Shri Siddhartha Jalan, Kolkata V. ACIT, Circle - 30, Kolkata

ITA 1313/KOL/2009

• Counselvise Citation: 131323514 RSA 2009
• Duration Of Justice: 5 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 29-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S JHAJHARIA F
• Keywords: Unexplained cash credit; Additional evidence; Corroborative evidences
• Section: 131; 68; 144; 40A(3); 133(6)

Judgement Text

I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 1 OF 19 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI SHAMIM YAHYA (ACCOUNTANT MEMBER), AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO. 1313/KOL./ 2009 ASSESSMENT YEAR : 2005-2006 SHRI SIDDHARTHA JALAN,............................. ............................................APPELLA NT 118A, C.R. AVENUE, KOLKATA-700 073 [PAN : ACSPJ 9958 Q] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. .........................RESPONDENT CIRCLE-37, KOLKATA, & I.T.A. NO. 1494/KOL/2009 ASSESSMENT YEAR : 2005-2006 DEPUTY COMMISSIONER OF INCOME TAX,................. .......................APPELLANT CIRCLE-37, KOLKATA, PODDAR COURT, 18, RABINDRA SARANI, 8 TH FLOOR KOLKATA-700 001 -VS.- SHRI SIDDHARTHA JALAN,............................. .,......................RESPONDENT 118A, C.R. AVENUE, KOLKATA-700 073 [PAN : ACSPJ 9958 Q] APPEARANCES BY: SHRI S. JHAJHARIA, F.C.A. AND SHRI S. SEN, A.R., FO R THE ASSESSEE SMT. MADHU MALTI GHOSH, JCIT, SR. D.R., FOR THE DEP ARTMENT DATE OF CONCLUDING THE HEARING : JULY 17, 2014 DATE OF PRONOUNCING THE ORDER : 05.08.2014 O R D E R PER GEORGE MATHAN: ITA 1313/KOL/2009 IS AN APPEAL FILED BY THE ASSESS EE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-X XIV, KOLKATA IN I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 2 OF 19 APPEAL NO.279/CIT(A)-XXIV/C-37/07-08 DATED 20.05.20 09 FOR THE ASSESSMENT YEAR 2005-06. ITA NO. 1494/KOL/2009 IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL S)-XXIV, KOLKATA IN APPEAL NO. 279/CIT(A)-XXIV/C-37/07-08 DATED 20.05.2 009 FOR THE ASSESSMENT YEAR 2005-06. 2. SHRI S. JHAJHARIA, F.C.A. ALONGWITH SHRI S. SEN, REPRESENTED ON BEHALF OF THE ASSESSEE AND SMT. MADHU MALTI GHOSH, LD. JCIT, SR. D.R., REPRESENTED ON BEHALF OF THE REVENUE. 3. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS:- (1) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE A DDITION OF RS.4,10,571/- MADE U/S 68 OF THE INCOME TAX ACT BEI NG UNEXPLAINED CASH CREDIT. (2) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLANT HAVING FURNISHED THE CONFIRMATI ONS FROM THE LOAN CREDITORS, WHO WERE ALL ASSESSED TO TAX TH E ADDITION U/S 68 OF THE INCOME TAX ACT, WAS UNJUSTIFIED. (3) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ADDITION U/S 68 AMOUNTING TO RS.4,10,571/ - BE DELETED AND/OR REDUCED. (4) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS ALSO UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS.25,975/- PAID ON THE LOANS. (5) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS.89,667/- MADE BY THE AO BY INVOK ING SEC. 40A(3) OF THE ACT. (6) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS.2,15,284/- MADE OUT OF FABRICATI ON CHARGES. I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 3 OF 19 (7) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS FURTHER UNJUSTIFIED IN ENHANCI NG THE DISALLOWANCE OUT OF FABRICATION CHARGES BY AN AMOUN T OF RS.18,887/-. (8) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE PARTIAL DISALLOWANCE MADE OUT OF FABRICAT ION CHARGES BE DELETED. (9) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OUT OF CAR MAINTENANCE EXPENSES, ETC. TO THE EXTENT OF RS.33,293/-. (10) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OUT OF MOBILE PHONE CHARGES FOR THE AL LEGED PERSONAL USE OF THE APPELLANT. (11) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OUT OF FOREIGN TRAVEL EXPENSES TO THE EXTENT OF RS.1,04,457/-. (12) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS.21,58,375/- BEING COMMISSION PAI D TO S.P.S. METAL CAST & ALLOYS PVT. LTD. WHO HAD ASSIST ED THE APPELLANT IN MAKING PURCHASES OF RAW MATERIALS. (13) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AUTHORITIES BELOW WERE UNJUSTIFIED IN DIS ALLOWING THE COMMISSION PAID EVEN THOUGH THE RECIPIENT OF TH E COMMISSION HAD APPEARED THROUGH ITS SENIOR EXECUTIV E AND HAD CONFIRMED THE RECEIPT OF THE COMMISSION AND HAD ALSO AFFIRMED THE SERVICES RENDERED AND, THEREFORE, THE DISALLOWANCE WAS UNJUSTIFIED. (14) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSION PAID TO M/S. SPS METAL CAST & ALLOYS PVT. LTD. BE DELETED. 4. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .1,58,725/- I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 4 OF 19 WITHOUT APPRECIATING THAT NO MATERIAL PROVE HAS BEE N P LACED BY THE ASSESSEE IN SUPPORT OF THE IMPUGNED TR ANSACTION RELATING TO FABRICATION CHARGES MADE BETWEEN THE AS SESSEE AND MD. KALAM. (2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .18,936/- WITHOUT APPRECIATING THAT THE REASONABLE ADDITION W AS MADE IN ACCORDANCE WITH THE PROVISION OF SECTION 133(6) OF THE I.T. ACT. (3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .35,621/- WITHOUT APPRECIATING THAT THE REASONABLE ADDITION A T THE RATE OF 10% OF GENERAL EXPENSES WAS MADE DUE TO WAN T OF LEGITIMATE VOUCHER. (4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .7,90,553/- UNDER THE HEAD FOREIGN TRAVEL EXPENSES MADE BY THE AO WITHOUT APPRECIATING THAT THE ASSESSEE HAS FAILED T O SUBMIT RELEVANT SUPPORTING EVIDENCES FOR THE PURPOSE OF PR OPER VERIFICATION AT THE TIME OF REGULAR ASSESSMENT OR A T THE REMAND STAGE, HENCE, THE REVENUE WAS DENIED PROPER OPPORTUNITY TO VERIFY THE CLAIM. (5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .6,72,357/- WITHOUT APPRECIATING THAT THE ALLEGED TRANSACTION W AS MADE AND CLAIMED BY THE ASSESSEE WITHOUT PARTY, REPORTED LY NOT TRACEABLE AT THEIR GIVEN ADDRESS. (6) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN CONSIDERING THE ADDITION MA DE BY THE AO TO THE TUNE OF RS.2,15,284/-, UNDER THE HEAD OF UNSUBSTANTIATED FABRICATION CHARGES, IS GENUINE TRA NSACTION BUT, THE TRANSACTION WAS MADE IN VIOLATION OF SECTI ON 40A(3) OF THE I.T. ACT. THE PRONOUNCEMENT WAS MADE WITHOUT APPRECIATING THAT THE ALLEGED TRANSACTION WAS MADE AND CLAIMED BY THE ASSESSEE WITH THE PARTY, REPORTEDLY NOT TRACEABLE AT THEIR GIVEN ADDRESSES AND EVIDENCES IN SUPPORT OF THE SAID TRANSACTION AND ITS RELATED FABRICATION JOB WAS NEITHER FILED BEFORE THE AO NOR BEFORE THE LD. CIT( A). (7) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE ORDER OF THE LD. CIT(A) MAY BE REVERTED AND UPH ELD THE SAME OF THE AO ON THE POINTS, SUPRA. I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 5 OF 19 5. AT THE TIME OF HEARING, IT WAS SUBMITTED BY THE LD. A.R. ON BEHALF OF THE ASSESSEE THAT HE DID NOT WISH TO PRESS GROUNDS NO. 6, 7 & 8 OF THE ASSESSEES APPEAL. CONSEQUENTLY THE SAME STANDS DIS MISSED BEING NOT PRESSED. 6. IN RESPECT OF GROUNDS NO. 1 TO 4 OF THE ASSESSEE S APPEAL, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASSESSEE IS IN T HE BUSINESS OF EXPORT OF LEATHER GOODS. IT WAS THE SUBMISSION THAT IN THE CO URSE OF ASSESSMENT, THE ASSESSING OFFICER HAD DIRECTED THE ASSESSEE TO PROD UCE THE DETAILS OF THE PERSONS FROM WHOM UNSECURED LOAN TO AN EXTENT OF RS .4,10,571/- WAS TAKEN. IN THE COURSE OF ASSESSMENT, THE ASSESSEE WA S UNABLE TO PRODUCE THE DETAILS. IT WAS THE SUBMISSION THAT ON APPEAL B EFORE THE LD. CIT(APPEALS), THE ASSESSEE HAD PRODUCED ALL THE EVI DENCES IN THE FORM OF CONFIRMATION OF ACCOUNTS ALONGWITH PERMANENT ACCOUN T NUMBERS AND NAMES AND ADDRESSES OF THE PERSONS. IT WAS THE SUBM ISSION THAT THE EVIDENCES PRODUCED BY THE ASSESSEE BEFORE THE ASSES SING OFFICER WERE SENT TO THE ASSESSING OFFICER FOR HIS COMMENTS. IN THE REMAND REPORT BY THE ASSESSING OFFICER DATED 11.11.2008, NO ADVERSE COMMENTS WERE PASSED. IT WAS THE SUBMISSION THAT HOWEVER, THE LD. CIT(APPEALS) HAD NOT ACCEPTED THE CLAIM OF THE ASSESSEE BY SAYING THAT T HESE WERE FRESH EVIDENCES. LD. A.R. DREW OUR ATTENTION TO PAGES 34 TO 48 OF THE PAPER BOOK, WHICH WAS THE COPIES OF THE CONFIRMATION OF A CCOUNTS AS PROVIDED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS). HE ALS O DREW OUR ATTENTION TO PAGE 33, WHICH WAS THE LIST OF THE PERSONS, WHO HAD GIVEN UNSECURED LOANS TO THE ASSESSEE ALONGWITH THEIR ADDRESSES, PE RMANENT ACCOUNT NUMBERS, PRINCIPAL AND THE INTEREST THEREON. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD PROVIDED ALL THE DETAILS AND NO AD VERSE COMMENTS HAVING BEEN MADE BY THE ASSESSING OFFICER IN VIEW OF THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DATAWARE P VT. LTD. IN G.A. NO. I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 6 OF 19 2856 OF 2011 DATED 21.09.2009, WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS FOLLOWS:- AFTER GETTING PAN NUMBER AND GETTING THE INFORMATI ON THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSI NG OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CR EDITOR AS TO THE GENUINENESS OF THE TRANSACTION AND WHETHER S UCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFI CER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, T HE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CRED ENCE. IT WAS THE SUBMISSION THAT THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LD. CIT(APPEALS) OF THE SAID AMOUNT OF THE LOAN CREDITOR MAY BE DELETED. 7. IN REPLY, LD. D.R. SUBMITTED THAT THE GENUINENES S OF THE TRANSACTIONS HAS NOT BEEN ESTABLISHED NOR HAS ANY EVIDENCE BEEN PRODUCED TO SHOW THAT THE CREDITORS HAVE THE CAPACITY TO GIVE THE LO ANS. IT WAS THE SUBMISSION THAT THE LD. CIT(APPEALS) HAD ALSO NOT A DMITTED THE ADDITIONAL EVIDENCES. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE WAS LIABLE TO BE UPHELD. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ORDER OF THE LD. CIT(APPEALS) CLEARLY SHOWS THAT THE ASSESSE E HAS PRODUCED THE CONFIRMATION OF ACCOUNTS ALONGWITH THE NAMES AND AD DRESSES AND PERMANENT ACCOUNT NUMBERS AND OTHER DETAILS BEFORE THE LD. CIT(APPEALS). THE LD. CIT(APPEALS) HAS ALSO SENT TH E SAME FOR THE COMMENTS OF THE ASSESSING OFFICER. THE ASSESSING OF FICER IN THE REMAND REPORT HAS NOT MADE ANY ADVERSE COMMENT IN RESPECT OF THE EVIDENCES PRODUCED. IN FACT, THE REMAND REPORT IS ABSOLUTELY SILENT ON THE ISSUE. IT IS TRUE THAT IT IS THE LD. CIT(APPEALS) PREROGATIVE TO ADMIT ADDITIONAL EVIDENCES OR NOT TO ADMIT THE SAME. HOWEVER, THE FA CT THAT THE LD. CIT(APPEALS) HAS TAKEN ON RECORD THE ADDITIONAL EVI DENCES AND HAS SENT THE SAME FOR THE COMMENTS OF THE ASSESSING OFFICER, CLEARLY SHOWS THAT I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 7 OF 19 THE LD. CIT(APPEALS) HAD THE INTENTION OF ADMITTING THE SAME. HOWEVER, AFTER GETTING THE REMAND REPORT, THE LD. CIT(APPEAL S) HAS RECORDED THAT HE IS NOT ADMITTING THE ADDITIONAL EVIDENCES. THIS WOU LD BE A MISCARRIAGE OF JUSTICE IN SO FAR AS THE EVIDENCES HAVING BEEN PROD UCED AND THE SAME HAVING BEEN SENT FOR A REMAND REPORT JUST BECAUSE N O ADVERSE INFERENCE HAS BEEN DRAWN BY THE ASSESSING OFFICER IN THE REMA ND REPORT, THE EVIDENCES HAD NOT BEEN CONSIDERED. IN THESE CIRCUMS TANCES, AS IT IS NOTICED THAT THE ASSESSEE HAS PRODUCED ALL THE EVID ENCES IN RESPECT OF THE LOAN CREDITORS AND AS IT IS NOTICED THAT NO ADVERSE REPORT HAS BEEN GIVEN BY THE ASSESSING OFFICER IN RESPECT OF THE EVIDENCE S PRODUCED BY THE ASSESSEE, IN VIEW OF THE DECISION OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF DATAWARE PVT. LTD.(SUPRA), THE FINDI NG OF THE LD. CIT(APPEALS) ON THIS ISSUE STANDS REVERSED. THE ASS ESSING OFFICER IS DIRECTED TO DELETE THE ADDITION REPRESENTING THE LO AN CREDITORS AND DISALLOW INTEREST THEREON. 9. IN THE RESULT, GROUNDS NO. 1 TO 4 OF ASSESSEES APPEAL STAND ALLOWED. 10. IN RESPECT OF GROUND NO. 5, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS ) IN CONFIRMING THE DISALLOWANCE OF RS.89,667/- MADE BY THE ASSESSING O FFICER BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT HAD D IRECTED THE ASSESSEE TO PROVE THE PURCHASES FROM FIVE VENDORS, WHO WERE FRO M THE UNORGANIZED SECTOR. IT WAS THE SUBMISSION THAT THE ASSESSING OF FICER HAS RECORDED HIS FINDING IN PARA 2 OF HIS ORDER. IT WAS THE SUBMISSI ON THAT THE ASSESSEE HAD MADE PURCHASES OF NEARLY RS.2.02 CRORES. OUT OF THE SAID PURCHASES, PURCHASES TO AN EXTENT OF RS.4.48 LAKHS WERE FROM F IVE VENDORS, WHO WERE FROM THE UNORGANIZED SECTOR. THE ASSESSEE HAD PRODU CED THE DETAILS OF THE PURCHASES FROM THE SAID FIVE VENDORS IN THE FORM OF SELF-MADE VOUCHERS. IT WAS THE SUBMISSION THAT BECAUSE THE ASSESSEE DID NO T HAVE ANY BILLS IN RESPECT OF THE PURCHASES, THE PURCHASES WERE RECORD ED THROUGH SELF-MADE I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 8 OF 19 VOUCHERS AND ON THE REASON THAT NO VERIFICATION COU LD BE MADE FROM THE VENDORS, THE ASSESSING OFFICER HAD INVOKED THE PROV ISIONS OF SECTION 40A(3) AND HAD DISALLOWED 20% OF THE PURCHASES FROM THE FIVE VENDORS. IT WAS THE SUBMISSION THAT THE PURCHASES BEING FROM TH E UNORGANIZED SECTOR, THE ASSESSEE COULD NOT GET THE BILLS AND IT WAS FOR THAT REASON THE SELF-MADE VOUCHERS HAVE BEEN MADE. IT WAS THE SUBMI SSION THAT THE PURCHASES AS ALSO THE QUANTITY OF THE PURCHASES HAD BEEN TALLIED AND NO DIFFERENCE WAS FOUND. IT WAS THE SUBMISSION THAT IT IS NOT THE CLAIM OF THE ASSESSING OFFICER THAT THE ASSESSEE PURCHASES FROM THE UNORGANIZED SECTOR TO THE EXTENT OF RS.4.48 LAKHS WERE AT A HIG HER VALUE OR IT HAD ANY ELEMENT OF UNREASONABLENESS. IT WAS THE SUBMISSION THAT THE DISALLOWANCE WAS LIABLE TO BE DELETED. IT WAS THE FURTHER SUBMIS SION THAT THE LD. CIT(APPEALS) HAD CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE PURCHASES WERE IN CASH AND MORE THAN RS.25,000/-. 11. IN REPLY, LD. D.R. VEHEMENTLY SUPPORTED THE ORD ER OF THE LD. CIT(APPEALS). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE LD. CIT(APPEALS) SHOWS THAT THE LD. CIT(APPEALS ) HAS CONFIRMED THE DISALLOWANCE BECAUSE THE PAYMENTS HAVE BEEN MADE BE YOND THE PRESCRIBED LIMITS UNDER SECTION 40A(3). HOWEVER, TH E PROVISIONS OF SECTION 40A(3) OF THE ACT ARE CONTROLLED BY THE EXE MPTION UNDER RULE 6DD. A PERUSAL OF THE PROVISION OF RULE 6DD(E)(II) SHOWS THAT IN RESPECT OF THE PAYMENTS MADE FOR THE PURCHASES OF PRODUCE O F ANIMAL HUSBANDRY INCLUDING HIDES AND SKINS, EXEMPTION IS PROVIDED. T HUS CLEARLY THE LEGISLATURE DID RECOGNIZE THE UNORGANIZED SECTOR IN THE SAID BUSINESS OF DEALING IN ANIMAL SKINS AND HIDES. FURTHER THE FACT THAT THE TOTAL PURCHASE FROM THE FIVE VENDORS FROM THE UNORGANIZED SECTOR I S ONLY TO AN EXTENT OF RS.4.48 LAKHS AS AGAINST THE TOTAL PURCHASE OF RS.2 .02 CRORES SHOWS A NOMINAL PURCHASES IN CASH FROM THE UNORGANIZED SECT OR. SUCH DISALLOWANCE IN RESPECT OF THE PURCHASES FROM THE U NORGANIZED SECTOR I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 9 OF 19 ITSELF WOULD HURT THE UNORGANIZED SECTOR. IN THESE CIRCUMSTANCES, AS IT IS NOTICED THAT THE ASSESSEE HAS BEEN ABLE TO LINK THE PURCHASES WITH THEIR STOCK AND THERE IS NO VARIATION IN THE STOCK REPRES ENTING THE QUANTITY PURCHASED AND AS IT IS NOTICED THAT THE PURCHASES A RE FROM THE UNORGANIZED SECTOR AND THE PURCHASES ARE OF ARTICLE S PROVIDED IN THE EXEMPTION IN RULE 6DD(E)(II), THE DISALLOWANCE CONF IRMED BY THE LD. CIT(APPEALS) STANDS DELETED. 13. IN THE RESULT, GROUND NO. 5 OF THE ASSESSEES A PPEAL STANDS ALLOWED. 14. IN RESPECT OF GROUNDS NO. 9 & 10 OF THE ASSESSE ES APPEAL, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUES WERE AGAI NST THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF THE CAR MAINTE NANCE EXPENSES AND THE MOBILE PHONE CHARGES. IT WAS THE SUBMISSION THA T THE ASSESSING OFFICER HAD DISALLOWED 20% OF THE CAR MAINTENANCE E XPENSES AND OUT OF THE MOBILE PHONE CHARGES ON ACCOUNT OF PERSONAL USE . IT WAS THE SUBMISSION THAT THE LD. CIT(APPEALS) HAD REDUCED TH E DISALLOWANCE TO 10%. IT WAS THE SUBMISSION THAT THE DISALLOWANCE MA Y BE DELETED. 15. IN REPLY, LD. D.R. VEHEMENTLY SUPPORTED THE ORD ER OF LD. CIT(APPEALS). 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF LD. CIT(APPEALS) SHOWS THAT THE LD. CIT(APPEALS) HA S TAKEN INTO CONSIDERATION THE FACT THAT THE EXPENSES REPRESENTI NG THE GENERAL EXPENSES AND CAR MAINTENANCE EXPENSES AND TELEPHONE S EXPENSES WERE IN LINE WITH THE EXPENSES IN COMPARISON TO THE TOTAL S ALES. IN PARAS 7.2, 8.2 AND 9.1 OF THE ORDER OF LD. CIT(APPEALS), THE LD. C IT(APPEALS) AFTER ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE T OTAL EXPENSES WERE ONLY 0.47% OF THE TOTAL TURNOVER COMPARED TO 0.42% OF TH E SAME EXPENSES FOR THE EARLIER YEARS HAD REDUCED THE DISALLOWANCE TO 1 0%. THE FACT THAT THE LD. CIT(APPEALS) HAS ACCEPTED THAT THE EXPENSES ARE IN LINE WITH THE I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 10 OF 19 GENERAL EXPENSES TREND OF THE EARLIER YEARS. THE LD . CIT(APPEALS) OUGHT TO HAVE DELETED THE DISALLOWANCE IN FULL. IN THESE CIR CUMSTANCES, THE ORDER OF THE LD. CIT(APPEALS) STANDS MODIFIED AND THE DISALL OWANCE AS CONFIRMED BY THE LD. CIT(APPEALS) STANDS DELETED. CONSEQUENTL Y, GROUNDS NO. 9 & 10 OF THE ASSESSEES APPEAL STAND ALLOWED. 17. IN REGARD TO GROUND NO. 11, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS ) IN CONFIRMING THE DISALLOWANCE OF THE FOREIGN TRAVEL EXPENSES IN RELA TION TO THE WIFE OF ASSESSEE. IT WAS THE SUBMISSION THAT THE ASSESSEE A ND HIS WIFE HAD ATTENDED A LEATHER EXPORT FAIR IN AUSTRALIA AND HAD CLAIMED RS.8,94,710/- ON FOREIGN TRAVEL. THE VISITS WERE AUSTRALIA AND HO NGKONG. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD DISALLOWE D THE SAME HOLDING THAT THE SAID TRAVEL WAS PERSONAL IN NATURE. IT WAS THE SUBMISSION THAT THE LD. CIT(APPEALS) HAD VERIFIED THE DOCUMENTS PRODUCE D BY THE ASSESSEE AND HAD DISALLOWED THE PROPORTIONATE EXPENSES IN RE SPECT OF THE ASSESSEES WIFE. CONSEQUENTLY THE TRAVELLING EXPENS ES OF THE ASSESSEE HAVE BEEN ALLOWED AND THAT OF HIS WIFE IS DISALLOWE D BY THE LD. CIT(APPEALS). IT WAS THE SUBMISSION THAT AGAINST TH E ALLOWANCE OF THE FOREIGN TRAVEL EXPENSES IN RESPECT OF THE ASSESSEE, THE REVENUE HAS FILED AN APPEAL IN REVENUES APPEAL IN GROUND NO. 4. IT W AS THE SUBMISSION THAT IN RESPECT OF THE TRAVELLING EXPENSES, WHICH HAS BE EN DISALLOWED BY THE LD. CIT(APPEALS) IN RESPECT OF THE WIFE OF ASSESSEE, TH E ASSESSEE IS IN APPEAL. IT WAS THE SUBMISSION THAT THE WIFE HAD ACCOMPANIED THE ASSESSEE. IT WAS THE SUBMISSION THAT THE DISALLOWANCE MAY BE DELETED . 18. IN REPLY, LD. D.R. VEHEMENTLY SUPPORTED THE ORD ER OF ASSESSING OFFICER. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY EVIDENCE BEFORE TH E LOWER AUTHORITIES TO SHOW THE REQUIREMENT OF THE ASSESSEES WIFES TRAVE L FOR THE PURPOSE OF I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 11 OF 19 BUSINESS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIE W THAT THE FINDING OF THE LD. CIT(APPEALS) ON THIS ISSUE IS ON RIGHT FOOT ING AND DOES NOT CALL FOR ANY INTERFERENCE. CONSEQUENTLY, GROUND NO. 11 OF TH E ASSESSEES APPEAL STANDS DISMISSED. 20. IN RESPECT OF GROUNDS NO. 12, 13, & 14 OF THE A SSESSEES APPEAL, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE WAS AG AINST THE ACTION OF THE LD. CIT(APPEALS) IN CONFIRMING THE DISALLOWANCE OF RS.21,58,375/- BEING THE COMMISSION PAID TO M/S. S.P.S. METAL CAST & ALL OYS PVT. LTD. IT WAS THE SUBMISSION THAT THE MANAGING DIRECTOR OF M/S. S.P.S . METAL CAST & ALLOYS PVT. LTD. SHRI BIPIN KUMAR BHORA WAS PERSONALLY KNO WN TO THE ASSESSEE AND HE HAD HELPED THE ASSESSEE TO OBTAIN THE FRESH SOURCES FOR THE PURCHASE OF LEATHER. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS MAKING PURCHASES FROM SUBSTANTIALLY 12 VENDORS WHO WERE SH OWN AT PAGE 144 OF THE PAPER BOOK. IT WAS THE SUBMISSION THAT OUT OF T HE SAID 12 VENDORS, 6 OF THEM WERE NEW PERSONS, WHO WERE INTRODUCED BY SH RI BIPIN KUMAR BHORA. IT WAS THE SUBMISSION THAT PROCUREMENT OF TH E ANIMAL HIDES WAS BECOMING MORE AND MORE DIFFICULT. CONSEQUENTLY HE H AD TAKEN ASSISTANCE OF SHRI BIPIN KUMAR BHORA TO GET NEW VENDORS TO SUP PLY QUALITY HIDES TO THE ASSESSEE AT A REASONABLE PRICE AND FOR THIS PUR POSE THE ASSESSEE HAD PAID THE COMMISSION. IT WAS THE SUBMISSION THAT THE COMMISSION WAS PAID BY CHEQUE AND TDS WAS ALSO DEDUCTED. IT WAS THE FUR THER SUBMISSION THAT THE PURCHASES FROM THE NEW PERSONS WHO HAD BEEN INT RODUCED BY SHRI BIPIN KUMAR BHORA WERE TO THE EXTENT OF 41% OF THE TOTAL PURCHASES OF THE ASSESSEE. IT WAS THE FURTHER SUBMISSION THAT ON ACCOUNT OF THIS INTRODUCTION THE ASSESSEES TURNOVER ITSELF HAD INC REASED SUBSTANTIALLY AS ALSO HIS EXPORT BUSINESS. IT WAS THE SUBMISSION THA T THE ASSESSING OFFICER HAD DISALLOWED THE COMMISSION ON THE GROUND THAT SH RI BIPIN KUMAR BHORA WAS A DEALER IN STEEL AND THERE WAS NO NECESS ITY FOR THE ASSESSEE TO PAY COMMISSION OF M/S. S.P.S. METAL CAST & ALLOYS P VT. LTD. IT WAS THE FURTHER SUBMISSION THAT THE COMMISSION WAS PAID FOR ONLY ONE YEAR AS THE ASSESSEE WAS ABLE TO MAINTAIN HIS CONTACT WITH THE NEW SUPPLIERS. IT WAS I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 12 OF 19 THE SUBMISSION THAT THE ASSESSING OFFICER HAD DISAL LOWED THE COMMISSION ALSO ON THE GROUND THAT NO COMMISSION HAD BEEN PAID IN THE SUBSEQUENT YEARS. IT WAS THE SUBMISSION THAT THE LD. CIT(APPEA LS) HAD CONFIRMED THE DISALLOWANCE BY HOLDING THAT THE ASSESSEE HAD SHOWN COMMERCIAL IMPRUDENCE BY INCREASING HIS OUTLAY BY WAY OF COMMI SSION WHEN THERE IS NO SPECIFIC COMMERCIAL BENEFIT TO THE ASSESSEES BU SINESS. IT WAS THE SUBMISSION THAT THE ASSESSEE IS IN THE LEATHER BUSI NESS AND GETTING HIDES AND SKINS IS BECOMING DIFFICULT YEAR BY YEAR AND IT WAS A PRUDENT DECISION TAKEN BY THE ASSESSEE TO PAY COMMISSION AND GET HIS LINKS AND CONTACTS SO THAT THE BUSINESS OF THE ASSESSEE DID NOT SUFFER ON ACCOUNT OF NON- AVAILABILITY OF RAW MATERIALS. IT WAS THE SUBMISSIO N THAT EVEN THE STATEMENT OF SHRI BIPIN KUMAR BHORA HAD BEEN RECORD ED BY THE ASSESSING OFFICER WHEREIN HE HAS CONFIRMED THE TRANSACTIONS W ITH THE ASSESSEE. IN REPLY, THE LD. D.R. VEHEMENTLY REITERATED THE A SSESSMENT ORDER AND THE ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE . 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET, WHAT IS COMMERCIAL PRUDENCE IS KNOWN ONLY TO THE BUSINESSMA N, WHO IS DOING A PARTICULAR BUSINESS. TRUE, DOUBT WOULD BE CREATED I F A PERSON WHO IS DEALING IN LEATHER IS PAYING COMMISSION TO A PERSON WHO IS DEALING IN STEEL. BUT WHEN THE PERSON HAS BEEN EXAMINED AND HE HAS CATEGORICALLY ADMITTED TO HAVING PROVIDED THE CONTACTS THEN SUCH TRANSACTIONS SHOULD NORMALLY BE ACCEPTED. THE APPEAL UNDER DISPUTE IS F OR THE ASSESSMENT YEAR 2005-06. THE ASSESSING OFFICER HIMSELF RECOGNI ZES THAT THE PERSON, TO WHOM THE COMMISSION HAS BEEN PAID, NAMELY SHRI J ALAN, HAD APPEARED BEFORE HIM THROUGH HIS REPRESENTATIVE. IN THE STATE MENT RECORDED IT HAS BEEN CLARIFIED THAT SHRI BIPIN KUMAR BHORA KNOWS TH E ASSESSEE. HE HAS ALSO CONFIRMED THAT HE HAS RECEIVED COMMISSION FROM VARIOUS PERSONS TO AN EXTENT NEARLY RS.1.72 CRORES. THEY HAD ALSO PLAC ED BEFORE THE ASSESSING OFFICER, THE NAMES OF NEARLY 11 PERSONS W HO WERE DEALERS OF LEATHERS, WHO HAVE BEEN INTRODUCED TO THE ASSESSEE. THIS STATEMENT AS GIVEN ON BEHALF OF SHRI BIPIN KUMAR BHORA HAS NOT B EEN DISPROVED OR I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 13 OF 19 DISLODGED BY THE REVENUE. JUST BECAUSE STATEMENT DO ES NOT GO IN FAVOUR OF THE REVENUE IT DOES NOT FOLLOW THAT THE STATEMENT I S TO BE DISREGARDED. IF A STATEMENT HAS BEEN RECORDED AND SUCH STATEMENT IS IN FAVOUR OF THE ASSESSEE THEN REASONABLENESS SHOULD BE FOLLOWED AND CLAIM IF ALLOWABLE MUST BE ALLOWED. IT IS TRUE THAT A DOUBT CAN BE CRE ATED IN THE MIND OF THE ASSESSING OFFICER WHEN A METAL DEALER SHOWS RECEIPT OF COMMISSION FROM A LEATHER DEALER BUT WHEN SUBSTANTIAL EVIDENCES IN THE FORM OF COMMISSION, EVEN NAMES AND ADDRESSES OF THE PERSONS INTRODUCED HAVE BEEN GIVEN THEN THERE IS OBVIOUSLY SOME TRUTH IN TH E MATTER. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE STATEMEN TS RECORDED FROM SHRI B.M. SONI, VICE-PRESIDENT (ACCOUNTS) OF M/S. S.P.S. METAL CAST & ALLOYS PVT. LTD. ON BEHALF OF SHRI BIPIN KUMAR BHORA WERE SHOWN AT PAGES 154 TO 156 OF THE PAPER BOOK. THIS STATEMENT HAS BEEN RECO RDED UNDER SECTION 131 OF THE ACT. THIS STATEMENT HAS NOT BEEN DISLODG ED. THE CORRESPONDING EVIDENCES HAVE ALSO BEEN PROVIDED BY M/S. S.P.S. ME TAL CAST & ALLOYS PVT. LTD. VIDE A LETTER DATED 12.12.2007. THE STATEMENT HAS BEEN RECORDED ON 11.12.2007. ALL THESE CLEARLY SHOW THAT THE CLAIM O F COMMISSION PAYMENT TO M/S. S.P.S. METAL CAST & ALLOYS PVT. LTD. IS A G ENUINE PAYMENT, WHICH IS LIABLE TO BE ALLOWED AND WE DO SO. IN THESE CIRCUMS TANCES, THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER AND A S CONFIRMED BY THE LD. CIT(APPEALS) IN RESPECT OF THE COMMISSION PAID TO M /S. S.P.S. METAL CAST & ALLOYS PVT. LTD. STANDS DELETED. 22. IN THE RESULT, GROUNDS NO. 12, 13 & 14 OF THE A SSESSEES APPEAL STAND ALLOWED. 23. GROUND NO. 15 IS GENERAL IN NATURE AND DOES NOT NEED FOR ANY ADJUDICATION. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 25. ITA NO. 1494/KOL/2009 (DEPARTMENTAL APPEAL) I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 14 OF 19 IN RESPECT OF GROUND NO. 1, IT WAS SUBMITTED BY TH E LD. SR. D.R. THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APP EALS) IN DELETING THE ADDITION REPRESENTING THE PAYMENTS MADE TO THE FABR ICATOR, NAMELY MD. KALAM. IT WAS THE SUBMISSION THAT MD. KALAM WAS NOT IDENTIFIED IN THE COURSE OF ASSESSMENT. IT WAS THE SUBMISSION THAT TH E LD. CIT(APPEALS) HAD DELETED THE ADDITION ON THE BASIS OF RATION CARD PR ODUCED BY THE ASSESSEE IN THE NAME OF MD. KALAM. IT WAS THE SUBMISSION THA T THE ORDER OF THE LD. CIT(APPEALS) WAS LIABLE TO BE REVERSED. 26. IN REPLY, LD. A.R. DREW OUR ATTENTION TO PARAS 4 TO 4.3 OF THE ORDER OF LD. CIT(APPEALS). IT WAS THE SUBMISSION THAT THE AS SESSEE HAD SUBMITTED PROOF OF IDENTITY AND RESIDENCE OF MD. KALAM BY WAY OF THE RATION CARD. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(AP PEALS) WAS LIABLE TO BE CONFIRMED ON THIS ISSUE. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE LD. CIT(APPEALS) IN PARA 4.3 OF THE ORDER SHOWS THAT THE RATION CARD DETAILS OF MD. KALAM WAS PRODUCED BY THE ASSESSEE B EFORE THE LD. CIT(APPEALS) AND THE SAME WAS ALSO SENT BY THE LD. CIT(APPEALS) TO THE ASSESSING OFFICER FOR HIS VERIFICATION. A PERUSAL O F THE ORDER OF LD. CIT(APPEALS) SHOWS THAT HE HAS TAKEN ON RECORD THE FACT THAT THE FABRICATORS HAVE BEEN PRODUCED BEFORE THE ASSESSING OFFICER WHO REFUSED TO RECORD THEIR STATEMENTS AND THEIR APPEARANCES BE FORE HIM ON THE GROUND THAT THEY WERE NOT CARRYING THE BOOKS OF ACC OUNTS. IT IS FURTHER FOUND THAT THE LD. CIT(APPEALS) HAS TAKEN INTO CONS IDERATION THE RATION CARD WHICH IS A GOVERNMENT DOCUMENT FOR DELETING TH E DISALLOWANCE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE OR DER OF THE LD. CIT(APPEALS) ON THIS ISSUE IS ON RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. 28. IN REGARD TO GROUND NO. 2, IT WAS SUBMITTED BY THE LD. D.R. THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS ) IN DELETING THE I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 15 OF 19 ADDITION REPRESENTING THE DISALLOWANCE IN RESPECT O F THE PURCHASES FROM TWO PERSONS. LD. D.R. DREW OUR ATTENTION TO PARA 5 OF THE ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER HAS DISALLOWED 10% OF THE PURCHASES FROM MAASSA INTERNATIONAL AND SOVA INTERNATIONAL AS THE SAID PARTIES HAD NOT RESPONDED TO THE NOTICES UNDER SECTION 133(6). IT WAS THE SUBMISSION THAT THE LD. CIT(APPEALS) HAD DELETED THE ADDITION ON THE GROUND THAT THE NOTICES UNDER SECTION 133(6) WERE DULY SERVED ON TH E PARTIES AND PART OF THE PAYMENTS WAS ALSO MADE BY CHEQUE. IT WAS THE SU BMISSION THAT THE ORDER OF THE LD. CIT(APPEALS) MAY BE REVERSED. 29. IN REPLY, LD. A.R. DREW OUR ATTENTION TO PARAS 6 TO 6.2 OF THE ORDER OF LD. CIT(APPEALS). IT WAS THE SUBMISSION THAT THE PA YMENTS WERE GENUINE AND THE NOTICES WERE ALSO SERVED ON THE PARTIES. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(APPEALS) MAY BE SUSTA INED. 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE PARA 6.2 OF THE ORDER OF LD. CIT(APPEALS) CLEARLY SHOWS THAT HE HAS TAKEN INTO CONSIDERATION THE FACT THAT THE NOTICES UNDER SECTI ON 133(6) WERE DULY SERVED ON THE PARTIES AND PART OF THE PAYMENTS WERE MADE BY CHEQUE AND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY SPECIF IC REASON FOR DISALLOWING 10% OF THE PURCHASES FROM THE SAID TWO PERSONS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(APPEALS) ON THIS ISSUE IS ON RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. 31. IN REGARD TO GROUND NO. 3 OF THE REVENUES APPE AL, IT WAS THE SUBMISSION THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS) IN REDUCING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER OF 20% OF THE GENERAL EXPENSES. IT WAS THE SUBMISSION THAT THE IS SUE WAS SIMILAR TO GROUNDS NO. 9 AND 10 OF THE ASSESSEES APPEAL. 32. LD. D.R. VEHEMENTLY SUPPORTED THE ORDER OF ASSE SSING OFFICER. IN REPLY, LD. A.R. SUBMITTED THAT NO DISALLOWANCE ITSE LF WAS CALLED FOR. I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 16 OF 19 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS WE HAVE ALREADY ALLOWED GROUNDS NO. 9 & 10 OF THE ASSESSEES APPEAL AND WE HAVE DELETED THE DISALLOWANCE, WHICH HAS BEEN LIMITED TO 10% BY THE LD. CIT(APPEALS), GROUND NO. 3 OF THE REVENUES APPEAL STANDS DISMISS ED. 34. IN RESPECT OF GROUND NO. 4, IT WAS SUBMITTED BY THE LD. D.R. THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS ) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER UNDER THE HE AD FOREIGN TRAVELLING EXPENSES. IT WAS THE SUBMISSION THAT THE ISSUE WAS SIMILAR TO THE GROUND NO. 11 OF THE ASSESSEES APPEAL. IT WAS THE SUBMISS ION THAT IN THE REVENUES APPEAL IN GROUND NO. 4, THE REVENUE HAS C HALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE DISALLOWANC E MADE IN RESPECT OF THE ASSESSEE AND IN GROUND NO.11 THE ASSESSEE HAS C HALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN NOT DELETING THE DISALLO WANCE IN RESPECT OF THE ASSESSEES WIFE FOR FOREIGN TRAVEL ALONGWITH THE AS SESSEE. 35. LD. A.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE A.R. THAT OF THE LD. CIT(APPEALS). 36. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HA VE ALSO PERUSED THE ORDER OF LD. CIT(APPEALS) IN PARAS 11 TO 11.2. A PERUSAL OF PARA 11.2 OF THE ORDER OF LD. CIT(APPEALS) SHOWS THAT THE LD. CI T(APPEALS) HAS TAKEN INTO CONSIDERATION THE FACT THAT THE ASSESSEE HAS T RAVELLED TO VARIOUS PLACES AND HAS MADE CONTACT WITH VARIOUS BUYERS OF THE ASSESSEES PRODUCTS AND HAS ALSO PARTICIPATED IN VARIOUS FAIRS CONDUCTED AT VARIOUS PLACES. IT IS ONLY THEN THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF THE FOREIGN TRA VEL MADE BY THE ASSESSEE. AS IT IS NOTICED THAT THE LD. CIT(APPEALS ) HAS TAKEN INTO CONSIDERATION ALL THE FACTS IN RESPECT OF FOREIGN T RAVEL OF THE ASSESSEE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(APPEALS) IS ON RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 17 OF 19 37. IN RESPECT OF GROUND NO. 5, IT WAS SUBMITTED BY THE LD. D.R. THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS ) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF THE S UNDRY CREDITORS. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER IN TH E COURSE OF ASSESSMENT HAD NOTICED THAT THE ASSESSEE HAD MADE PURCHASES OF MATERIALS FROM M/S. ASHIKA IMPEX. THE ADDRESS PROVIDED BY THE ASSESSEE WAS FOUND TO BE NOT EXISTED. CONSEQUENTLY THE ASSESSING OFFICER HAD TRE ATED THE PURCHASES BOGUS. IT WAS THE SUBMISSION THAT THE LD. CIT(APPEA LS) HAD DELETED THE DISALLOWANCE BY HOLDING THAT M/S. ASHIKA IMPEX WAS A GENUINE CONCERN AND PURCHASES WERE MADE FROM THE SAID CONCERN EVEN IN THE PAST. 38. LD. D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE A.R. THAT OF THE LD. CIT(APPEALS). 39. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF PARAS 13 TO 13.2 OF THE ORDER OF LD. CIT(APPEALS) SHOWS THAT TH E LD. CIT(APPEALS) HAS TAKEN INTO CONSIDERATION THE FACT THAT THE ASSESSEE HAS PURCHASED CLOTH, BAKRAM ETC. FOR MANUFACTURING OF LEATHER GOODS FROM M/S. ASHIKA IMPEX. LD. CIT(APPEALS) HAS ALSO CONSIDERED THE INVOICES P RODUCED BY THE ASSESSEE IN RESPECT OF M/S. ASHIKA IMPEX AS ALSO TH E FACT THAT THERE WAS AN OPENING BALANCE OF RS.2,38,402/-. IT IS ALSO NOT ICED THAT THE LD. CIT(APPEALS) HAS TAKEN INTO CONSIDERATION THE FACT THAT THE PAYMENTS MADE TO M/S. ASHIKA IMPEX WERE SUBSTANTIALLY BY CHE QUE AND THAT IN THE EARLIER YEARS THE PURCHASES FROM M/S. ASHIKA IMPEX HAD BEEN ACCEPTED AS GENUINE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(APPEALS) ON THIS ISSUE IS ON RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. 40. IN RESPECT OF GROUND NO. 6 OF THE REVENUES APP EAL, IT WAS SUBMITTED BY THE LD. SR. D.R. THAT THE ISSUE WAS AG AINST THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER OF THE EXPENDITURES WHICH WERE UNVERIFIABLE . IT WAS THE I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 18 OF 19 SUBMISSION THAT THE FABRICATORS TO WHOM THE PAYMENT S WERE MADE DID NOT APPEAR IN RESPONSE TO THE NOTICES UNDER SECTION 131 OF THE ACT. CONSEQUENTLY THE ASSESSING OFFICER HAD DISALLOWED 1 0% OF THE TOTAL PAYMENTS MADE TO FABRICATORS RESULTING IN ADDITION TO RS.2,15,284/-. IT WAS THE SUBMISSION THAT ON APPEAL, LD. CIT(APPEALS) IN PARA 5.3 OF HIS ORDER HAS DELETED THE DISALLOWANCE AT 10% BUT HAD I NVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWED 20% OF THE TOTAL PAYMENTS MADE TO THE FABRICATORS. THIS HAS RESULTED IN AN EN HANCEMENT OF THE ADDITION BY RS.18,827/-. LD. D.R. SUBMITTED THAT TH E DISALLOWANCE WAS RIGHTLY MADE BY THE ASSESSING OFFICER. 41. IN REPLY, LD. A.R. SUBMITTED THAT THIS WAS CONN ECTED TO THE GROUNDS 6, 7 & 8 OF THE ASSESSEES APPEAL, WHICH HAD BEEN W ITHDRAWN BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ENHANCEMEN T AS DONE BY THE LD. CIT(APPEALS) WAS WRONG. IT WAS THE SUBMISSION THAT IN ANY CASE, AS THE LD. CIT(APPEALS) HAS ENHANCED THE ADDITION, THE APPEAL OF THE REVENUE BECOMES INFRUCTUOUS. 42. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF LD. CIT(APPEALS) CLEARLY SHOWS THAT THOUGH THE LD. CIT(APPEALS) HAS DELETED 10% DISALLOWANCE, HE HAS ENHANCED THE DISAL LOWANCE BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND CON SEQUENTLY THE ADDITION HAS BEEN ENHANCED BY RS.18,827/-. CONSEQUENTLY THE GROUND RAISED BY THE REVENUE IS MISCONCEIVED AND IS CONSEQUENTLY DISMISS ED. 43. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH AUGUST, 2014. SD/- SD/- SHAMIM YAHYA GEORGE MATHAN (ACCOUNTANT MEMBER) (JU DICIAL MEMBER) KOLKATA, THE 05 TH DAY OF AUGUST, 2014 I.T.A. NO. 1313/KOL. /2009 & ITA NO. 1494/KOL/2009 ASSESSMENT YEAR: 2005-2006 PAGE 19 OF 19 COPIES TO : (1) SHRI SIDDHARTHA JALAN, 118A, C.R. AVENUE, KOLKATA-700 073 (2) ASSISTANT/ DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-37, KOLKATA, PODDAR COURT, 18, RABINDRA SARANI, 8 TH FLOOR KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.