M/s. Swapnil Distributors P.Ltd., Pune V. ACIT Range-1, Pune

CO 30/PUN/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7726 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Opportunity of being heard; Additional evidence; Non-deduction of tax

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 675/PN/2009 & ITA NO. 963/PN/2009 (ASSESSMENT YEARS 2005-06 AND 2006-07) ASST. COMMISSIONER OF INCOME TAX, RANGE-1, PUNE .. APPELLANT VS. M/S. SWAPNIL DISTRIBUTORS PVT. LTD., 9A, RAMCHANDRA APARTMENTS, 711, NARAYAN PETH, LAXMI ROAD, PUNE 411030. .. RESPONDENT PAN NO.AAICS 7965F CO NO. 30/PN/2010 & ITA NO.899/PN/2009 (ASSESSMENT YEARS 2005-06 AND 2006-07) M/S. SWAPNIL DISTRIBUTORS PVT. LTD., 9A, RAMCHANDRA APARTMENTS, 711, NARAYAN PETH, LAXMI ROAD, PUNE 411030. .. APPELLANT PAN NO.AAICS 7965F VS. ASST. COMMISSIONER OF INCOME TAX, RANGE-1, PUNE .. RESPONDENT ASSESSEE BY : SRI NIKHIL PATHAK DEPARTMENT BY : SRI S.K. SINGH, CIT DATE OF HEARING : 09-08-2012 DATE OF PRONOUNCEMENT : 31 -08-2012 ORDER PER R.K. PANDA, AM : ITA NO. 675/PN/2009 FILED BY THE REVENUE AND CO NO. 30/PN/2010 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATE D 18-03-2009 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2005-06. SIMILARL Y ITA NO. 899/PN/2009 AND ITA NO. 963/PN/2009 FILED BY THE REVENUE ARE CROSS APPEALS AND ARE DIRECTED AGAINST THE ORDER DATED 29-05-2009 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT 2 YEAR 2006-07. SINCE COMMON GROUNDS HAVE BEEN TAKEN IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO. 675/PN/2009 (BY REVENUE A.Y. 2005-06 ) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN PAPER. THE A SSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.72,300/- ON 15-09-2005 . A SURVEY ACTION U/S.133A WAS CARRIED OUT IN THE CASE OF THE ASSESSEE ON 13-0 3-2007 AND SUBSEQUENTLY PROCEEDINGS U/S.147 WERE INITIATED. THE COMPANY WA S ALSO DIRECTED TO GET ITS ACCOUNTS AUDITED U/S.142(2A) OF THE INCOME TAX ACT AND THE AUDITORS FURNISHED THEIR REPORT TO THE AO ON 11-04-2008. 3. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTED T HAT THE ASSESSEE HAS MADE PURCHASES OF 288 METRIC TONS OF PAPER COSTING RS.99 ,89,840/- FROM THE FOLLOWING TWO PERSONS : 1. KOMAL ENTERPRISES, 76, KESHAVJI NAIK ROAD, IST FLOOR, MASJID BUNDER ROAD, MUMBAI 400 009. RS. 2,85,41,447/- 2. PRITAM ENTERPRISES, 30, KAJI SAYYED STREET, MUMBAI -400 009. RS.1,04,40,94,343/- 4. THE ASSESSEE CLAIMED TO HAVE TRANSPORTED THESE G OODS BY M/S. SAHIL TRANSPORT COMPANY. HE FURTHER NOTED THAT ALL THESE PURCHASES HAVE BEEN SHOWN TO HAVE DONE ONLY ON TWO DAYS, I.E. ON 21-03-05 AND 26 -03-05. THE PAYMENTS HAVE BEEN DONE IN CASH THEREAFTER ON 29-03-05 AND 30-03- 05. THE AO HAD CERTAIN DOUBTS AS TO HOW THE ABOVE MENTIONED TWO PARTIES SO LD THE GOODS AND HANDED OVER ITS POSSESSION TO THE ASSESSEE WITHOUT TAKING THE S ALE CONSIDERATION ESPECIALLY WHEN THE ASSESSEE HAS NOT DONE ANY TRANSACTION WITH THEM PRIOR TO THAT. HE OBSERVED THAT DURING THE SURVEY CONDUCTED ON THE BUSINESS PREMISE S OF THE ASSESSEE ON 13-02- 2007 IT WAS SEEN THAT THE PURCHASES ARE NOT VERIFIA BLE. HE THEREFORE ASKED THE 3 ASSESSEE TO PRODUCE THESE PARTIES TO VERIFY THE PUR CHASES. THE ASSESSEE DID NOT PRODUCE ANY PRINCIPAL OFFICER/DIRECTOR OF THE AFORE SAID SUPPLIER COMPANIES. HOWEVER ONE AUTHORISED PERSON OF M/S.SELECTION MERC ANTILE COMPANY PVT. LTD. WAS PRODUCED WHO CLAIMED TO HAVE DONE SUPERVISION O F SALES OF THAT COMPANY DURING THE RELEVANT PERIOD ALTHOUGH HE HAS NO CONNE CTION WITH THE AFORESAID COMPANY AT PRESENT. THE PERSON WHO ALLEGEDLY TRANS PORTED THE GOODS WAS ALSO PRODUCED THROUGH ONE OF ITS PARTNERS. THE AO RECOR DED THE STATEMENT OF THESE TWO PERSONS WHO STATED THAT SALES HAVE TAKEN PLACE AND THE GOODS HAVE BEEN DULY TRANSPORTED. HOWEVER, THEY FAILED TO PRODUCE THE I NCOME TAX ASSESSMENT DETAILS, P&L ACCOUNT AND BALANCE SHEET OF THESE TWO CONCERNS . THEREFORE, THE AO WAS NOT ABLE TO VERIFY AS TO WHETHER THE SALES AND TRAN SPORTATION CHARGES CLAIMED TO HAVE BEEN RECEIVED/RECEIVABLE HAVE BEEN DULY SHOWN BY THESE CONCERNS IN THEIR BOOKS OF ACCOUNT. 5. THE AO THEREFORE DEPUTED HIS WARD INSPECTOR TO C ONDUCT SPOT ENQUIRY AT THE BUSINESS PREMISES OF THESE 3 CONCERNS, I.E. 2 SUPPL IERS AND 1 TRANSPORTER. THE INSPECTOR REPORTED THAT NONE OF THESE CONCERNS EXIS T AT THE GIVEN ADDRESS THOUGH THEIR EXISTENCE IN THE PAST 2 TO 3 YEARS CANNOT BE RULED OUT. THE TRANSPORTER IN SUPPORT OF HIS EXISTENCE HAS PRODUCED DETAILS OF BI LLS RAISED BY LLOYDS STEEL INDUSTRIES LTD., TELEPHONE BILL IN RESPECT OF TELEP HONE NO. APPEARING ON THE BILL (ALTHOUGH IT WAS NOT IN ITS NAME), PAN CARD OF SRI ASHOK PANDE, BANK ACCOUNT MAINTAINED WITH SARASWATI COOPERATIVE BANK ETC. 6. IN THE LIGHT OF THE ABOVE FACTS AND THE REPORT O F THE INSPECTOR THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASE SHOU LD NOT BE TREATED AS BOGUS. THE ASSESSEE FILED DETAILED SUBMISSION, THE GIST OF WHI CH IS AS UNDER : (I) THE SALE MADE TO THE BLUE BIRD (INDIA) LTD (BBI L), A LIMITED COMPANY ESTABLISHES THAT CORRESPONDING PURCHASES HAVE BEEN DONE. THE S ALE HAS BEEN ALSO CONFIRMED BY THE BBIL. 4 (II) THE PROPER PURCHASE INVOICES OF GOODS DULY SUP PORT PURCHASE. (III) THE PARTIES FROM WHOM PURCHASES HAVE BEEN SHO WN ARE DULY REGISTERED UNDER THE STATE SALES TAX ACT AS WELL AS CENTRAL SALES TAX AC T. (IV) EXPENDITURE ON ACCOUNT OF TRANSPORTATION HAS B EEN DULY SUPPORTED BY BILLS AND VOUCHERS, WHICH HAVE BEEN DULY DEBITED IN THE BOOKS OF ACCOUNTS. (V) DAY TO DAY QUALITATIVE STOCK IS MAINTAINED. (VI) THE SALE CONSIDERATION HAS BEEN RECEIVED THROU GH THE LETTER OF THE CREDIT (LC) ISSUED BY THE BBIL. (VII) THE BANK THAT HAS CLEARED THE LC HAS PHYSICAL LY VERIFIED THE STOCK BEFORE RELEASING PAYMENTS AGAINST THE LC, WHICH IS EVIDENT FROM THE SALE INVOICES BEARING SIGNATURE OF THE BANK AUTHORITY WITH A STAMP OF THE BANK. (VIII) FOLLOWING JUDICIAL PRONOUNCEMENTS HAVE BEEN CITED IN FAVOUR OF THE ASSESSEE : J.R. SOLVENT INDUSTRIES PVT. LTD., 68 ITD 65 (CHD) (TM) BALAJI TEXTILE INDUSTRIES INDUSTRIES PVT. LTD., VS. ITO 49 ITD 177 (BOM) SATLEJ COTTON MILLS LTD. VS. ACIT 96 TAXMANN 22 (DE L) BANSAL STEEL ROLLING MILLS VS. ITO 96 TAXMANN 29 (D EL) CIT VS. M.K. BROTHERS 163 ITR 249 (GUJ) (IX) IN VIEW OF ABOVE FACTS THE ASSESSEE HAS REQUES TED THAT THE PURCHASES ARE GENUINE. 7. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE AND MADE ADDITION OF RS.1,01,50,000/- AS U NEXPLAINED INVESTMENT/UNACCOUNTED PURCHASES BY HOLDING AS UNDE R : 3.4 THE PLEA OF THE ASSESSEE IS NOT ACCEPTABLE IN T OTO ON THE BASIS OF FACTS GIVEN BELOW: (I) THE PURCHASES ARE NOT VERIFIABLE AT ALL AS THE ASSESSEE HAS FAILED TO PROVE BEYOND DOUBT THAT THE PURCHASES SHOWN BY IT IN ITS BOOKS OF ACCOUNTS ARE TRUE AND COMPLETE. THE GOODS HAVE BEEN SHOWN TO HAVE BEEN B ROUGHT BY VARIOUS TRUCKS VIDE LORRY RECEIPTS NUMBERS : 1064-1083 OF SAHIL TR ANSPORT CO. I.E. 20 TRUCKS. BUT IT IS SURPRISING TO NOTE THAT THE FREIGHT OF ON LY 06 TRUCKS HAVE BEEN FOUND TO HAVE BEEN DEBITED @ 450/- PER TON IN ITS BOOKS OF A CCOUNTS. FURTHER, IT HAS BEEN NOTICED THAT THE HANDLING CHARGES AND MISCELLANEOUS EXPENSES HAVE ALSO BEEN SHOWN TO HAVE BEEN INCURRED IN RESPECT OF THESE SIX TRUCKS. NO EXPENDITURE RELATING TO 14 TRUCKS HAVE BEEN DEBITED IN THE BOOK S OF ACCOUNTS THOUGH THE ACCOUNTING METHOD OF THE ASSESSEE IS MERCANTILE. T HE AUTHORISED PERSON OF SELECTION MERCANTILE CO. PVT. LTD. AND SRI ASHOK PA NDE HAVE ADMITTED IN THEIR STATEMENTS THAT THEY HAVE NOT SEEN SRI RAMAKANT JAV ALGEKAR NOT ONLY IN THE RELEVANT PERIOD BUT THEREAFTER. FURTHER, THEY ADMI TTED THAT THESE TRANSACTIONS HAVE MATERIALIZED THROUGH PHONE CALLS WHEREAS SHRI RAMAKANT JAVALGEKAR, DIRECTOR OF THE ASSESSEE, COMPANY, HAS SPECIFICALLY ADMITTED DURING SURVEY POST SURVEY PROCEEDINGS THAT THE SALES HAVE MATERIALIZED THROUGH THE AGENTS OF THE SUPPLIERS. THE INFERENCE DRAWN FROM THIS CONTRADIC TION THEREFORE IS THAT THE PURCHASES SHOWN IN THE REGULAR BOOKS OF ACCOUNTS AR E NOT GENUINE. (II) IN THIS MATERIALISTIC WORLD NO ONE WOULD SALE GOODS WITHOUT ENSURING THE RECEIPTS AGAINST THEREOF ESPECIALLY IN THE CASE WHE N THE PARTIES ARE NOT WELL ACQUAINTED AND THE ASSESSEE BEING NEW IN THIS TRADE . THE ASSESSEE HAD NOT TRADED ANY GOODS OF SIMILAR NATURE IN THE PAST WITH ANYONE INCLUDING THE ABOVE 5 MENTIONED TWO PARTIES, WHICH IS ALSO EVIDENT FROM T HE STATEMENT OF SHRI RAMAKANT JAVALGEKAR RECORDED DURING THE COURSE OF SURVEY OPE RATION ON 13-02-2007. ITS PLEA THAT SUPPLIERS HAVE DELIVERED THE GOODS WITHOU T TAKING PAYMENTS BECAUSE IT HAS SHOWN THE LETTER OF THE CREDIT OF THE BLUE BIRD (INDIA) LTD. (BBIL), WHICH WAS IN ITS POSSESSION. BUT THE FACT IS THAT THE LETTER OF CREDIT CANNOT BE SHOWN AT THE TIME OF PURCHASES AS IT WAS NOT QUANTIFIED AND ISSU ED IN THE NAME OF THE ASSESSEE ON THAT DAY. HOW BBIL WAS AWARE OF THE VALUE TO BE QUOTED IN THE LC BEFORE COMPLETION OF THE TRANSACTIONS IS ALSO SURPRISING I F THE ASSESSEES PLEA IS ACCEPTED FOR THE SAKE OF DISCUSSION THAT IT HAS LC BEFORE PU RCHASING GOODS. IN CASE THE BBIL HAS MENTIONED THE VALUE, IT MEANS THAT IT IS D ECIDING THE SALES AND PURCHASES OF THE ASSESSEE AND THE ASSESSEE IS A FRONT COMPANY OF BBIL. IT IS SURPRISING TO NOTE THAT THE CASH HAS NEVER BEEN WITHDRAWN FROM TH E BANK BY THE ASSESSEE. IT HAS BEEN WITHDRAWN BY ONE OF THE EMPLOYEE OF BBIL AS EV IDENT FROM THE PHOTOCOPY OF THE SELF-DRAWN CHEQUES ENCASHED FROM THE BANK. DUR ING THE COURSE OF SURVEY AND POST SURVEY PROCEEDINGS, SHRI RAMAKANT JAVALGEKAR H AS STATED THAT IT HAS GIVEN THE DULY SIGNED SELF DAWN CHEQUES TO THE SHRI NITIN SONTAKE, MD OF THE BBIL OR KISHORE PILANKAR, AN EMPLOYEE OF THE BBIL. INITIAL LY, IT HAS BEEN STATED THAT THESE PERSONS HAVE NEVER RETURNED THE CASH AFTER ENCASHME NT OF CHEQUES BUT LATER THIS FACT HAS BEEN DENIED IN THE STATEMENTS RECORDED IN MARCH 2007 IN POST SURVEY PROCEEDINGS. THUS IT CAN BE INFERRED THAT THE SO-C ALLED SUPPLIERS HAVE NOT SOLD GOODS AFTER PERUSING THE LCS. THUS IT CAN BE INFERR ED THAT THE PAYMENTS IF REQUIRED TO BE MADE, THEREFORE, HAVE BEEN MADE AT T HE TIME OF PURCHASES, N CASE SALE HAS TAKEN PLACE FROM THE PARTIES SHOWN IN THE BOOKS OF ACCOUNTS. HOWEVER, THE PAYMENTS HAVE BEEN SHOWN IN THE BOOKS OF THE AC COUNTS IN THE SUBSEQUENT DATE WHEN THERE WAS CASH AVAILABILITY IN THE BOOKS. (III) THE ASSESSEE HAS SUBMITTED THAT THE SALE AMOU NT IS INCLUSIVE OF ALL DIRECT EXPENSES AND SALES TAX PAYABLE ON THE GOODS SOLD OU T. THIS PLEA IS ALSO NOT ACCEPTABLE BECAUSE IF FREIGHT AND SALE TAX PAYABLE, LC DISCOUNTING CHARGES AND OTHER DIRECT EXPENDITURE ARE CLAIMED OUT OF GROSS S ALE, THUS THERE IS GROSS LOSS, WHICH NO PRUDENT BUSINESSMAN WILL LIKE TO INCUR IN A PLANNED WAY. THIS LOSS IS FURTHER AGGRAVATED BY THE DISALLOWANCE @ 20% OF GRO SS PAYMENTS IN CASH IN EXCESS OF RS.20,000/- U/S.43B OF THE INCOME TAX ACT . FURTHER, IT IS SURPRISING TO NOTE THAT THE PURCHASES ARE BEING DONE IN CASH AND SALE CONSIDERATION IS BEING RECEIVED THROUGH BANK. (IV) ON VERIFICATION OF PAN IT WAS FOUND THAT THE S UPPLIERS DO EXIST ON THE ADDRESS MENTIONED ABOVE WHEREAS THE TRANSPORTER DOE S NOT EXIST IN THE PAN DATA. THERE IS ONE AND ONLY ONE FIRM IN THE NAME STYLE OF SAHIL TRANSPORT COMPANY, A- 202, SAI NIKETAN, UDAY SHREE ROAD BHANDUP WEST, MUM BAI-78 WITH PAN AAJFS 7129K IN THE STATUS OF FIRM. THIS ALSO PROVES THAT THE TRANSPORTER IS NOT ASSESSED TO TAX. (V) THE BOOKS OF ACCOUNTS ARE NOT TRUE AND COMPLETE AS PROVED BY THE FACT THAT IT HAS NOT RECORDED THE PAYMENT OF SALES TAX OF RS. 5000/- AND THE FREIGHT AND HANDLING CHARGES IN RESPECT OF 14 TRUCKS. THOUGH I T APPEARS THAT THESE PAYMENTS HAVE BEEN DONE OUT OF BOOKS AS NO LIABILITY ON THIS SCORE APPEAR IN THE BOOKS THOUGH THE BASIC RESPONSIBILITY TO PAY THIS SUM WAS ON THE ASSESSEE. (VI) THE ASSESSEE HAS DONE ANY SALE TO ANYBODY NOT ONLY IN THIS YEAR BUT ALSO IN THE SUBSEQUENT YEARS TOO. ALL GOODS HAVE BEEN DELI VERED TO THE BBIL. IT MEANS THAT IT IS SHOWING PURCHASES AFTER RECEIVING ORDERS FROM THE BBIL NOT ONLY IN THIS YEAR BUT ALSO IN THE SUBSEQUENT YEARS TOO. 3.5 KEEPING IN VIEW THE ABOVE FACTS, I AM NOT SATIS FIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE BECAUS E IT HAS NOT ACCOUNTED FOR ALL EXPENDITURE INCLUDING SALES TAX, FREIGHT, HANDLING CHARGES, PURCHASE PRICE THOUGH ACTUALLY INCURRED AS DISCUSSED ABOVE. THEREFORE, T HE BOOKS OF ACCOUNTS ARE REJECTED U/S.145 OF THE I.T. ACT AND ASSESSMENT THEREFORE, I S COMPLETED U/S.144 OF THE I.T. ACT. 6 3.6 IN VIEW OF THE ABOVE FACTS, I HEREBY DRAW THE I NFERENCE THAT SINCE THE SALES HAS TAKEN PLACE THEREFORE, THE PURCHASES HAVE BEEN DON E BUT NOT FROM THE PARTIES WHOSE NAME APPEARS IN THE BOOKS. THE PURCHASES HAVE BEEN DONE FROM SOME THIRD PARTIES IN CASH. THE PAYMENT THEREOF HAS BEEN DONE OUT OF UNE XPLAINED/UNACCOUNTED SOURCES TO THAT PARTIES PRIOR TO THE DATE SHOWN IN THE BOOKS OF THE ACCOUNTS. THEREAFTER, THE ASSESSEE HAS REGULARISED SUCH EXPENDITURE BY SHOWING THE PURCHAS ES IN THE NAME OF THE ABOVE SUPPLIERS AS MENTIONED IN PARA 03 ABOVE. THUS THE INVESTMENT IN THE UNEXPLAINED EXPENSES AND HANDLING CHARGES IS BEING WORKED OUT. SINCE THE QUALITY AND QUANTUM OF PAPER SOLD TO THE BBIL HAS BEEN CONFIRMED BY THE BB IL, THEREFORE, THESE QUALITATIVE AND QUANTITATIVE DETAILS ARE BEING TAKEN FOR WORKING OF THE UNEXPLAINED/UNACCOUNTED PURCHASE PRICE. THE AVERAGE MARKET RATE OF THE ABO VE MENTIONED QUALITY PAPER AND FREIGHT CHARGES AS SHOWN IN THE BILLS OF M/S. TAMIL NADU NEWSPRINT AND PAPER LTD AND M/S. ANIL CARGO CARRIERS RESPECTIVELY ARE BEING TAK EN (THESE RATE HAVE BEEN OBTAINED FROM THE BBIL) FOR WORKING OUT THE INVESTMENT IN TH E UNEXPLAINED PURCHASES. THE INVESTMENT IN UNEXPLAINED/UNACCOUNTED PURCHASES OF OFFSET WHILE PAPER 166 TONS AND MAPLITHA WHITE PAPER 122 TONS @ PREVAILING MARKET P RICE THEREFORE, IS WORKED OUT AT RS. 1,01,50,000/- IN ROUND FIGURE INCLUSIVE OF FREIGHT @ 450/- PER TON AND LOADING + HANDLING CHARGES @ RS. 25 PER TON. THIS INVESTMENT IN UNEXP LAINED/UNACCOUNTED PURCHASES THEREFORE, IS ADDED INTO THE INCOME OF THE ASSESSEE (ADDITION OF RS.1,01,50,000/-). 8. IN APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON MADE ON ACCOUNT OF INVESTMENT IN UNACCOUNTED PURCHASES OF RS.99,89,840 /- BY HOLDING AS UNDER : 4.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED MATERIAL ON RECORD. THE FIRST ISSUE THAT REQUIRES DECISION IN THIS CASE IS WHETHER THE AFFIDAVIT SUBMITTED BY THE APPELLANT OF SHRI MUKESH CHANDAK, DIRECTOR OF TAKSHIL TRADING CO. PVT. LTD. FROM WHOM THE APPELLANT CLAIMS TO HAVE PURCHAS ED THE GOODS, IS IN NATURE OF ADDITIONAL EVIDENCE OR NOT. THOUGH THE AFFIDAVIT M ERELY AFFIRMS THE TRANSACTIONS WHICH ARE RECORDED IN THE BOOKS OF ACCOUNTS WHICH ARE SUB JECT MATTER OF SPECIAL AUDIT BUT IT IS TRITE LAW THAT AN AFFIDAVIT FILED BEFORE THE CIT(A) FOR THE FIRST TIME IS IN NATURE OF ADDITIONAL EVIDENCE. IN VIEW OF THIS, APPELLANT CO NTENTION THAT SINCE THE AFFIDAVIT SUPPORTS THE CONTENTION MADE AT THE LEVEL OF THE AS SESSING OFFICER AND THEREFORE, IT NEED NOT BE TREATED AS FRESH EVIDENCE HAS NO MERITS . THE AFFIDAVIT IS HELD TO BE IN THE NATURE OF ADDITIONAL EVIDENCE. 4.4.1 THE NEXT ISSUE TO BE DECIDED IS WHETHER THE A PPELLANT IS ENTITLED TO PRODUCE THE AFFIDAVIT BEFORE THE CIT(A). IT IS CONTENTION OF T HE APPELLANT THAT THE APPELLANTS CASE IS COVERED UNDER SUB-CLAUSE(C) AND CLAUSE(D) OF CLAUSE (1) OF RULE 46A. THE CIRCUMSTANCES AS CONTAINED IN SUB-CLAUSES (C) & (D) OF CLAUSE (1) OF RULE 46A ARE REPRODUCED AS UNDER : (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL. (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELL ANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. 4.4.2 THE COMMENTS OF THE ASSESSING OFFICER ON THE ADDITIONAL EVIDENCE WERE CALLED FOR AND THE LEARNED ASSESSING OFFICER HAS OBJECTED TO THE ADMISSION OF THE ADDITIONAL EVIDENCE VIDE HIS LETTER DATED 13-02-2009, CONTENTS OF WHICH ARE ALREADY REPRODUCED HEREINBEFORE. AFTER PERUSAL OF MATERIAL ON RECORD, IT IS CLEAR THAT THE LEARNED ASSESSING OFFICER GAVE APPELLANT MORE THAN REASONABLE OPPORTU NITIES FOR PRODUCING ANY MATERIAL IN SUPPORT OF ITS CLAIM RELATING TO GENUINENESS OF PUR CHASES. THE LEARNED ASSESSING OFFICER HAS ALSO PROVIDED SUFFICIENT OPPORTUNITY TO THE APP ELLANT FOR PLACING ITS CONTENTIONS BEFORE HIM. TAKING INTO ACCOUNT ALL THESE ASPECTS OF THE MATTER AND MATERIAL ON RECORD, 7 IT IS HELD THAT THE APPELLANTS CASE DOES NOT COME WITHIN THE PURVIEW OF SUB-CLAUSE (C) AND OR (D) OF CLAUSE (1) OF RULE 46A OF THE INCOME TAX RULES , 1962. ACCORDINGLY, IT IS HELD THAT THE ADDITIONAL EVIDENCE SUBMITTED BY THE APPELLANT IS NOT ADMISSIBLE WITHIN THE MEANING OF SUB-CLAUSE(C) AND (D) OF RULE CLAUSE (1) OF RULE 46A OF THE I.T. RULES, 1962 AND ACCORDINGLY, REJECTED. 4.5 AS REGARDS THE ISSUE OF ADDITION ON ACCOUNT UNA CCOUNTED/UNEXPLAINED PURCHASES, FROM THE PERUSAL OF MATERIAL ON RECORD, FOLLOWING ASPECTS EMERGE: (I) IT IS CLAIM OF THE APPELLANT THAT IT HAS MADE THE PURCHASES FROM THE FOLLOWING TWO PARTIES FOR WHICH PAYMENTS HAVE BEEN MADE IN CASH AND ARE DULY RECORDED IN BOOKS OF ACCOUNTS : (A) SELECTION MERCANTILE CO. PVT. LTD. : RS.74,90,8 40/- (B) TAKSHIL TRADING PVT. LTD. : RS.24,99,000/- THESE PURCHASES ARE DULY SUPPORTED BY PURCHASES INV OICES CONTAINING DETAILS SUCH AS NAME, ADDRESS, TELEPHONE NUMBER, DESCRIPTION OF MAT ERIAL AND SALES TAX REGISTRATION NUMBER, DECLARATION OF THE ASSESSEE AS PER SALES TA X RULES ETC. AS IS CLEARLY RECORDED BY THE LEARNED ASSESSING OFFICER IN PARA 3.1 OF THE AS SESSMENT ORDER THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AUTHORISED PERSON FROM S ELECTION MERCANTILE CO. PVT. ATTENDED THE OFFICE OF THE ASSESSING OFFICER IN RES PONSE TO SUMMONS U/S.131 AND CONFIRMED THE TRANSACTIONS. THIS IS CLEAR FROM THE STATEMENT DATED 21-05-2008 RECORDED BY THE LEARNED ASSESSING OFFICER. THE TWO QUESTION S AND ANSWER TO THESE QUESTIONS AS CONTAINED IN THE STATEMENT OF SHRI ARUN P. MANDAVIA ARE REPRODUCED AS UNDER : Q.NO.1 PLEASE REFER YOUR STATEMENT RECORDED ON 21- 05-2008. TODAY YOU HAVE FURNISHED POWER OF ATTORNEY ISSUED BY SHRI SHANTILA L TARACHAND SHAH, DIRECTOR OF M/S. SELECTION MERCANTILE COMPANY PVT. LTD. AND CON FIRMATION OF ACCOUNTS OF M/S. SWAPNIL DISTRIBUTORS PVT. LTD. FOR F.Y. 2004-0 5. PLEASE STATE WHETHER TWO DOCUMENTS ARE SIGNED AND ISSUED BY SHANTILAL T. SHA H. ANS. YES Q.NO.2 THE GOODS SOLD BY SELECTION MERCANTILE CO. P VT. LTD., DURING THE F.Y. 2004- 05 HAVE BEEN LOOKED AFTER BY YOU ? ANS. YES I WAS LOOKING AFTER THIS TRANSACTION. II) PURCHASES MADE FROM THE ABOVE TWO PARTIES HAVE BEEN SOLD TO BLUE BIRD INDIA LTD. AND SALE IS RECORDED IN APPELLANTS BOOK S OF ACCOUNTS. THE SALE PROCEED IS ALSO RECORDED IN APPELLANTS BOOKS OF ACCOUNTS A ND OUT OF THIS SALE PROCEEDS, THE PAYMENT FOR PURCHASES IS CLAIMED TO BE MADE. T HE BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BEEN SUBJECTED TO THE SPECIAL AUDIT U/S.142(2A) OF THE INCOME TAX ACT, 1961. III) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, S HRI ASHOK PANDE, PARTNER OF SAHIL TRANSPORT CO. ATTENDED THE OFFICE OF THE A SSESSING OFFICER IN RESPONSE TO SUMMONS U/S.131 ISSUED BY THE LEARNED ASSESSING OFF ICER. HIS STATEMENT WAS RECORDED ON 21-05-2008 AND IN THIS STATEMENT, SHRI ASHOK PANDE CONFIRMED HAVING DONE TRANSPORTATION WORK FOR THE APPELLANT. SHRI PANDE HAS SUBMITTED A LETTER TO THE ASSESSING OFFICER ON 09-06-2008. THE OPERATIVE PORTION OF WHICH IS REPRODUCED AS UNDER : THIS IS FURTHER TO MY STATEMENT GIVEN TO YOU IN TH E ABOVE REFERRED FROM TIME TO TIME. AS DESIRED BY YOU ENCLOSED PLEASE FI ND XEROX COPIES OF THE FOLLOWING DOCUMENTS : 8 1. LEASE DEED IN RESPECT OF MY CURRENT PLACE OF BUS INESS AT ABOVE MENTIONED ADDRESS FOR THE PERIOD FROM 20-07-2 007. 2. I HAD BEEN CARRYING OUT MY BUSINESS AS TRANSPORT ER CARRIER FROM THE PLACE AT THE PREMISES OF ASSOCIATED TRADER & ENGINEERING AT 4 TH FLOOR, SHAMMIK CHAMBERS, BAROCH STREET, BOMBAY 4 00 009. THE COPY OF TELEPHONE BILL 9MTNL) OF THE YEAR 1999 IS ENCLOSED. 3. THE COPY OF PURCHASE ORDER OF LLOYDS STEEL INDUS TRIES LTD. MUMBAI DATED 25 TH MAY 1999 IN MY NAME (SAHIL TRANSPORTER COMPANY) ON THE ADDRESS MENTIONED IN PARA 2 ABOVE I S ENCLOSED. 4. COPY OF PAN CARD IS ENCLOSED. 5. MY BUSINESS IS BEING RUN FROM NEW ADDRESS WHERE NAME BOARD OF SAHIL TRANSPORT IS ALREADY IN EXISTENCE. PHOTOGRAPH OF THE SAME HAS ALREADY BEEN PRODUCED BEFORE YOU TODAY . FROM THE FOREGOING, I FEEL THAT I HAVE SUFFICIENTLY PROVED BEFORE YOU BY PRESENTING THE VARIOUS DOCUMENTS AS EVIDENCE, MY GE NUINENESS AS AN INDIVIDUAL AS WELL AS A TRANSPORTER. IV) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SH RI RAMESH PADMANABHAN, CHIEF MANAGER OF FEDERAL BANK OF INDIA WHICH WAS PROVIDING CREDIT FACILITIES TO BLUE BIRD (I) LTD. TO WHOM APP ELLANT HAS MADE SALES OF GOODS PURCHASED FROM THE AFORESAID TWO PARTIES WAS EXAMIN ED BY THE LEARNED ASSESSING OFFICER U/S.131 OF THE INCOME TAX ACT, 19 61 AND HIS STATEMENT WAS RECORDED. DURING THE COURSE OF THIS STATEMENT, THE ASSESSING OFFICER ASKED SHRI RAMESH PADMANABHAN REGARDING VERIFICATION OF GOODS PURCHASED BY BLUE RAMESH PADMANABHAN REGARDING VERIFICATION OF GOODS PURCHASED BY BLUE BIRD (I) LTD. THE RELEVANT QUESTIONS AND ITS ANSWER ARE REP RODUCED AS UNDER: Q. HAVE YOU EVER VERIFIED THE GOODS PURCHASED BY BL UE BIRD INDIA LTD. IN F.Y.2004-05 & 2005-06, IF YES, GIVE DETAILS THER EOF? ANS. YES, I HAVE VERIFIED THE GOODS WHEREVER PERTAI NING TO OUR BRANCH. I HAVE VERIFIED THE GOODS BECAUSE THE BANK IS PARTI NG MONEY ON SUCH PURCHASES. I PHYSICALLY GO TO THE FACTORY FOR VERI FICATION OF STOCK AS AND WHEN BANK HAS RECEIVED THE BILLS PREPARED TO THE DI SCOUNTING. AFTER DISCOUNTING PARTY ACCOUNT IS CREDITED. Q. ARE YOU THE PERSON WHO HAS DONE PHYSICAL VERIFIC ATION OF PURCHASES/STOCK WHICH PAYMENTS ARE REQUIRED TO BE M ADE THROUGH LCBD IN F.Y. 2004-05 & 2005-06. ANS. YES, I HAVE VERIFIED. WHEN I GO TO THE FACTOR Y FOR VERIFICATION TRUCK LOADS OF RAW MATERIALS HAD BEEN SEEN BEING OFF LOAD ED IN FACTORY PREMISES OF BBI LTD. WE VERIFIED THE STOCK WITH THE RESPECT IVE BILLS/INVOICES OF THE PARTICULAR SUPPLIERS. WE ALSO CHECK QUANTITY OF MA TERIAL AND THE SPECIFICATIONS AS PER BILLS SUBMITTED TO US. I HAV E GONE VERIFICATION ON MY OWN I HAVE NOT DEPUTED ANYONE FOR THIS, NO ONE HAS ASSIGNED ME FOR VERIFICATION AS IT IS NOT REQUIRED AS PER BANKING N ORMS. FROM THE ABOVE, IT IS CLEAR THAT IN CASE OF BLUE BI RD (L) LTD. TO WHOM SALES HAVE BEEN MADE BY THE APPELLANT, GOODS PURCHASED BY BBIL FROM THE APPELLANT HAVE BEEN VERIFIED BY THE BANK MANAGER WITH REFERENCE TO RESPECTIVE SALE BILLS/INVOICES OF THE PARTICULAR SUPPLIES OF THE AP PELLANT WHICH ARE PURCHASE 9 VOUCHERS FOR BLUE BIRD (I) LTD. AND QUANTITY OF THE MATERIAL AND SPECIFICATION OF MATERIAL AS PER BILL HAS ALSO BEEN VERIFIED BY THE BANK CHIEF MANAGER, SHRI PADMANABHAN. V) THE FACT THAT THE AUTHORISED PERSON FROM M/S. SE LECTION MERCANTILE CO. PVT. LTD. AND TRANSPORTER STATED THAT THE PURCHASES AND TRANSPORTATION HAVE BEEN MADE, HAS BEEN RECORDED BY THE LEARNED ASSESSING OF FICER IN PARA 3.1 OF THE ASSESSMENT ORDER. THE LEARNED ASSESSING OFFICER HA S MENTIONED THAT THE TWO PERSONS FAILED TO PRODUCE INCOME TAX ASSESSMENT DET AILS, PROFIT & LOSS A/CS AND BALANCE SHEETS OF THESE TWO CONCERNS. HOWEVER, IF INCOME TAX DETAILS HAVE NOT BEEN PRODUCED BY THE TWO PERSONS, THE APPELLANT CAN NOT BE HELD RESPONSIBLE FOR THE SAME. VI. THE CASE OF THE APPELLANT WAS SUBJECTED TO SPEC IAL AUDIT U/S.142(2A) AND THE ISSUE RELATING TO GENUINENESS OF PURCHASES OF T HE APPELLANT HAS BEEN EXAMINED BY THE SPECIAL AUDITOR. ACCORDING TO THE SPECIAL AUDITOR, THE PURCHASES EFFECTED BY THE APPELLANT COMPANY AND ITS CORRESPON DING SALE ARE GENUINE AND DULY SUPPORTED BY EVIDENCES. THE EXTRACTS FROM THE REPORT OF THE SPECIAL AUDITOR HAVE BEEN REPRODUCED HEREIN BEFORE. VII. IT IS CLEAR FROM PARA 3.1 OF THE ASSESSMENT OR DER THAT ALL THESE PURCHASES HAVE BEEN MADE WITHIN A PERIOD OF FIVE DAYS AND PAY MENTS HAVE BEEN MADE THEREAFTER. NOW, THE CREDIT OF A FEW DAYS CANNOT B E SAID TO BE EXTRA ORDINARY AND IS IN NORMAL OF BUSINESS. IN VIEW OF THIS, THE AO S COMMENTS REGARDING SALE OF GOODS ON CREDIT OF A FEW DAYS ARE HELD AS UNJUSTIFI ED. 4.5.1 THE LEARNED ASSESSING OFFICER HAS POINTED OUT SOME INCONSISTENCIES AND HAS DERIVED ADVERSE INFERENCE FROM THESE INCONSISTENCIE S FOR COMING TO THE CONCLUSION THAT THE PURCHASES HAVE BEEN MADE IN CASH FROM PARTIES O THER THAN SELECTION MERCANTILE CO. LTD. AND TAKSHIL TRADING PVT. LTD. IN THIS REGARD, IT MAY BE MENTIONED THAT THE FACT OF PURCHASE OF GOODS FROM THE TWO COMPANIES IS CLEARLY RECORDED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND ALSO REFLECTED AS SALES IN ITS BOOKS AND IS DULY BACKED BY BILLS/VOUCHERS AS IS CLEARLY STATED BY THE SPECIAL AUDITOR IN THE TAX AUDIT REPORT. THE RECEIPT OF PAYMENT ON ACCOUNT OF ALL THESE PURCHASE S IS ALSO RECORDED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND THE SALE HAS BEEN EFF ECTED TO A LIMITED COMPANY IN WHOSE BOOKS THE TRANSACTION IS DULY REFLECTED AS PURCHASE S. THE AUTHORISED PERSON FROM THE COMPANY FROM WHOM THE MAJOR PURCHASES HAVE BEEN MAD E BY THE APPELLANT HAS CLEARLY STATED THE FACTUM OF PURCHASE OF GOODS BY APPELLANT IN HIS STATEMENT RECORDED BY THE ASSESSING OFFICER. THE TRANSPORTER WHO TRANSPORTED THE GOODS FOR THE APPELLANT HAS ALSO CONFIRMED THE FACT OF TRANSPORTATION OF GOODS. THE CHIEF MANAGER OF FEDERAL BANK HAS CLARIFIED THAT HE HAS VERIFIED THE GOODS PURCHASED BY BLUE BIRD INDIA LTD. WITH REFERENCE TO THE BILLS/VOUCHERS ISSUED BY THE APPELLANT. THE LEARNED ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY RELEVANT, RELIABLE AND COGENT MATERIAL IN SUPPORT OF HIS VIEW THAT PURCHASES HAVE BEEN MADE FROM PARTIES OTHER THAN TH OSE SHOWN BY THE APPELLANT AND THE PAYMENT FOR SUCH PURCHASES HAVE BEEN MADE IN CA SH AT THE TIME OF PURCHASES. IN THE LIGHT OF THESE FACTS, THE VIEW OF THE ASSESSING OFFICER THAT THOUGH THE ASSESSEE HAS MADE SALES TO BLUE BIRD (I) LTD. BUT THE PURCHASES FOR SUCH SALES WERE MADE FROM SOME THIRD PARTIES OTHER THAN THOSE SHOWN BY THE APPELLA NT AND THE PAYMENT FOR SUCH PURCHASES WAS MADE SIMULTANEOUSLY HAS NO BASIS AND IS HELD TO BE UNJUSTIFIED. THE APPELLANTS PURCHASES STAND PROVED WITH REFERENCE T O ITS BOOKS OF ACCOUNTS, ITS SALE OF SUCH GOODS TO BLUE BIRD (I) LTD. AND RECEIPT OF CON SIDERATION FROM BLUE BIRD (INDIA) BY THE APPELLANT AND OTHER MATERIAL SUCH AS STATEMENTS OF SHRI MANDAVIA, SHRI ASHOK PANDE AND CHIEF MANAGER OF THE FEDERAL BANK. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 10 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.99,89,840/- MADE ON ACC OUNT OF INVESTMENT IN UNEXPLAINED EXPENSES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE PURCHASES HAVE BEEN M ADE FROM SOME THIRD PARTIES IN CASH AND THE PAYMENT THEREOF HAS BEEN DONE OUT OF UNEXPL AINED/UNACCOUNTED SOURCES TO THOSE PARTIES PRIOR TO THE DATE SHOWN IN THE BOOKS OF ACC OUNTS. 3. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE AO RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 10. THE LEARNED DR HEAVILY RELIED ON THE ORDER OF T HE AO. HE SUBMITTED THAT THE AO HAD CONCLUSIVELY PROVED THAT THE ASSESSEE HAD NO T PURCHASED GOODS FROM THE SO CALLED TWO CONCERNS BUT MIGHT HAVE PURCHASED FROM S OME OTHER PARTIES IN CASH AND SUPPLIED THE GOODS TO AN ASSOCIATE CONCERN. THE WH OLE EXERCISE IS A COLOURABLE ONE AND THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETIN G THE ADDITION MADE BY THE AO ON ACCOUNT OF INVESTMENT IN UNACCOUNTED PURCHASES. 11. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE IS A TRADER IN PAPERS AND THIS IS THE VERY FIRST YEAR OF ITS OPERATION. THE ASSESSEE HAS CONCLUSIVELY PROVED THE GENUINENESS OF THE PURCHASES BY PRODUCING THE PERSO NS FROM WHOM PURCHASES HAVE BEEN MADE, BY PRODUCING THE TRANSPORTER THROUGH WHO M GOODS HAVE BEEN TRANSPORTED, BY PRODUCING THE MANAGER OF THE BANK W HO HAS CLEARED THE LC AND WHO HAS PHYSICALLY VERIFIED THE GOODS BEFORE RELEAS ING THE PAYMENTS. THE AO HAS MERELY ON PRESUMPTIONS AND SURMISES DISBELIEVED THE PURCHASES AND MADE HUGE ADDITIONS WHICH IS UNCALLED FOR. HE SUBMITTED THAT THE LEARNED CIT(A) AFTER EXHAUSTIVELY DISCUSSING THE VARIOUS EVIDENCES FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND AFTER CONSIDERING THE REPORT OF THE SPECIAL AUDITORS APPOINTED BY THE AO U/S.142(2A) HAS DELETED THE ADDITION MADE BY THE AO. THEREFORE, THE ORDER 11 OF THE LEARNED CIT(A) BEING IN ACCORDANCE WITH LAW AND BEING A REASONED ONE SHOULD BE UPHELD. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE VOLUMINOUS PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO DISBELIEVED THE PURCH ASE OF PAPERS BY THE ASSESSEE COMPANY FROM THE TWO FIRMS, NAMELY KOMAL ENTERPRISE S AND M/S. PRITAM ENTERPRISES ON THE GROUND THAT : (A) ALL THESE PURCHASES HAVE BEEN DONE ONLY IN TWO DAYS; (B) PAYMENTS HAVE BEEN DONE IN CASH AFTER THE PURC HASES, I.E.29-03-05 AND 30-03-05; (C) ALL EXPENDITURE INCLUDING SALES TAX, FREIGHT, H ANDLING CHANGES ETC. HAVE NOT BEEN PROPERLY ACCOUNTED FOR AND (D) SINCE SALES HAVE BEEN MADE THEREFORE PURCHASES HAVE BEEN DONE BUT NOT FROM THE PARTIES WHOSE NAME APPEAR IN THE BOOKS AND THE PURC HASES MIGHT HAVE BEEN DONE FROM SOME THIRD PARTIES IN CASH. 13. IN VIEW OF THE ABOVE, THE AO CAME TO THE CONCLU SION THAT THE PAYMENTS FOR THE PURCHASES MADE FROM SOME OTHER PARTIES OTHER TH AN THE TWO PARTIES SHOWN BY THE ASSESSEE HAVE BEEN DONE OUT OF UNEXPLAINED/UNAC COUNTED SOURCES TO THAT PARTIES PRIOR TO THE DATE SHOWN IN THE BOOKS OF ACCOUNTS. THEREAFTER THE ASSESSEE HAS REGULARISED SUCH EXPENDITURE BY SHOWING THE PURCHAS ES. IN VIEW OF THE ABOVE, THE AO MADE ADDITION ON ACCOUNT OF INVESTMENT IN UNEXPL AINED EXPENSES AND FREIGHT AND HANDLING CHARGES AND MADE ADDITION OF RS.1,01,5 0,000/- AS PER PARA 7 OF THIS ORDER. 14. WE FIND THE LEARNED CIT(A) AFTER CONSIDERING TH E STATEMENT OF SRI ARUN P. MADANIA, AUTHORISED PERSON OF SELECTION MERCANTILE COMPANY PVT. LTD., SRI ASHOK PANDE, PARTNER OF SAHIL TRANSPORT COMPANY AND RAMES H PADMANABHAN, CHIEF MANAGER OF FEDERAL BANK OF INDIA WHICH WAS PROVIDIN G CREDIT FACILITATES TO BLUE BIRD INDIA PVT. LTD. TO WHOM THE ASSESSEE HAS MADE SALES ACCEPTED THE PURCHASES MADE BY THE ASSESSEE COMPANY AS GENUINE. WHILE DOI NG SO, HE HAS ALSO CONSIDERED THE REPORT OF THE SPECIAL AUDITORS APPOINTED BY THE AO U/S.142(2A) WHO HAVE 12 MENTIONED THAT THE PURCHASES EFFECTED BY THE ASSESS EE COMPANY AS WELL AS THE CORRESPONDING SALES ARE GENUINE AND ARE DULY SUPPOR TED BY EVIDENCES. UNDER THESE CIRCUMSTANCES AND IN VIEW OF THE DETAILED ORDER PAS SED BY THE LEARNED CIT(A) WHICH HAS ALREADY EXTRACTED AT PARA 8 OF THIS ORDER WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, WE UPHOLD THE SAME AND THE GROUNDS RAI SED BY THE ASSESSEE ARE DISMISSED. CO NO. 30/PN/2010 (BY ASSESSEE A.Y. 2005-06 ) : 15. GROUNDS RAISED BY THE ASSESSEE IN THE CO ARE AS UNDER : 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION MADE U/S.40A(3) OF RS.19,97,986/- WITHOUT APPRECIATING THAT THE ADDITI ON WAS NOT WARRANTED ON THE FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS. 96,000/- MADE U/S.69C OF THE ACT. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS. 20,000/- BEING SALARY PAID TO MRS. ANJALI JAVALGEKAR. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING OF RS. 5, 000/- U/S.69C OF THE ACT. 16. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIM E OF HEARING WAS NOT VERY SERIOUS ABOUT THE CO FILED BY THE ASSESSEE. WE, TH EREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) CONFIRMING THE ABOVE ADDITIONS MADE BY THE AO. THE CO FILED BY THE ASSESSEE IS ACCORDINGLY DI SMISSED. ITA 963/PN/2009 ( BY REVENUE A.Y. 2006-07 ) : 17. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 2,90,75,252/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING THE FACT THAT THE PURCHASES HAVE BEEN DONE FROM SOME THIRD PARTIES IN CASH AND THE PAYMENT THEREOF HAS BEEN DONE OUT OF U NEXPLAINED/UNACCOUNTED SOURCES TO THOSE PARTIES PRIOR TO THE DATE SHOWN IN THE BOOKS OF ACCOUNTS. 3. THE ORDER OF THE CIT(APPEALS) MAY BE VACATED AND THAT OF THE AO RESTORED. 13 18. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUN DS RAISED BY THE REVENUE IN THE ABOVE APPEAL ARE IDENTICAL TO THE GROUNDS RAISED BY THE REVENUE IN ITA NO. 675/PN/2009. WE HAVE ALREADY DECIDED THE ISSUE AND DISMISSED THE APPEAL OF THE REVENUE BY CONFIRMING THE ORDER OF THE CIT(A) IN DE LETING THE ADDITION ON ACCOUNT OF INVESTMENT IN UNEXPLAINED PURCHASES. FOLLOWING T HE SAME RATIO, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ITA 899/PN/2009 ( BY ASSESSEE A.Y. 2006-07 ) : 19. GROUND OF APPEAL NO. 1 AND 1.1 WAS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE FOR WHICH THE LEARNED DR HAS NO OBJECT ION. ACCORDINGLY THE SAME IS DISMISSED. 20. IN GROUNDS OF APPEAL NO. 2 TO 2.2 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE O F RS.1,11,46,319/- U/S.40(A)(IA) OF THE INCOME TAX ACT. 21. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DUE TO NON-DEDUCTION OF TAX FROM THE FREIGHT PAYMENT AND PAYMENT OF THE SAM E TO THE CREDIT OF THE CENTRAL GOVERNMENT THE AO MADE THE DISALLOWANCE OF RS.1,11, 46,319/- U/S.40(A)(IA) WHICH HAS BEEN UPHELD BY THE LEARNED CIT(A). HE SUBMITTED THAT SINCE ALL PAYMENTS HAVE BEEN MADE BEFORE 31-03-2006, THEREFORE, IN VIEW OF THE DECISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT REPORTED IN 136 ITD 23 NO DISALL OWANCE US/.40(A)(IA) IS CALLED FOR. HE SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO TO VERIFY THE SAME AND DECIDE THE ISSUE IN THE LIGHT OF THE VISAK HAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT (SUPRA). THE LEARNED DR ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT HE HAS 14 NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW. 22. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. IN THIS CASE ADDITIONS HAVE BEEN MADE ON ACCOUNT OF NON-DEDUCTIO N OF TAX FROM THE FREIGHT PAYMENT. IT IS THE SUBMISSION OF THE LEARNED COUNSE L FOR THE ASSESSEE THAT ALL THE PAYMENTS HAVE BEEN MADE BEFORE THE CLOSE OF THE ACC OUNTING YEAR FOR WHICH NO DISALLOWANCE U/S.40(A)(IA) CAN BE MADE IN VIEW OF T HE DECISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT (SUPRA) AND THIS FACT CAN BE VERIFIED BY THE AO IF THE MATTER IS RESTORED TO HIS FILE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER REQUIRES VERIFICATION AT THE LEVEL OF THE AO . WE, THEREFORE, DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH THE D IRECTION TO VERIFY THE DATES OF PAYMENT AND DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPI NG AND TRANSPORT (SUPRA) AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSESSEE IN THE CO IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 23. GROUND OF NO. 2.3 READS AS UNDER : WITHOUT PREJUDICE TO THE GROUND NOS. 2 TO 2.2 THE ASSESSEE SUBMITS THAT IT HAD ITSELF DISALLOWED 20% OF RS. 1,11,46,319/- U/S.40A(3) AND THEREFORE, THE DISALLOWANCE IF AT ALL, TO BE MADE U/S.40(A)(IA) SHOULD BE RESTRICTED TO TH E BALANCE AMOUNT AFTER CONSIDERING THE DISALLOWANCE U/S.40A(3). 24. AFTER HEARING BOTH THE SIDES WE FIND THIS GROUN D IS LINKED TO GROUND OF APPEAL NO. 2 DISCUSSED ABOVE. SINCE THE ABOVE GROUN D HAS BEEN RESTORED TO THE FILE OF THE AO, THEREFORE, WE ARE OF THE CONSIDERED OPIN ION THAT THIS GROUND ALSO SHOULD GO BACK TO THE AO FOR HIS ADJUDICATION AFRESH. 15 25. IN THE RESULT, ITA NO. 675/PN/2009 AND ITA NO. 963/PN/2009 FILED BY THE REVENUE AND THE CO NO. 30/PN/2010 FILED BY THE ASSE SSEE ARE DISMISSED. ITA NO. 899/PN/2009 FILED BY THE ASSESSEE IS PARTLY-ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF AUGUST 2012 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 31 ST AUGUST 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CCIT, PUNE 4. CIT-I, PUNE 5. THE ASSESSING OFFICER (ACIT, RANGE-I, PUNE) 6. THE D.R, B PUNE BENCH 7. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE