Ankur Chem Food Products (Guj) Ltd., Gandhidham-Kutch V. The DCIT, Cen. Cir.-1, Rajkot

ITA 133/RJT/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50022 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-03-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 07-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MEENA
• Assessee Lawyers: J C RANPURA
• Keywords: Depreciation; Income from undisclosed sources; Fair market value
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.133/RJT/2006 (ASSESSMENT YEAR 2002-03) ANKUR CM FOOD PRODUCTS (GUJ) LTD VS THE DY.CIT, CEN T.CIR.1 D-114, JAWAHAR CHOWK RAJKOT GANDHIDHAM (KUTCH) PAN : AABCA8203F (APPELLANT) (RESPONDENT) I.T.A. NO.168/RJT/2006 (ASSESSMENT YEAR 2002-03) ACIT, GANDHIDHAM CIRCLE VS ANKUR CHEM FOOD PRODUC TS GANDHIDHAM (GUJ) LTD, GANDHIDHAM KUTCH (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JC RANPURA REVENUE BY : SHRI SL MEENA O R D E R PER AL GEHLOT, AM THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 15 -01-2006 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, AHMEDA BAD FOR THE ASSESSMENT YEARS 2002-03. 2. THE FIRST GROUND RAISED IN THE ASSESSEES APPEAL AND GROUND NO.3 IN REVENUES APPEAL IS IN RESPECT OF ADDITION ON ACCOU NT OF ALLEGED EXCESS STOCK OF FINISHED SALT FOUND DURING THE COURSE OF SURVEY U/S 133A. THE BRIE FACTS OF THIS GROUND IS THAT THE ASSESSEE COMPANY IS ENGAGED IN T HE BUSINESS OF MANUFACTURING OF SALT. A SURVEY U/S 133A WAS CARRIED OUT ON 02-0 2-2002. DURING THE COURSE OF SURVEY AT THE FACTORY PREMISES OF THE ASSESSE, THE FOLLOWING STOCK WAS FOUND: DESCRIPTION STOCK PHYSICALLY FOUND DURING SURVEY STOCK AS PER STOCK REGISTER MAINTAINED AT FACTORY FINISHED SALT RS.93,37,510/ - RS.98,92,735/ - ITA NO.133 & 168/RJT/2006 2 RAW SALT RS.44,89,650/ - RS. 47,87,516/ - TOTAL RS.1,38,27,160/ - RS.1,46,80,251/ - APART FROM THE ABOVE STOCK, STOCK OF FINISHED GOODS OF RS.42,87,210 WAS LYING AT VARIOUS DEPOTS OF THE ASSESSEE COMPANY. A STATEMEN T OF SHRI ASHOK CHAMPALAL PARIKH, DIRECTOR OF THE ASSESSEE WAS RECORDED. THE RELEVANT PART OF HIS STATEMENT HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN HIS ORDER ON PAGE 7 OF THE ASSESSMENT ORDER, WHICH READS AS BELOW: QUESTION-40: AS PER BOOKS, FINISHED GOODS IS 1,62, 435 BAGS WHOSE VALUE IS RS.98,92,735/-. AS PER PHYSICAL VER IFICATION, FINISHED GOODS IS 1,50,741 BAGS WHOSE VALUE IS RS.9 3,37,510/-. HENCE, THERE IS SHORTAGE OF 11,691 BAGS. EXPLAIN T HE REASON FOR THE SAME. IN ADDITION TO THIS, THERE ARE 48,130 BA GS OF FINISHED (TRANSIT) AT DEPOTS WHOSE VALUE IS RS.42,87,210/-. HENCE, TOTAL FINISHED GOODS COMES TO 1,98,871 BAGS WHOSE VALUE I S RS.1,36,24,720/-. HENCE TOTAL DIFFERENCE COMES TO 36,436 BAGS WHICH IS IN EXCESS AND WHOSE VALUE IS RS.37,31,985/ -. WHAT DO YOU WANT TO SAY? ANS:- 40: IN REPLY TO THE ABOVE, IT IS SUBMITTED TH AT 48,130 BAGS WHOSE VALUE IS RS.42,87,210/- ARE LYING IN OUR DEPO TS AND THEY ARE IN TRANSIT. THEY ARE TO BE CONSIDERED. REGARDING THE BALANCE, I AM UNABLE TO OFFER ANY EXPLANATION. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE ASSESSING OFFICER NOTICED THAT THE PHYSICAL STOCK OF FINISHED SALT FO UND DURING SURVEY AT THE FACTORY PREMISES WAS RS.93,37,510 AGAINST STOCK AS PER STOC K REGISTER MAINTAINED AT FACTORY OF RS.98,92,735. IN ADDITION TO THIS STOCK OF FINISHED SALT RS.42,87,200 WAS LYING AT VARIOUS DEPOTS OF THE ASSESSEE COMPANY . HENCE, TOTAL STOCK OF FINISHED GOODS WHICH INCLUDES STOCK PHYSICALLY FOUN D AT FACTORY AND VARIOUS DEPOTS COMES TO RS.1,36,24,720 AGAINST WHICH THE ST OCK AS PER STOCK REGISTER MAINTAINED AT FACTORY WAS RS.98,92,735. THERE WAS EXCESS STOCK OF RXS.37,31,985. THE ASSESSING OFFICER DID NOT ACCEP T THE ASSESSEES CONTENTION THAT THE OBSERVATION THAT WHATEVER STATED BY THE AS SESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS IS AN AFTERTHOUGHT. THE ASS ESSING OFFICER STATED THAT THE ASSESSEE DOES NOT COME UNDER THE CONTROL OF CIVIL S UPPLIES AUTHORITIES AND HENCE ITA NO.133 & 168/RJT/2006 3 ITS STOCK REGISTER IS NOT MAINTAINED AS PER THE REQ UIREMENT OF CIVIL SUPPLIES AUTHORITIES. THE ASSESSEE CAN PREPARE STOCK REGIST ER AS PER ITS CONVENIENCE. THE ASSESSING OFFICER ACCORDINGLY REJECTED THE ASSE SSEES EXPLANATION AND MADE ADDITION OF RS.37,31,985. 4. THE CIT(A) REDUCED THE ADDITION ON THE ACCOUNT O F THE FINISHED GOODS. HOWEVER, THE CIT(A) MADE AN ADDITION ON ACCOUNT OF DEFICIT OF STOCK OF RAW SALT ON 1325 M.T. VALUING AT RS.2,97,675 FOR WHICH THE A SSESSING OFFICER DID NOT MAKE SEPARATE ADDITION, DUE TO THE ADDITION OF EXCESS ST OCK OF FINISHED SALT STOCK. THUS, THE CIT(A) SUSTAINED THE ADDITION TO THE EXTE NT OF RS.8,50,900 AND THE BALANCE ADDITION OF RS.28,81,085 HAS BEEN DELETED. WHILE DECIDING THE ISSUE, THE CIT(A) NOTICED THAT THE ASSESSEE HAS ACCEPTED T HE DIFFERENCE OF 11,694 BAGS BEING DIFFERENCE IN THE PHYSICAL STOCK FOUND OF 1,5 0,741 BAGS AND THE STOCK FOUND AS PER THE STOCK REGISTER MAINTAINED AT THE FACTORY OF 1,62,435 BAGS. THE CIT(A) SUSTAINED THE ADDITION OF RS.5,55,225 BEING THE VAL UE OF DIFFERENCE 11,694 BAGS FOUND RECORDED SHORT IN THE STOCK REGISTER AND NOTI NG DOWN THAT HE DID NOT FIND ANY SUBSTANCE IN THE SUBMISSION OF THE ASSESSEE THA T DIFFERENCE IS NEGLIGIBLE AND HENCE NEEDS TO BE IGNORED. THE CIT(A) WAS OF THE V IEW THAT SINCE THE DIFFERENCE HAS BEEN ACCEPTED BY THE ASSESSEE, THE SAME NEEDS T O BE ADDED TO TOTAL INCOME OF THE ASSESSEE. AS REGARDS 48,130 BAGS, BEING STO CK LYING AT VARIOUS DEPOTS OF THE ASSESSEE THE CIT(A) NOTED THAT THE AO HAS UNNEC ESSARILY TWISTED THE MEANING OF THE STATEMENT OF SHRI ASHOK C PAREKH IN ORDER TO MAKE THE ADDITION. HE NOTED THAT DEPOTS WERE NEITHER SURVEY NOR BOOKS OF ACCOUNT MAINTAINED AT DEPOT WERE EXAMINED BY THE ASSESSING OFFICER. THE CIT(A) AGREED WITH THE SUBMISSIONS OF THE ASSESSEE THAT STOCK OF 48,130 BA GS IS DULY ACCOUNTED FOR AND HENCE NO ADVERSE INFERENCE IS REQUIRED. 5. THE LD.AR SUBMITTED DURING THE COURSE OF SURVEY, THE SURVEY TEAM FOUND THAT THE ASSESSEE MAINTAINED STOCK REGISTER IN THE COLUMN SHOWING OPENING STOCK, PRODUCTION, LOADING (MEANING DISPATCH FROM T HE FACTORY) AND CLOSING STOCK. THE LD.AR DREW OUR ATTENTION TO DETAILS OF STOCK FO UND PHYSICALLY AND STOCK AS PER ITA NO.133 & 168/RJT/2006 4 REGISTER FROM SYNOPSIS. THE LD.AR FURTHER SUBMITTE D THAT THE ASSESSING OFFICER WORKED OUT THE DIFFERENCE OF EXCESS STOCK FOR RS.37 ,31,985 DETAILED AS UNDER:- PARTICULARS NO. OF BAGS AMOUNT (RS.) SHORTAGE AS PER COLUMN B. ABOVE 11694 5,55,225 STOCK LYING WITH DEPOTS AND IN TRANSIT 48130 42,87,210 DIFFERENCE BEING EXCESS STOCK 36436 37,31,985 THE LD.AR SUBMITTED THAT DURING THE COURSE OF SURVE Y, IN REPLY TO QUESTION NO.40, THE ASSESSEE EXPLAINED THAT STOCK OF RS.48,130 BAGS VALUED AT RS.40,87,210 IS LYING IN DEPOT AS ALSO IN TRANSIT AND IF THESE ARE CONSIDERED, THE DIFFERENCE SHOULD BE INSIGNIFICANT. THE LD.AR SUBMITTED THAT THE ASS ESSING OFFICER HAS DULY DISREGARDED THE FACTS AS TO STOCK AS PER BOOKS OF A CCOUNT WITH REFERENCE TO STOCK AT DEPOTS IN KOLHAPUR, ERODE, DELHI, INDORE AND BEL LARY AND IN TRANSIT. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE DEPOT -WISE DETAILS OF THE GOODS OF WHICH COPY HAS BEEN PLACED IN THE PAPER BOOK, SUMMA RY OF WHICH IS AS UNDER:- 1 KOLHAPUR 5,411 35 2 ERODE 12,607 42 3 DELHI 9,568 57 4 INDORE 946 68 5 BELLARY 6,033 72 6 IN TRANSIT-REPLY TO Q.36 13,565 TOTAL 48,130 6. THE LD. AR SUBMITTED THAT THE CIT(A) ACCEPTED TH E SHORTAGE OF 11,694 BAGS AT FACTORY PREMISES VALUED AT RS.5,55,225. HO WEVER, THE CIT(A) OUGHT TO HAVE ACCEPTED THE NORMAL LOSS ON ACCOUNT OF HANDLIN G / SHIFTING OF SALT FROM SALT PANS TO THE FACTORY PREMISES / GODOWNS. THE CIT(A) OUGHT TO HAVE CONSIDERED THAT SALT IS PACKED IN POLYTHENE BAGS AND ARE STORE D IN OPEN PLOT AND IN GODOWN AND THERE WILL ALWAYS BE SOME NORMAL LOSS / DAMAGE AND WHILE HANDLING BY HOOKS, TROLLEYS, ETC. ARE USED IN LOADING AND UNLOA DING AS THERE ARE WEAR AND TEAR TO THESE POLYTHENE BAGS CAUSING LOSS. THE LD.AR SU BMITTED THAT THE CIT(A) IS NOT CORRECT IN MAKING FURTHER ADDITION OF RS. 2,97,675 ON ACCOUNT OF SHORTAGE OF 1325 ITA NO.133 & 168/RJT/2006 5 M.T. AND MATERIAL FOUND IN THE COURSE OF SURVEY THA T THE SAME STANDS EXPLAINED BEFORE THE ASSESSING OFFICER AND NOT BEING A GROUND OF APPEAL THOUGH DURING SURVEY, IN REPLY TO QUESTION NO.41 REASON FOR SUCH LOSS WAS EXPLAINED. THE ASSESSING OFFICER ACCEPTED THE FACT THAT SALT IS MA NUFACTURED IN OPEN SALT PANS AND ARE RAW SALT IS KEPT IN THE OPEN. THEREFORE, T HERE HAS TO BE LOSS DUE TO EVAPORATION, RAIN, CYCLONE ETC AND NO ADDITION CAN BE MADE. IT IS ALSO THE SUBMISSION OF THE LD.AR THAT DURING THE YEAR, THE A SSESSEE MANUFACTURED 1,01,609 M.T. OF SALT AND THE SHORTAGE WAS 11,694 B AGS OF 50 KGS I.E. 584.7 M.TS I.E. 0.575% WHICH CANNOT BE CONSIDERED AS UNREASONA BLE. THE LD.AR SUBMITTED THAT DURING THE SURVEY, NO INCRIMINATING MATERIAL O R EVIDENCE INDICATING ANY UNRECORDED SALE, ETC. WAS FOUND NOR COULD THE ASSES SING OFFICER FIND ANY DISCREPANCY OR DEFECT IN THE AUDITED BOOKS OF ACCOU NT AND THE AUDITOR HAS ALSO NOT PUT ANY QUALIFICATION TO AUDIT REPORT. UNDER T HE CIRCUMSTANCES, THE CIT(A) OUGHT NOT TO HAVE SUSTAINED THE ADDITION OF RS.5,55 ,225 AND RS.2,97,675 ON ACCOUNT OF SHORTAGE IN FINISHED GOODS AND RAW-MATER IAL, RESPECTIVELY PARTICULARLY WHEN THE ASSESSING OFFICER WAS SATISFIED ABOUT THE LOSS ON ACCOUNT OF RAW MATERIAL. 7. THE LD.AR, WITHOUT PREJUDICE TO THE MAIN SUBMISS ION, SUBMITTED THAT ANY SHORTAGE IN STOCK ATTRACT ADDITION ON ACCOUNT OF PR OFIT AND NOT THE FULL VALUE. THE LD.AR IN SUPPORT OF HIS CONTENTION RELIED UPON THE FOLLOWING DECISIONS: CIT VS SAMIR SYNTHETICS MILL 326 ITR 410 (GUJ) CIT VS PRESIDENT INDUSTRIES 258 ITR 654 (GUJ) CIT VS PRESIDENT INDUSTRIES 258 ITR 654 (GUJ) CIT VS FRIENDS BRUQUIETTES INDUSTRIES 155 TAXMAN 1 65 (ALL) 8. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER HA S MADE THE ADDITION ON THE BASIS OF FACTS AND MATERIAL COLLECTED DURING THE CO URSE OF SURVEY. A STATEMENT WAS ALSO RECORDED DURING THE COURSE OF SURVEY WHICH HAS BEEN CONSIDERED BY THE ITA NO.133 & 168/RJT/2006 6 ASSESSING OFFICER BEFORE MAKING THE ADDITION. THE LD.DR SUBMITTED THAT AS PER THE PHYSICAL STOCK FOUND DURING THE COURSE OF SURVE Y AND AFTER CONSIDERING THE STOCK LYING IN THE DEPOTS AND IN TRANSIT THE ASSESS ING OFFICER HAS RIGHTLY CALCULATED EXCESS STOCK DIFFERENCE OF RS.36,436 BAGS VALUED AT RS.37,31,985. THE LD.DR SUBMITTED THAT THE CIT(A) HAS WRONGLY DELETED THE A DDITION. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. IT IS CASE OF SURVEY UNDER SECTION 133A OF THE ACT. THE OBJECTS FOR CONDUCTING SURVEY ARE I) WHETHER THE PERSONS CARRYING ON BUSINESS MAINTAI N REGULAR BOOKS OF ACCOUNT OR WHETHER THEY PREPARE ACCOUNT BO OKS AT THE END OF THE YEAR FOR THE PURPOSE OF FILING THE RETUR N; II) WHETHER THEY MAKE CORRECT ENTRIES IN THEIR BOOK S OF ACCOUNT; III) WHETHER CASH IN HAND AND STOCK- IN-TRADE TALLY WITH THE ENTRIES IN THE ACCOUNT BOOKS; IV) WHETHER THEIR DOCUMENTS ARE INDICATING UNACCOUN TED PURCHASES AND SALES ETC.; V) WHETHER THERE EXIST OTHER VALUABLE ARTICLES OR T HINGS CONNECTED WITH BUSINESS WHICH ARE NOT DISCLOSED IN BOOKS OF A CCOUNTS. 9.1 AS STATED ABOVE THAT SURVEY IS UNDERTAKEN T O CHECK THE STOCKS ALSO. FOR CHECKING ALL TYPES OF STOCK, RAW-MATERIAL, FINI SHED GOODS AND SEMI- FINISHED GOODS, SOME EXERCISE OF CALCULATION AS PER NORMAL METHOD OF MATHEMATICAL CALCULATION AND ACCOUNTING PRINCIPLES IS REQUIRED. THE SURVEY TEAM SHOULD TAKE PHYSICAL STOCK OF ALL ITEMS LYING AT ALL PLACES, FACTORY, GODOWN, STORE, DEPOT AND OTHERS, A LIST OF SUCH GOODS SHOWING ITA NO.133 & 168/RJT/2006 7 QUANTITY AS WELL AS VALUE OF THE STOCK IS REQUIRED TO BE PREPARED. THE SAID LIST OF GOODS IS REQUIRED TO BE COMPARED WITH THE GOODS RECORDED IN BOOKS OF ACCOUNT AND A STOCK REGISTER. IF ANY DIFFERENCE IS FOUND BETWEEN THE PHYSICAL STOCK LIST AND BOOKS OF ACCOUNT, NECESSARY EXPLANAT ION IS REQUIRED TO BE OBTAINED FROM THE ASSESSEE. AND AFTER CONSIDERING T HE EXPLANATION OF THE ASSESSEE, STILL ANY DIFFERENCE IS FOUND, SAME IS RE QUIRED TO BE CONSIDERED FOR THE PURPOSE OF CALCULATION OF UNACCOUNTED INCOME AN D INVESTMENT IN STOCK. IT IS PERTINENT TO NOTE THAT TWO THINGS ARE IMPORTA NT IN RESPECT OF CALCULATION OF UNACCOUNTED INCOME OR INVESTMENT. FIRST THING I S THAT THE LIST PREPARED AFTER PHYSICAL VERIFICATION OF THE GOODS MUST BE TR UE AND CORRECT AND THERE SHOULD NOT BE ANY LAPSES OR DEFECTS IN PREPARATION OF THE LIST. SECONDLY, THE STOCK RECORDED IN BOOKS OF ACCOUNT AND STOCK REGIST ER WAS UPDATED AND QUANTITY/VALUE PROPERLY RECORDED IN THE BOOKS OF AC COUNT AS PER THE REGULAR METHOD FOLLOWED BY THE ASSESSEE. IN THE CASE OF EI THER OF THE THING IS NOT CORRECT, UNDER THAT CIRCUMSTANCES, IT IS VERY DIFFI CULT TO SAY THAT DIFFERENCE IS UNACCOUNTED INCOME/INVESTMENT BECAUSE IN THAT CASE ACTUAL POSITION OF GOODS CAN BE ASCERTAINED. THERE CAN BE ONLY PRESUMP TION BY TAKING HELP OF THAT INCOMPLETE LIST OF THE STOCK REGARDING INCOME / INVESTMENT IN STOCK. 9.2 IN THE LIGHT OF ABOVE DISCUSSIONS IF WE C ONSIDERED THE FACTS OF THE CASE UNDER CONSIDERATION WE FIND THAT STOCK FOUND PHYSICALLY AT FACTORY PREMISES WAS RS.1,50,741 BAGS VALUING RS.93,37,510 WHEREAS THE STOCK AS PER STOCK REGISTER MAINTAINED AT FACTORY PREMISES W AS RS.1,62,435 BAGS VALUING RS.98,92,735. A PHYSICAL STOCK OF 11,694 B AGS WAS FOUND SHORT OF WHICH VALUE WAS RS.5,55,225. THE ASSESSING OFFICER MIXED UP THIS SHORTAGE OF 11,694 BAGS FOUND DURING THE COURSE OF SURVEY IN THE FACTORY PREMISES AND STOCK LYING WITH DEPOTS AND IN TRANSIT OF 48,130 BA GS AMOUNTING TO RS.42,87,210 AND AFTER GIVING SET OFF OF THIS SHORT AGE, THE ASSESSING OFFICER ITA NO.133 & 168/RJT/2006 8 CALCULATED DIFFERENCE OF EXCESS STOCK OF 36,436 BAG S AMOUNTING TO RS.37,31,985. ANOTHER IMPORTANT FACT OF THIS CASE IS THAT IN REPLY TO QUESTION NO.40 SHRI ASHOK C PARIKH HAS CLEARLY STATED IN HIS REPLY TO QUESTION NO.40 THAT HE WAS UNABLE OFFER ANY EXPLANATION REGARDING THE BALANCE STOCK EXCEPT 48130 BAGS LYING IN DEPOT AND IN TRANSIT. THE CIT(A ) OBSERVED THAT THE ASSESSING OFFICER HAS TWISTED THE MEANING OF THE ST ATEMENT OF SHRI ASHOK PAREKH AND RECORDED SOME CRUCIAL FACTS THAT DEPOTS OF THE ASSESSEE WERE NEITHER SURVEYED NOR BOOKS OF ACCOUNT MAINTAINED AT DEPOT WERE EXAMINED DURING THE COURSE OF SURVEY. THERE IS NO MATERIAL ON RECORD NOR HAS BEEN POINTED OUT DURING THE COURSE OF HEARING THAT DURIN G SURVEY, THE PHYSICAL STOCK LYING AT THE DEPOTS OF THE ASSESSEE WERE PHYS ICALLY CHECKED AND CALCULATED THE PHYSICAL STOCK AND COMPARED THE SAME WITH THE BOOKS OF ACCOUNT MAINTAINED AT DEPOT BY THE ASSESSEE. IN ABS ENCE OF SUCH EXERCISE IN RESPECT OF PHYSICAL VERIFICATION OF THE STOCK ANY D IFFERENCE NOTICED IS MERELY PRESUMPTION AND CANNOT SAID TO BE ACTUAL POSITION O F THE STOCK. AS DISCUSSED ABOVE THAT AFTER EXERCISING SUCH PROCEDURE, EXCESS OR SHORTAGE OF THE STOCKS CAN BE DETERMINED. THE AMOUNT OF INCOME/INVESTMENT IN SUCH EXCESS STOCK CALCULATED CAN BE SAID TO BE INCOME/ INVESTED IN ST OCKS OUT OF THE BOOKS AND THAT TYPE OF ADDITION IS ONLY WARRANTED. IN THE CA SE UNDER CONSIDERATION FACTS ARE VERY CLEAR THAT THAT DURING THE COURSE OF SURV EY, THE ABOVE TYPE OF EXERCISE, I.E. PHYSICAL VERIFICATION OF STOCK LYING AT DEPOTS AND BOOKS OF MAINTAINED AT THE DEPOTS WERE NOT EXAMINED, UNDER T HE CIRCUMSTANCES, IT CANNOT BE HELD THAT THERE WAS ACTUAL EXCESS OR SHO RTAGE OF STOCK. IN ABSENCE OF SUCH FINDING ADDITION IS NOT WARRANTED. 9.3 NOW THE QUESTION REMAINS TO BE SEEN HERE IS THE STOCK OF THE FACTORY, WHERE THE PHYSICAL VERIFICATION HAS BEEN CARRIED OU T AS DISCUSSED ABOVE AND A SHORTAGE OF 11,694 BAGS WAS FOUND OF WHICH VALUE IS RS.5,55,225. THESE ITA NO.133 & 168/RJT/2006 9 FACTS SHOW THAT EITHER THERE IS A LOSS OF GOODS IN PROCESS OR HAS BEEN SOLD OUT OF THE BOOKS. IF THE GOODS HAVE BEEN SOLD OUT OF T HE BOOKS, THEN IN SUCH CASES ONLY PROFIT CAN BE ADDED TO THE INCOME OF THE ASSESSEE AND NOT THE GROSS AMOUNT. THE CONTENTION OF THE LD.AR THAT SUC H SHORTAGE IS ON ACCOUNT OF NORMAL PROCESS OF GOODS AS SALT IS PACKED IN POL YTHENE BAGS AND IS STORED IN THE OPEN PLOT WHICH IS BOUND TO BE DAMAGED WHILE HANDLING THE LD.AR POINTED OUT THAT SUCH SHORTAGE IS ONLY 0.575% OF TO TAL PRODUCTION AND SUCH LOSS IS NOT UNREASONABLE CONSIDERING THE NATURE OF GOODS / SALT MANUFACTURED BY THE ASSESSEE. THIS CONTENTION OF THE LD.AR IS A CCEPTABLE BECAUSE AT THE TIME OF SURVEY NO INCRIMINATING DOCUMENT OR OTHER M ATERIAL WERE FOUND WHICH WOULD SHOW THAT THE ASSESSEE HAS SOLD THE GOO DS OUT OF THE BOOKS OF ACCOUNT. THEREFORE, SUCH CONTENTION OF THE ASSESSE E CANNOT BE PUT ASIDE . WE, THEREFORE, FIND THAT THE CIT(A) HAS RIGHTLY DEL ETED THE ADDITION MADE BY THE ASSESSING OFFICER. HOWEVER, THE CIT(A) IS NOT CORRECT IN SUSTAINING ADDITION WHICH IS ON ACCOUNT OF SHORTAGE OF PHYSICA L STOCK AS PER DISCUSSION MADE ABOVE. WE, THEREFORE ORDER DELETION OF RS.5,5 5,225 SUSTAINED BY THE CIT(A) ON THIS ACCOUNT. 10. THE CIT ENHANCED THE ADDITION BY MAKING ADDITIO N ON ACCOUNT OF FINISHED STOCK OF RAW SALT 1325 M.T. VALUING RS.2,9 7,675. THE ADDITION IS ALSO NOT SUSTAINABLE AS IN CASE OF FINISHED GOODS O R RAW MATERIAL OF SALT FOUND THE ADDITION CANNOT BE MADE FOR THE GROSS AMOUNT. IN CASE OF DEFICIENCY IN RAW MATERIAL, STOCK, IF ANY, THE INCOME WHICH IS GE NERATED BY SUCH SHORTAGE OF RAW MATERIAL CAN BE ADDED. BUT IT IS TO BE NOTE D THAT THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION ON THIS ACCOUNT AND THE S UBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAS FURNISHED THE NECESSARY EXPLA NATION AND DETAILS WHICH WERE FOUND SATISFACTORY BY THE ASSESSING OFFICER, T HEREFORE, NO ADDITION WAS ITA NO.133 & 168/RJT/2006 10 MADE. THE CIT(A) MADE THE ADDITION MERELY ON THE B ASIS OF DIFFERENCE IN CALCULATION WITHOUT EXAMINING ANY DETAILS. EVEN OT HERWISE, THE ADDITION OF DEFICIENCY/ SHORTAGE IN RAW SALT / RAW MATERIAL CA NNOT BE MADE AS DISCUSSED ABOVE. WE, THEREFORE, DELETE THE ADDITION OF RS.2, 97,675 MADE BY THE CIT(A). AS A RESULT SOLE GROUND OF THE ASSESSEE IS ALLOWED AND GROUND NO.3 OF THE REVENUE IS REJECTED. 11. NOW WE COME TO THE OTHER GROUNDS OF APPEAL RAIS ED BY THE REVENUE IN ITS APPEAL. THE FIRST GROUND IS IN RESPECT OF DELE TION OF ADDITION OF RS.19,36,064 U/S 40A(2)(B) OF THE ACT. THE BRIEF F ACTS OF THIS GROUND ARE THAT THE ASSESSEE COMPANY HAS PURCHASED RAW SALT FR OM ASSOCIATE CONCERNS DUNGARSHI SALT WORKS PVT LTD AND FROM OTHER CONCERN S ALSO. THE ASSESSING OFFICER WAS OF THE VIEW THAT AVERAGE PURCHASE RATE IN CASE OF ASSOCIATE CONCERN IN TERMS OF SECTION 40A(2)(B) OF THE ACT IS MORE THAN PURCHASES FROM OUTSIDE CONCERN. THE RELEVANT FINDINGS OF THE ASSESSING OFFICER REPRODUCED BY THE CIT(A) IN HIS ORDER ON PAGES 2 & 3 ARE AS UNDER: THE ASSESSEE HAD PURCHASED TOTAL RAW SALT OF 20499 9.97 METRIC TON OUT OF WHICH 26800.445 METRIC TON WAS PURCHASED FROM SISTER CONCERNS. TOTAL PAYMENT OF RS.4,35,03,682/- IS MADE BY THE ASSESSEE, OUT OF WHICH, PAYMENT OF RS.73,70,387 IS MADE TO SISTER CONCERNS. HENCE, DETAILS OF PAYMENT AND RAT ES ARE SUMMARIZED AS UNDER: DESCRIPTION QUANTITY AMOUNT RATE (MT) (RS.) (RS./MT) TOTAL PURCHASE 204999.970 43503682 212.21 SISTER CONCERNS 26800.445 7370387 275.01 OUTSIDE CONCERNS 178199.525 36133295 202.77 ITA NO.133 & 168/RJT/2006 11 HENCE, IT IS SEEN THAT PURCHASE FROM SISTER CONCERN S IS 13.07% OF TOTAL PURCHASES IN TERMS OF QUANTITY, HOWEVER, T HE SAME IS 16.94% OF TOTAL PURCHASES IN TERMS OF AMOUNT. AVER AGE RATE OF PURCHASE FROM SISTER CONCERNS IS 35.63% HIGHER AS C OMPARED TO AVERAGE RATE OF PURCHASE OF OUTSIDE CONCERNS. MORE OVER, AVERAGE RATE OF PURCHASE FROM SISTER CONCERNS IS 25 .59% HIGHER THAN OVERALL AVERAGE RATE OF PURCHASE. HENCE IT IS SEEN THAT RATE OF PURCHASE FROM SISTER CONCERNS IS MUCH HIGHER THA N AVERAGE RATE OF PURCHASE FROM OUTSIDE PARTIES. AFTER CONSIDERING ASSESSEES SUBMISSION THE ASSESSI NG OFFICER MADE ADDITION OF RS.19,36,064 U/S 40A(2)(B) OF THE ACT. 12. THE CIT(A) EXAMINED THE ISSUE IN DETAILS AND FO UND THAT THE ASSESSEE HAD DEMONSTRATED HIS CASE BY FURNISHING THE COMPLET E DETAILS OF PURCHASE. ON PERUSAL OF THE DETAILS THE CIT(A) FOUND THAT THE PURCHASING RATE IN THE MONTH OF JUNE FROM ARIHANT SALT INDUSTRIES WAS RS.1 02 PER M.T. AND FROM THE SAME CONCERN THE SALT IN SUBSEQUENT MONTH HAVE BEEN PURCHASED @ RS.235 PER M.T. SIMILARLY FROM DUNGARSHI SALT WORK S LTD THE PURCHASE RATE VARIED FROM RS.225 PER M.T. TO RS.335 PER M.T. THE CIT(A) FOUND THAT SIMILAR WAS THE CASE OF OTHER CONCERNS, VIZ. NARAYA N SALT INDUSTRIES RS.160 TO RS.225; RAJ INDUSTRIES RS.201 TO RS.225; SHIVKRU PA SALT RS.201 TO RS.294 AND UDIT TRADING RS.232 TO RS.295. THE CIT(A) OBSE RVED THAT THE FIGURE ITSELF IS FIXED THAT THERE IS VARIATION IN THE QUAL ITY WHICH HAS NOT BEEN PROVED BY THE DESCRIPTION GIVEN IN THE INVOICES. IT IS AL SO OBSERVED BY THE CIT(A) THAT THERE IS VARIATION IN THE QUALITY OF SALT THOU GH ALL THE RAW SALT PURCHASED COME TO COMMON POOL OUT OF WHICH THE FINISHED SALT IS MANUFACTURED HAS TO BE ACCEPTED THAT IT WAS NOT ABLE TO FURNISH ANY SPE CIFIC EVIDENCE. THE CIT(A) ALSO EXAMINED THE ISSUE FROM THE POINT OF VI EW THAT THE EXPENDITURE ITA NO.133 & 168/RJT/2006 12 IS NOT EXCESSIVE OR UNREASONABLE HAVING REGARD TO T HE FAIR MARKET VALUE OF GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE. THE CIT(A) FOUND THAT THE RATE AT WHICH THE ASSOCIATE CONCERNS , VIZ. DUNGARSHI SALT WORKS PVT LTD HAS SOLD SALT TO THE ASSESSEE ARE COM PARABL WITH THE RATES OF SALE TO OTHER PARTIES, ON THE SAME DAY I.E. ON 06-0 7-2001. THE SAID COMPANY SOLD COMMON SALT AT RS.250 PER MT TO THE ASSESSEE C OMPANY UNDER BILL NO.66 DATED 06-07-2001 AND ON THE SAME DAY THAT COM PANY SOLD COMMON SALT AT RS.260 PER M.T. TO UNCONNECTED PARTY, M/S K ESRI INDUSTRIES UNDER BILL NO.68. THE CIT(A) ALSO QUOTED ANOTHER BILL NO.121 DATED 05TH DECEMBER, 2001 AND BILL NO.117 DATED 05TH DECEMBER, 2001 AND FOUND THAT THE ASSESSEE HAD DEMONSTRATED THAT GOODS WERE PURCHASED FROM THE ASSOCIATE CONCERN BY THE ASSESSEE AT MARKET RATE. THE CIT(A) HELD THAT THE FACTS OF THE CASE CLEARLY PROVED THAT THE ASSESSING OFFICER DID NOT APPRECIATE THE FULL FACTS OF THE CASE AND HAS WRONGLY ALLEGED THAT THE EXPEND ITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE . THE CIT(A) ALSO EXAMINED THE ISSUE FROM THE POINT OF VIEW OF TAX PA ID BY ASSOCIATE CONCERN AND NOTED THAT DUNGARSHI SALT WORKS PVT LTD IS ASSE SSED TO TAX AND HAS PAID TAX FOR THE YEAR UNDER CONSIDERATION. ANOTHER CONC ERN, M/S LAXMI TRADING HAS ALSO PAID TAXES WHEREAS THE ASSESSEES HAS INCUR RED HEAVY LOSSES FOR THE YEAR UNDER CONSIDERATION AS WELL AS HAVE SUBSTANTIA L CARRY FORWARD LOSS. SO THE INTENTION IS NOT TO AVOID PAYMENT OF LEGITIMATE TAX. 13. THE LD.DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER MADE THE ADDITION ON THE BASIS OF FACTS AS OBSERVED FROM THE BOOKS OF ACCOUNT. THE EXPLANATION GIVEN B Y THE ASSESSEE WAS GENERAL IN NATURE. THE ASSESSING OFFICER FOUND THA T THE ASSESSEE HAS FOLLOWED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. TH E LD.DR SUBMITTED THAT THE ITA NO.133 & 168/RJT/2006 13 CIT(A) WITHOUT APPRECIATING THE FACTS NOTED BY THE ASSESSING OFFICER HAS DELETED THE ADDITION. 14. THE LD.AR, ON THE OTHER HAND, SUBMITTED THAT TH E ASSESSEE HAS PURCHASED THE RAW SALT RANGING FROM RS.102 TO RS.33 4 PER M.T. DEPENDING UPON VARIOUS FACTORS LIKE QUALITY, MARKET CONDITION , SEASON, ETC. THE LD.AR SUBMITTED THAT THE ASSESSING OFFICER OBSERVED THAT AVERAGE COST OF PURCHASES WAS RS.212.21 PER MT WHEREAS THE AVERAGE COST PAID TO SISTER CONCERN IS RS.275.01 PER M.T. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FURNISHED THE DETAILS TO DEMONSTRATE THAT PURCHASES FROM OUTSIDE PARTIES WERE AT RS.330 PER M.T. THE LD.AR RELIED U PON THE ORDER OF CIT. WHILE REFERRING TO THE JUDGMENT OF THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF WHOLE TIME TRANSFORMERS PVT LTD VS CIT 129 ITR 104 (GUJ) WHEREIN THE COURT FOLLOWED A PRINCIPLE THAT THE ASS ESSING OFFICDER IS EXPECTED TO EXERCISE HIS JURISDICTION IN A REASONABLE AND FA IR MANNER. IT SHOULD BE BORNE IN MIND THAT THE PROVISIONS IS MADE TO CHECK EVASION OF TAX THROUGH EXCESSIVE OR UNREASONABLE PAYMENT TO RELATIVE AND A SSOCIATE CONCERNS AND SHOULD NOT BE APPLIED IN A MANNER WHICH WILL CAUSE HARDSHIP TO BONA FIDE CASES. 15. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES, RECORD PERUSED. WE FIND THAT BEFORE DELETING THE ADDITION THE CIT(A) HAS EXAMINED THE ISSUE FROM VARIOUS ANGLES AND FOUND THAT ADDITI ON U/S 40A(2)(B) CANNOT BE MADE AS THERE WAS NO MATERIAL FOUND ON THE BASIS OF WHICH IT CAN BE SAID THAT THE ASSESSEE HAS MADE EXCESSIVE OR UNREASONABL E PAYMENTS HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS TO ASS OCIATE CONCERNS. THE ASSESSEE HAS DEMONSTRATED THIS ASPECT AND THE CIT(A ) IN DETAILED DISCUSSION ITA NO.133 & 168/RJT/2006 14 RECORDED THE FACT THAT EXPENDITURE WAS NEITHER EXCE SSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS . SINCE THERE IS NO VIOLATION OF SECTION 40A(2)(B) WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION. 16. GROUND NO.2 OF APPEAL OF REVENUE IS IN RESPECT OF DELETION OF ADDITION OF RS.7,01,119 ON ACCOUNT OF EXCESS STOCK OF PACKIN G MATERIAL. DURING THE COURSE OF SURVEY AT FACTORY PREMISES EMPTY BAGS AND EMPTY POUCHES NUMBERS 1,02,98,914 WERE FOUND AGAINST THE BOOK STO CK OF 83,39,051. THERE WAS EXCESS STOCK OF PACKING MATERIAL OF 19,59,863 P OUCHES VALUING RS.7,01,119. IN THE STATEMENT, SHRI ASHOK PAREKH, DIRECTOR OF THE COMPANY WHILE ANSWERING QUESTION NO.39 STATED THAT PACKING MATERIAL OF OUTSIDE PARTIES FOR WHICH THE ASSESSEE IS DOING JOB WORK WE RE ALSO AT THE FACTORY PREMISES. THEREFORE, THE SAME WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE A SSESSEES CONTENTION. HE MADE THE ADDITION OF RS.7,01,119. THE CIT(A) DELET ED THE SAID ADDITION BY OBSERVING THAT DURING THE COURSE OF SURVEY ITSELF S HRI ASHOK PAREKH HAS STATED THAT STOCK OF OUTSIDE PARTIES WAS LAYING IN HIS PREMISES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. DURING THE ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER DID NOT RAISE ANY QUESTION ABOUT THIS ISSUE. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THE DETAILS OF PACKIN G MATERIAL PERTAINING TO KARGIL INDIA PVT LTD AND IN SUPPORT IT CONTENDED TH AT IT HAS MAINTAINED COMPLETE RECORD OF POUCHES RECEIVED IN CONNECTION W ITH JOB WORK AND THEREFORE CONSUMPTION IN JOB WORK. A STATEMENT SHO WING DETAILS WERE ALSO FURNISHED WHICH EXPLAINED THE DIFFERENCE OF STOCK O F RS.19,59,860. THE CIT(A) EXAMINED THE SAID STATEMENT AND NOTICED THAT THERE WAS STILL AN ITA NO.133 & 168/RJT/2006 15 EXCESS STOCK OF RS.10,683 EMPTY POUCHES. HOWEVER, THE CIT (A) DELETED THE ENTIRE ADDITION OBSERVING THAT THE DIFFERENCE I S NEGLIGIBLE. 17. THE LD. DR REITERATED THE SUBMISSIONS WHICH WER E MADE IN RESPECT OF ADDITION MADE ON ACCOUNT OF EXCESS STOCK IN GROUND NO.3 OF REVENUES APPEAL AND GROUND NO.1 OF ASSESSEES APPEAL. THE L D. DR SUBMITTED THAT THE ADDITION WAS MADE ON THE BASIS OF MATERIAL FOUND AT THE TIME OF SURVEY. THE CIT(A) WITHOUT APPRECIATING THE FACTS HAS DELETED T HE ADDITION. 18. THE LD.AR, ON THE OTHER HAND, RELIED UPON THE O RDER OF CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER WITHOUT APPREC IATING THE FACT THAT THE MATERIAL BELONGED TO THIRD PARTY LYING IN THE FACTO RY OF THE ASSESSEE WAS INCLUDED IN THE INVENTORY. DURING THE COURSE OF SU RVEY VIDE REPLY TO QUESTION NO.39 THE ASSESSEE EXPLAINED THAT THEY ARE CARRYING ON THE JOB WORK OF M/S KARGIL INDIA PVT LTD WHO SUPPLIED THE PACKIN G MATERIAL WHICH WERE KEPT IN THE PREMISES OF THE ASSESSEE. THE LD.AR SU BMITTED THAT THE CIT(A) HAS DELETED THE ADDITION AFTER CONSIDERING THE DETA ILS OF RECONCILIATION FILED BY THE ASSESSEE. 19. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF THE PARTIES, PERUSED THE RECORD. WE FIND THAT DURING THE COURSE OF SURVEY I TSELF THE ASSESSEE SUBMITTED THAT SOME OF THE RAW MATERIAL IS IN RESPE CT OF THE JOB WORK CARRIED OUT BY THE ASSESSEE FOR THIRD PARTIES WHICH WERE NO T INCLUDED IN THEIR STOCK. THE ASSESSEE HAS DEMONSTRATED THIS ASPECT BY SUBMIT TING THE DETAILS AND RECONCILIATION. THIS HAS BEEN RECORDED BY THE CIT( A) IN HIS ORDER. THERE IS NO CONTRARY MATERIAL NEITHER ON RECORD NOR HAS BEEN POINTED OUT. IN THE LIGHT ITA NO.133 & 168/RJT/2006 16 OF THE FACT WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE CIT(A). THE ORDER OF CIT(A) IS CONFIRMED. 20. GROUND NO.4 OF APPEAL OF REVENUE IS IN RESPECT OF EXCESS DEPRECIATION OF RS.5,16,090. THE BRIEF FACTS OF THIS ISSUE IS T HAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HA REDUCED AMOUNT OF FIXED ASSETS FROM COST OF BUILDING RS.15, 60,000 AND COST OF PLANT AND MACHINERY RS.14,40,000 TOTALLING RS.30 LAKHS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY RS.30 LAKHS IS RE DUCED FROM COST OF MACHINES WHEREAS THE SUBSIDY OF RS.60 LAKHS WAS SAN CTIONED. THE ASSESSEE SUBMITTED THAT THOUGH THE STATE GOVERNMENT HAS SANC TIONED SUBSIDY OF RS.60 LAKHS BUT THE ASSESSEE HAS RECEIVED ONLY SUBSIDY OF RS.30 LAKHS. RS.41.98 LAKHS IN THE YEAR UNDER CONSIDERATION AND RS.1.198 LAKHS IN THE SUBSEQUENT YEAR WHICH HAVE BEEN ACCOUNTED FOR ON THE BASIS OF ACTUAL RECEIPT IN RESPECTIVE ASSESSMENT YEAR. IT WAS SUBMITTED BY TH E ASSESSEE THAT AS PER PARAGRAPH 13 OF AS-12 ACCOUNTING FOR GOVERNMENT GRA NTS THE GOVERNMENT GRANT SHOULD NOT BE RECOGNIZED UNTIL THERE IS A REA SONABLE ASSURANCE THAT THE GRANT WILL BE RECEIVED. ACCORDINGLY SUBSIDY WAS AC COUNTED FOR ON ACTUAL RECEIPT BASIS. THE ASSESSING OFFICER DID NOT ACCEP T THE ASSESSEES SUBMISSION AND REDUCED THE COST OF THE ASSETS AND MADE ADDITIO N OF RS.5,16,090 ON ACCOUNT OF RECALCULATION OF DEPRECIATION CLAIM. TH E CIT(A) ACCEPTED THE ASSESSEES CONTENTION AND DELETED THE ADDITION. 21. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES. WE FIND THAT THE ASSESSEE HAS FOLLOWED A PARTICULAR SYSTEM OF AC COUNTING WHICH IS IN ACCORDANCE WITH AS-12 ISSUED BY INSTITUTE OF CHARTE RED ACCOUNTANTS OF INDIA. THE ASSESSEE HAS FOLLOWED THE SYSTEM OF ACC OUNTING TO REDUCE THE ITA NO.133 & 168/RJT/2006 17 VALUE OF ASSETS ON ACTUAL RECEIPT OF SUBSIDY AND CL AIMED THE DEPRECIATION ACCORDINGLY. THE SUBSIDY WHICH HAS NOT BEEN RECEIV ED CANNOT BE REDUCED. THE SUBSIDY OF RS.11,98,000 WAS RECEIVED IN SUCCEED ING YEAR AND ACCORDINGLY THE WRITTEN DOWN VALUE WAS REDUCED IN R ESPECTIVE YEAR. IN THE LIGHT OF ABOVE DISCUSSION WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF CIT(A). 22. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13-05-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 13 TH MAY, 2011 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV, AHMEDABAD 4. THE CIT, AMEDABAD 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT