SUPREME CYLINDERS LTD., Alwar V. ACIT, Jaipur

CO 44/JPR/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3801 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J C KULHERI
• Assessee Lawyers: RANO JAIN DHK
• Keywords: Business income; Loose papers; Proportionate interest; Validity of assessment; Condonation of delay
• Section: 133A; 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH HKKXPUN ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 525/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2005-06. THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-2, ALWAR. CUKE VS. M/S. SUPREME CYLINDERS LTD., A-146K, INDUSTRIAL AREA, BHIWADI,ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AACCS 9200 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 44/JP/2016 (ARISING OUT OF ITA NO. 525/JP/2014) ASSESSMENT YEAR : 2005-06. M/S. SUPREME CYLINDERS LTD., A-146K, INDUSTRIAL AREA, BHIWADI, ALWAR. CUKE VS. THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-2, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AACCS 9200 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHERI (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : MS RANO JAIN (ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22.03.2018. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 29/05/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 6 TH MAY, 2014 OF LD. CIT (A), ALWAR FOR THE ASSESSMENT YEAR 2005-06. THE REVENUE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL :- 2 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN DELETING THE ADDITION OF RS. 10,78,097/- MA DE BY AO ON A/C OF INCOME BOOKED IN P & L ACCOUNT IN EXCESS OF CASH AVAILABLE. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN DELETING THE ADDITION OF RS. 37,61,845/- MA DE BY AO ON A/C OF UNDERSTATEMENT OF SCRAP SALE. 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN DELETING THE ADDITION OF RS. 5,67,936/- MAD E BY AO ON A/C OF ESTIMATION OF PROFITS U/S 145 OF THE ACT APP RECIATING MATERIAL FACTS OF THE CASE. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE ADDITION OF RS. 5,85,323/- TO RS. 1,37,902/- MADE BY AO ON A/C OF FREIGHT RECEIPTS WI THOUT APPRECIATING THE FINDINGS OF AO GIVEN ON THE BASIS OF ANNEXURE A02 PAGE 1-6 OF LOOSE PAPERS IMPOUNDED DURING THE C OURSE OF SURVEY. 5. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN DELETING THE DISALLOWANCE OF RS. 2,53,590/- MADE BY AO ON A/C OF INTEREST U/S 36(1)(III) OF THE I.T. ACT, 1961. 6. THAT THE COMMISSIONER OF INCOME TAX (APPEALS), A LWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS. 50,000/ - TO RS. 15,000/- MADE BY AO ON A/C OF DIRECTORS TRAVELLING EXPENSES. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR AL TER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE THE APPEAL IS FINALLY HEARD FOR DISPOSAL. GROUND NO. 1 IS REGARDING THE ADDITION MADE BY THE AO ON ACCOUNT OF INCOME BOOKED IN THE PROFIT & LOSS ACCOUNT IN EX CESS OF CASH AVAILABLE WHICH WAS DELETED BY THE LD. CIT (A). 3 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. 2. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING N IL INCOME ON 30 TH OCTOBER, 2005 AFTER SETTING OFF OF BROUGHT FORWARD BUSINESS LOSSES. THERE WAS A SURVEY UNDER SECTION 133A OF THE IT ACT ON 22.11.2004. THE AO N OTED THAT THE ASSESSEE HAD DECLARED A GROSS PROFIT OF RS. 17,10,930/-. DURING THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSEE SURRENDERED UNDISCLOSED INCOME OF RS. 57,00,000/- FOR THE ASSESSMENT YEAR 2004-05 AND RS. 20,00,000/- FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE DISCLOSED RS. 20,00,000/- IN THE PROFIT & LOSS ACCO UNT UNDER THE HEAD MISCELLANEOUS INCOME AND AS INCOME FROM OTHER SOURCES IN THE RETU RN OF INCOME. THE AO AFTER ANALYZING THE FUND FLOW FOR THE ASSESSMENT YEARS 20 04-05 AND 2005-06 CAME TO THE CONCLUSION THAT THOUGH THE ASSESSEE HAS SURRENDERED AN AMOUNT OF RS. 20,00,000/- FOR THE YEAR UNDER CONSIDERATION, HOWEVER, IT HAS R ECONCILED THE AMOUNT TO THE EXTENT OF RS. 9,21,903/-. THUS THE AO FOUND THAT T HE ASSESSEE IS HAVING EXCESS OF CASH AMOUNTING TO RS. 10,78,097/-. ACCORDINGLY, THE AO MADE AN ADDITION OF THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. O N APPEAL, THE LD. CIT (A) HAS DELETED THE ADDITION BY HOLDING THAT THE ADDITION M ADE BY THE AO BY CONSIDERING THE SURRENDERED AMOUNT AND COMPARING WITH THE AVAILABIL ITY OF CASH WOULD AMOUNT TO DOUBLE TAXATION OF THE SAME INCOME. 3. BEFORE US, THE LD. D/R HAS SUBMITTED THAT THE AO HAS ANALYZED ALL THE DETAILS AND REFERRED TO THE STATEMENT OF INFLOW AND OUTFLOW OF FUNDS. THUS THE AO WORKED OUT THAT THE ASSESSEE HAS INCURRED THE EXPENSES OUT OF BOOKS TO THE EXTENT OF RS. 10,78,097/-. 3.1. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THOUGH THE ASSESSEE SURRENDERED AN INCOME OF RS. 20,00,000/-, HOWEVER, THE SAID INCOME WAS DECLARED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOU NT AS MISCELLANEOUS INCOME. THE 4 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. AO HAS MADE THE ADDITION ON THE GROUND THAT THE ASS ESSEE HAS SPENT ONLY RS. 9,21,903/- OUT OF THE SURRENDERED AMOUNT OF RS. 20, 00,000/-. THEREFORE, THE BALANCE AMOUNT WAS ADDED BY THE AO AS SURPLUS INCOM E OF THE ASSESSEE. THE LD. A/R HAS SUBMITTED THAT THE AO HAS CONSIDERED THE AM OUNT SPENT BY THE ASSESSEE FROM LOOSE PAPERS IMPOUNDED DURING THE SURVEY AND I N FACT IT GOES IN FAVOUR OF THE ASSESSEE THAT THE AMOUNT SURRENDERED WAS MORE THAN THE AMOUNT APPEARING IN THE LOOSE PAPERS. WHEN THE SURRENDERED AMOUNT WAS MORE THAN THE AMOUNT SPENT BY THE ASSESSEE AND ALREADY TAXED THEN MAKING ADDITION OF THE DIFFERENTIAL AMOUNT IS NOTHING BUT DOUBLE TAXATION OF THE SAME INCOME. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. ONCE THE ASSESSEE HAS SURRENDERED AN INCOM E OF RS. 20,00,000/- DUE TO THE INCRIMINATING MATERIAL FOUND DURING THE SURVEY THEN THE APPLICATION OF THE SAME INCOME IF LESS THAN THE AMOUNT SURRENDERED BY THE A SSESSEE WOULD NOT LEAD TO THE SITUATION THAT ASSESSEE HAD SURRENDERED LESS AMOUNT THAN IT OUGHT TO HAVE SURRENDERED. THE AO HAS MADE AN ADDITION ON THE GRO UND THAT THE ASSESSEE HAS SPENT ONLY RS. 9,21,903/- AND, THEREFORE, THE BALAN CE AMOUNT IS LIABLE TO BE TAXED AS SURPLUS CASH. THE LD. CIT (A) HAS DELETED THIS ADD ITION BY CONSIDERING THE FACT THAT THERE IS NO BASIS OF SUCH ADDITION MADE BY THE AO. WE DO CONCUR WITH THE FINDING OF THE LD. CIT (A) THAT THE SURPLUS CASH, IF ANY, IS C OMPUTED BY THE AO TO THE EXTENT OF THE SURRENDERED AMOUNT CANNOT BE CONSIDERED AS AN A DDITIONAL INCOME LIABLE TO TAX. GROUND NO. 2 IS REGARDING THE ADDITION MADE BY THE AO ON ACCOUNT OF UNDERSTATEMENT OF SCRAP SALE WHICH WAS DELETED B Y THE LD. CIT (A). 5. DURING THE COURSE OF SURVEY CERTAIN DISCREPANCIE S ON ACCOUNT OF SALE OF SCRAP WAS FOUND AS PER LOOSE PAPERS IMPOUNDED. THE AO NOT ED THAT THE ASSESSEE HAD SOLD 5 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. ALL THE SCRAP WITH A HIGHER RATE AS COMPARED TO BIL LED RATE. THE ASSESSEE COMPANY HAS SHOWN TOTAL SALE OF SCRAP DURING THE YEAR OF RS . 1,03,72,636/- WHEREAS AS PER THE LOOSE PAPERS FOUND DURING THE SURVEY RECEIPT OF RS. 30,02,650/- WAS RECORDED AS AGAINST THE BILLED AMOUNT OF RS. 19,13,089/-. THER EFORE, BY CONSIDERING THE SAID DIFFERENTIAL AMOUNT OF RS. 10,89,560/-, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS CHARGED 56.95% OVER THE BILLED AMOUNT OF SCRAP SALE. THUS THE AO HELD THAT THE ASSESSEE HAS UNDERSTATED THE SCRAP SA LE IN THE BOOKS AS WELL AS IN THE BILLS AND ACCORDINGLY THE AO HAS APPLIED 56.95% ON THE BILLED AMOUNT TO COMPUTE THE AMOUNT OF UNDERSTATEMENT OF SCRAP SALE. THE AO THUS COMPUTED RS. 59,07,216/- AS UNDERSTATED AMOUNT OF SCRAP SALE AND AFTER GIVING THE ADJUSTMENT OF RS. 10,67,274/- AS ALREADY COVERED IN THE SURRENDER ED PEAK, AN ADDITION OF RS. 48,39,942/- WAS PROPOSED. SINCE THE AO HAD ALREADY MADE AN ADDITION OF RS. 10,78,097/- ON ACCOUNT OF SURPLUS CASH, ACCORDINGLY THE AO GRANTED THE BENEFIT OF TELESCOPIC AGAINST THE SAID ADDITION OF RS. 48,39,9 42/- AND THE NET ADDITION WAS MADE OF RS. 37,61,845/-. THE ASSESSEE CHALLENGED T HE ACTION OF THE AO BEFORE LD. CIT (A). THE LD.CIT (A) HAS DELETED THE ADDITION B Y HOLDING THAT THE ASSESSEE HAS ALREADY DECLARED INCOME FROM SALE OF SCRAP APPEARIN G IN THE LOOSE PAPERS FOUND DURING THE COURSE OF SURVEY. THEREFORE, THERE IS N O BASIS FOR EXTRAPOLATING THE FIGURES OF SALE DECLARED BY THE ASSESSEE. 6. BEFORE US, THE LD. D/R HAS SUBMITTED THAT THE AS SESSEE HAS ADMITTED THE ACTUAL AMOUNT OF SCRAP SALE IS MORE THAN THE BILLED AMOUNT AS IT IS EVIDENT FROM THE IMPOUNDED MATERIAL FOUND DURING THE SURVEY. THE AS SESSEE HAS ACCEPTED THE RECEIPT OF RS. 30,02,658/- ON ACCOUNT OF SCRAP SALE AS AGAINST THE BILLED AMOUNT OF RS. 19,13,089/-. THEREFORE, ONCE THE OVERCHARGING ON ACCOUNT OF SCRAP SALE OVER 6 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. AND ABOVE THE BILLED AMOUNT IS FOUND DURING THE COU RSE OF SURVEY AND FROM THE IMPOUNDED MATERIAL, THEN THE AO HAS RIGHTLY MADE TH E ADDITION BY APPLYING THE SAME RATIO IN RESPECT OF THE ENTIRE SCRAP SALE DURI NG THE YEAR UNDER CONSIDERATION. 6.1. ON THE OTHER HAND, THE LD. A/R HAS SUBMITTED T HAT THE ASSESSEE HAS NOT ACCEPTED UNDER BILLING OF SCRAP SALE. HOWEVER, ON THE BASIS OF LOOSE PAPERS FOUND DURING THE COURSE OF SURVEY AND IN ORDER TO BUY PEA CE OF MIND, THE ASSESSEE SURRENDERED UNDISCLOSED INCOME OF RS. 20,00,000/- W HICH COVERS THE DIFFERENCE AS FOUND IN THE LOOSE PAPERS ON ACCOUNT OF SCRAP SALE. THE AO HIMSELF HAS GIVEN THE TELESCOPIC CREDIT OF THE ADDITION MADE IN RESPECT O F THE AMOUNT SURRENDERED BY THE ASSESSEE AND ADDITION MADE ON ACCOUNT OF SURPLUS CA SH. IN THE ABSENCE OF ANY EVIDENCE, THE AO IS NOT JUSTIFIED TO HOLD THAT THE ASSESSEE HAS UNDER BILLED THE ENTIRE SALE OF SCRAP WHEN THE TRANSACTIONS IN THE LOOSE PA PERS WERE FOUND ONLY IN RESPECT OF THE SALE OF RS. 30,02,650/- TO FOUR PARTIES. SHE H AS FURTHER CONTENDED THAT ALL SALES OF SCRAP ARE CONTROLLED BY EXCISE RULES AND IN THE ABSENCE OF ANY OTHER MATERIAL, NO SUCH EXTRAPOLATING CAN BE MADE BY THE AO. FURTHER, THERE ARE DIFFERENT ITEMS OF SCRAP WHICH HAS DIFFERENT RATES BY WHICH THESE SCRA PS SOLD. THEREFORE, APPLYING ONE RATE FOR ALL KINDS OF SCRAP IS NOT JUSTIFIED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. SO FAR AS THE UNDERSTATEMENT OF SCRAP SALE IN RESPECT OF THE BILLED AMOUNT OF RS. 19,13,089/- AGAINST THE ACTUAL RECEIPT OF RS. 3 0,02,650/- IS CONCERNED, THE SAID FACT WAS DULY MANIFESTED IN THE IMPUGNED MATERIAL A ND, THEREFORE, THE ASSESSEE HAS ACCEPTED THE SAID UNDERSTATEMENT OF SCRAP SALE. TH E AO APPLIED THE SAID RATE OF UNDERSTATEMENT BEING 56.95% ON THE ENTIRE SCRAP SAL E MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. HOWEVER, WE NOTE THAT THE ASSESSEE HAS SOLD SCRAP 7 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. DURING THE YEAR OF DIFFERENT MATERIALS AND AT DIFFE RENT RATES. THE SCRAP SALE UPTO 5 TH MAY, 2004 IS SHOWN IN THE BOOKS @ RS. 8500/- PER MT AND THEREAFTER @ RS. 11,500/- PER MT. THIS SALE WAS MADE ONLY TO THE SEL ECTED PARTIES AND, THEREFORE, A PARTICULAR SCRAP WAS SOLD BY THE ASSESSEE DURING TH E YEAR TO THE SELECTED PARTIES. APART FROM THIS PARTICULAR METAL SOLD AS SCRAP @ RS .11,500/- PER MT WHICH CONSIST OF THE MAJOR AMOUNT OF SCRAP SALE DURING THE YEAR, THE ASSESSEE HAS ALSO SHOWN THE SCRAP SALE OF OTHER ITEMS @ RS. 25/- PER KG. THUS IT APPEARS THAT ONLY 3 RATES ARE RECORDED IN THE BOOKS. FIRST RATE IS RS. 8,500/- P ER MT I.E. ONLY AFTER 8 TH MAY, 2004 AND THEREAFTER THE SAID PARTICULAR ITEM OF SCRAP WA S SOLD @ RS. 11,500/- PER MT. SOME OTHER ITEMS LIKE EMPTY CONTAINERS, V.P. RINGS, ZINC DUST ETC. WERE SOLD BY THE ASSESSEE @ RS. 25/- PER KG. THUS THE DETAILS OF TH E VARIOUS ITEMS OF SCRAP IS VERY WELL CLEAR FROM THE RECORD AND BOOKS OF ACCOUNT AND , THEREFORE, THE SCRAP SALE OF A PARTICULAR ITEM WHICH IS FOUND IN THE LOOSE PAPERS SHOWING THE ACTUAL RECEIPT IS MORE THAN THE BILLED AMOUNT CAN BE EXTRAPOLATED IN RESPE CT OF THE SCRAP SALE OF THE SAME ITEM AND NOT TO THE OTHER ITEMS. FURTHER THE DATE OF SCRAP SALE AS FOUND IN THE LOOSE PAPERS IS ALSO A RELEVANT FACTOR TO ASCERTAIN THE S AID TRANSACTION BELONGS TO THE LOT OF THE SCRAP SALE AND RATE PREVAILING DURING THE SAID PERIOD. THEREFORE, THE RATE OF A PARTICULAR ITEM OF SCRAP SALE AS FOUND IN THE LOOSE PAPERS AND THE RATE AS RECORDED IN THE BILLS AND BOOKS OF ACCOUNTS CAN BE VERIFIED AND THEN ONLY TO THE EXTENT OF THE SAME RATE AND SAME ITEM OF SCRAP SALE WILL BE CONSI DERED FOR MAKING THE ADDITION ON ACCOUNT OF UNDER BILLING. HENCE, IN VIEW OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR PROPER VERIFICATION OF THE FACTS AND IDENTIFY THE PARTICULAR ITEM OF SCRAP SALE FOUND RE CORDED IN THE LOOSE PAPERS IMPOUNDED DURING THE COURSE OF SURVEY AND THEN APPL Y THE SAME RATE IN RESPECT OF 8 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. THE SCRAP SALE OF THE SAME ITEM WHICH IS SHOWN BY T HE ASSESSEE SOLD AT THE RATE AS MENTIONED IN THE CORRESPONDING BILL. NEEDLESS TO S AY, THE ASSESSEE BE GIVEN AN OPPORTUNITY OF HEARING BEFORE PASSING A FRESH ORDER ON THIS ISSUE. GROUND NO. 3 IS REGARDING TRADING ADDITION MADE BY THE AO WAS DELETED BY THE LD. CIT (A). 8. THE AO REJECTED THE BOOKS OF ACCOUNT UNDER SECTI ON 145(3) OF THE IT ACT. THE AO NOTED THAT FOR THE ASSESSMENT YEAR 2004-05 AFTER CONSIDERING THE SURRENDERED AMOUNT OF RS. 57,00,000/-, THE GP RATE COMES TO 7.4 6% AS AGAINST THE GP RATE FOR THE YEAR UNDER CONSIDERATION AFTER CONSIDERING THE SURRENDERED AMOUNT AND ADDITION IS 2.44%. THEREFORE, THE AO PROPOSED TO APPLY THE GP RATE OF 7.46% TO THE TOTAL SALE/TURNOVER OF THE ASSESSEE. THE ASSESSEE OBJECT ED TO THE REJECTION OF BOOKS OF ACCOUNT AS WELL AS THE GP ADDITION PROPOSED BY THE AO. THE AO FINALLY APPLIED THE GP RATE AT 6% INCLUDING SURRENDERED AMOUNT AND CONS EQUENTLY MADE AN ADDITION OF RS. 5,67,936/- AFTER ALLOWING THE TELESCOPIC BENEFI T FOR THE ADDITION MADE ON ACCOUNT OF SCRAP SALE RECEIPTS. ON APPEAL, THE LD. CIT (A) DELETED THE ADDITION BY HOLDING THAT THE ASSESSEE HAS DECLARED BETTER GP THAN THE E ARLIER YEAR. THEREFORE, THE LD. CIT (A) WAS OF THE VIEW THAT THE ADDITION MADE BY T HE AO WAS NOT JUSTIFIED. 9. BEFORE US, THE LD. D/R HAS SUBMITTED THAT ONCE T HE AO HAS REJECTED THE BOOKS OF ACCOUNT AND THE SAID ACTION OF REJECTION OF BOOK S OF ACCOUNT WAS UPHELD BY THE LD. CIT (A), THEN THE INCOME OF THE ASSESSEE IS REQUIRE D TO BE ESTIMATED BY APPLYING A REASONABLE AND PROPER GP RATE. THE AO HAS CONSIDER ED THE GP OF THE EARLIER YEAR AND ALSO ALLOWED RELIEF OF 1.46% AND THEN APPLIED O NLY 6% AS GP FOR THE YEAR UNDER CONSIDERATION FOR ESTIMATION OF INCOME OF THE ASSES SEE. THE AO HAS ALSO GIVEN THE CREDIT AND BENEFIT OF OTHER ADDITIONS MADE BY THE A O AND ONLY THE BALANCE AMOUNT 9 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. OF RS. 5,67,936/- WAS ADDED BY THE AO ON THIS ACCOU NT. THE LD. D/R HAS RELIED UPON THE ORDER OF THE A.O. 9.1. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS DECLARED GP AT 1.12% FOR THE YEAR UNDE R CONSIDERATION AS AGAINST THE GP @ 0.5% IN THE PRECEDING YEAR. THE AO HAS CONSID ERED THE GP OF THE EARLIER YEAR AT 7.46% AFTER INCLUDING AN AMOUNT OF RS. 57,00,000 /- AS SURRENDERED BY THE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE AO I S NOT BASED ON REASONABLE AND PROPER BASIS. THE AO CAN ESTIMATE THE INCOME OF TH E ASSESSEE ONLY ON THE BASIS OF THE UNDISPUTED GP RATE OF THE EARLIER YEAR. THEREF ORE, THE ACTION OF THE AO INCLUDING INCOME SURRENDERED IN THE BUSINESS INCOME WHILE COM PUTING THE GP RATE IS BAD IN LAW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE AO HAS APPLIED THE GP OF THE PRECEDING YEAR WHICH IS NOT A NORMAL COMPUTATION OF INCOME BUT THE ASSESSEE SURRENDERED AN INCOME OF RS. 57,00,000/- WHICH WAS INCLUDED BY THE AO WHILE COMPUTING THE GP RATE TO BE APPLIED FOR THE YEAR UNDER CONSIDERATION . THERE IS NO QUARREL ON THE POINT THAT AFTER REJECTION OF BOOKS OF ACCOUNT, THE ONLY COURSE OF ACTION LEFT WITH THE AO IS TO ESTIMATE THE INCOME OF THE ASSESSEE BY APPLYING A PROPER AND REASONABLE BASIS. THE GP RATE OF EARLIER YEAR IS NO DOUBT A REASONABL E AND PROPER BASIS FOR ESTIMATION OF INCOME. HOWEVER, THE AO INSTEAD OF APPLYING THE UNDISPUTED AND NON- CONTROVERSIAL GP RATE OF THE EARLIER YEAR, HAS CONS IDERED ONLY THE GP RATE WHICH WAS COMPUTED AFTER INCLUDING THE SURRENDERED INCOME OF THE ASSESSEE OF THE PRECEDING YEAR. THEREFORE, WE FIND THAT THE BASIS APPLIED BY THE AO IS NOT PROPER AND 10 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. APPROPRIATE AND, THEREFORE, WE DO NOT FIND ANY ERRO R OR ILLEGALITY IN THE ORDER OF LD. CIT (A) IN DELETING THE SAID ADDITION. GROUND NO. 4 IS REGARDING AN ADDITION MADE ON ACCOU NT OF FREIGHT RECEIPTS OF RS. 5,85,323/- WHICH WAS RESTRICTED BY THE LD. CIT (A) TO RS. 1,37,902/-. 11. THE AO ON THE ANALYSES OF LOOSE PAPERS FOUND TH AT THE ASSESSEE HAS RECEIVED UNACCOUNTED CASH @ 22.25% WHICH IS THE DIFFERENCE B ETWEEN THE BILLED AMOUNT AND ACTUAL FREIGHT MUTUALLY DETERMINED WITH THE TRANSPO RTERS. BY APPLYING THIS RATE TO THE TOTAL EXPENSES ON FREIGHT DECLARED BY THE ASSES SEE, THE AO HAS MADE AN ADDITION OF RS. 5,85,323/- OVER AND ABOVE AN AMOUNT OF RS. 1 ,37,902/- DECLARED BY THE ASSESSEE AND SURRENDERED DURING THE SURVEY. THE LD . CIT (A) DELETED THE SAID ADDITION ON THE GROUND THAT THE AO HAS MADE THE ADD ITION WITHOUT BRINGING ANY MATERIAL ON RECORD TO PROVE THAT THE ASSESSEE HAS R ECEIVED CASH BACK ON THE TOTAL FREIGHT CHARGES. 12. BEFORE US, THE LD. D/R HAS SUBMITTED THAT THOUG H THE LOOSE PAPERS CONTAINS THE UNACCOUNTED CASH RECEIPT FOUND AT RS. 1,37,902/ - ON ACCOUNT OF FREIGHT CHARGES, HOWEVER, ONCE THIS UNDECLARED INCOME WAS FOUND DURI NG THE SURVEY, THE AO HAS APPLIED THE SAME RATIO ON THE ENTIRE FREIGHT CHARGE S PAID BY THE ASSESSEE. 12.1. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSE E HAS SUBMITTED THAT THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL OR EVIDENCE TO P ROVE THAT THE ASSESSEE HAD IN FACT RECEIVED AN AMOUNT @ 22.25% OF THE FREIGHT EXP ENSES RECORDED IN THE BOOKS OF ACCOUNT. THE ONLY EVIDENCE IS THE LOOSE PAPERS FOUN D DURING THE COURSE OF SURVEY WHICH CONTAINS ONLY RS. 1,37,902/- AND, THEREFORE, OVER AND ABOVE THE SAID AMOUNT THE AO CANNOT MAKE AN ADDITION. SHE HAS SUPPORTED T HE ORDER OF THE LD. CIT (A). 11 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS NOTED FROM ANNEXURE-A-22 OF THE LOOSE PAPERS THAT THE BILLS OF HARYANA RAJASTHAN ROADLINES WERE IMPOUNDED DURING S URVEY. THE DETAILS OF THE LEDGER ACCOUNT AND THE BILL AMOUNT AS PER THE LOOSE PAPER IS GIVEN BY THE AO AS UNDER :- MONTH EXPENSES CLAIMED BY COMPANY BILL AMOUNT AS PER LOOSE PAPER DIFFERENCE APRIL, 04 78338 55000 23338 MAY, 04 243901 165900 7800 JUNE, 04 127463 96800 30663 JULY, 04 48104 19400 28704 AUG, 04 122097 74700 47397 TOTAL 619903 411800 137902 ACCORDINGLY THE AO COMPUTED THE DIFFERENCE BETWEEN THE BILLED AMOUNT AND ACTUAL FREIGHT AMOUNT MUTUALLY DETERMINED BETWEEN THE PART IES @ 22.25%. THIS RATE OF DIFFERENCE WAS APPLIED BY THE AO ON THE TOTAL FREIG HT CHARGES OF RS. 32,50,451/- AND ARRIVED AT TOTAL DIFFERENCE AMOUNT OF RS. 7,23,225/ -. SINCE AN AMOUNT OF RS. 1,37,902/- IS FOUND FROM THE LOOSE PAPERS BEING DIF FERENCE BETWEEN THE AGREED RATE AND THE EXPENSES CLAIMED IN THE BOOKS WAS ALREADY S URRENDERED BY THE ASSESSEE, THEREFORE, THE AO HAS MADE THE ADDITION OF RS. 5,85 ,323/-. THE ASSESSEE HAS OBJECTED TO THE EXTRAPOLATING OF THIS DIFFERENCE TO THE ENTIRE FREIGHT CHARGES WHICH IS ACCEPTED BY THE LD. CIT (A) AND DELETED THE SAID AD DITION. 13.1. HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE ASSESSEE HAS ADMITTED THE OVER-INFLATED CLAIM OF FR EIGHT CHARGES AS FOUND IN THE LOOSE PAPERS FOR THE MONTHS OF APRIL TO AUGUST IN R ESPECT OF THE PAYMENT MADE TO ONE TRANSPORTER, NAMELY, HARYANA RAJASTHAN ROADLINE S, THE SAID RATE OF INFLATED 12 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. EXPENSES ON ACCOUNT OF FREIGHT CHARGES CAN BE APPLI ED IN RESPECT OF THE FREIGHT CHARGES CLAIMED BY THE ASSESSEE PAID TO HARYANA RAJ ASTHAN ROADLINES. THEREFORE, TO THE EXTENT OF FREIGHT PAID TO THE SAID TRANSPORT ER, THE INFLATED RATE AS APPLIED BY THE ASSESSEE IS JUSTIFIED BUT NOT IN RESPECT OF THE OTHER TRANSPORTER WHEN THERE IS NO MATERIAL OR OTHER RECORD TO SHOW SUCH AN ARRANGEMEN T BETWEEN THE ASSESSEE AND OTHER TRANSPORTER. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO TO VERIFY THE OTHER FREIGHT CHARGES AND ONLY TO THE EX TENT OF FREIGHT CHARGES TO HARYANA RAJASTHAN ROADLINES THIS DIFFERENCE RATE CAN BE APP LIED. GROUND NO. 5 IS REGARDING DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) WHICH WAS DELETED BY THE LD. CIT (A). 14. THE ASSESSEE HAS GIVEN LOAN TO M/S. INTERNATION AL ENGINEERING & MANUFACTURING SERVICES PVT. LTD. WITHOUT CHARGING A NY INTEREST. THE AO HAS DISALLOWED THE PROPORTIONATE INTEREST EXPENDITURE A MOUNTING TO RS. 2,53,590/-. ON APPEAL, THE LD. CIT (A) HAS DELETED THE DISALLOWANC E MADE BY THE AO BY RECORDING THE FACT THAT NO FRESH LOAN WAS GIVEN BY THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION. 15. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT TH E DISALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST EXPENSES DUE TO LOAN GIVEN TO M /S. INTERNATIONAL ENGINEERING & MANUFACTURING SERVICES PVT. LTD., A SISTER CONCERN OF THE ASSESSEE, WITHOUT CHARGING INTEREST WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE ORDER DATED 4 TH MARCH, 2015 IN ITA NO. 1038/JP/2011. THE REVENUE HAS NOT DISPUTED THE FACT THAT THERE IS NO FRESH LOAN GIVEN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION TO THE SISTER C ONCERN. THEREFORE, WHEN THE 13 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. DISALLOWANCE MADE BY THE AO ON THIS ACCOUNT WAS ALR EADY DECIDED IN FAVOUR OF THE ASSESSEE BY THE LD. CIT (A) AND THEREAFTER BY THIS TRIBUNAL, THEN FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT (A) QUA THIS ISSUE. GROUND NO. 6 IS REGARDING DISALLOWANCE OF RS. 50,00 0/- ON ACCOUNT OF TRAVELLING EXPENSES WHICH WAS RESTRICTED BY THE LD. CIT (A) TO RS. 15,000/-. 16. THE AO NOTED THAT THE ASSESSEE HAS INCURRED RS. 3,44,125/- ON ACCOUNT OF TRAVELLING EXPENSES OF THE DIRECTORS OF THE ASSESSE E COMPANY. THE AO MADE A DISALLOWANCE OF RS. 50,000/- BY HOLDING THAT THE EX PENSES INCURRED ARE PERSONAL IN NATURE. THUS THE DISALLOWANCE MADE BY THE AO IS AN ADHOC ONE. 17. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS NOT DISPUTED THAT TH E EXPENDITURE WAS INCURRED ON THE TRAVELLING OF THE DIRECTOR AND, THEREFORE, IN T HE ABSENCE OF ANY FACT OR MATERIAL TO SHOW THAT THE VISITS UNDERTAKEN BY THE DIRECTOR OF THE ASSESSEE WAS PERSONAL AND NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, SU CH AN ADHOC DISALLOWANCE OF RS. 50,000/- IS NOT JUSTIFIED. ACCORDINGLY, WE DO NOT F IND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT (A) QUA THIS ISSUE. C.O. NO. 44/JP/2016 : 18. THERE IS A DELAY OF 846 DAYS IN FILING THE CROS S OBJECTION. AN APPLICATION FOR CONDONATION OF DELAY IS ON RECORD. HOWEVER, WE NOT E THAT THE SAID APPLICATION IS NEITHER SIGNED BY THE ASSESSEE NOR SUPPORTED BY ANY AFFIDAVIT OF THE ASSESSEE EXCEPT THE A/R OF THE ASSESSEE HAS SIGNED THE SAID APPLICA TION FOR CONDONATION OF DELAY. UNDISPUTEDLY, THE DELAY IN FILING THE CROSS OBJECTI ON IS ABNORMAL AND INORDINATE AND, 14 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. THEREFORE, THE ASSESSEE IS REQUIRED TO EXPLAIN THE DELAY IN FILING THE CROSS OBJECTION. SINCE NEITHER THE APPLICATION IS SIGNED BY THE ASSE SSEE NOR ANY SUPPORTING AFFIDAVIT IS FILED, THEREFORE, WE DO NOT INCLINED TO ENTERTAIN T HE APPLICATION FOR CONDONATION OF DELAY. ACCORDINGLY, THE CROSS OBJECTION FILED BY T HE ASSESSEE BEING BARRED BY LIMITATION IS DISMISSED. 19. THE LD. A/R OF THE ASSESSEE HAS PLEADED THAT TH E ASSESSEE IS RAISING THE OBJECTION AGAINST THE APPEAL OF THE REVENUE AS PER RULE 27 OF THE ITAT RULES, 1963. WE HAVE GONE THROUGH THE ORDER OF LD. CIT (A) AS WE LL AS THE OBJECTIONS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION AND NOTED THAT NONE OF THE OBJECTIONS RAISED BY THE ASSESSEE BEFORE LD.CIT (A) WHICH WERE DECIDED A GAINST THE ASSESSEE SHALL HAVE THE EFFECT OF REJECTING THE APPEAL OF THE REVENUE B EFORE US. THE SCOPE OF RAISING THE OBJECTIONS UNDER RULE 27 OF THE ITAT RULES IS ONLY TO THE EXTENT THAT IF THE ASSESSEE SUCCEEDS IN ITS GROUND RAISED BEFORE THE LD. CIT (A ), THE APPEAL FILED BY THE REVENUE WOULD FAIL. THUS THE EFFECT OF OBJECTION RAISED UN DER RULE 27 WOULD IN ANY CASE WILL SUSTAIN THE IMPUGNED ORDER OF LD. CIT (A) AND CONSE QUENT FAILURE OF THE REVENUES APPEAL BUT IF THE GROUNDS WHICH ARE DECIDED AGAINST THE ASSESSEE ARE NOT HAVING DIRECT BEARING EITHER ON THE SUSTAINABILITY OF THE ASSESSMENT ORDER OR ON THE GROUNDS RAISED BY THE REVENUE, THEN THE OBJECTIONS SO RAISE D CANNOT BE TAKEN UNDER RULE 27 OF THE ITAT RULES. IN ANY CASE, THE ORDER OF LD. C IT (A) WOULD STAND AND WILL HAVE FULL EFFECT IN SO FAR AS IT IS AGAINST THE ASSESSEE AND ONLY IN CASE THE ASSESSEE SUCCEEDS IN THE PLEA RAISED, THEN THE APPEAL OF THE REVENUE WOULD FAIL. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF B.R. BAMASI VS. C IT, 83 ITR 223 (BOM.) WHILE DISCUSSING THE SCOPE OF RULE 27 HAS HELD AS UNDER : - 15 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. BUT EVEN IF THE ASSESSEE HAD NOT MADE SUCH A STATEM ENT, THE ABOVE JUDGMENT SHOWS THAT THE ASSESSEE WOULD BE ENTITLED TO RAISE A NEW GROUND, PROVIDED IT IS A GROUND OF LAW AND DOES NOT NECESSITATE ANY OTHER EVIDENCE TO BE RECORDED, THE NATURE OF WHICH WOULD NOT ONLY BE A DEFENCE TO THE APPEAL ITSELF, B UT MAY ALSO AFFECT THE VALIDITY OF THE ENTIRE ASSESSMENT PROCEEDINGS. IF THE GROUND SUCCEE DS, THE ONLY RESULT WOULD BE THAT THE APPEAL WOULD FAIL. THE ACCEPTANCE OF THE GROUND WOULD SHOW THAT THE ENTIRE ASSESSMENT PROCEEDINGS WERE INVALID, BUT YET THE TR IBUNAL WHICH HEARS THAT APPEAL WOULD HAVE NO POWER TO DISTURB OR TO SET ASIDE THE ORDER IN FAVOUR OF THE APPELLANT AGAINST WHICH THE APPEAL HAS BEEN FILED. THE GROUND WOULD SERVE ONLY AS A WEAPON OF DEFENCE AGAINST THE APPEAL. IF THE RESPONDENT HAS N OT HIMSELF TAKEN ANY PROCEEDINGS TO CHALLENGE THE ORDER IN APPEAL, THE TRIBUNAL CANNOT SET ASIDE THE ORDER APPEALED AGAINST. THAT ORDER WOULD STAND AND WOULD HAVE FULL EFFECT IN SO FAR AS IT IS AGAINST THE RESPONDENT. THE TRIBUNAL REFUSED TO ALLOW THE ASSES SEE TO TAKE UP THIS GROUND UNDER AN INCORRECT IMPRESSION OF LAW THAT IF THE POINT WA S ALLOWED TO BE URGED AND SUCCEEDED, THE TRIBUNAL WOULD HAVE NOT ONLY TO DISM ISS THE APPEAL, BUT ALSO TO SET ASIDE THE ENTIRE ASSESSMENT. THE POINT WOULD HAVE S ERVED AS A WEAPON OF DEFENCE AGAINST THE APPEAL, BUT IT COULD NOT BE MADE INTO A WEAPON OF ATTACK AGAINST THE ORDER IN SO FAR AS IT WAS AGAINST THE ASSESSEE. THEREFORE, THE EFFECT OF OBJECTION WHICH CAN BE RAI SED UNDER RULE 27 OF THE ITAT RULES IF ACCEPTED, THE APPEAL OF THE REVENUE WOULD FAIL. BUT IN THE CASE IN HAND THE APPEAL OF THE REVENUE IS ALTOGETHER ON SEPARATE ISS UES WHICH ARE DECIDED IN FAVOUR OF THE ASSESSEE AND, THEREFORE, THE APPEAL OF THE R EVENUE ON THE ISSUES WHICH ARE DECIDED IN FAVOUR OF THE ASSESSEE CANNOT BE REJECTE D IN PURSUANT TO THE OBJECTION OF THE ASSESSEE IN RESPECT OF THE OTHER ISSUES WHICH W ERE DECIDED AGAINST THE ASSESSEE. SINCE THE ASSESSEE HAS NOT RAISED ANY SUCH ISSUE CH ALLENGING THE VALIDITY OF ASSESSMENT ORDER, THEREFORE, WE DO NOT FIND ANY SUB STANCE OR MERITS IN THE PLEA OF THE LD. A/R OF THE ASSESSEE TO RAISE OBJECTIONS UND ER RULE 27 OF THE ITAT RULES. 16 ITA NO. 525/JP/2014 & CO NO. 44/JP/2016 M/S. SUPREME CYLINDERS LIMITED, JAIPUR. 20. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/05/2018 . SD/- SD/- HKKXPUN FOT; IKY JKWO (BHAGCHAND) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29/05/2018. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-2, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S. SUPREME CYLINDERS LTD., JAIPUR . 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 525/JP/2014 & CO 44/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR