DCIT CIR 29(3), MUMBAI V. RAJ GIRISH KARIA, MUMBAI

ITA 1279/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1075 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN SHENOY
• Keywords: Rejection of books of accounts; Unexplained investment; Capital asset; Business expenditure; Opportunity of being heard; Question of law; Onus to prove
• Section: 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1279/MUM/2015 ASSESSMENT YEAR: 2010-11 DCIT CIR 29(3) VS. MR. RAJ GIRISH KARIA 4 TH FLOOR, R. NO. 402 PROP. RAJGIRI MARMO C-10 BLDG, PRATYAKSHKAR BHAVAN GARAGE NO. 3, VASU DHA BKC BANDRA (E) BPS ROAD, MULUND (WEST) MUMBAI 400051 MUMBAI - 400080 PAN NO. AHXPK7597E ITA NO. 1037/MUM/2015 ASSESSMENT YEAR: 2010-11 MR. RAJ GIRISH KARIA VS. JCIT 23(3) 3 VASUDHA B.P.S. ROAD, BKC, BANDRA (E) MULUND (W) MUMBAI - 400051 MUMBAI - 400080 PAN NO. AHXPK7597E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ARUN SHENOY, DR ASSESSEE BY: SHRI DHARMESH SHAH, AR DATE OF HEARING : 07/02 /2017 DATE OF PRONOUNCEMENT: 28/04/2017 ORDER PER N.K. PRADHAN, AM THESE TWO CROSS APPEALS ONE BY THE REVENUE AND TH E OTHER BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11 INVO LVE SOME ITA NO. 1279 & 1037/MUM/2015 2 COMMON ISSUES. AS SUCH WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 2. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE A.Y. 2010-11 ON 29.09.2010 SHOWING INCOME OF RS. 68,55,600/-. THE A SSESSEE TRADES IN MARBLE, GRANITE, TILES ETC. HE ALSO IMPORTS RAW MATERIALS AND SELLS THEM ON HIGH SEAS. WE BEGIN WITH THE GROUNDS OF APP EAL FILED BY THE REVENUE WHICH READS AS UNDER: I . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 19,23,050/- MADE ON ACCOUNT OF DIFFERENCE IN DEBTORS, IN CONTRAVENTION OF PROVISIO NS OF RULE 46A OF I.T. RULES, 1962. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,04,08,270/- MADE ON ACCOUNT OF UNPROVED PURCHASES, IN CONTRAVENTION OF PROVISIONS OF RULE 46A OF I.T. RULES, 1962. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 5,00,000/- MA DE U/S 68 ON ACCOUNT OF UNPROVED LOANS OF 2 LOAN LENDERS, IN CON TRAVENTION OF PROVISIONS OF RULE 46A OF I.T. RULES, 1962. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 4,57,977/- MA DE ON ACCOUNT OF DISALLOWANCE OF INTEREST ATTRIBUTABLE TO THE INVEST MENT IN PLOTS WHICH IS NOT PUT INTO USE FOR THE BUSINESS IN CONTRAVENTI ON OF PROVISIONS TO SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961. V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 14,17,335/- O N ACCOUNT OF 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE HO NBLE ITAT D BENCH VIDE THEIR ORDER DATED 25.06.2014 IN THE ASSESSEES OWN CASE FOR A.Y. 2008-09 HAS SET ASIDE THE ISSUE TO THE FILE OF THE A.O. FOR RE- EXAMINATION AND THEREFORE, THE ISSUE IS NOT DECIDED IN ASSESSEES FAVOUR. 3. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. THE ASSESSING OFFICER (A.O.) MADE AN ADDITION OF RS. 19,23,050/- BEING TH E DIFFERENCE IN ITA NO. 1279 & 1037/MUM/2015 3 VALUE OF RECEIVABLES SHOWN TO THE BANK AND THAT SHO WN IN THE BOOKS OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE A.O. OBSERVED THAT THE RECEIVABLES SHOWN TO THE BANK WER E RS. 4,54,31,109/- WHEREAS THE RECEIVABLES HAS SHOWN IN THE BOOKS WERE RS. 4,35,08,059/-. WHEN ASKED TO EXPLAIN BY THE A.O ., THE ASSESSEE FILED A RECONCILIATION STATEMENT BEFORE HIM. THE A. O. HELD THAT NO SUCH RECONCILIATION HAD BEEN FILED BY THE ASSESSEE BEFOR E THE BANK. THE A.O. TOOK NOTE OF THE FACT THAT THE BOOKS OF ACCOUN T ARE ALREADY REJECTED, THEREFORE, HE MADE AN ADDITION OF RS. 19, 23,050/- (RS. 4,54,31,109/- MINUS RS. 4,35,08,059/-). 3.1 AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSE E FILED AN APPEAL BEFORE THE LEARNED CIT(A). THE ASSESSEE FILED COPY OF ACCOUNT OF THE SAID PARTIES ALONG WITH A RECONCILIATION STATEMENT, SHOWING THE RECEIPT OF PAYMENT FROM THE CONCERNED PARTIES AND H OW IT WAS ACCOUNTED FOR IN THEIR RESPECTIVE LEDGER ACCOUNT. T HE ASSESSEE ALSO SUBMITTED THAT THE LIST OF RECEIVABLES SUBMITTED TO THE BANK WAS NOT FULLY UPDATED AND DID NOT INCORPORATE THE PART PAYM ENTS RECEIVED FROM THE SAID PARTIES. THE LEARNED CIT(A), HAVING G ONE THROUGH THE SUBMISSION MADE BY THE ASSESSEE HELD THAT JUST BEC AUSE BOOKS OF ACCOUNT ARE REJECTED DUE TO NON-MAINTENANCE OF QUAN TITATIVE RECORDS OF STOCK, IT DOES NOT AUTOMATICALLY MEAN THAT ALL F IGURES RECORDED IN BOOKS ARE UNRELIABLE/INCORRECT. THEREFORE, THE LEA RNED CIT(A) DIRECTED THE A.O. TO DELETE THE ADDITION OF RS. 19, 23,050/-. 3.2 BEFORE US, THE LEARNED DR RELIED ON THE ORDER O F THE A.O., WHEREAS THE LEARNED COUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT(A). 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THERE WAS NO CONTR AVENTION OF THE ITA NO. 1279 & 1037/MUM/2015 4 PROVISIONS OF RULE 46A OF THE INCOME TAX RULES, 196 2 BY THE LEARNED CIT(A) AS NO NEW MATERIAL OR EVIDENCE WAS FILED BY THE ASSESSEE BEFORE HIM. IT IS FOUND THAT THE ASSESSEE FILED A R ECONCILIATION STATEMENT BEFORE THE A.O. ON 05.12.2012. THE A.O. D ID NOT ACCEPT IT ON THE GROUND THAT SUCH A RECONCILIATION STATEMENT HAS NOT BEEN FILED BEFORE THE BANK. UNLESS THERE IS A REQUIREMENT, THE ASSESSEE NEED NOT FILE A RECONCILIATION STATEMENT BEFORE THE BANK. AS ASKED BY THE A.O., THE ASSESSEE FILED A RECONCILIATION STATEMENT. THE A.O. SHOULD HAVE GONE THROUGH IT AND IN CASE OF ANY DOUBT, HE SHOULD HAVE ASKED THE ASSESSEE TO RECONCILE THE SAME. HE HAS NOT DONE SO. THE OTHER REASON ON WHICH THE A.O. HAS RELIED IS THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE ALREADY REJECTED. THIS MAY NOT BE A RE ASON TO MAKE AN ADDITION OF RS. 19,23,050/-. AS THE ADDITION MADE B Y THE A.O. IS BEREFT OF ANY MATERIAL EVIDENCE, WE UPHOLD THE ORDER OF TH E LEARNED CIT(A). THUS THE 1 ST GROUND OF APPEAL IS DISMISSED. 4. NOW WE DEAL WITH THE 2 ND GROUND OF APPEAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. ISSUED NOTICES T O CERTAIN PARTIES FROM WHOM THE ASSESSEE HAD SHOWN PURCHASES . IN RES PONSE TO IT, NO DETAILS / CONFIRMATIONS WERE FILED FROM M/S. STONEM AN ROYALE LTD. (SRL) FOR PURCHASE OF RS. 1,44,45,463/- SHOWN BY TH E ASSESSEE FROM THE SAID PARTY. WHEN ASKED TO EXPLAIN, THE ASSESSEE STATED THAT NOTICE U/S 133(6) HAD BEEN DULY SERVED ON THE SAID PARTY A ND THE PAYMENTS TO THEM HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. TH E ASSESSEE FILED BEFORE THE A.O. COPY OF SRLS ACCOUNT AS APPE ARING IN THE BOOKS OF THE ASSESSEE ALONG WITH COPIES OF BILLS, LR AND BANK STATEMENT HIGHLIGHTING THE PAYMENTS MADE TO THE SAID PARTY. H OWEVER, THE A.O. HELD THAT THE PURCHASES SHOWN BY THE ASSESSEE HAVE NOT BEEN CONFIRMED BY THE OTHER PARTY. THE A.O. ALSO NOTED T HAT AS THE ASSESSEE WAS NOT MAINTAINING QUANTITATIVE DETAILS OF STOCK, THE PURCHASES ITA NO. 1279 & 1037/MUM/2015 5 SHOWN IN THE BOOKS FROM SRL COULD NOT BE VERIFIED. ACCORDINGLY, THE A.O. HELD RS. 1,44,45,463/- AS UNVERIFIED PURCHASES . HOWEVER, SINCE ADDITION HAD ALREADY BEEN MADE FOR EXCESS STOCK OF RS. 41,69,363/- AND UNACCOUNTED RECEIVABLES OF RS. 19,23,050/-, THE A.O. ALLOWED SET OFF FOR THESE AMOUNTS AND MADE AN ADDITION OF RS. 1 ,04,08,270/- TREATING THE PURCHASES AS UNACCOUNTED / UNVERIFIED U/S 69A OF THE ACT. 4.1 IN APPEAL, THE AR SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE DISCHARGED HIS ONUS BY FURNISHING THE CORR ECT ADDRESS OF THE PARTY, ON WHICH NOTICE U/S 133(6) WAS DULY SERVED. THE ASSESSEE SUBMITTED THAT AFTER CONSTANT FOLLOW UP, THE SAID P ARTY RELENTED AND PROVIDED CONFIRMATION OF THE PURCHASES SHOWN BY THE ASSESSEE IN HIS BOOKS AS ALSO THE SALES MADE BY THE ASSESSEE TO THA T PARTY DURING THE YEAR. THE ASSESSEE FILED BEFORE THE LEARNED CIT(A) COPY OF CONFIRMATION FOR THE PURCHASES AND SALES MADE ALONG WITH COPY OF SRLS RETURN OF INCOME AND BALANCE SHEET ETC. FOR T HE YEAR. THE LEARNED CIT(A) HELD THAT (I) PURCHASES OF RS. 1,44, 45,463/- ARE DULY SHOWN IN THE BOOKS OF THE ASSESSEE, FOR WHICH PAYME NT ARE ALSO DULY RECORDED IN THE BOOKS OF ACCOUNT, (II) THE DISCREPA NCY IN THE FIGURES APPEARING IN THE BOOKS OF THE ASSESSEE AND THE BOOK S OF SRL IS BECAUSE OF THE FACT THAT THE ASSESSEE WAS MAINTAINI NG TWO SEPARATE ACCOUNTS IN THE NAME OF THE SAID PARTY ONE FOR PU RCHASES AND ANOTHER FOR SALES, WHICH WERE MERGED DURING THE YEA R. SRL, ON THE OTHER HAND WAS MAINTAINING THREE ACCOUNTS IN THE NA ME OF THE ASSESSEE IN THEIR BOOKS. WHEN THE ENTRIES IN ALL TH ESE ACCOUNTS ARE MERGED, THE FIGURES IN THE BOOKS OF BOTH THE PARTIE S TALLY. THEREFORE, THE LEARNED CIT(A) DELETED THE ADDITION OF RS. 1,04 ,08,270/- MADE BY THE A.O. ITA NO. 1279 & 1037/MUM/2015 6 4.2 BEFORE US, THE LEARNED DR STATED THAT THE ASSES SEE FILED BEFORE THE LEARNED CIT(A) CONFIRMATION FROM SRL ALONG WITH COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME AND BALANCE SHE ET ETC. THESE DOCUMENTS, IT WAS STATED BY HIM, WERE NOT FILED BEF ORE THE A.O. 4.3 ON THE OTHER HAND, THE LEARNED COUNSEL OF THE A SSESSEE RELIED ON THE ORDER OF THE LEARNED CIT(A). HE ALSO STATED THA T COPY OF SRLS ACCOUNT AS APPEARING IN THE BOOKS OF THE ASSESSEE A LONG WITH BILLS, LR AND BANK STATEMENT WERE FILED BEFORE THE A.O. 4.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE FILED FOR THE FIRST TIME BEFORE THE LEARNED CIT(A) CONFIRMATION OF SRL ALONG WITH RETURN OF INCOME AND BALANCE SHEET. THESE DOCUMENTS WERE NOT FILED BEFORE THE A.O. IN OUR VIEW, THE LEARNED CIT(A) SHOULD NOT HAV E GRANTED RELIEF TO THE ASSESSEE RELYING UPON FRESH EVIDENCE WITHOUT GI VING OPPORTUNITY TO THE A.O. TO THAT EXTENT, THERE IS VIOLATION OF R ULE 46A. FOR PROPER APPRECIATION OF THE FACTS, WE SET ASIDE THE ORDER O F THE LEARNED CIT(A) IN RESPECT OF THE ABOVE GROUND OF APPEAL AND RESTOR E THE SAME TO THE FILE OF THE A.O. FOR MAKING AN ORDER AFRESH AS PER THE PROVISIONS OF THE ACT AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE ABOV E DOCUMENTS BEFORE THE A.O. THUS THE 2 ND GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5. NOW WE COME TO 3 RD GROUND OF APPEAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASS ESSEE HAD TAKEN LOANS OF RS. 2,00,000/- FROM SAVITABEN G. PATEL AND RS. 3,00,000/- FROM RATILAL B. PATEL, IN RESPECT OF WHICH CONFIRMA TIONS WERE NOT FILED. THE A.O. HELD THAT THE ASSESSEE WAS NOT ABLE TO PRO VE THE IDENTITY AND ITA NO. 1279 & 1037/MUM/2015 7 CREDIT WORTHINESS OF THE ABOVE CREDITORS. THEREFORE , HE MADE AN ADDITION OF RS. 5,00,000/- U/S 68 OF THE ACT. 5.1 IN APPEAL THE ASSESSEE SUBMITTED BEFORE THE LEA RNED CIT(A) THAT THE ABOVE TWO CREDITORS HAD FURNISHED TO THE A.O. T HE DETAILS CALLED FOR U/S 133(6) OF THE ACT THROUGH A COURIER. THE LEARNE D CIT(A) DELETED THE ADDITION MADE BY THE A.O. ON THE REASON THAT (I ) BOTH THE LOAN CREDITORS HAVE CONFIRMED HAVING GIVEN LOAN TO THE A SSESSEE, WHICH ARE DULY DEBITED IN THEIR RESPECTIVE BANK ACCOUNT, (II) BOTH THE LOAN CREDITORS ARE ASSESSED TO TAX AND HAVE FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION AND (III) CONFIRMATIONS WE RE APPARENTLY DISPATCHED BY COURIER TO THE A.O. THE LEARNED CIT(A ) FOUND THAT THE IDENTITY AND CREDIT WORTHINESS OF THE ABOVE TWO CRE DITORS HAD BEEN SUFFICIENTLY ESTABLISHED AS ALSO THE GENUINENESS OF LOAN TRANSACTIONS. THEREFORE, HE DIRECTED TO A.O. TO DELETE THE ADDITI ON OF RS. 5,00,000/-. 5.2 BEFORE US, THE LEARNED DR RELIED ON THE ORDER O F THE A.O. STATING THAT NO CONFIRMATION WAS FILED BEFORE HIM BY THE AS SESSEE IN RESPECT OF THE ABOVE TWO LOAN CREDITORS. 5.3 THE LEARNED COUNSEL OF THE ASSESSEE RELIED ON T HE ORDER OF THE LEARNED CIT(A). 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LEARNED CIT(A) HAS TAKEN INTO ACCOUNT THE FACT THAT (I) THE LOAN CREDITORS ARE AS SESSED TO TAX, HAVING FILED THEIR RETURN OF INCOME FOR THE YEAR UNDER CON SIDERATION, (II) THE AMOUNT OF LOAN ARE DULY DEBITED BY THEM IN THEIR RE SPECTIVE BANK ACCOUNTS. THE ABOVE FINDINGS OF THE LEARNED CIT(A) ARE BASED ON DOCUMENTS. WE UPHOLD THE SAME AND DISMISS THE 3 RD GROUND OF APPEAL. ITA NO. 1279 & 1037/MUM/2015 8 6. WE NOW COME TO THE 4 TH GROUND OF APPEAL. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASS ESSEE HAD DEBITED INTEREST EXPENSE OF RS. 38,16,473/-. ON THE OTHER H AND, THE ASSESSEE HAD MADE INVESTMENT OF RS. 23,52,000/- FOR PURCHASE OF A PLOT WHICH WAS SHOWN AS AN INVESTMENT. NO BUSINESS ACTIVITY HA D STARTED YET ON THIS PLOT. ACCORDINGLY, THE A.O. CONSIDERED IT AS A NON-BUSINESS ASSET AND DISALLOWED 12% OF THE TOTAL INTEREST EXPENSES W HICH COMES TO RS. 4,57,977/-. 6.1 IN APPEAL BEFORE THE LEARNED CIT(A), THE ASSESS EE EXPLAINED THAT THE SAID PLOT AT SILVASSA WAS PURCHASED FOR BUSINES S PURPOSE ONLY BUT NO BUSINESS COULD BE STARTED AS THE NECESSARY PERMI SSION WAS NOT RECEIVED FROM THE LOCAL AUTHORITIES. HE FILED COPY OF THE APPLICATION DATED 25.04.2009 FILED BEFORE THE ADMINISTRATION O F DADRA & NAGAR HAVELI, DISTRICT INDUSTRIES CENTRE, SILVASSA ASKIN G FOR NECESSARY PERMISSION. THE LEARNED CIT(A) HELD THAT (I) THE SA ID PLOT OF LAND WAS PURCHASED BY THE ASSESSEE FOR THE PURPOSE OF SETTIN G UP A UNIT FOR SAWING AND CUTTING OF MARBLE BLOCKS, (II) SINCE NEC ESSARY PERMISSION HAS NOT BEEN GRANTED BY THE LOCAL ADMINISTRATION, T HE ASSESSEE COULD NOT USE THE PLOT FOR THE STATED PURPOSE AND HAS BEE N STORING HIS STOCK ON THE SAID PLOT OF LAND, (III) NOTHING HAS BEEN BR OUGHT ON RECORD TO ESTABLISH THAT THE PLOT HAS BEEN PURCHASED WITH THE INTENTION OF RESALE OR FOR USING IT FOR ANY NON-BUSINESS PURPOSE. THAT BEING THE SITUATION, INTEREST EXPENSES PROPORTIONAL TO COST OF THE LAND CANNOT BE CONSIDERED AS NON-BUSINESS EXPENSES AND CANNOT BE D ISALLOWED. THEREFORE, THE LEARNED CIT(A) DELETED THE DISALLOWA NCE OF INTEREST EXPENSE OF RS. 4,57,977/-. ITA NO. 1279 & 1037/MUM/2015 9 6.2 BEFORE US, THE LEARNED DR RELIED ON THE ORDER O F THE A.O. ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSESSEE REL IED ON THE ORDER OF THE LEARNED CIT(A). 6.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS FOUND THAT THE ASSESSEE P URCHASED THE SAID PLOT AT SILVASSA FOR BUSINESS PURPOSE ONLY. IT IS E VIDENT FROM THE APPLICATION DATED 25.04.2009 FILED BEFORE THE ADMI NISTRATION OF DADRA & NAGAR HAVELI, DISTRICT INDUSTRIES CENTRE, S ILVASSA ASKING FOR NECESSARY PERMISSION. UNDER SECTION 36(1)(III), INT EREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSI NESS IS A PERMISSIBLE DEDUCTION. SECTION 36(1)(III) DOES NOT MAKE ANY DISTINCTION BETWEEN INTEREST PAID ON CAPITAL UTILIS ED IN ACQUIRING A CAPITAL ASSET OR A REVENUE ASSET. IT HAS BEEN HELD SO IN INDIA CEMENTS LTD. VS. CIT (1966) 60 ITR 52 (SC). NOTHING HAS BEEN BROUGHT ON RECORD BY THE A.O. TO ESTABLISH THAT THE SAID PLOT HAS BEEN PURCHASED BY THE ASSESSEE WITH THE INTENTION OF RESALE OR FOR USING IT FOR ANY NON- BUSINESS PURPOSE. THEREFORE, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE 4 TH GROUND OF APPEAL. 7. WE NOW COME TO THE LAST GROUND OF APPEAL OF THE REVENUE. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. OBSERVE D THAT THE ASSESSEE HAD DEBITED RS. 14,17,335/- AS PAYMENT OF FREIGHT CHARGES TO SHIPPING COMPANY WITHOUT TDS. THE ASSESSEE EXPLAINE D BEFORE THE A.O. THAT THIS ISSUE WAS PART OF THE ASSESSMENT ORD ER FOR THE A.Y. 2008-09 AND REITERATED THE SAME EXPLANATION. THE A. O. DID NOT ACCEPT THE SUBMISSION MADE BY THE ASSESSEE AND DISALLOWED RS. 14,17,335/- U/S 40(A)(IA) OF THE ACT. 7.1 IN APPEAL, THE LEARNED CIT(A) OBSERVED THAT IMP ORTS HAVE BEEN DONE BY 14 INVOICES, OUT OF WHICH FREIGHT CHARGES, ETC. HAVE BEEN PAID ITA NO. 1279 & 1037/MUM/2015 10 BY THE ASSESSEE TO THE NON-RESIDENT SHIPPING COMPAN IES OR THEIR AGENTS IN 3 CASES ONLY. IN THE REMAINING 11 CASES, FREIGHT CHARGES ETC. HAVE BEEN PAID BY THE PARTIES PURCHASING THOSE MARB LES / GRANITES FROM THE ASSESSEE ON HIGH SEAS, DIRECTLY TO THE SHI PPING COMPANY OR TO THEIR LOCAL AGENTS AND HAVE DEBITED THE SAID AMOUNT S TO THE ASSESSEE. THUS IN RESPECT OF 11 PURCHASES, THE FREIGHT AND IN SURANCE CHARGES HAVE ONLY BEEN REIMBURSED BY THE ASSESSEE TO THOSE PURCHASERS AND SINCE THE ASSESSEE HAS NOT PAID THEM DIRECTLY, THER E IS NO QUESTION OF ANY DEDUCTION OF TDS. FOR THE 3 REMAINING CASES, A CERTIFICATE FROM THE LOCAL AGENT MSC AGENCY INDIA PVT. LTD. OF THE F OREIGN SHIPPING COMPANY HAS BEEN SUBMITTED REGARDING PROVISION OF S ECTION 172. THE LEARNED CIT(A) HELD THAT IN VIEW OF THE FREIGHT AND INSURANCE BEING PAID TO FOREIGN SHIPPING COMPANIES OR THEIR LOCAL A GENTS COVERED U/S 172, TDS WAS NOT REQUIRED TO BE DEDUCTED BY THE ASS ESSEE ON PAYMENTS MADE EITHER DIRECTLY OR THROUGH THE PURCHA SERS. THEREFORE, HE DELETED THE DISALLOWANCE OF RS. 14,17,335/- MADE BY THE A.O. 7.2 BEFORE US, THE LEARNED DR SUBMITS THAT THE ITAT D BENCH, MUMBAI IN THE CASE OF THE ASSESSEE FOR THE A.Y. 200 8-09 (ITA NO. 7232/MUM/2011) HAS SET ASIDE THE ISSUE TO THE FILE OF THE A.O. FOR RE- EXAMINATION ON SIMILAR FACTS. 7.3 ON THE OTHER HAND, THE LEARNED COUNSEL OF THE A SSESSEE SUBMITS THAT THE LEARNED CIT(A) HAS TAKEN INTO ACCOUNT THE ORDER OF THE ITAT IN HIS ORDER. HE RELIED ON THE ORDER OF THE LEARNED CIT(A). 7.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS MERIT IN THE ORDER OF THE LEARNED CIT(A) THAT IN VIEW OF THE FREIGHT AND INSURANCE BEING PAI D TO FOREIGN SHIPPING COMPANIES OR THEIR LOCAL AGENTS BEING COVE RED U/S 172 OF THE ACT, TDS WAS NOT REQUIRED TO BE MADE BY THE ASSESSE E ON PAYMENTS ITA NO. 1279 & 1037/MUM/2015 11 MADE EITHER DIRECTLY OR THROUGH THE PURCHASERS. WE ALSO FIND THAT THE LEARNED CIT(A) HAS TAKEN INTO ACCOUNT THE ORDER OF THE ITAT . THEREFORE, WE UPHOLD THE ORDER THE LEARNED CIT(A) A ND DISMISS THE LAST GROUND OF APPEAL OF THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. ITA NO. 1037/MUM/2015 ASSESSMENT YEAR: 2010-11 9. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: I. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) WAS ERRED IN CONFIRMING THE REJECTION OF BOO KS OF ACCOUNT U/S 145 OF INCOME-TAX ACT WITHOUT APPRECIATING THE FACT THAT ASSESSING OFFICER HAS NOT BROUGHT ANY DISCREPANCY IN THE BOOK S ON RECORD. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) WAS ERRED IN CONFIRMING THE ADDITION AL OF RS. 41,69,363/- ON ACCOUNT OF DIFFERENCE IN VALUATION O F STOCK STATEMENT IN THE BOOKS OF ACCOUNT AND THAT SUBMITTED TO THE BANK WITHOUT APPRECIATING THE FACT THAT APPELLANT HAS RECONCILED THE SAME. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) WAS ERRED IN PARTLY CONFIRMING THE E STIMATION OF NET PROFIT WITHOUT APPRECIATING THE FACT THAT THE REPOR T OF WARD INSPECTOR WAS NOT PRECISE AND SILENT ON VOLUME OF THE SALES O F THE PARTY. IV. THE APPELLANT PRAYS THAT THE ADDITIONS / DISALLOWAN CES MADE IN RESPECT OF DIFFERENCE IN VALUATION OF STOCK STATEMENT IN TH E BOOKS OF ACCOUNT AND THAT SUBMITTED TO THE BANK AND ESTIMATING THE N ET PROFIT BE DELETED. 10. WE BEGIN WITH THE 1 ST GROUND OF APPEAL OF THE ASSESSEE. THE A.O. NOTED THAT THE ASSESSEE WAS NOT MAINTAINING QUANTIT ATIVE AND QUALITATIVE DETAILS OF STOCK. THE ARGUMENT OF THE A SSESSEE IS THAT SINCE HE IS IN THE BUSINESS OF TRADING IN MARBLE, IT WAS NOT POSSIBLE TO MAINTAIN ITEM-WISE QUANTITATIVE DETAILS. THE A.O. H ELD THAT SINCE QUANTITATIVE DETAILS ARE MENTIONED IN THE PURCHASE BILLS AND SINCE ITA NO. 1279 & 1037/MUM/2015 12 MOST OF THE PURCHASES WERE MADE FROM THE LIMITED NU MBER OF PARTIES, THIS WAS POSSIBLE. THE A.O. ALSO HELD THAT MATERIAL WAS PURCHASED FROM M/S. R.R. DEVELOPERS, IN WHICH THE ASSESSEE WA S A PARTNER. THIS FACT WAS NOT DISCLOSED IN THE AUDIT REPORT. THE A.O . RELIED ON THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF WALL STREET CONSTRUCTION LTD. VS. DCIT 87 ITD 47 AND REJECTED THE BOOKS OF ACCOUNTS OF TH E ASSESSEE U/S 145(3) OF THE ACT. 10.1 IN APPEAL THE LEARNED CIT(A) UPHELD THE REJECT ION OF BOOKS OF ACCOUNTS MADE BY THE A.O. U/S 145(3) ON THE GROUND THAT (I) THE SO- CALLED STOCK REGISTER PREPARED AND PRODUCED DURING APPELLATE PROCEEDINGS DOES NOT SHOW QUALITY-WISE / GRADE-WISE ITEM OF STOCK OF MARBLE AND (II) THERE IS A DISCREPANCY BETWEEN THE STOCK REPORTED TO THE BANK BOTH IN TERMS OF QUANTITY AND VALUE FROM T HE STOCK SHOWN IN THE BOOKS. 10.2 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITS THAT THE A.O. HAS NOT POINTED OUT ANY DISCREPANCY IN THE BOO KS OF ACCOUNTS AND, THEREFORE, HE IS NOT CORRECT IN REJECTING THE SAME. 10.3 PER CONTRA , THE LEARNED DR SUPPORTS THE ORDER PASSED BY THE A.O. AS WELL AS THE LEARNED CIT(A). 10.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. THERE IS MERIT IN THE FINDING O F THE LEARNED CIT(A) THAT ADMITTEDLY THE ASSESSEE WAS NOT MAINTAINING QU ANTITATIVE RECORDS OF EACH ITEM OF STOCK ON A DAY TO DAY BASIS I.E. PROPER STOCK REGISTER WAS NOT MAINTAINED DURING THE RELEVANT PER IOD AND THERE WAS DIFFERENCE BETWEEN THE QUANTITY OF STOCK SHOWN IN T HE BOOKS AND THAT REPORTED TO THE BANK (WHICH HAS NOT BEEN DISPROVED) AND THE BOOKS OF ACCOUNTS CLEARLY WERE FAULTY AT LEAST TO THAT EX TENT. THERE IS MERIT IN ITA NO. 1279 & 1037/MUM/2015 13 THE FINDING OF THE A.O. THAT THE ASSESSEE COULD HAV E MAINTAINED ITEM- WISE QUANTITATIVE DETAILS AS THESE ARE REFLECTED ON THE PURCHASE BILLS AND MOST OF THE PURCHASES WERE MADE FROM LIMITED NU MBER OF PARTIES. TAKING INTO ACCOUNT THE NATURE OF BUSINESS OF ASSESSEE, WE FIND THAT MAINTENANCE OF QUANTITATIVE DETAILS IS AN IMPORTANT ONE. WITHOUT THE SAME IT WOULD NOT BE POSSIBLE FOR ANYON E TO MAKE PROPER VERIFICATION. THEREFORE, WE AGREE WITH THE FINDINGS OF THE LEARNED CIT(A) THAT THE A.O. HAS RIGHTY REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. THUS THE 1 ST GROUND OF APPEAL IS DISMISSED. 11. NOW WE TAKE UP THE 2 ND GROUND OF APPEAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE STO CK OF MATERIAL AS ON 31.03.2010 DISCLOSED BEFORE THE BANK WAS RS. 2,7 9,64,238/- WHEREAS THE STOCK AS PER BOOKS ON THAT DATE WAS ONL Y RS. 2,37,94,875/- LEAVING A DIFFERENCE OF RS. 41,69,363 /-. WHEN ASKED TO EXPLAIN, THE ASSESSEE SUBMITTED BEFORE THE A.O. THA T THE VALUE OF STOCK SUBMITTED TO THE BANK WAS AT MARKET PRICE WHEREAS T HE STOCK SHOWN IN THE BOOKS WAS AT COST PRICE. THE ASSESSEE SUBMIT TED BEFORE THE A.O. NO PURCHASES WERE RETURNED. IN VIEW OF THE ABOVE, T HE A.O. MADE AN ADDITION OF THE DIFFERENCE OF THE STOCK OF RS. 41,6 9,363/-. 11.1 IN APPEAL, THE LEARNED CIT(A) HELD AS UNDER: I HAVE CONSIDERED THE SUBMISSION AND FIND THAT TH E CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. IT IS SEEN THAT (AS ADM ITTED BY THE AUTHORISED REPRESENTATIVE DURING APPELLATE PROCEEDINGS) THE ST OCK STATEMENT SUBMITTED BY THE ASSESSEE TO THE BANK AS ON 31.03.2 010 NOT ONLY DIFFERED WITH THE BOOK STOCK IN TERMS IN VALUE, BUT ALSO IN TERMS OF QUANTITY. IT WAS ADMITTED THAT THE QUANTITY OF STOC K SHOWN TO THE BANK WAS RS. 1,93,943 SQ. FT. WHEREAS QUANTITY SHOWN IN THE BOOK WAS ONLY RS. 1,35,128 SQ. FT. SINCE THERE IS A DIFFERENCE IN QUANTITY OF STOCK AS ON 31.03.2010, IT CANNOT BE PLEADED THAT THE VALUE OF STOCK SHOWN TO THE BANK WAS INFLATED ARTIFICIALLY ONLY FOR OBTAINING H IGH CREDIT FACILITY. THE ASSESSEE CANNOT TAKE ADVANTAGE OF THIS PLEA AND THE CITED CASE LAWS IN THE LIGHT OF THE DIFFERENCE IN THE QUANTITY OF STOC K REPORTED BY HIM TO THE ITA NO. 1279 & 1037/MUM/2015 14 BANK AND THAT SHOWN IN THE BOOKS. IN THE ABSENCE OF ANY PURCHASE RETURNS AS ADMITTED BY THE AUTHORISED REPRESENTATIV E / APPELLANT, THE QUANTITY OF STOCK SHOWN TO THE BANK HAS NOT BEEN PR OVED TO BE INCORRECT. THE APPELLANT HAS FAILED TO BRING OUT AN YTHING TO ESTABLISH THAT THE STOCK SHOWN IN THE BOOKS WAS CORRECT AND T HE STOCK SHOWN TO THE BANK WAS INCORRECT, IN QUANTITATIVE TERMS. THAT BEING THE SITUATION, THE DIFFERENCE IN VALUE OF STOCK SHOWN TO THE BANK ALSO CANNOT BE TAKEN TO BE INCORRECT, BEING ONLY FOR THE PURPOSE OF OBTA INING HIGH CREDIT FACILITY. IN THE LIGHT OF THESE FACTS, IT IS HELD T HAT THE STOCK AS ON 31.03.2010 DECLARED BEFORE THE BANK IS TO BE TREATE D AS CORRECT AND THE DIFFERENCE BETWEEN THAT VALUE AND THE VALUE SHOWN I N THE BOOKS I.E. RS. 41,69.363/-, IS TO BE TREATED AS UNACCOUNTED STOCK, AS HAS BEEN HELD BY THE ASSESSING OFFICER. ACCORDINGLY, THE ADDITION OF RS. 41,69,363/- MADE BY THE ASSESSING OFFICER IS CORRECT AND IS HEREBY U PHELD AND GROUND OF APPEAL NO. 2 IS DISMISSED. 11.2 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE FILED A RECONCILIATION CHART OF STOCK STATEMENT SUBMITTED T O THE BANK AND AS PER BOOKS OF ACCOUNTS. HE ALSO RELIED ON THE DECISI ON IN THE CASE OF CIT VS. VRUNDVAN ROLLER FLOOR MILL (2016) 72 TAXMANN.COM 250 (GUJ), CIT VS. ACROW INDIA LTD . (2008) 298 ITR 447(BOM), CIT VS. RELAXO FOOTWEAR (2003) 259 ITR 744 (RAJASTHAN), CIT VS. KHAN & SIROHI STEEL ROLLING MILLS (2006) 200 CTR (ALL) 595, CIT VS. N. SWAMY (2000) 241 ITR 363 (MAD), 11.3 PER CONTRA , THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A) CONFIRMING THE ADDITION OF RS. 41,69 ,363/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN STOCK STATEME NT. 11.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. WE BEGIN WITH THE DECISIONS REL IED ON BY THE LEARNED COUNSEL OF THE ASSESSEE. IN VRUNDVAN ROLLER FLOOR MILL (SUPRA), THE A.O. FOUND A DIFFERENCE BETWEEN THE STOCK AS PE R BOOKS OF ACCOUNTS AND THE STOCK STATEMENT SUBMITTED TO THE B ANK. HE MADE AN ADDITION AND TREATED THE DIFFERENCE AS UNACCOUNTED INVESTMENT IN STOCK. THE HON'BLE HIGH COURT HELD THAT SINCE INFLA TED STATEMENT WAS ITA NO. 1279 & 1037/MUM/2015 15 FURNISHED TO BANKING AUTHORITIES FOR AVAILING OF HI GHER CREDIT, DIFFERENCE OF STOCK SHOWN IN BOOKS OF ACCOUNTS AND IN STATEMENT FURNISHED TO BANKING AUTHORITIES COULD NOT BE TREAT ED AS UNDISCLOSED INVESTMENT. IN ACROW INDIA LTD. (SUPRA), IT HAS BEEN HELD THAT THE BURDEN IS ON REVENUE TO PROVE THE VALUATION AS INCORRECT AND THE REVENUE CANNOT RELY ON STATEMENT BY ASSESSEE TO ITS BANK. IN RELAXO FOOTWEAR (SUPRA), IT HAS BEEN HELD THAT THE FINDING OF THE TRIBUNAL ON VALUATION OF STOCK SUBMITTED TO BAN K WAS MOTIVATED TO AVAIL OF HIGHER LIMITS OF CREDIT, THE SAME BEING FINDING OF FACT, NO QUESTION OF LAW ARISES. IN KHAN & SIROHI STEEL ROLLING MILLS (SUPRA), IT HAS BEEN HELD THAT THE TRIBUNAL WAS JUSTIFIED IN ACCEPTING THE EXPLANA TION OF THE ASSESSEE THAT IN VIEW OF THE PREVAILING PRACTICE, THE VALUE OF STOCK HYPOTHECATED TO BANK WAS INFLATED TO AVAIL OF MORE OVERDRAFT FACILITIES AND DELETING THE ADDITION ON ACCOUNT OF DIFFERENCE BETWEEN STOCK SHOWN TO BANK AND THE STOCK SHOWN IN THE BOOKS OF T HE ASSESSEE. IN N. SWAMY (SUPRA), THE HON'BLE HIGH COURT HELD THAT THE BURDEN OF PROOF IS ON REVENUE AND THE SAME COULD NO T BE DISCHARGED BY MERELY REFERRING TO STATEMENT OF THE ASSESSEE TO THIRD PARTY. 11.5 WE FIND THAT THE INSTANT CASE IS DISTINGUISHAB LE FROM THE ABOVE DECISIONS RELIED ON BY THE LEARNED COUNSEL AS PER D ISCUSSION BELOW. 11.6 IN THE INSTANT CASE, ADMITTEDLY THE QUANTITY O F STOCK SHOWN BY THE ASSESSEE WAS 1,94,019 WHEREAS QUANTITY SHOWN IN THE BOOKS OF ACCOUNTS WAS ONLY 1,35,128. THERE IS MERIT IN THE F INDING OF THE LEARNED CIT(A) THAT SINCE THERE IS A DIFFERENCE IN QUANTITY OF STOCK AS ON 31.03.2010, IT CANNOT BE PLEADED THAT THE VALUE OF STOCK SHOWN TO ITA NO. 1279 & 1037/MUM/2015 16 THE BANK WAS INFLATED ARTIFICIALLY ONLY FOR OBTAINI NG HIGH CREDIT FACILITY. WE FIND THAT THE ASSESSEE VIDE LETTER DA TED 15.12.2012 HAS SUBMITTED BEFORE THE A.O. THE FOLLOWING EXPLANATION : REGARDING PURCHASES RETURN DURING ABOVE YEAR, IT I S SUBMITTED THAT OUR CLIENT HAS NOT RETURN ANY GOODS PURCHASES DURING AB OVE YEAR. FURTHER, IT IS STATED THAT THERE IS NO GOODS RETURN AGAINST SAL E DURING ABOVE YEAR. IN THE RECONCILIATION STATEMENT FILED BEFORE THE T RIBUNAL, THE LEARNED COUNSEL OF THE ASSESSEE HAS STATED (I) THE DIFFERENCE IN QUANTITY(69) AND AMOUNT(- RS. 2,260/-) IN RESPECT O F MUMBAI MARBLE BECAUSE OF SALES INVOICE NO. 14/09-10 ISSUED TO M/S DELLA POSTED IN ACCOUNTS AFTER SUBMITTING STATEMENT TO BANK, (II) T HE DIFFERENCE IN QUANTITY(75.64) AND AMOUNT( RS. 10,44,420/-) IN RES PECT OF SIL MARBLE BLOCK BECAUSE OF SALES BILL NO. HSS/14/09-10 AND HS S/13/09-10 W.R.T HIGH SEA SALE BILLS WERE POSTED IN ACCOUNTS AFTER S UBMITTING STATEMENT TO BANK (III) THE DIFFERENCE IN QUANTITY (54482) AN D AMOUNT (RS. 63,99,370/-) IN RESPECT OF SIL MARBLE OMS BECAUSE O F PURCHASE RETURN. THE ABOVE SUBMISSION RUNS COUNTER TO THE EXPLANATIO N FILED BEFORE THE A.O. ON 15.12.2012. ALSO THE INSTRUCTION OF THE KARNATAKA BANK LTD. IS THAT VALUATION OF STOCKS SHOULD BE ON THE SAME BASIS AS ADOPTED FOR BALANCE SHEET OF THE BORROWER/PURCHASE INVOICE. THUS THE REVENUE HAS DISCHARGED THE BURDEN OF PROOF. 11.7 THE CLAIM THAT A STOCK STATEMENT MADE FOR THE BANK SHOULD BE IGNORED BECAUSE OF THE PRACTICE TO INFLATE STOCK SO AS TO GET LARGER CREDIT FROM THE BANK CANNOT BE LIGHTLY ACCEPTED AS WAS DECIDED BY THE HON'BLE MADRAS HIGH COURT IN COIMBATORE SPINNING AND WEAVING CO. VS. CIT (1974) 95 ITR 375 (MAD). FOLLOWING THE SAID DECISI ON, IT WAS HELD THAT IN SIMILAR CIRCUMSTANCES, THE ADDITION WA S JUSTIFIED. WE MAY REFER TO THE DECISION IN THE CASE OF DHANSIRAM AGARWALLA VS. CIT (1993) 201 ITR 192 (GAU) ASSESSEES SLP DISMISSED I N (1993) 204 ITA NO. 1279 & 1037/MUM/2015 17 ITR ST. 45 (SC). IN RAMANLAL KACHARULAL TEJMAL VS. CIT (1983) 12 TAXMAN 130 (BOM.), THE ASSESSEE OBTAINED LOANS FROM BANKS FOR FINANCING CERTAIN FIRMS BY PLEDGING GOODS WHICH WER E FOUND IN EXCESS OF STOCK . THE HONBLE BOMBAY HIGH COURT HELD EXCES S STOCK REPRESENTED ASSESSEE'S PROPERTY ASSESSABLE AS UNEXP LAINED INVESTMENT . 11.8 IN VIEW OF THE ABOVE REASONS WE UPHOLD THE ORD ER OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION OF RS. 41,69,363/ - MADE BY THE A.O. THUS THE 2 ND GROUND OF APPEAL IS DISMISSED. 12. WE COME TO THE 3 RD GROUND OF APPEAL OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED TH AT THE ASSESSEE HAD SHOWN NET PROFIT @ 10.74% ON SALES OF RS. 6,19, 09,000/-. THE A.O. DEPUTED THE INSPECTOR OF INCOME TAX TO FIND OUT THE NET PROFIT IN SIMILAR LINE OF BUSINESS. RELYING ON THE REPORT OF THE INSPECTOR, THE A.O. ESTIMATED THE NET PROFIT @ 20% AND MADE AN ADD ITION OF RS. 57,34,141/-. 12.1 IN APPEAL, THE LEARNED CIT(A) HAS FOUND THAT A FTER CONSIDERING THE ADDITION FOR THE DIFFERENCE IN STOCK, THE NET P ROFIT PERCENTAGE COMES TO 17.47% WHICH APPEARS REASONABLE EVEN GOING BY THE REPORT OF THE WARD INSPECTOR. THEREFORE, HE DIRECTED THE A .O. TO RESTRICT THE ESTIMATION OF NET PROFIT @ 17.47% OF THE TOTAL TURN OVER AND ALLOW SET OFF FOR THE DIFFERENCE IN STOCK OF RS. 41,69,363/-. 12.2 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE RELIES ON THE DECISION IN THE CASE OF JAYTICK INTERMEDIATES (P) LTD. VS. ACIT (2016) 73 TAXMANN.COM 195 (GUJ), CIT VS. JASJACK ELEGANCE EXPORTS (2010) 324 ITR 95 (DEL) AND ITO VS. M/S. NEELAM INDUSTRIES (ITA NO. 8133/MUM/2011) ORDER OF THE ITAT B BENCH MUMBAI . HE ALSO SUBMITS THAT THE INSPECTORS REPORT REGARDING COMPA RABLE CASES DOES ITA NO. 1279 & 1037/MUM/2015 18 NOT GIVE OUT THE VOLUME OF BUSINESS AND HOW IT IS A PPLICABLE TO THE CASE OF THE ASSESSEE. 12.3 ON THE OTHER HAND, THE LEARNED DR RELIES ON TH E ORDER OF THE LEARNED CIT(A). 12.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE INSPECTOR OF I NCOME TAX DEPUTED BY THE A.O. HAS MADE A GENERAL ENQUIRY AND FOUND TH E AVERAGE PROFIT IN SIMILAR LINE OF BUSINESS AT 20%. THE ENQUIRY MAD E BY THE INSPECTOR DOES NOT GIVE THE VOLUME OF BUSINESS IN COMPARABLE CASES AND HOW IT IS APPLICABLE TO THE CASE OF THE ASSESSEE. ALL THE MORE AS THE DIFFERENCE IN STOCK SHOWN TO THE BANK AND THAT IN THE BOOKS OF ACCOUNTS AMOUNTING TO RS. 41,69,363/- HAS BEEN SUSTAINED, TH ERE IS NO MERIT IN THE ORDER OF THE LEARNED CIT(A) IN PARTLY CONFIRMIN G THE ESTIMATION OF NET PROFIT. THUS THE 3 RD GROUND OF APPEAL IS ALLOWED. 13. AS WE HAVE DEALT WITH 2 ND AND 3 RD GROUND OF APPEAL, WE NEED NOT DEAL THE 4 TH GROUND OF APPEAL WHICH RELATE TO THE SAME ISSUES. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 15. TO SUM UP, THE APPEAL FILED BY THE REVENUE AND THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/04/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 28/04/2017 BISWAJIT, SR. P.S. ITA NO. 1279 & 1037/MUM/2015 19 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI