACTS AND LAW RELATABLE TO BARD ANA SALE PRICE. 2. BECAUSE THE ACTION IS BEING IS CHALLENGED ON FA CTS AND LAW FOR UPHOLDING THE ESTIMATED DISALLOWANCE OF 10% EXPENDI TURE FOR REPAIRS & 3 MAINTENANCE & MACHINERY REPAIRS RS. 5,000/-, DIESEL EXPENSES RS. 30,000/- FREIGHT OUTWARD FREIGHT INWARD, WAGES & LABOUR 36,3 00/- (RS. 71,300/-). 3. BECAUSE THE ACTION FOR UPHOLDING THE ADDITION OF RS. 1,89,000/- IS BEING CHALLENGED ON FACTS AND LAW BY INVOKING THE P ROVISIONS OF SECTION 68 WITHOUT AFFORDING 'OPPORTUNITY' AS PRAYED IN ACCORD ANCE WITH THE TRUE INTERPRETATION OF SECTION 250(5),(6), SECTION 251(L )(C) THE EXPLANATION REFERRING TO THE WORDS 'SATISFACTION', 'STATE POINT S FOR DETERMINATION', 'PASS SUCH ORDERS' IN THE INTEREST OF SUBSTANTIAL J USTICE'. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' PLACED RELIANCE ON THE ORDER PASSED BY THE AO, IN R ESPECT OF GROUND NO.1. HE, ALSO REFERRED TO PARA 12.1 AT PAGE 7 OF THE ASSESSMENT ORDER, AND ALSO FINDINGS OF THE LD. CIT( APPEALS), AS CONTAINED IN PARA 6.3 OF THE APPELLATE ORDER DATED 07.03.2011. LD. 'AR' PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(APPEALS), HOWEVER, THE ACTION OF UPHOLDING THE PART AMOUNT OF ADDITION BY THE CIT(APPEALS), HAS BEEN CH ALLENGED BY HIM IN GROUND NO.1 OF THE GROUNDS RAISED IN THE C.O., UNDER REFERENCE. 5. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RIV AL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT REC ORDS. THE AO, MADE AN ADDITION OF RS.1,52,170/-, ON ACCOUNT O F UNDER- VALUATION OF SALE OF BARDANA. THE AO, NOTED THAT T HE ASSESSEE RECEIVED 88539 BAGS FROM THE GOVERNMENT AND OUT OF WHICH, 59539 BAGS WERE CONSUMED IN RICE DELIVERED AND THE BALANCE 29000 BAGS WERE SOLD BY THE GOVERNMENT TO THE ASSES SEE @ 12.63 PER BAG, VALUING RS.3,52,060/-. THE ASSESSEE PURCHASED 27850 BAGS OF BARDANA @ RS.4.50, FROM THE OPEN MARK ET, FOR A CONSIDERATION OF RS.1,19,509/-. THEREFORE, AS PER AO, THE ASSESSEE HAD TOTAL BARDANA OF 56850 BAGS SHOWN AT V ALUE OF 4 RS.4,70,569/-. OUT OF THIS, THE ASSESSEE SOLD. OUT OF THIS, THE ASSESSEE SOLD 34000 BAGS @ 8.5 PER BAG IN THE OPEN MARKET FOR RS.2,77,250/-. OUT OF THE BALANCE 22850 BAGS, T HE ASSESSEE CONSUMED 12767 BAGS OF BARDANA IN BY-PRODU CTS VIZ. RICE BRAN, NAKU, PHAK. THE ASSESSEE HAS NOT DECLARE D THE VALUE OF THE BARDANA CONSUMED IN BY-PRODUCTS BUT HA S VALUED THE REMAINING 10083 BAGS AS CLOSING STOCK FOR RS.1, 22,407/- DECLARING THE NET LOSS OF RS.71,911/- THE AO REJECT ED THE APPELLANT'S CONTENTION THAT THE ASSESSEE HAD SOLD B ARDANA IN THE MARKET AT A LESSER RATE THAN THAT OF PURCHASE R ATE AS THE APPELLANT DID NOT FURNISH SUPPORTING BILLS AND VOUC HERS. AS PER THE AO NO PRUDENT PERSONS WILL SELLS/ITS GOODS IN THE MARKET AT A LOSS. THE AO ALSO OBSERVED THAT THE ASS ESSEE HIMSELF HAS VALUED THE CLOSING STOCK OF BARDANA @ R S.12.63 PER BAG. THEREFORE, THE AO VALUED THE TOTAL SALE OF BARDANA OF 34000 BAGS SOLD IN THE OPEN MARKET AT RS.4,22,950/- @ RS.12.63 PER BAG AS AGAINST THE DECLARED VALUE OF RS.2,77,250/- THUS AN ADDITION OF RS.1,52,170/- WAS MADE. THE FINDINGS OF THE CIT(APPEALS), AS RECORDED IN PA RA 6.3 OF THE APPELLATE ORDER, IS REPRODUCED HEREUNDER : 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E BY THE APPELLANT, AND ALSO THE REASONING GIVEN BY THE AO. IT IS SEEN THAT THE BASIS OF ADDITION MADE BY THE AO AS WELL AS THE SUB MISSION OF THE APPELLANT IS UNSUPPORTED BY ANY DETAILS WITH REGARD TO THE QUALITY OF THE BAGS SOLD I.E. WHETHER THESE ARE THE OLD BAGS P URCHASED @ RS.4.30 OR THE NEW BAGS PURCHASED @ RS.12.63. IT IS HOWEVER SEEN THAT ONLY 29000 BAGS WERE PURCHASED @ OF RS.12.63/-. THE REFORE, AT THE MOST ONLY 29000 BAGS CAN BE HELD TO HAVE BEEN SOLD @ RS.12.63/-, THE VALUE OF WHICH WILL COME TO RS.352060/-. THE SALE V ALUE OF BALANCE 5000 BAGS @ RS.4.30 WILL COME TO RS.21,500/-. THEREFORE, THE TOTAL SALE 5 VALUE BY ACCEPTING THE AO'S CONTENTION COMES TO RS. 3,73,560/- AS AGAINST RS.4,22,950/- WORKED OUT BY THE AO AND AS A GAINST RS.2,77,250/- SHOWN BY THE APPELLANT. THEREFORE, IT WILL BE FAIR AND JUST IF THE ADDITION ON THIS ACCOUNT IS RESTRICTED TO RS.96,310/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. THE ASSESSEE APPELLANT IS NOT A DEALER IN BARDAN A. THE ASSESSEE IS ENGAGED IN THE ACTIVITIES OF MILLING. C ONSEQUENTLY, SALE OF USED BARDANA BY THE APPELLANT AND NOT THE S ALE OF NEWLY PURCHASED OF BARDANA WAS THE SUBJECT MATTER B EFORE AO, AND CIT(APPEALS). A BARE PERUSAL OF THE FINDINGS O F BOTH AO AND CIT(APPEALS), REVEALS THAT NO TANGIBLE MATERIAL HAS BEEN BROUGHT ON RECORDS TO DEMONSTRATE THAT ASSESSEE HAD SOLD THE NEWLY PURCHASED BARDANA. THE LD. CIT(APPEALS), HAS RIGHTLY DELETED THE ADDITION MADE BY THE APPELLANT, BASED O N NO- EVIDENCE. HOWEVER, AS THE ASSESSEE APPELLANT IS NO T ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF BARDANA, IT CANNOT BE CONSTRUED THAT THE ASSESSEE HAD SOLD THE UNUSED AND NEWLY PURCHASED BARDANA. THEREFORE, ADDITION MADE BY THE CIT(APPEALS), CANNOT BE SUSTAINED. IN VIEW OF THIS, THE FINDINGS OF THE LD. CIT(APPEALS), TO THE EXTENT OF UPHOLDING OF ADDITION OF RS.96,310/-, CANNOT BE SUSTAINED. CONS EQUENTLY, THE GROUND OF APPEAL NO.1, RAISED BY THE REVENUE, I S DISMISSED. HOWEVER, GROUND NO.1 IN C.O. OF THE ASS ESSEE APPELLANT IS ALLOWED. 7. LD. 'DR', IN RESPECT OF GROUND NO.2 OF THE APPEA L, REFERRED TO, PARA 12.2, AT PAGE 8 OF THE ASSESSMENT ORDER AND PARA 7.3, AT PAGE 9 OF THE CIT(APPEALS)S ORDER AND STATED THAT THE FINDINGS OF THE CIT(APPEALS) BE REVERSED. LD. 'AR' PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(APPEALS). 6 8. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RIV AL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT REC ORDS AND FOUND THAT THE AO, MADE ADDITION OF RS.5,60,000/-, ON ACCOUNT OF MILLING CHARGES, PAID TO M/S RAMA KRISHN A RICE & GENERAL MILLS. THE AO, FOUND THAT NO DETAILS, WITH REGARD TO THE PURPOSE OF THE PAYMENT MADE TO M/S RAMA KRISHNA RICE & GENERAL MILLS, WERE FILED BY THE APPELLANT, EXCEPT A COPY OF LEDGER ACCOUNT OF THE APPELLANT, SHOWING ENTRY OF RS.5,60,000/- DEBITED TO ITS ACCOUNT. CONSEQUENTLY , THE AO, HELD THAT EXPENDITURE HAS BEEN DEBITED, WITH A VIEW TO REDUCING THE TAXABLE INCOME. THE CIT(APPEALS), ON APPRECIATION OF THE REMAND REPORT AND SUBMISSION FI LED BEFORE HER ALLOWED THIS GROUND OF APPEAL, VIDE FINDINGS CO NTAINED IN PARA 7.3 OF THE ORDER, PASSED BY THE CIT(APPEALS). THE RELEVANT FINDINGS OF THE CIT(APPEALS), ARE REPRODUC ED HEREUNDER: 7.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E BY THE APPELLANT AND THE FACTS OF THE CASE. IT HAS BEEN CONTENDED TH AT THE AMOUNT HAS BEEN PAID TO M/S RAMA KRISHANA RICE & GENERAL MILLS ON ACCOUNT OF MILLING GOT DONE FROM IT. IT IS NOTED THAT THE PAYM ENT SO MADE TO RAMA KRISHNA RICE & GENERAL MILLS HAS BEEN SHOWN AS INCO ME BY THE RESPECTIVE FIRM WHICH HAS BEEN DULY ACCEPTED BY THE DEPARTMENT . IT IS ALSO SEEN THAT THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO STATE THAT THE MILLING WAS ACTUALLY DONE BY THE APPELLANT AND NOT BY M/S RAMA KRISHANA RICE & GENERAL MILLS. THERE IS NO DISPUTE THAT THE MILLING CHARGES FOR THE PADDY GOT MILLED FROM M/S RAMA KRIS HNA RICE & GENERAL MILLS HAVE BEEN RECEIVED BY THE APPELLANT FROM THE GOVT. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE TO SUGGEST THAT THE MIL LING WAS ACTUALLY DONE BY THE APPELLANT AND NOT THE CONCERN TO WHOM T HE PAYMENT HAS BEEN MADE, NO ADDITION ON THIS ACCOUNT CAN BE MADE. THE ADDITION SO MADE IS THEREFORE DELETED. THIS GROUND OF APPEAL IS ALLOWED . 7 9. A BARE PERUSAL OF THE FACTUAL MATRIX OF THE CASE AND FINDINGS OF THE CIT(APPEALS) REVEALS THAT THE FINDI NGS OF THE CIT(APPEALS) ARE WELL REASONED AND BASED ON APPRECI ATION OF THE FACT-SITUATION OF THE CASE. IN VIEW OF THIS, W E DO NOT FIND ANY INFIRMITY THEREIN. HENCE, THE SAME ARE UPHELD. CONSEQUENTLY, GROUND NO. 2 OF THE APPEAL RAISED BY THE REVENUE IS DISMISSED. 10. IN RESPECT OF GROUND NO.3, LD. 'DR' REFERRED TO PAGE 10 OF THE ASSESSMENT ORDER. SIMILARLY, LD. 'DR' REFER RED TO PAGE 8 & 9 OF THE ASSESSMENT ORDER AND ALSO FINDINGS OF TH E CIT(APPEALS), AT PAGE 13 OF THE ORDER PASSED BY HER . HE PLEADED THAT FINDINGS OF THE AO BE RESTORED. LD. ' AR' SUPPORTED THE FINDINGS OF THE CIT(APPEALS), SUBJECT TO THE CONTENTION RAISED IN C.O. 11. IN THE COURSE OF ASSESSMENT PROCEEDINGS, AO MAD E ADHOC ADDITION, IN RESPECT OF REPAIRS AND MAINTENANCE, MA CHINERY REPAIR, DIESEL EXPENSES AND FREIGHT OUT-WARD, FREIG HT INWARD, WAGES AND LABOUR CHARGES ETC. THE AO MADE AN ADDIT ION OF RS.50,000/- IN RESPECT OF REPAIR AND MAINTENANCE AN D MACHINERY REPAIR, AS CERTAIN EXPENSES WERE FOUND NO T VERIFIABLE. SIMILARLY, AO MADE AN ADDITION OF RS.2 ,06,015/-, IN RESPECT OF DIESEL EXPENSES AND RS.3,63,000/- IN RESPECT OF FREIGHT OUTWARD AND FREIGHT INWARD, WAGES AND LABOU R CHARGES ETC. LD. CIT(APPEALS), ON APPRECIATION OF THE SUBM ISSION AND EVIDENCES FILED BEFORE HER, RESTRICTED THE DISALLOW ANCE TO 10% OF SUCH EXPENSES. FINDINGS OF THE CIT(APPEALS), A RE RECORDED 8 AT PAGE 13 OF THE ORDER, WHICH ARE REPRODUCED HEREU NDER : THE APPELLANT IN THE REJOINDER HAS REITERATED TH E SUBMISSION ALREADY MADE. IT IS SEEN THAT THE ADHOC DISALLOWANCE HAS BEEN MAD E BY THE AO OBSERVING THAT THE SUPPORTING VOUCHERS HAVE NOT BEEN PRODUCED. THE APPELLANT ON THE OTHER HAND HAS CHALLENGED THE ADDITION STATING THAT ALL THE VO UCHERS ARE AVAILABLE NOW AND CAN BE PUT TO SCRUTINY BY THE AO. THE AO HAS HOWEVE R OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCE STATING THAT THE S AME WAS NOT PRODUCED DESPITE ADEQUATE OPPORTUNITY GIVEN DURING THE ASSESSMENT PR OCEEDINGS. IN TOTALITY OF THE FACTS OF THE CASE, IT IS CONSIDERED FAIR THAT T HE ADHOC DISALLOWANCE UNDER ALL THESE HEADS JS RESTRICTED TO 10% OF THE TOTAL EXPEN SES. THE AO IS DIRECTED TO RE-COMPUTE THE DISALLOWANCE. THE APPELLANT GETS PAR TIAL RELIEF. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 12. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE FI NDINGS OF THE CIT(APPEALS), IN THE MATTER VIS--VIS FINDIN GS OF THE AO AND RELEVANT MATERIAL PRODUCED, BEFORE THESE AUTHOR ITIES. HAVING REGARD TO THE FACT-SITUATION OF THE CASE AND ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(APPEALS), HENC E, THE SAME ARE UPHELD. CONSEQUENTLY, THE GROUND NO.3 OF THE A PPEAL OF THE REVENUE IS DISMISSED. 13. IN GROUND NO.4, LD. 'DR' STATED THAT A REFERENC E BE MADE TO PARA 12.6, AT PAGE 10 OF THE ASSESSMENT ORDER AN D ALSO TO PARA 9.3 OF THE ORDER OF THE CIT(APPEALS), AS APPEA RING AT PAGE 14 OF HER ORDER. THE LD. 'DR' SUPPORTED THE FINDIN GS OF THE AO. LD. 'AR' RELIED UPON THE ORDER PASSED BY THE CIT(AP PEALS). 14. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RI VAL SUBMISSIONS, FACTS OF THE CASE AND THE FINDINGS OF BOTH THE LOWER AUTHORITIES. IT IS PERTINENT TO REPRODUCE FI NDINGS OF THE 9 CIT(APPEALS), AS CONTAINED IN PARA 9.3 AT PAGE 14 O F HER ORDER : 9.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E BY THE APPELLANT, ASSESSMENT ORDER, REMAND REPORT OF THE A O AND THE REJOINDER FILED BY THE APPELLANT. IT IS SEEN THAT THE AO'S FI NDING THAT THE EXPENDITURE IS PENAL IN NATURE IS UNSUPPORTED BY FACTS. THE EXP ENDITURE HAS BEEN INCURRED DURING THE COURSE OF BUSINESS OF THE APPEL LANT AND IS THEREFORE ADMISSIBLE BUSINESS EXPENDITURE. THE ADDITION MADE BY THE AO IS-THEREFORE NOT JUSTIFIED AND IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 15. LD. CIT(APPEALS) HAS ALLOWED THE APPEAL OF THE ASSESSEE ON APPRECIATION OF THE FINDINGS IN ASSESSMENT ORDER , REMAND REPORT SUBMITTED BY THE AO AND THE REJOINDER FILED BY THE ASSESSEE. IN VIEW OF THIS, WE DO NOT FIND ANY INFI RMITY IN THE FINDINGS OF THE CIT(APPEALS), WHICH ARE BASED, ON T HE FOUNDATION OF THE FACTS OF THE CASE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 16. IN GROUND NO.5, THE REVENUE CONTENDED THAT CIT(APPEALS), ERRED IN DELETING THE DISALLOWANCE MA DE OUT OF MOISTURE CUT CLAIMED BY THE ASSESSEE, BY IGNORING THE FACTS THAT NO CLARIFICATION COULD BE FILED BY ASSESSEE. IN THIS CONTEXT, LD. 'DR' REFERRED TO THE FINDINGS OF THE A O, AS CONTAINED, IN PARA 12.7, AT PAGE 10 OF THE ASSESSME NT ORDER AND FINDINGS OF THE CIT(APPEALS) IN PARA 10.2 AT PA GE 15. FINDINGS OF THE CIT(APPEALS) ARE REPRODUCED HEREUND ER : 10.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT, ASSESSMENT ORDER, REMAND REPORT OF THE AO AND THE R EJOINDER FILED BY THE APPELLANT. IT IS SEEN THAT THE 'MOISTURE CUT' IS A NORMAL COMPONENT/EXPENSES IN COURSE OF BUSINESS OF RICE SHELTERS ENGAGED IN MILL ING FOR THE GOVT. THE SAME CANNOT BE HELD AS PENAL IN NATURE. IT IS NOT THE CA SE OF THE AO THAT THE EXPENDITURE IS NOT GENUINE OR IS NOT SUPPORTED BY D OCUMENTS. THE DISALLOWANCE 10 MADE BY THE AO IN THIS REGARD IS THEREFORE DELETED. THE GROUND OF APPEAL IS ALLOWED. 17. THE CIT(APPEALS) HAS CONSIDERED THE REMAND REPO RT AND THE FINDINGS OF THE AO, INCLUDING THE SUBMISSIONS M ADE BY THE ASSESSEE. THE CIT(APPEALS), DELETED THE ADDITION, MADE BY THE AO, HOLDING THAT THE IMPUGNED EXPENSES CANNOT BE CO NSTRUED, AS PENAL IN NATURE. FINDINGS OF THE CIT(APPEALS) A RE WELL REASONED AND ARE BASED ON APPRECIATION OF THE FACTS OF THE CASE AND FINDINGS OF THE AO, AS CONTAINED IN ASSESS MENT ORDER AND REMAND REPORT. THEREFORE, WE DO NOT FIND ANY I NFIRMITY THEREIN AND, HENCE, THE SAME ARE UPHELD. ACCORDING LY, GROUND NO.5 OF THE APPEAL OF THE REVENUE IS DISMISS ED. 18. GROUND NOS. 6 & 7 OF THE REVENUES APPEAL IS GE NERAL IN NATURE AND, HENCE, NEED NO SEPARATE ADJUDICATION. ACCORDINGLY, THE SAME ARE DISMISSED. 19. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 20. IN CO/18/CHD/2012, LD. 'AR' SUBMITTED THAT THE DELAY IN FILING THE APPEAL MAY PLEASE BE CONDONED, IN VIE W OF THE WRITTEN SUBMISSIONS AND AFFIDAVIT FILED BY HIM. AFFIDAVIT FILED BY MEGHA GUPTA D/O LATE SHRI ARUN GUPTA IS RE PRODUCED HEREUNDER : I, MEGHA GUPTA D/O LATE SH. ARUN GUPTA PARTNER OF M/S RAMA UDYOG, 4219, DAL MANDI, AMBALA CANTT (HARYANA) DO HEREBY S OLEMNLY AFFIRM AND; DECLARE AS UNDER :- 1. IN THE AFORESAID CASE THE MAIN WORKING PARTNER SH. ARUN GUPTA EXPIRED ON DT. 15.01.2005 AND THE ASSESSMENT PROCEE DINGS WERE COMPLETED THROUGH THE ORDER U/S 143(3) DT. 12.12.2007 WHICH W AS CHALLENGED THROUGH 11 GROUNDS OF APPEAL DT. 28.12.2007 AND THE ORDER OF T HE CIT(A) ALLOWING THE APPEAL PARTIALLY IS DT. 07.03.2011. 2. THE APPEAL BEFORE THIS HON'BLE COURT HAS BEEN FILED BY THE INCOME TAX DEPARTMENT IN ITA NO. 527/CHD/2011 IN PU RSUANCE TO WHICH THE FIRST NOTICE OF COMMUNICATION OF THE APPE AL FILING HAS BEEN BROUGHT TO THE KNOWLEDGE OF THE ASSESSEE BY HAVING SERVED THROUGH THE INCOME TAX DEPARTMENT ON DT. 30.03.2012 EVIDENT FRO M THE NOTICE AT PG. 2-3 AND THE LAST DATE FOR FILING THE CROSS OBJECTIO NS IS 29.04.2012 (SATURDAY) WHEREBY THE COUNSEL SH. PANKAJ JAIN, O.K. GOYAL ADV OCATES AT CHANDIGARH WERE ENGAGED ON DT. 28.04.2012 AND AFTER PREPARATIO N OF THE PAPERS FOR PRESENTING BEFORE THIS HON'BLE COURT THE SAME HAVE BEEN RECEIVED BY THE ASSESSEE ON 01.05.2012 (TUESDAY) AND THEREAFTER THE SAME HAS BEEN RETURNED FOR FILING ON DT. 05.05.2012 (SATURDAY) HE NCE, THE FLING THEREAFTER ON 07.05.2012 (MONDAY). 3. THEREFORE IN ACCORDANCE WITH THE AFORESAID FACTS AN D CIRCUMSTANCES OF THE CASE THERE IS A DELAY OF 8 DAYS IN THE FILING O F THE PRESENT CROSS OBJECTIONS BEFORE THIS HON'BLE COURT AND IN ACCORDA NCE WITH THE PROVISIONS OF SECTION' 253(4), (5) THERE IS A SUFFICIENT CAUSE FOR PURSUING THE REMEDY AVAILABLE AFTER THE EXPIRY OF THE FATHER FOR ENGAGI NG THE COUNSEL WITHIN THE TIME LIMIT AS REFERRED UNDER THE INCOME TAX ACT. 19 61. 21. LD. 'AR' VEHEMENTLY CONTENDED THAT DELAY NEEDS TO BE CONDONED AND SUBSTANTIAL JUSTICE BE RENDERED. LD. 'DR' DID NOT SERIOUSLY CONTESTED THE ISSUE OF CONDONATION OF DELAY. 21(I) ON APPRECIATION OF THE FACTUAL MATRIX OF THE CASE OF THE CASE, AND TO ADVANCE THE CAUSE OF SUBSTANTIVE JUSTI CE, THE DELAY IS CONDONED, IN VIEW OF THE SUBMISSION FILED BY LD. 'AR'. 22. AS FAR AS GROUND NO.1, RAISED IN C.O. IS CONCER NED, THE SAME HAS BEEN ADJUDICATED WHILE ADJUDICATING GROUND NO.1 OF THE APPEAL. HENCE, THIS GROUND OF C.O. IS ALLOWED. 12 23. IN GROUND NO.2 OF THE C.O., IT IS CONTENDED THA T ESTIMATED DISALLOWANCE OF 10%, UPHELD BY THE CIT(AP PEALS), NEEDS TO BE DELETED. THIS GROUND, RAISED IN THE C. O. HAS BEEN DULY ADJUDICATED WHILE CONSIDERING AND DECIDING GRO UND NO.3 OF THE REVENUES APPEAL, WHERE, THE FINDINGS OF THE CIT(APPEALS) HAVE BEEN UPHELD AND SUCH FINDINGS ARE APPLICABLE TO GROUND NO.2, RAISED BY THE APPELLANT IN CO. IN VIEW OF SUCH FINDINGS, GROUND NO.2 OF THE C.O. IS D ISMISSED. 24. IN GROUND NO.3 OF THE CO, IT IS CONTENDED THAT ADDITION OF RS.1,89,000/- HAS BEEN MADE BY INVOKING THE PROV ISIONS OF SECTION 68 OF THE ACT, AND WITHOUT AFFORDING PROPER OPPORTUNITY TO THE ASSESSEE. 24(I) WE HAVE HEARD AND CONSIDERED THE RIVAL SUBMIS SIONS, IN THE MATTER AND ALSO PERUSED AND CONSIDERED THE FIND INGS OF LOWER AUTHORITIES. THE AO, MADE AN ADDITION OF RS. 1,89,000/- , ON ACCOUNT OF UNSUBSTANTIATED, UNSECURED LOANS, S HOWN UNDER THE HEAD RELATIVES AND FRIENDS. THE AO, FOUND THAT THE ASSESSEE CLAIMED TO HAVE RECEIVED A LOAN OF RS.19,000/- FROM EACH OF THE FOLLOWING ELEVEN PERSO NS, AS INCORPORATED IN THE ASSESSMENT ORDER AS WELL AS IN PARA 13 OF THE ORDER OF THE CIT(APPEALS)S ORDER. 25. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V VIKA S CHEMI GUM INDIA (2005) 276 ITR 32 (P&H. THE HON'BLE JURI SDICTIONAL HIGH COURT HAS HELD IN THAT CASE THAT IT IS THE DUT Y OF THE TRIBUNAL TO GIVE REASONS FOR ITS DECISION. LD. 'AR ' APPLIED THIS RATIO TO THE FINDINGS GIVEN BY THE CIT(APPEALS). 13 25(I) THE ASSESSEE, FURTHER, PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT, IN THE CASE OF WOOLCOMBE RS OF INDIA V THEIR WORKERS UNION AIR 1973 (S.C) 2758. TH E DECISION, RELIED UPON BY THE ASSESSEE, IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, AS THE LD. CIT(APPEA LS) HAS PASSED A WELL REASONED AND DETAILED ORDER. 25(II) WE HAVE CAREFULLY PERUSED AND CONSIDERED THE FINDINGS OF THE CIT(APPEALS) AND FOUND THE SAME AS WELL REAS ONED AND BASED ON THE FOUNDATION OF FACTUAL MATRIX OF THE CA SE, AS ALSO, THE APPRECIATION OF THE SUBMISSION FILED BY THE ASS ESSEE. FINDINGS OF THE CIT(APPEALS), AS CONTAINED IN PARA 13 ARE REPRODUCED HEREUNDER : 13. THE AO MADE AN ADDITION OF RS.1,89,000/- ON AC COUNT OF UNSUBSTANTIATED UNSECURED LOANS UNDER THE HEAD 'REL ATIVES AND FRIENDS'. THE AO NOTED THAT THE APPELLANT HAS CLAIMED HAVING RECE IVED A LOAN OF RS.19,000/- EACH FROM THE FOLLOWING PERSONS. S. NO. NAME OF CREDITOR/ STATION AMOUNT 1 AMAR PARKASH SADHAURA 19,000 2 VIBHUR GUPTA MUZZAFARNAGAR 19,000 3 PULKIT GUPTA SADHAURA 19,000 4 SANNY GUPTA SADHAURA 19,000 5 PARVEEN GUPTA SADHAURA 19,000 6 NIDHI GUPTA AMBALA 19,000 7 PARVEEN GUPTA MUZZAFARNAGAR 19,000 8 SUNITA GUPTA SADHAURA 19,000 9 MENU GUPTA SADHAURA 19,000 10 SHALINI GUJDTA SADHAURA 19,000 11 ANKIT GUPTA AMBALA 19,000 14 ON A QUERY BY THE AO, THE APPELLANT FURNISHED THE C ONFIRMATION FROM ABOVE CREDITOR'S ALONGWITH THEIR ADDRESS. THE AO MADE IND EPENDENT INQUIRIES WITH REGARD TO THESE CREDITORS, THE FINDING OF WHICH ARE SUMMED UP AS UNDER.- 'TO ASCERTAIN THE GENUINENESS OF THE CREDITORS, SUM MONS WERE ISSUED TO ALL THE ABOVE CREDITORS ON THE ADDRESSES GIVEN BY THE ASSES SEE EXCEPT MS NIDHI GUPTA, SH. ANKIT GUPTA. IN RESPECT OF PULKIT GUPTA WHO WAS MINOR HIS CREDIT WAS CONFIRMED BY HER MOTHER MS SUNITA GUPTA. EXCEPT SH. AMAR PARKASH , THE REMAINING CREDITORS WERE NOT AVAILABLE AT THE GIVEN ADDRESSES. THE INSPECTOR OF THIS OFFICE WAS DEPUTED TO SERVE THE SUMMONS TO SH. VIBHUR GUPTA AND SH. PARVEEN GUPTA WERE SENT THROUGH REGISTERED POST AT MUZZAFARNAGAR ON THE GIVEN ADDRESSES BY THE ASSESSEE. THE SAME HAVE BEEN RECEIVED BACK. ON THE ENVELOPES THE VISIT OF THE POSTMAN SHOWED % TIMES A T THE GIVEN ADDRESSES AND THE SUMMONS HAVE BEEN RECEIVED BACK WITH THE COMMEN TS THAT ON ENQUIRY THE ADDRESSES COULD NOT BE TRACED OUT. HOWEVER, MS SUNITA GUPTA W/O SH. ASHWANI GUPTA ATTE NDED ON 29.11.07 SUO MOTO. ON RESPECT OF CREDITS IN HER NAME AND IN THE NAME OF HER MINOR SON PULKIT GUPTA, STATEMENT WAS RECORDED U/S 131 OF THE INCOME TAX ACT, 1961. IN HER STATEMENT SHE STATED THAT ADVANCE OF RS.19, OOO /- BY HER AND HIS SON PULKIT GUPTA WAS GIVEN TO MRS. NEERAJ GUPTA. THE SOURCE OF LOAN TO MRS. NEERAJ GUPTA WAS TOLD THAT THE MONEY WHICH WAS RECEIVED FR OM THE RELATIVES AFTER THE DEATH OF HER HUSBAND. HER HUSBAND HAD EXPIRED IN TH E YEAR!996. IN HER CONFIRMATIONS FILED EARLIER BY THE ASSESSEE BY MS S UNITA GUPTA IN HER OWN CASE AND ON BEHALF OF HER SON CONFIRMED THE CREDITS MADE TO M/S RAMA UDYOG SADHAURA BUT IN HER STATEMENT DT. 29.11.07 SH E STATED THAT THE LOANS WERE ADVANCED TO MS. NEERAJ GUPTA WHO HAD NO IDENTI FITY IN THE FIRM. CREDIBILITY OF HT CREDIT AMOUNT ADVANCED BY MS.SUNI TA ATO M/S RAMA UDYOGS ALSO CONSIDERED TO BE BEYOND DOUBT AS SHE ALLEGED T O HAVE ADVANCED THE MONEY TO MS NEERAJ GUPTA OUT OF THE FUNDS WHICH WERE RECEIVED AFTER THE DEATH OF HER HUSBAND. SH. ANKIT GUPTA HAS BEEN SHOWN AS CREDITOR ON THE O THER HAND HE HAS BEEN SHOWN PARTNER OF THE ASSESSEE FIRM. SIMILARLY ON ONE OCCASION MS NIDHI GUPTA HAS BEEN SHOWN PARTNER AND ON THE OT HER SIDE CREDITOR OF RS.19,000/-. THE ASSESSEE DID NOT EXPL AIN AS TO WHAT WAS THE PURPOSE OF KEEPING TWO ACCOUNTS. NO SOURCE OF T HESE CREDITS WERE EXPLAINED. 15 IN VIEW OF THE ABOVE FINDINGS OF INDEPENDENT VERIFI CATIONS AND IN THE BACK GROUND OF THE FACTS THAT EACH OF THE CREDITORS IS F OR RS.19,000/- ONLY, THE AO CONCLUDED THAT THE ASSESSEE DEPLOYED HIS OWN FUNDS IN THE NAMES OF THE NEARS AND DEARS TO THE EXTENT OF RS.19000/- IN EACH NAME ONLY TO DEFEAT THE PROVISIONS OF SECTION 40A(3). THE AO THEREFORE HELD THE CREDITORS TO BE NON GENUINE AND MADE AN ADDITION OF RS.1,89,000/- AFTER REDUCING RS.19,000/- ON ACCOUNT OF CREDIT CONFIRMED BY SH. AMAR PRAKASH. 13.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT FILED WRITTEN SUBMISSION WHICH IS REPRODUCED AS UNDER:- S.NO. NAME STATION AMOUNT 1 AMAR SADHAURA 19,000 2 VIBHUR MUZZAFARNAGAR 19,000 3 PULKIT SADHAURA 19,000 4 SANNY MUZZAFARNAGAR 19,000 5 PARVEEN SADHAURA 19,000 6 NIDHI GUPTA AMBALA 19,000 7 PARVEEN MUZZAFARNAGAR 19,000 8 SUNITA SADHAURA 19,000 9 % MONU GUPTA SADHAURA 19,000 10 SHALINI SADHAURA 19,000 11 ANKIT GUPTA AMBALA 19,000 THE APPELLANT FILED CONFIRMATION FROM ALL THE ABOVE CREDITS WITH THE LD. ITO. THE LD. ITO HAS MADE ADDITION ON THE GROUND THAT TH E SUMMON SENT ON THE ABOVE ADDRESSES HAVE BEEN RECEIVED BACK. THE LD. IT O HAS NOT OBJECTED THE IDENTITY OF THE PERSON NOR HAS HELD THAT THE AFFIDA VITS FILED BY THE CREDITORS WERE FAKE BUT HAS MADE ADDITION ONLY ON THE POINT T HAT THE LETTERS SENT BY THE LD. IRO HAS BEEN RECEIVED BACK. MOREOVER IN THE CASE OF SUMITA GUPTA D PULKIT GUPTA, THE LD. ITO HAS MADE ADDITION ON THE GROUND THAT WHILE MAKING THE STATEMENT, ALTHOUGH THEY CONFIRMED THE LOAN BUT THE MONEY WAS HANDED OVER TO THE WIFE OF THE PARTNER SH. ARUN GUPTA AS A RUN GUPTA WAS ILL AND WAS ON BED. SO WHEN THE APPELLANT HAS GIVEN THE CONFIRM ATION OF ALL THE CREDITORS HAD ADDITION MADE ON THE GROUND THAT THE LETTERS WE RE NOT RECEIVED BY THE CREDITORS AND ADDITION MADE ON THE GROUND THAT THE LETTERS WERE NOT RECEIVED BY THE CREDITORS AND WITHOUT GIVING OPPORT UNITY TO THE APPELLANT THE ADDITIONS MADE DESERVE TO BE QUASHED. YO9UR KIND AT TENTION IS INVITED TO THE CASE OF DHIRENDERA S. PARIKH VS. ITO (1994) 491 ITO (BOM) 257 IN WHICH CASE, IT IS HELD THAT STATEMENT OR FACT RECORDED BE HIND ASSESSEE BACK WITHOUT GIVING HIM OPPORTUNITY TO CROSS EXAMINE IS ILLEGAL. SIMILAR IN THE CASE 16 OF SHIV CHARAN GUPTA VS. IAC (1991) 41 TTJ (DEL) 27 3, IT HAS BEEN HELD THAT MAKING ADDITIONS WITHOUT AFFORDING OPPORTUNITY OF B EING HEAD IS ILLEGAL & VOID AB INITIO.' 13.2 IN THE REMAND REPORT THE AO HAS RELIED UPON TH E FINDINGS GIVEN IN THE ASSESSMENT ORDER AND HAS STATED THAT NO BOOKS O F ACCOUNT WERE PRODUCED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. THEREFORE, THE CASH CREDITS WHICH HAVE NOT BEEN CONFIRMED AS PER THE IN DEPENDENT VERIFICATION HAVE BEEN RIGHTLY ADDED BACK. IN THE REJOINDER THE APPELLANT HAS REITERATED ITS SUBMISSION AND HAS STATED THAT THE CONFIRMATION S WERE FILED BY THE APPELLANT BEFORE THE AO AND THAT THE AO IS NOT JUST IFIED TO MAKE THE ADDITION SIMPLY BECAUSE THE SUMMONS ISSUED TO THESE PERSONS ON THE ADDRESS GIVEN HAVE BEEN RECEIVED BACK UN-SERVED/ OR THEY ARE NOT FOUND AT THE ADDRESS GIVEN. 13.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E BY THE APPELLANT AND FIND NO MERIT IN THE SAME. IT IS NOTED THAT NO BOOK S OF ACCOUNT WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDING ON THE G ROUND THAT THE MAIN PARTNER OF THE FIRM HAS DIED DURING THE YEAR AND TH E REMAINING PARTNERS DO NOT HAVE MUCH KNOWLEDGE IN THIS REGARD. THE CONFIRMATIO NS FILED BY THE APPELLANT HAS NO EVIDENTIARY VALUE IN THE ABSENCE OF THE SUPP ORTING BOOKS OF ACCOUNT AND IN VIEW OF THE FACT THAT IN NONE OF THE CASES T HE AMOUNTS WERE CONFIRMED IN THE INDEPENDENT VERIFICATIONS CONDUCTED BY THE A O. THE ADDITION MADE BY THE AO IN THIS REGARD IS HELD TO BE RIGHTLY MADE AN D IS UPHELD. THE GROUND OF APPEAL IS DISMISSED. 26. THE PROVISIONS OF SECTION 68 OF THE ACT, CONTAI N A GOLDEN RULE OF EVIDENCE AND CAST BURDEN ON THE ASSESSEE, T O PROVE THE NATURE AND SOURCE OF SUMS, FOUND CREDITED IN HIS BO OKS OF ACCOUNT. IT IS A WELL-SETTLED LEGAL PROPOSITION THA T THE ASSESSEE APPELLANT IS REQUIRED TO PROVE THE IDENTITY, CREDIT WORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS, WHILE PROVING THE NATURE AND SOURCE OF SUCH LOANS OR SUMS FOUND CREDITED IN HIS BOOKS OF ACCOUNT. MERE FILING OF C ONFIRMATIONS ARE NOT SACROSANCT. SIMILARLY, ROUTING OF TRANSACT ION THROUGH BANKING CHANNEL IS AN INDICATION OF MOVEMENT OF FUN DS ALONE 17 AND DOES NOT PROVE THE GENUINENESS OF THE TRANSACTI ONS, AS ALSO CREDIT WORTHINESS OF THE PARTIES. IN THE PRES ENT CASE, THE ASSESSEE HAS FAILED TO PROVE NATURE AND SOURCE OF S UCH FUNDS, WITHIN THE MEANING OF SECTION 68 OF THE ACT. THERE FORE, FINDINGS OF THE CIT(APPEALS) ARE UPHELD. ACCORDING LY, THIS GROUND RAISED BY THE APPELLANT IN THE C.O. IS DISMI SSED. 29. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DEC.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 TH DEC.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH