M/s. Blue Bird India Pvt. Ltd., Pune V. ACIT Range-1, Pune

CO 33/PUN/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7721 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Bogus purchase; Depreciation; Opportunity of being heard
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 674/PN/2009 & ITA NO. 964/PN/2009 (ASSESSMENT YEARS 2005-06 AND 2006-07 ACIT, RANGE-1, PUNE .. APPELLANT VS. BLUE BIRD (INDIA) LTD., 759/74, PRABHAT ROAD, PUNE 411 004. .. RESPONDEN T PAN NO. AADCA 0162D CO.NO.33/PN/2010 (ARISING OUT OF ITA NO. 674/PN/2009) ASSESSMENT YEAR 2005-06 BLUE BIRD (INDIA) LTD., 759/74, PRABHAT ROAD, PUNE 411 004. .. APPELLANT PAN NO. AADCA 0162D VS. ACIT, RANGE-1, PUNE .. RESPONDENT ITA NO. 900/PN/2009 (ASSESSMENT YEAR 2006-07) BLUE BIRD (INDIA) LTD., 759/74, PRABHAT ROAD, PUNE 411 004. .. APPELLANT PAN NO. AADCA 0162D VS. ACIT, RANGE-1, PUNE .. RESPONDENT ASSESSEE BY : SRI NIKHIL PATHAK & SUHAS P. BORA DEPARTMENT BY : SRI S.K. SINGH, CIT DATE OF HEARING : 09-08-2012 DATE OF PRONOUNCEMENT : 06-09-2012 ORDER PER R.K. PANDA, AM : ITA 674/PN/2009 FILED BY THE REVENUE AND CO NO. 33/ PN/2010 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 24-03 -2009 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2005-06. ITA NO. 900/P N/2009 FILED BY THE ASSESSEE AND ITA NO.964/PN/2009 FILED BY THE REVENUE ARE CRO SS APPEALS AND ARE DIRECTED 2 AGAINST THE ORDER DATED 29-05-2009 OF THE CIT(A) PU NE RELATING TO ASSESSMENT YEAR 2006-07. FOR THE SAKE OF CONVENIENCE, ALL THE SE APPEALS AND THE CO WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER : ITA NO. 674/PN/2009 (A.Y. 2005-06) ( BY REVENUE ) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE COMPANY DERIVES INCOME FROM MANUFACTURING OF NOTE BOOKS, GUIDES, OTHER BOO KS AND PRINTING MATERIALS. IT FILED ITS RETURN OF INCOME ON 31-03-2006 DECLARING TOTAL INCOME AT RS.21,07,46,680/-. DURING THE ASSESSMENT PROCEEDIN GS THE AO NOTED THAT A SURVEY WAS CONDUCTED ON THE BUSINESS PREMISES OF M/S. SWAP NIL DISTRIBUTORS PVT. LTD., (SDPL) ON 13-02-2007 ACCORDING TO WHICH THE ASSESSE E HAS PURCHASED GOODS WORTH RS.1.04 CRORES FROM IT. IN THE CASE OF M/S. SWAPNI L DISTRIBUTORS PVT. LTD. I.E. SDPL THE AO VIDE ASSESSMENT ORDER DATED 09-06-08 FO R A.Y. 2005-06 HAD HELD THAT THE PURCHASES OF SDPL ARE NOT VERIFIABLE. THE AO EXTRACTED THE RELEVANT OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER DATE D 09-06-08 OF M/S. SWAPNIL DISTRIBUTORS PVT. LTD. FOR A.Y. 2005-06. HE NOTED THAT THE ASSESSEE HAS MADE TOTAL PURCHASE OF RS.330.62 CRORES DURING THE RELEVANT PE RIOD OUT OF WHICH PURCHASES WORTH RS.253.73 CRORES HAVE BEEN MADE FROM THE FOLL OWING PARTIES : (I) M/S. SWAPNIL DISTRIBUTORS PVT. LTD. RS. 1, 04,05,880/- (II) M/S. NAIRA DISTRIBUTORS PVT. LTD. RS. 55,06,270/- (III) M/S. DHANSHREE ENTERPRISES RS. 21,53,65,47 9/- (IV) M/S. LAUKIK PAPER INDUSTRIES PVT. LTD. RS.230 ,60,48,860/- ----------------------- TOTAL RS.253,73,26,939/- -------------------------- 3. THE AO RECORDED THE STATEMENTS OF THE MANAGING D IRECTOR/PROPRIETORS OF M/S. NAIRS DISTRIBUTORS PVT. LTD., M/S. DHANSHREE E NTERPRISES AND M/S. LAUKIK PAPER INDUSTRIES PVT. LTD.. HE NOTED THAT THE ABOV E 3 PARTIES HAVE MADE PURCHASES IN CASH IN THE SIMILAR WAY AS DISCUSSED IN THE CASE OF M/S. SWAPNIL DISTRIBUTORS PVT. LTD. THESE 3 SUPPLIERS HAVE MADE PAYMENTS IN CASH I N CONTRAVENTION OF PROVISIONS 3 OF SECTION 40(A)(3). THESE 3 SUPPLIERS HAVE MADE P AYMENTS AFTER GETTING THE LCS DISCOUNTED IN THE SIMILAR WAY AS M/S. SDPL. THESE 3 PARTIES HAVE SUPPLIED GOODS DIRECTLY TO THE ASSESSEE AND THEY HAVE NOT STORED I T. HE FURTHER NOTED THAT THESE 3 PARTIES EXCEPT M/S. LAUKIK PAPER INDUSTRIES PVT. LT D. ARE NEW IN THIS TRADE AND ARE NOT AWARE OF BRANDS/QUALITY OF GOODS PURCHASED AND SOLD TO THE ASSESSEE. THE AO CONFRONTED THE MODUS OPERANDI ADOPTED BY THE ASSESS EE AND ASKED THE ASSESSEE TO EXPLAIN WHY ITS BOOKS OF ACCOUNTS SHOULD NOT BE TRE ATED AS INCORRECT AND INCOMPLETE. IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAD MADE PURCHASES FROM VARIOUS OTHER PARTIES ALSO INCLUDING THE 4 PARTIES NAMED BY THE AO. THE CONFIRMATION CERTIFICATES FROM VARIOUS CREDITORS, V ARIOUS SUNDRY DEBTORS, XEROX COPIES OF THE PURCHASE INVOICES DULY VERIFIED BY TH E BANK AUTHORITY BEFORE DISCOUNTING THE LCS IN FAVOUR OF THE 4 PARTIES WERE FILED BEFORE THE AO. THE ASSESSEE HAS ALSO MADE DETAILED SUBMISSIONS BEFORE THE AO TO THE PROPOSITION THAT THE ENTIRE PURCHASES DONE BY IT IS GENUINE AND THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE AND REJECTED THE BOOKS RESULTS. HE ENHANC ED THE SALES TO RS.360 CRORES AND AFTER ADOPTING THE GP RATE OF 15% MADE ADDITION OF RS.8,98,57,000/- BEING THE DIFFERENCE BETWEEN GP DETERMINED BY HIM AND THE GP SHOWN BY THE ASSESSEE BY HOLDING AS UNDER : 3.2 THE ABOVE PLEA IS NOT ACCEPTABLE BECAUSE : (I) THE PURCHASES IN BULK HAVE BEEN MADE FROM FOUR PARTIES AS MENTIONED ABOVE. THESE PURCHASES ARE NOT FULLY VERIFIABLE WH EN INVESTIGATED IN DEPTH AS IS EVIDENT FROM THE FACT MENTIONED IN THE ASSESSMENT O RDER OF THE SDPL FOR A.Y. 2005-06. SINCE THE FACTS IN OTHER CASES ARE SIMILA R TO THAT OF SDPL, THEREFORE, THE SAME INFERENCE IS DRAWN IN OTHER CASES. (II) SALES ARE ALSO NOT VERIFIABLE AS MENTIONED ABO VE. NON MAINTENANCE OF ADDRESSES OF PARTIES FROM WHOM CASH REALIZATION HAV E BEEN SHOWN IS NOT UNDERSTANDABLE. EVERY PRUDENT BUSINESS MAN WILL MA INTAIN THE DETAILS OF CORRESPONDENCES OF SUCH PARTIES FOR ITS FUTURE BUSI NESS. THE PROBABILITY OF SALES EFFECTED TO SUCH PARTIES IN THE SUBSEQUENT PERIOD C ANNOT BE RULED OUT. 4 (III) MOST OF THE SALES ARE NOT VERIFIABLE. (IV) THE PURCHASES FROM THE FOUR PARTIES AS MENTION ED ABOVE AREA ALSO NOT FULLY VERIFIABLE. (V) DAY TO DAY QUANTITATIVE DETAILS OF LOSS IN THE MANUFACTURING PROCESS IS NOT MAINTAINED. 3.3 IN VIEW THE REASONS STATED ABOVE, THE FACTS EME RGED ARE THAT THE PURCHASES AND SALES ARE NOT FULLY VERIFIABLE AND THEREFORE, THE B OOKS OF THE ACCOUNTS SUFFER FROM VARIOUS DEFECTS, WHICH WARRANT THE REJECTION OF ITS BOOKS O F ACCOUNTS U/S.145 OF THE I.T. ACT. THUS I AM NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLE TENESS OF THE ACCOUNTS OF THE ASSESSEE. THEREFORE, THE BOOKS OF ACCOUNTS ARE REJECTED U/S. 145 OF THE I.T. ACT AND THE INCOME THEREFORE, IS COMPLETED IN THE MANNER PRESCRIBED U/ S.144 OF THE I.T. ACT. SINCE THE SALES ARE NOT VERIFIABLE, THEREFORE, IN THE VIEW OF THE R EASONS STATED ABOVE, THE SALES OF THE ASSESSEE IS ESTIMATED AT RS.360 CRORES INSTEAD OF N ET SALE OF RS. 330.79 CRORES SHOWN BY THE ASSESSEE. 3.4 THE PROFIT SHOWN IN THE BOOKS OF ACCOUNTS ARE N OT ACCEPTABLE. THE ACTUAL GROSS PROFIT RATE SHOWN BY THE ASSESSEE IS 12.97% THOUGH IT HAS SHOWN @ 13.02% IN THE AUDIT REPORT SUBMITTED IN FORM 3CD. THE GROSS PROFIT RAT IO IN THIS RANGE VARIES FROM 12% - 20%. THE GROSS PROFIT RATIO OF SUNDARAM MULTI PAP. LTD. AS SEEN ON E-NET IS 19.80% FOR THE RELEVANT PERIOD. THE ASSESSEE WAS SO CAUSED TO EXPLAIN THAT WHY THE GROSS PROFIT RATIO OF 19.80% IN THE CASE OF SUNDARAM MULTI PAP. LTD. F OR A.Y. 2005-06 MAY NOT BE APPLIED. IN RESPONSE TO THIS QUERY THE ASSESSEE HAS SUBMITTE D A REPLY THAT ITS CASE IS QUITE DIFFERENT THAN SUNDARAM MULTI PAP LTD. FOR A.Y. 2005-06. THE FACTS OF THESE TWO CASES ARE NOT WORTH TO COMPARE. THE FACTS OF SUNDARAM MULTI PAP LTD. FOR A.Y. 2005-06 AS MENTIONED IN THE ASSESSEES REPLY ARE EXTRACTED BELOW : (A) TURNOVER OF OUR COMPANY IS 330.79 CRORES AS AG AINST THE TURNOVER OF SUNDARAM MULTI PAP. LTD. IS 55.60 CRORES. (B) OUR COMPANY DEALS IN VARIOUS TYPE OF PRODUCTS S UCH AS NOTE BOOKS, OFFICE STATIONERY, PRINT PUBLICATION WHEREAS SUNDARAM MULT I PAP. LTD. CO. DEALS IN THE NOTE BOOKS AND SCHOOL PAPER STATIONERY PRODUCT. (C) EMPLOYEE COST IN CASE OF OUR COMPANY IS 1.79 CR ORE WHEREAS IN CASE OF SUNDARAM MULTI PAP LTD. IT IS ONLY 0.72 CRORE. (D) OTHER MANUFACTURING EXPENSES IN CASE OF OUR COM PANY IS 4.71 CRORE WHEREAS IN CASE OF SUNDARAM MULTI PAP LTD. IT IS 3. 10 CRORE. (E) SELLING AND ADMINISTRATION EXPENSES IN CASE OF OUR COMPANY IS 8.83 CRORE WHEREAS IN CASE OF SUNDARAM MULTI PAP. LTD. IT IS 5 .87 CRORE. (F) INTEREST AND FINANCE CHARGES IN CASE OF OUR COM PANY ARE AT RS. 6.28 CRORES WHEREAS IN CASE OF SUNDARAM MULTI PAP. LTD. IT IS 1.58 CRORE. (G) THE DEPRECIATION IN CASE OF OUR COMPANY IS 1.08 CRORE WHERAS IN CASE OF SUNDARAM MULTI PAP. LTD. IT IS 0.42 CRORE. (H) NET PROFIT BEFORE TAX IN CASE OF OUR COMPANY IS 27.53 CRORE WHEREAS IN THE CASE OF SUNDARAM MULTI PAP. LTD. IT IS 2.02 CRORE I N TERMS OF PERCENTAGE IT WORKS OUT TO 8.32% WHEREAS IT IS 3.63% IN CASE OF SUNDARA M MULTI PAP. LTD. (I) SHARE CAPITAL OF OUR COMPANY IS AT RS.25 CRORES WHEREAS IN CASE OF SUNDARAM MULTI PAP. LTD. IT IS 3.25 CRORE. (J) FIXED ASSETS IN CASE OF OUR COMPANY ARE AT RS.3 1.97 CRORE WHEREAS IN CASE OF SUNDARAM MULTI PAP. LTD. IT IS 8.80 CRORE. (K) INVESTMENT IN INVENTORIES IN CASE OF OUR COMPAN Y IS 87.84 CRORE WHEREAS IN CASE OF SUNDARAM MULTI PAP. LTD. IT IS 11.72 CRO RE. 5 3.5 THE ASSESSEES ARGUMENTS ARE TAKEN INTO CONSIDE RATION. KEEPING IN VIEW THE FACTS STATED ABOVE AND THE GROSS PROFIT RATIOS OF OTHER B USINESS CONCERNS, THE GROSS PROFIT RATE OF 15% IS TAKEN INTO ACCOUNT AT ENHANCED SALE OF 36 0 CRORES FOR WORKING OUT THE INCOME OF THE ASSESSEE. THE GROSS PROFIT @15% ON ENHANCED SALES OF RS. 360 CRORES WORKS OUT TO RS.54,00,00,000/- AS AGAINST RS.45,01,43,000/- S HOWN BY THE ASSESSEE. THE ADDITION ON THIS SCORE THEREFORE, WORKS OUT TO RS.8,98,57,00 0/-, WHICH IS ADDED BACK INTO THE INCOME OF THE ASSESSEE. 5. IN APPEAL, THE ASSESSEE MADE DETAILED SUBMISSION S CHALLENGING THE ENHANCEMENT OF THE TURNOVER AND ADOPTION OF GP AT 1 5%. THE AUDIT REPORT OF THE SPECIAL AUDITORS U/S.142(2A) APPOINTED BY THE AO WA S ALSO BROUGHT TO THE NOTICE OF THE CIT(A). ON THE BASIS OF THE VARIOUS SUBMISSION S MADE BY THE ASSESSEE THE CIT(A) DIRECTED THE ASSESSEE TO SUBMIT A COPY OF TH E WRITTEN REPLY TO THE AO FOR HIS VERIFICATION WHICH THE ASSESSEE COMPLIED WITH. AFT ER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE AO THE CIT(A) D ELETED THE ADDITION OF RS.8,98,57,000/- BY HOLDING AS UNDER : 4.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED MATERIAL ON RECORD. FROM THE PERUSAL OF MATERIAL ON RECORD, FOLLOWING ASPECTS EMERGE : (I) AS REGARDS THE PURCHASES THE GENUINENESS OF WHI CH HAS BEEN DOUBTED BY THE ASSESSING OFFICER, IT MAY BE MENTIONED THAT THE APPROACH OF THE ASSESSING OFFICER ON THE ISSUE SUFFERS FROM INCONSISTENCIES A ND CONTRADICTIONS. IN CASE OF SWAPNIL DISTRIBUTORS FOR ASSESSMENT YEAR 2004-05, T HE CONCLUSION OF THE ASSESSING OFFICER WAS THAT THOUGH THE PURCHASES OF SWAPNIL DISTRIBUTORS PVT. LTD., WERE FROM PARTIES OTHER THAN THOSE FROM WHOM PURCHA SES WERE SHOWN, THE FACT OF SALE BY SWAPNIL DISTRIBUTORS TO BLULE BIRD (INDIA) LTD., IS NOT QUESTIONED IN THE ASSESSMENT PROCEEDINGS OF SWAPNIL DISTRIBUTORS, HOW CAN THE PURCHASE OF BBIL FROM SWAPNIL DISTRIBUTORS PVT. LTD., BE QUESTIONED IN ASSESSMENT PROCEEDINGS OF BLUE BIRD (INDIA) LTD? IT IS CLEAR THAT THE ASSESSI NG OFFICERS APPROACH IN THIS REGARD IS CONTRARY TO THE FACTS ON RECORDS. SINCE THE POSITION OF PURCHASES FROM OTHER THREE PARTIES, NAMELY NAIRS DISTTRIBUTORS PVT . LTD., M/S. DHANSSHREE ENTERPRISES AND M/S. LAUKIK PAPER INDUSTRIES PVT. L TD. IS THE SAME AS THAT IN CASE OF PURCHASES FROM SWAPNIL DISTRIBUTORS, WHAT IS SAI D ABOUT THE PURCHASES FROM SWAPNIL DISTRIBUTORS PVT. LTD. APPLIES TO PURCHASES FROM THESE PARTIES ALSO. FOR REASONS GIVEN IN THE APPELLATE ORDER DATED 18-03-20 08 PASSED BY THIS OFFICE IN THE CASE OF M/S.SWAPNIL DISTRIBUTORS PVT. LTD. IN APPEA L NO. PN/CIT(A)-/I/ACIT, RG- 1/31/08-09, THE ASSESSING OFFICER;S CONCLUSIONS REG ARDING THE GENUINENESS OF PURCHASES MADE BY SWAPNIL DISTRIBUTORS PVT. LTD. HA VE BEEN HELD TO BE UNACCEPTABLE AND ADDITIONS MADE BY THE ASSESSING OF FICER IN THIS REGARD HAVE BEEN DELETED. SINCE THE POSITION IS SIMILAR IN RES PECT OF PURCHASES FROM OTHER THREE PARTIES BY THE APPELLANT, IT IS HELD THAT CON CLUSIONS OF THIS OFFICE IN RESPECT OF PURCHASE FROM SWAPNIL DISTRIBUTORS PVT. LTD., APPLY TO THOSE PURCHASES ALSO AND ASSESSING OFFICERS CONCLUSIONS IN THIS REGARD ARE HELD TO BE WITHOUT ANY COGENT AND RELEVANT BASIS AND HENCE, UNACCEPTABLE. THE SA LES EFFECTED BY THE APPELLANT COMPANY ARE CREDIT SALES AND ADMITTEDLY, ADDRESS OF THE PARTIES TO WHOM CREDIT SALES HAVE BEEN MADE HAVE NOT BEEN SUBMITTED BY THE APPELLANT AND THE SALE PROCEEDS IN A LARGE NUMBER OF CASES HAVE BEEN RECEI VED IN CASH. THUS, IN THE ABSENCE OF ADDRESS IN CASE OF PARTIES FROM WHOM PAY MENTS HAVE BEEN RECEIVED IN CASH, THE SALES ARE NOT VERIFIABLE. THUS, SUB-SECT ION (2) OF SECTION 145 OF THE INCOME TAX ACT, 1961 CLEARLY APPLIED BECAUSE BOOKS OF ACCOUNTS CANNOT BE SAID TO BE COMPLETE IN THE ABSENCE OF ADDRESS OF THE PAR TIES TO WHOM THE SALES HAVE 6 BEEN MADE. HOWEVER, FOR COMING TO A CONCLUSION THA T BOOKS OF ACCOUNTS ARE NOT CORRECT, SOME INSTANCES OF UNDERSTATEMENT OF SALES AND/OR SUPPRESSION OF SALES HAVE TO BE BROUGHT ON RECORD AND INCORRECTNESS OF B OOKS OF ACCOUNTS CANNOT BE PRESUMED. THIS HAS NOT BEEN DONE. ON THE OTHER HA ND, SPECIAL AUDITORS APPOINTED U/S.142(2A) OF THE INCOME TAX ACT, 1961 H AS CLEARLY MENTIONED THAT THE RATE AT WHICH THE ASSESSEE COMPANY HAS PURCHAS ED THE GOODS AND SOLD THEM IN THE MARKET ARE COMPARABLE AND IN LINE WITH THE E XISTING RATES OF SIMILAR COMMODITIES IN THE MARKET. THE SPECIAL AUDITORS F URTHER POINT OUT AT THE END OF PARAGRAPH 13.4 OF THE SPECIAL AUDIT REPORT THAT SI MILARLY, THE TRANSACTION OF SALE WITH THE TWO PARTIES REFERRED TO IN OUR LETTER ARE GENUINE AND DOES NOT APPEAR TO BE IN NATURE OF ACCOMMODATION TRANSACTION. IN VIE W OF THIS AND IN VIEW OF THE COMMENTS OF THE SPECIAL AUDITOR REGARDING TRADING A CCOUNT AND VERIFICATION OF SALES WITH REFERENCE TO SALES TAX ORDER, IT IS CLEA R THAT THERE IS NO MATERIAL ON RECORD FOR COMING TO THE CONCLUSION THAT BOOKS OF A CCOUNTS OF THE APPELLANT ARE NOT COVERED WITHIN THE MEANING OF SECTION 145(2) OF THE INCOME TAX ACT, 1961. (III) THE APPELLANT HAS MAINTAINED QUANTITATIVE DET AILS OF OPENING AND CLOSING STOCK OF PURCHASES, CONSUMPTION OF RAW MATERIAL (PR INCIPAL ITEMS) AND SALE OF FINISHED GOODS BOTH IN TERMS OF QUALITY AND VALUE. NO DISCREPANCY IN THIS REGARD HAS BEEN DETECTED DURING THE COURSE OF SPECIAL AUDI T. (IV) IT IS A FACT THAT APPELLANT HAS SHOWN SALES OF RS. 330.79 CRORE AND THESE SALES COMPRISE OF SALE TO FOLLOWING : (I) SALES TO LIMITED COMPANIES (II) SALES TO GOVT. PARTIES (III) EXPORT SALES (IV) SALES TO CUSTOMERS FROM VARIOUS BRANCHES ANY DEALERS NETWORK THROUGHOUT THE COUNTRY THUS, THE PAYMENTS ON ACCOUNT OF EXPORT SALES AND S ALES FROM OUTSIDE MAHARASTRA PARTIES HAVE BEEN RECEIVED THROUGH CHEQUE. SIMILARLY, PAYM ENT ON ACCOUNT OF SALE TO GOVT. PARTIES HAVE BEEN RECEIVED THROUGH CHEQUE. THE SAL E WHICH IS UNVERIFIABLE BECAUSE OF LACK OF ADDRESS IS THE SALE WHICH HAS BEEN MADE ON CREDIT IN RESPECT OF WHICH REALIZATION OF SALE PROCEEDS IS RECEIVED IN CASH. IN RESPECT O F SUCH SALES NO MATERIAL IS ADDUCED BY THE ASSESSING OFFICER TO THE EFFECT THAT SUCH SALES HAS BEEN UNDERSTATED, NO INSTANCES OF SUPPRESSION OF SALE HAS BEEN BROUGHT ON RECORD EITH ER BY THE LEARNED ASSESSING OFFICER OR BY THE SPECIAL AUDITOR. AS MENTIONED HEREINBEFORE, AS PER THE REPORT OF THE SPECIAL AUDITOR, THE RATE AT WHICH THE ASSESSEE COMPANY HAS PURCHASED THE GOODS AND SOLD THEM IN THE MARKET ARE COMPARABLE AND IN LINE WITH THE E XISTING RATES OF SIMILAR COMMODITIES IN THE MARKET. (V) AS MENTIONED HEREINBEFORE, THE PURCHASES IN THE CASE OF SWAPNIL DISTRIBUTORS HAVE BEEN HELD TO BE GENUINE FOR THE REASONS GIVEN IN THE APPELLATE ORDER PASSED BY THIS OFFICE ON 18-03-2009 IN CASE OF SWAPNIL DISTRIBUTOR S PVT. LTD. THE PURCHASES FROM OTHER PARTIES ARE OF SIMILAR NATURE ACCORDING TO THE ASSE SSING OFFICER. IN VIEW OF THIS, CONCLUSION GIVEN IN RESPECT OF SWAPNIL DISTRIBUTORS PVT.LTD. APPLIES WITH EQUAL FORCE TO THE PURCHASES FROM THE OTHER THREE PARTIES NAMELY, NAIRS DISTRIBUTORS PVT. LTD. DHANASHREE ENTERPRISES AND M/S. LAUKIK PAPER INDUST RIES PVT. LTD. THEREFORE, THE CONCLUSION OF THE LEARNED ASSESSING OFFICER IN RESP ECT OF PURCHASES FROM THESE CONCERNS IS HELD TO BE ERRONEOUS AND UNACCEPTABLE. 4.3.1 IN VIEW OF THE FOREGOING DISCUSSION, SUBMISSI ON OF THE APPELLANT, REPORT OF THE SPECIAL AUDITOR, JUDICIAL DECISIONS CITED BY THE AP PELLANT AND MATERIAL ON RECORD, IT IS HELD THAT THERE IS NO JUSTIFICATION WHATSOEVER FOR INCREASING THE TURNOVER OF THE ASSESSEE FROM RS.330.79 CRORE TO RS.360 CRORE. THE ASSESSIN G OFFICERS CONCLUSIONS IN THIS REGARD PERTAINING TO INCREASE OF TURNOVER ARE HELD TO HAVE NO BASIS IN LAW AND ON FACTS AND ARE TOTALLY ERRONEOUS. ACCORDINGLY, IT IS HELD THAT THERE IS NO JUSTIFICATION FOR INCREASING THE TURNOVER FROM RS.330.79 CRORE TO RS. 360 CRORE. 4.3.2 AS REGARDS THE INCREASE OF GROSS PROFIT FROM 12.97% TO 15%, IT MAY BE MENTIONED THAT THE GROSS PROFIT CAN BE INCREASED ONLY IF EXPE NSES ARE UNVERIFIABLE OF THERE IS UNDERSTATEMENT OR SUPPRESSION OF SALES. THE LEARNE D ASSESSING OFFICER HAS FAILED TO 7 ADDUCE ANY COGENT MATERIAL ON BOTH THE ASPECTS. TH E CONCLUSION OF THE LEARNED ASSESSING OFFICER IN THIS REGARD HAVE NO COGENT AND RELEVANT BASIS. THE LEARNED ASSESSING OFFICER HIMSELF POINTS OUT THAT THE G.P. IN THIS LI NE OF BUSINESS RANGES FROM 12-20%. IF THIS IS SO AND APPELLANT HAS SHOWN G.P. OF 12.97%, THERE IS NO JUSTIFICATION FOR INCREASING IT TO 15%. ACCORDING TO THE ASSESSING OFFICER, THE G.P. OF SUNDARAM MULTI PAP LTD. IS 19.80% THOUGH SUCH G.P. IS FOUND TO BE LOWER MUCH L OWER AT 6.4% AS IS CLEAR FROM THE FIGURES SUBMITTED FROM THE VARIOUS FINANCIAL WEBSIT ES EXTRACT OF WHICH IS REPRODUCED HEREINBEFORE. HOWEVER, THE LEARNED ASSESSING OFFIC ER HIMSELF IMPLIEDLY ACCEPTS THAT THERE IS DIFFERENCE BETWEEN THE NATURE OF BUSINESS OF THE APPELLANT AND THAT OF SUNDARAM MULTI PAP LTD. WHEN HE DOES NOT APPLY HIGHER GROSS PROFIT OF 19% WHICH HAS BEEN SHOWN BY SUNDARAM MULTI PAP LTD. THOUGH IT IS A DIFFERENT MATTER THAT ACCORDING TO APPELLANT THE G.P. RATE OF SUNDARAM MULTI PAP LTD. IS MUCH LO WER AS IS CLEAR FROM THE DATA TAKEN FROM THE FINANCIAL WEBSITES REDIFFMONEYWIZ AND MON EYCONTROL.COM. 4.3.3 DURING THE COURSE OF APPELLANT PROCEEDINGS IT WAS SUBMITTED THAT THE BUSINESS OF THE APPELLANT IS QUITE DIFFERENT FROM THAT OF SUNDA RAM MULTI PAP LTD. IN VIEW OF THIS AND IN VIEW OF THE FACT THAT THE ASSESSEE HAS MADE SALE S AT COMPARABLE RATE AND MARKET RATE AS IS CLEARLY MENTIONED BY THE SPECIAL AUDITOR IN T HE SPECIAL AUDIT REPORT AND THE FACT THAT THE LEARNED ASSESSING OFFICER FAILED TO ADDUCE ANY INSTANCES OF UNVERIFIABLE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT AN D ANY INSTANCES OF UNDERSTATEMENT OR SUPPRESSION OF SALES, THERE IS NO JUSTIFICATION WHA TSOEVER FOR INCREASING THE G.P. OF THE APPELLANT FROM 12.97% TO 15%. IT IS HELD THAT THE ASSESSING OFFICERS ACTION IN THIS REGARD HAS NO BASIS. 4.3.4 IN VIEW OF THE FOREGOING DISCUSSION, COMMENTS OF THE SPECIAL AUDITOR IN THE SPECIAL AUDIT REPORT REGARDING MANUFACTURING AND TR ADING ACCOUNT, PURCHASES AND SALES OF APPELLANT BEING VERIFIABLE, QUANTITATIVE DETAILS MAINTAINED BY THE APPELLANT IN RESPECT OF PRINCIPAL ITEMS OF RAW MATERIAL AND FINISHED GOO DS, SUBMISSION OF THE APPELLANT HEREINBEFORE AND MATERIAL ON RECORD, THERE IS NO JU STIFICATION FOR INCREASING THE GROSS PROFIT RATE OF THE APPELLANT FROM 12.97% TO 15%. 4.3.5 IN VIEW OF THE FOREGOING DISCUSSION, THE ACTI ON OF THE ASSESSING OFFICER IN ENHANCING THE TURNOVER OF THE APPELLANT FROM RS.330 .79 CRORE TO RS.360 CRORE AND APPLYING HIGHER G.P. RATE OF 15% AS AGAINST 12.97 S HOWN BY THE APPELLANT ARE HELD TO BE WITHOUT ANY BASIS AND UNJUSTIFIED ON FACTS AND IN L AW. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.8,98,57,000/- IS HEREBY DELETED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.8,98,57,000/- MADE ON A CCOUNT OF ESTIMATION OF SALES AT RS. 360 CRORES AND ESTIMATED G.P. @15%. 2. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING THE FACT THAT CREDIT SALES AND PURC HASES ARE NOT FULLY VERIFIABLE. 3. THE ORDER OF THE CIT(APPEALS) MAY BE VACATED AND THAT OF THE AO RESTORED. 7. THE LEARNED DR HEAVILY RELIED ON THE ORDER OF TH E AO. HE SUBMITTED THAT SINCE THE SALES ARE NOT PROPERLY EFFECTED AND THE G P RATE DECLARED BY THE ASSESSEE IS LOWER THAN THE COMPARABLE CASES GIVEN BY THE AO, TH EREFORE, THE AO WAS JUSTIFIED 8 IN REJECTING THE BOOK RESULTS AND THEREBY ENHANCING THE TURNOVER TO RS.360 CRORES AND ADOPTING THE GP RATE @ 15%. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE AO AND THE CIT(A). HE SUBMITTED THAT THE MAIN ALLEGATION OF THE AO FOR REJECTING THE PURCHASES FR OM VARIOUS CONCERNS IS DUE TO HIS ORDER PASSED IN THE CASE OF SWAPNIL DISTRIBUTORS PV T. LTD. HE SUBMITTED THAT IN THE CASE OF SWAPNIL DISTRIBUTORS PVT. LTD. THE SALES TO BLUE BIRD INDIA PVT. LTD. WAS NEVER QUESTIONED BY THE AO. THEREFORE, NOW QUESTIO NING THE PURCHASES BY BLUE BIRD INDIA PVT. LTD. FROM SWAPNIL DISTRIBUTORS (P) LTD. IS NOT JUSTIFIED. HE SUBMITTED THAT THE SPECIAL AUDITORS APPOINTED BY TH E AO U/S.142(2A) HAVE MENTIONED THAT THE RATE AT WHICH THE ASSESSEE COMPA NY HAS PURCHASED THE GOODS AND SOLD THEM IN THE MARKET ARE COMPARABLE AND IN L INE WITH THE EXISTING RATES OF SIMILAR COMMODITIES IN THE MARKET. NOTHING ADVERSE HAS BEEN MENTIONED BY THE SPECIAL AUDITORS APPOINTED BY THE AO TO SUGGEST THA T THE BOOKS MAINTAINED BY THE ASSESSEE ARE DEFECTIVE. HE SUBMITTED THAT THE ASSE SSEE HAS MAINTAINED QUANTITATIVE DETAILS OF OPENING AND CLOSING STOCK OF PURCHASES, CONSUMPTION OF RAW MATERIALS (PRINCIPAL) AND SALE OF FINISHED GOODS BOTH IN TERM S OF QUALITY AND VALUE. NO DISCREPANCY IN THIS REGARD HAS BEEN DETECTED DURING THE COURSE OF SPECIAL AUDIT. FURTHER THE ASSESSEE SELLS THE GOODS TO GOVERNMENT AGENCIES, PRIVATE DISTRIBUTORS AND VARIOUS LIMITED COMPANIES. NO ACTION IN THE HA NDS OF ANY OF THE PARTY HAS BEEN TAKEN BY THE AO. MOST OF THE PAYMENTS HAVE BE EN RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. REFERRING TO THE DECISIONS REPORTED IN 129 ITD 1 (THIRD MEMBER), 59 TTJ 698 AND 30 TTJ 130 HE SUBMITTED THAT SALES C ANNOT BE ENHANCED UNLESS THE AO HAS CORROBORATIVE EVIDENCE. HE ACCORDINGLY SUBM ITTED THAT THE ORDER OF THE CIT(A) REJECTING THE ENHANCEMENT OF THE SALES BY TH E AO IS JUSTIFIED. 9 9. SO FAR AS THE ADOPTION OF GP RATE @15% HE SUBMIT TED THAT THE CASE COMPARED BY THE AO IN THE CASE OF SUNDARAM MULTI PAP LTD. IS NOT COMPARABLE WITH THAT OF THE ASSESSEE. REFERRING TO PARA 3.4 OF THE ASSESSM ENT ORDER THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE DISTINCTIONS BETWEEN THE ASSESSEE AND SUNDARAM MULTI PAP LTD. HE SUBMITTED T HAT THE AO HIMSELF HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE GP IN TH IS LINE OF BUSINESS RANGES FROM 12% TO 20%. SINCE THE ASSESSEE IN THE INSTANT CASE HAS SHOWN GP RATE OF 12.97% WHICH IS MORE THAN 12%, THEREFORE, HE IS NOT JUSTIF IED IN REJECTING THE GP SHOWN BY THE ASSESSEE AND ENHANCING THE SAME TO 15%. HE ACC ORDINGLY SUBMITTED THAT THE ORDER PASSED BY THE LEARNED CIT(A) IS JUST AND PROP ER AND SHOULD BE UPHELD AND THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE AO REJECTED THE BOOK RESULT S ON THE GROUND THAT PURCHASES AND SALES ARE NOT FULLY VERIFIABLE AND THE GP RATE SHOWN BY THE ASSESSEE IS LOWER THAN SOME OF THE CASES ENGAGED IN SIMILAR LINE OF B USINESS. FOR COMING TO THIS PROPOSITION HE CONSIDERED THE ORDER OF THE AO IN T HE CASE OF SWAPNIL DISTRIBUTORS PVT. LTD. FOR A.Y. 2005-06 WHEREIN THE PURCHASES MA DE BY SWAPNIL DISTRIBUTORS PVT. LTD. HAVE BEEN DOUBTED AS NOT GENUINE BY THE A O. FOR THE REASONS STATED THEREIN THE AO CAME TO THE CONCLUSION THAT THE PURC HASES FROM VARIOUS PARTIES MADE BY THE ASSESSEE SHOULD BE HELD AS NON GENUINE BECAUSE OF THE SAME MODUS OPERANDI. HOWEVER, WE FIND THAT AGAINST THE ORDER PASSED BY THE AO IN THE CASE OF SWAPNIL DISTRIBUTORS PVT. LTD. THE CIT(A) HAD DELET ED THE ADDITIONS MADE BY THE AO ON ACCOUNT OF INVESTMENT IN UNEXPLAINED PURCHASE S. WHEN THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL THE TRIBUNAL VIDE ITA NO . 675/PN/2009 ORDER DATED 31- 03-2012 HAS DISMISSED THE APPEAL FILED BY THE REVEN UE BY HOLDING AS UNDER : 10 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 PURCHASE OF PAPERS BY THE ASSESSEE COMPANY FROM THE TWO FIRMS, NAMELY KOMAL ENTERPRISES 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 PURCH ASES, 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 PURCHASES 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 THAN T HE TWO PARTIES SHOWN BY THE ASSESSEE HAVE BEEN DONE OUT OF UNEXPLAINED/UNACCOUNTED SOURC ES TO THAT PARTIES PRIOR TO THE DATE SHOWN IN THE BOOKS OF ACCOUNTS. THEREAFTER THE ASS ESSEE HAS REGULARISED SUCH EXPENDITURE BY SHOWING THE PURCHASES. IN VIEW OF T HE ABOVE, THE AO MADE ADDITION ON ACCOUNT OF INVESTMENT IN UNEXPLAINED EXPENSES AND F REIGHT AND HANDLING CHARGES AND MADE ADDITION OF RS.1,01,50,000/- 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 PROVIDING CREDIT FACILITATES TO BLUE BIRD INDIA PVT. LTD. TO WHOM THE ASSESSEE HAS MADE SALES ACCEPTED T HE PURCHASES MADE BY THE ASSESSEE COMPANY AS GENUINE. WHILE DOING SO, HE HAS ALSO CO NSIDERED THE REPORT OF THE SPECIAL AUDITORS APPOINTED BY THE AO U/S.142(2A) WHO HAVE M ENTIONED THAT THE PURCHASES EFFECTED BY THE ASSESSEE COMPANY AS WELL AS THE C ORRESPONDING SALES ARE GENUINE AND ARE DULY SUPPORTED BY EVIDENCES. UNDER THESE CIRCU MSTANCES AND IN VIEW OF THE DETAILED ORDER PASSED BY THE LEARNED CIT(A) WHICH HAS ALREAD Y EXTRACTED AT PARA 8 OF THIS ORDER WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, WE UPHOLD THE SAME AND THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 11. WE FIND THE SPECIAL AUDITORS APPOINTED U/S.142( 2A) BY THE AO HAVE MENTIONED THAT THE RATE AT WHICH THE ASSESSEE COMPA NY HAS PURCHASED THE GOODS AND SOLD THEM IN THE MARKET ARE COMPARABLE AND IN L INE WITH THE EXISTING RATES OF SIMILAR COMMODITIES IN THE MARKET. THE SPECIAL AUD ITORS HAVE NOT GIVEN ANY ADVERSE COMMENTS ABOUT THE PURCHASE AND SALES EFFEC TED BY THE ASSESSEE. WE FIND THE ASSESSEE HAS MAINTAINED QUANTITATIVE DETAILS OF OPENING AND CLOSING STOCK OF PURCHASES, CONSUMPTION OF RAW MATERIAL (PRINCIPAL I TEMS) AND SALE OF FINISHED GOODS BOTH IN TERMS OF QUALITY AND VALUE. NO DISCR EPANCY IN THIS REGARD HAS BEEN DETECTED DURING THE COURSE OF SPECIAL AUDIT. WE AL SO FIND THAT THE ASSESSEE HAS MADE SALES TO GOVERNMENT AGENCIES AND LIMITED COMPA NIES APART FROM EXPORT 11 SALES AND SALES TO VARIOUS CUSTOMERS FROM DIFFERENT BRANCHES. MOST OF THE PAYMENTS HAVE BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES. 12. WE FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT SALES CANNOT BE ENHANCED UNLESS THE AO HAS GOT ANY CORROBORATIVE EVIDENCE. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAS RECEIVED ANY EXTRA MONEY OUTSIDE THE BOOKS AGAINST SUCH UNACCOU NTED SALES. SIMILARLY, NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT ASSESSEE HA S INFLATED THE PURCHASES OR MADE BOGUS PURCHASES FOR WHICH PAYMENTS HAVE BEEN M ADE AND THE SAME HAS COME BACK TO THE ASSESSEE. 13. SO FAR AS THE ADOPTION OF GP@15% WE FIND THE AO HIMSELF IN THE BODY OF THE ASSESSMENT ORDER HAS MENTIONED THAT GP IN THIS LINE OF BUSINESS RANGES FROM 12% TO 20%. SINCE THE ASSESSEE IN THE INSTANT CASE HAS SHOWN GP @ 12.97% WHICH IS MORE THAN 12%, THEREFORE, WE FIND NO JUSTI FICATION TO ADOPT HIGHER RATE OF GP AT 15%. WE FURTHER FIND THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE VARIOUS EXPENSES DECLARED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT ARE EITHER UNVERIFIABLE OR BOGUS OR THERE IS UNDER STAT EMENT OR SUPPRESSION OF SALES OR ENHANCEMENT OF PURCHASES. FURTHER THE COMPARABLE C ASE GIVEN BY THE AO IN THE CASE OF SUNDARAM MULTI PAP LTD. IS DISTINGUISHABLE IN VIEW OF WIDE VARIATION IN TURNOVER, EMPLOYEE COST, MANUFACTURING EXPENSES, SE LLING AND ADMINISTRATIVE EXPENSES, INTEREST AND FINANCE CHARGES, DEPRECIATIO N ON FIXED ASSETS, INVESTMENT IN INVENTORIES AND SHARE CAPITAL ETC. WHICH HAVE BEEN INCORPORATED AT PARA 3.4 OF THE ASSESSMENT ORDER. UNDER THESE CIRCUMSTANCES, WE AR E OF THE CONSIDERED OPINION THAT THE AO WAS NOT JUSTIFIED IN ENHANCING THE SALE S TO RS.360 CRORES AND ADOPTING GP RATE AT 15% ON THE SAME. IN THIS VIEW OF THE MA TTER AND IN VIEW OF THE DETAILED ORDER PASSED BY THE CIT(A) DELETING THE ADDITION MA DE BY THE AO, WE FIND NO 12 INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) ON THI S ISSUE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD AND THE GROUNDS RAISED BY T HE REVENUE ARE DISMISSED. CO NO.33/PN/2010 (A.Y.2005-06) (BY ASSESSEE) : 14. GROUNDS RAISED IN THE CO ARE AS UNDER : 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION MADE U/S.40A(3) OF RS.3,20,001/- WITHOUT APPRECIATING THAT THE ADDITIO N WAS NOT WARRANTED ON THE FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN NOT DELETING THE ADD ITION OF RS.2,30,963/- MADE U/S.43B OF THE ACT. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS.1,09,337/- MADE U/S.40(A)(IA) OF THE ACT. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDITI ON OF RS.14,96,149/- ON THE GROUND THAT THE EXPENDITURE INCURRED WAS CAPITAL IN NATURE. 5. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE CROSS OBJECTIONS. 15. THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT SE RIOUS ABOUT GROUND NOS. 1, 2 AND 4 OF THE CO. ACCORDINGLY THE ORDER PASSED BY T HE AO MAKING THE ABOVE ADDITIONS WHICH HAVE BEEN SUSTAINED BY THE CIT(A) I S UPHELD. SO FAR AS THE GROUND NO.3 OF THE CO IS CONCERNED, THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE MAY BE SET-ASIDE TO THE AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT REPORTED IN 136 ITD 23 SINCE THE ASSESSEE HAS MADE THE PAYMENTS AND NO AMOUNT IS OUTSTANDING AT THE END OF THE ACCOUNTING YEAR. THE LEARNED DR HAS NO OBJECTION IF THE ISSUE IS SET-ASI DE TO THE FILE OF THE AO. IN VIEW OF THE ABOVE SUBMISSIONS BY THE LEARNED COUNSEL FOR THE ASSESSEE AND NO OBJECTION BY THE LEARNED DR WE RESTORE THE GROUND NO. 3 OF T HE CO TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION CIT ED (SUPRA) AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND NO. 3 OF THE CO IS ACCO RDINGLY ALLOWED FOR STATISTICAL PURPOSES AND OTHER GROUNDS OF THE CO ARE DISMISSED. 13 ITA NO. 964/PN/2009 (A.Y. 2006-07) (BY REVENUE) : 16. 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.8,38,97,678/- MADE O N ACCOUNT OF GROSS PROFIT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING THE FACT THAT SALES AND PURCHASE S ARE NOT FULLY VERIFIABLE. 3. THE ORDER OF THE CIT(APPEALS) 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. 17. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUNDS RAISED BY THE REVENUE ARE IDENTICAL TO GROUNDS OF APPEAL IN ITA NO. 674/PN/2009 FILED BY THE REVENUE. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME RATIO, THE ABOVE GROUNDS BY THE REVENUE ARE DISMISSED. ITA NO. 900/PN/2009 (A.Y. 2006-07) (BY ASSESSEE) : 18. IN GROUND OF APPEAL NO.1 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.6,10,70 9/- U/S.40A(3) OF THE INCOME TAX ACT. 19. THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT VE RY SERIOUS ABOUT THIS GROUND. ACCORDINGLY THE ORDER OF THE CIT(A) SUSTAINING THE ADDITION MADE BY THE AO U/S.40A(3) AMOUNTING TO RS. 6,10,709/- IS UPHELD. THIS GROUND IS ACCORDINGLY DISMISSED. 20. IN GROUND OF APPEAL NO.2 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.13,39,9 56/- U/S.40(A)(IA) OF THE INCOME TAX ACT. 21. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE PAYMENTS HAVE BEEN MADE BEFORE 31-03-2006. THEREFORE, NO ADDITIO N CAN BE MADE U/S.40(A)(IA) IN 14 VIEW OF THE DECISION OF THE VISAKHAPATNAM SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORT(SUPRA). HE SU BMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION AND FRESH ADJUDICATION IN THE LIGHT OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORT(SUPRA). THE LEARNED DR ON THE OTHER HAND HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND IN ACCORDANCE WITH LAW. IN VIEW OF THE ABOVE SUBMISSI ONS BY BOTH THE SIDES, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE A O FOR FRESH ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE DECISION CITED (SUPRA) AND IN A CCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND OF APPEAL NO. 2 IS ACCORDINGLY ALLOWED FOR S TATISTICAL PURPOSES. 22. GROUND OF APPEAL NO.3 BEING GENERAL IN NATURE IS DISMISSED. 23. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED WHEREAS THE APPEAL AND CO FILED BY THE ASSESSEE ARE PARTLY ALLO WED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 6 TH DAY OF SEPTEMBER 2012 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 6 TH SEPTEMBER 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CCIT, PUNE 4. CIT(A)-I, PUNE 5. ASSESSING OFFICER (ACIT, RANGE-1, PUNE) 6. THE D.R, B PUNE BENCH 7. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE