Deputy Commissioner of Income-tax, V. M/s. Force Motors Lts., Pune

ITA 1413/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5358 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-06-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 30-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Principle of natural justice; Earning of tax free income; Revised return
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , ' BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . .. . / ITA NOS.1205 & 1206/PUN/2016 $ $ / ASSESSMENT YEARS : 2010-11 AND 2011-12 FORCE MOTORS LIMITED, MUMBAI PUNE ROAD, AKURDI, PUNE 35 PAN : AAACB7066L ....... / APPELLANT / V/S. DCIT, CIRCLE-9, PUNE / RESPONDENT . .. . / ITA NOS.1412 & 1413/PUN/2016 $ $ / ASSESSMENT YEARS : 2010-11 AND 2011-12 DCIT, CIRCLE-9, PUNE ...... / APPELLANT / V/S. FORCE MOTORS LIMITED, MUMBAI PUNE ROAD, AKURDI, PUNE 35 PAN : AAACB7066L / RESPONDENT ASSESSEE BY : SHRI MUKESH M. PATEL REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 25.06.2018 / DATE OF PRONOUNCEMENT : 18.07.2018 / ORDER PER D. KARUNAKARA RAO, AM: THERE ARE 2 SETS OF CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE. ITA NOS. 1205 & 1206/PUN/2016 ARE FILED BY TH E ASSESSEE AND ITA NOS. 1412 & 1413/PUN/2016 ARE FILED BY THE REVE NUE AGAINST THE SEPARATE ORDERS OF CIT(A)-6, PUNE COMMONLY DATED 3 0-03-2016 FOR 2 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., THE A.YRS. 2010-11 AND 2011-12. ASSESSEE RAISED SIMILAR G ROUNDS OF APPEAL FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. WE SHALL FIRST TAKE UP THE CROSS APPEALS FOR THE A.Y. 2010-11. ITA NO.1205/PUN/2016 BY ASSESSEE A.Y. 2010-11 2. ASSESSEE RAISED GROUNDS ON COUPLE OF ISSUES, I.E.(1) DISALLOW ANCE OF AMORTIZATION OF LEASE CHARGES; AND (2) DISALLOWANCE U/S.14A OF THE ACT. 3. BEFORE US, THE FIRST ISSUE RELATING TO AMORTIZATION OF LEAS E CHARGES AMOUNTING TO RS.4,29,835/- WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE. ACCORDINGLY, THE SAID GROUND NO.1 IS DISMISSED AS NOT PRESSED. GROUND NO.3 BEING GENERAL IN NATURE IS DISMISSED. 4. THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO DISALLOWANCE OF EXPENDITURE OF RS.1,33,82,121/- U/S.14A OF THE ACT READS AS UNDER : 2. DISALLOWANCE U/S.14A OF THE ACT. (A) THE LD.CIT(A) ERRED IN DISALLOWING THE EXPENDITURE OF RS.1,33,82,121/- U/S.14A BY APPLYING RULE 8D, WITHO UT ESTABLISHING ANY NEXUS BETWEEN THE EXEMPT INCOME AND EXPENDITURE IN RELATION TO SUCH INCOME. (B) THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT ONLY S UCH INVESTMENT WHICH HAVE RESULTED IN EARNING OF EXEMPT INCOME SHO ULD BE CONSIDERED FOR CALCULATION OF DISALLOWANCE UNDER RULE 8D. THE REFORE, IT IS PRAYED THAT THE LD. AO BE DIRECTED TO EXCLUDE THE FOLLOWIN G INVESTMENTS FOR THE PURPOSE OF COMPUTING AVERAGE VALUE OF INVESTMENTS AS REQUIRED IN RULE 8D(II) OF THE RULES. INVESTMENTS ON WHICH NO DIVIDEND HAS BEEN EARNED DU RING THE YEAR UNDER CONSIDERATION OR CAPABLE OF GIVING ANY D IVIDEND INCOME. INVESTMENT ON WHICH TAXABLE INCOME HAS BEEN EARNED. STRATEGIC INVESTMENTS IN ALLIED LINE OF BUSINESS, T HE INTENTION OF INVESTMENT WHEREIN WAS NOT TO EARN DIVIDEND INCOME. 3 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., 5. RELEVANT FACTS INCLUDE THAT ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF LCV, UTILITY VEHICLES, THREE WHEELERS, TRACTORS AND SPARE PARTS THEREOF. ASSESSEE FILE D THE RETURN OF INCOME ON 29-09-2010 DECLARING TOTAL INCOME OF RS.42,75,76,77 0/- U/S.115JB OF THE ACT. ASSESSEE EARNED EXEMPT INCOME OF RS.6,94,375/- FROM SALE OF SHARES OF ICICI BANK LTD. VALUING RS.26,96,250/- AND CLAIMED THE SAID INCOME AS EXEMPT U/S.10(34) OF THE ACT. AS SESSEE CLAIMED EXPENDITURE OF RS.20,999/- FOR EARNING THE SAID EXEM PT INCOME. ASSESSEE MADE STRATEGIC INVESTMENT AND DID NOT EARN AN Y DIVIDEND INCOME FROM THE SAID STRATEGIC INVESTMENTS. HOWEVER, THE AO APPLYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D2(II) OF THE ACT MADE ADDITION OF RS.1,33,82,121/-. IN THE FIRST APPELLATE PROCEEDINGS, THE C IT(A) SUSTAINED THE ADDITION MADE BY THE AO. 6. AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL WITH THE GROUND EXTRACTED ABOVE. 7. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE MADE A SUO MOTO DISALLOWANCE OF RS.20,999/- AND FOLLOWED A ANALYTICAL METHOD IN QUANTIFYING THE SAME. HOWEVER, AO D ID NOT APPRECIATE THE FACT THAT THE EXEMPT INCOME IS ONLY RS.6,9 4,375/- AND HOWEVER, AO QUANTIFIED THE DISALLOWANCE AT A VERY HIGH FIGU RE OF RS.1.34 CRORE RELYING ON VARIOUS DECISIONS. THE SAME IS NOT SUSTA INABLE. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF PUNE BE NCH OF THE TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND VS. JCIT, DATED 2 8-02-2018 REPORTED AS (2018) 92 TAXMANN.COM 94 (PUNE. TRIB) (WHERE BOTH OF US ARE PARTIES TO IT), AND SUBMITTED THAT DISALLOWANCE U/S.14A R.W. RULE 8D(2) SHOULD NOT EXCEED THE EXEMPT INCOME EARNED BY THE ASSESSEE . 4 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., 8. ON HEARING BOTH THE SIDES ON THE LIMITED LEGAL ISSUE, WE FIND THE CASE OF THE ASSESSEE IS COVERED BY VIRTUE OF THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND (SUPRA). T HE SAID RATIO OF THE TRIBUNAL IS RELEVANT TO THE FACTS OF THE PRESENT CAS E FOR THE PROPOSITION THAT WHERE THE ASSESSEE HAD NOT RECEIVED ANY TAX FREE INCOME DURING ASSESSMENT YEAR UNDER APPEAL, NO DISALLOWANC E U/S.14A READ WITH RULE 8D WAS CALLED FOR. THE CONTENTS OF PARA N O.32 OF THE ORDER OF TRIBUNAL ARE RELEVANT AND THE SAME ARE EXTRACTED AS FOLLO WS : 32. NOW WE PROCEED ON TO DECIDE THE REMAINING GROU NDS RAISED IN APPEAL BY THE REVENUE. IN GROUND NO. 2 OF THE APPEAL, THE REVENUE HAS ASSA ILED THE DELETION OF DISALLOWANCE RS.6,21,87,028/- MADE U/S. 14A R.W.RUL E 8D OF THE ACT. AS PER THE CONTENTION OF THE ASSESSEE, THE ASSESSEE HA D INVESTED RS.1,00,44,15,900/- OVER A PERIOD OF TIME IN ITS GR OUP COMPANIES. THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND FROM THE SAI D COMPANIES IN THE PERIOD RELEVANT TO THE ASSESSMENT YEARS UNDER APPEA L. THIS FACT HAS NOT BEEN RE-BUTTED BY THE REVENUE. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENT (P) LTD.(SUP RA) HAS HELD THAT NO DISALLOWANCE U/S.14A R.W. RULE 8D(2)(III) CAN BE MADE WHERE NO EXEMPT INCOME FROM INVESTMENT IS RECEIVED DURING TH E YEAR. IN OTHER WORDS, ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENTS UNDER RULE 8D(2)(III) WHICH YIELD EXEMPT INCOME DURING THE YEAR. SIMILAR VIEW HAS BEEN TAKEN BY PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI GOYAL ISHWARCHAND KISH ORILAL VS. JCIT IN ITA NO. 422/PN/2013 DECIDED ON 26.06.2014. THE TRIBUNAL AFTER PLACING RELIANCE ON THE DECISIONS IN THE CASE OF CIT VS. SH IVAM MOTORS PVT. LTD. IN ITA NO.88/2014 DECIDED ON 05.05.2014 BY HON'BLE ALL AHABAD HIGH COURT AND CIT VS. LAKHANI MARKETING IN ITA NO.970/2008 DE CIDED ON 02.09.2014 BY THE HON'BLE PUNJAB & HARYANA HIGH COU RT, HELD AS UNDER: '9.4 SINCE IN THE INSTANT CASE THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME OUT OF THE SHARES HELD AS INVESTMEN T AND SINCE NO DISALLOWANCE U/S. 14A HAS BEEN MADE IN THE PRECEDIN G AS WELL AS SUCCEEDING ASSESSMENT YEARS, THEREFORE, WE AGREE WI TH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO DISALLOWANCE U/S.14A CAN BE MADE UNDER THE FACTS AND CIRCUMSTANC ES OF THE CASE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET A SIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLO WANCE OF RS.5,86,962/- MADE U/S.14A. GROUND RAISED BY THE AS SESSEE IS ACCORDINGLY ALLOWED.' THUS, IN VIEW OF THE UNDISPUTED FACT THAT THE ASSES SEE HAS NOT RECEIVED ANY TAX FREE INCOME DURING THE ASSESSMENT YEAR UNDE R APPEAL AND DECISIONS REFERRED ABOVE, WE HOLD THAT NO DISALLOWA NCE U/S. 14A R.W.RULE 8D IS CALLED FOR DURING THE ASSESSMENT YEAR UNDER A PPEAL. WE DO NOT SEE ANY INFIRMITY IN THE FINDINGS OF COMMISSIONER OF IN COME TAX (APPEAL) IN 5 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., DELETING THE SAID DISALLOWANCE. ACCORDINGLY, GROUND NO. 2 RAISED IN APPEAL BY THE DEPARTMENT IS DISMISSED. 9. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REMANDED TO THE FILE OF CIT(A) FOR DECIDING THE APP LICABILITY OF RELEVANT LAW AND RESTRICT THE DISALLOWANCE TO THE EXEMPT INCOME WHICH FORMED PART OF THE TOTAL INCOME OF THE ASSESSEE. ACCORDIN GLY, THE GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED PROTANTO. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1412/PUN/2016 BY REVENUE A.Y. 2010-11 11. GROUNDS RAISED BY THE REVENUE READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN ACCEPTING ASSES SEES CLAIM OF RS.55,97,541/- BEING EXPENDITURE PERTAINING TO YEAR UNDER CONSIDERATION WHICH WAS NOT CLAIMED BY THE ASSESSEE AT THE TIME O F FILING OF RETURN OF INCOME. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE AD DITION ON ACCOUNT OF UNDERESTIMATE OF SALE OF SCRAP. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 12. GROUND NO.1 RELATES TO CLAIM OF EXPENDITURE AMOUNTING T O RS.55,97,541/- FOR THE YEAR UNDER CONSIDERATION BUT ACCO UNTED FOR IN THE SUBSEQUENT YEARS. RELEVANT FACTS INCLUDE THAT ASSES SEE CLAIMED EXPENSES OF RS.49,24,466/- AND RS.11,20,980/- PERTAINING TO THE YEAR UNDER CONSIDERATION BUT ACCOUNTED IN F.YRS. 2010-11 AND 2011-12 IN THE YEAR OF RECEIPT. ASSESSEE CLAIMED THAT THESE BILLS WE RE RECEIVED SUBSEQUENTLY AFTER THE YEAR END OF THE RELEVANT PRECED ING YEAR AND 6 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., HENCE, THE SAME COULD NOT BE ACCOUNTED IN THE RELEVANT ACCOUNTING YEAR. HE ALSO STATED THAT THE SAME IS NOT EVEN REFLECTED THRO UGH THE REVISED RETURNS. THESE EXPENDITURES HAVE NOT BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE YEAR UNDER CONSIDERATION BUT BOOKED AS PRIOR PERIOD EXPENSES IN THE SUBSEQUENT ACCOUNTING YEARS. AO DENIED THE SAID CLAIM OF THE ASSESSEE RELYING ON THE JUDGMENT OF HONBLE SUP REME COURT IN THE CASE OF GOETZ INDIA LTD. VS. CIT 284 ITR 323 (SC). 13. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) ALLOWED TH E CLAIM OF THE ASSESSEE BY HOLDING AS UNDER : 5.9.2 IN THE PRESENT CASE, THE EXPENDITURE PERTAI NING TO THE CURRENT YEAR HAS BEEN ACCOUNTED IN THE SUBSEQUENT YEARS BUT NOT CLAIMED AS A EXPENSE IN THE RETURNS FILED FOR THOSE YEARS AS PRI OR PERIOD EXPENSE. THE CLAIM FOR ALLOWING THESE EXPENDITURE WAS MADE BEFOR E THE AO WHO COULD NOT ADMIT THE SAME, IN VIEW OF THE SUPREME COURT DE CISION. HOWEVER, IN VIEW OF THE DECISION OF THE BOMBAY HIGH COURT IN TH E CASE OF PRUTHVI BORKERS AND SHAREHOLDERS PVT. LTD. SUCH CLA IMS CAN BE ENTERTAINED BY THE APPELLATE AUTHORITIES. FOLLOWING THE JURISDICTIONAL HIGH COURT DECISION, THE CLAIM MADE BY THE APPELLAN T IS ADMITTED AND THE SAME IS ALLOWED AS EXPENDITURE FOR THE CURRENT YEAR , AS THE EXPENSES RELATE TO THE CURRENT YEAR THOUGH ACCOUNTED IN THE SUBSEQUENT YEARS. THE AO IS DIRECTED TO ENSURE THAT THESE EXPENSES HAVE N OT BEEN CLAIMED IN THE RETURNS FILED FOR THE SUBSEQUENT YEARS. SUBJECT TO THIS, THE GROUND IS ALLOWED. 14. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN AP PEAL BEFORE THE TRIBUNAL. 15. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 16. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FILED THE D ETAILS OF EXPENSES INCURRED IN THE YEAR UNDER CONSIDERATION BUT A CCOUNTED IN THE SUBSEQUENT YEARS. PAGE 4 OF THE PAPER BOOK CONTAINS T HE SAID DETAILS. LD. COUNSEL SUBMITTED THAT THE ASSESSEE IS A BIG COMPANY AND THE BILLS FOR CERTAIN EXPENSES COULD NOT BE RECEIVED IN THE YEAR U NDER CONSIDERATION. HENCE, THEY ARE NEITHER DEBITED IN THE PR OFIT AND LOSS 7 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., ACCOUNT NOR SHOWN IN THE RETURN OF INCOME/REVISED RETU RNS OF INCOME. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BOOKS O F ACCOUNT OF THE ASSESSEE COMPANY ARE AUDITED U/S.44AB OF THE ACT. THE EXPENSES ARE ACCOUNTED FOR IN THE SUBSEQUENT ACCOUNT YEARS AS PRIOR PERIOD EXPENSES. THEREFORE, THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED BY V IRTUE OF THE JUDGMENT IN THE CASE OF CIT VS. PRUTHVI BROKERS AND SHA REHOLDERS PVT. LTD. 23 TAXMAN.COM 23 (BOM.) WHICH WAS RIGHTLY CONSIDERED B Y THE CIT(A). THUS, LD. COUNSEL PRAYED FOR CONFIRMING THE ORDER OF CIT(A). 17. AFTER HEARING BOTH THE SIDES ON THIS ISSUE OF ALLOWING PR IOR PERIOD EXPENSES ACCOUNTED IN THE SUBSEQUENT YEARS, WE FIND THE CIT(A) HAS RIGHTLY APPLIED THE RATIO LAID DOWN IN THE CASE OF CIT VS. P RUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. 23 TAXMAN.COM 23 (BOM.). THER EFORE, CONSIDERING THE BINDING JUDGMENT OF THE HONBLE BOMBAY HIGH COURT, WE ARE OF THE VIEW THAT THIS ISSUE SHOULD BE REMANDED TO FILE OF AO. AO IS DIRECTED TO EXAMINE THE DETAILS FURNISHED BY THE ASSESSEE AT PAGE 4 OF THE PAPER BOOK REGARDING THE GENUINENESS OF EXPENDITURE AND THE REA SONS FOR NOT RECEIVING THE BILLS IN TIME, AND NOT INCLUDING THE EXPENS ES IN THE RETURNS OF INCOME FOR THE A.YRS. 2010-11 AND 2011-12, AS THE CASE MAY BE. NEEDLESS TO SAY, THE AO SHALL GRANT REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRIN CIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 18. GROUND NO.2 RAISED BY THE REVENUE RELATES DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF SALE OF SCRAP. RELEVANT FAC TS INCLUDE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION SOLD S CRAP OF 6157.48 MT VALUING RS.8,13,56,983/-. THE SCRAP INCLUDES FERROUS AND NON- 8 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., FERROUS ITEMS AND THE AVERAGE REALIZATION OF RS.13,212/- P ER MT. AO WORKED OUT THE SCRAP WHICH LED TO AN AVERAGE PRICE OF R S.12,389/- AS AGAINST RS.13,212/- CLAIMED BY THE ASSESSEE. VENTUALLY, T HE AO CONSIDERING THE MARKET VALUE OF THE SCRAP, PROFIT MARGIN, TR ANSPORT CHARGES, BURNING LOSS ETC. CONCLUDED THAT THE ASSESSEE U NDERSTATED THE SALE OF SCRAP BY RS.4/- PER KG WHICH WORKS OUT TO RS.2,22,45,680/-. 19. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) FOUND FAULT WITH THE MANNER OF HIS CALCULATION. THE CIT(A) CONCLUDED THAT THE AO DID NOT READ THE TABLES IN THE INDIAN MINERALS YEAR BOOK, 2011 WH ERE THE PRICES OF STEEL BARS, MS ANGLES, MS SQUARES, SCRAP, INDUCTION INGO TS ETC. ARE MENTIONED FOR EACH OF THE ITEMS. HE OPINED THAT INCOME ON SALE OF SCRAP OF SUCH FERROUS AND NON-FERROUS ITEMS CANNOT BE ESTIMATI ON ON SUCH PRESUMPTION. AO DID NOT COMPARE THE SCRAP DEALERS WHO ARE INTO THE SIMILAR BUSINESS. AO ALSO HAS NOT PROPER ANALYSIS RATES AT WHICH THE ASSESSEE PURCHASES THE SCRAP WITH THE RATES WITH THE OTHER MANUFACTURERS. EVENTUALLY, THE CIT(A) DELETED THE ADDITION IN THE HANDS OF THE ASSESSEE. 20. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE IS IN AP PEAL BEFORE THE TRIBUNAL. 21. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 22. WE HEARD BOTH THE SIDES AND PERUSED THE REASONING GIVEN BY THE CIT(A) ON THIS ISSUE AND FIND IT RELEVANT TO EXTRACT THE SA ME. THE SAID FINDING IS REPRODUCED AS UNDER : 9 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., 5.10.2 THE SCRAP IS GENERALLY MELTED IN EITHER THE INDUCTION FURNACE OR IN THE ARC FURNACE TO MAKE STEEL INGOTS. THESE INGOTS ARE THEN ROLLED INTO BILLETS WHICH ARE FURTHER ROLLED OR FORGED TO MAKE ANGLES, SQUARES ETC., WHICH ARE ACTUALLY MARKETED. THE INDIAN MINERAL BO OK INDICATES MELTING SCRAP TO BE RS.18,121/- PER MT AND THE INDUCTION IN GOT TO BE OF THE PRICE OF RS.23,244/- IN THE MUMBAI MARKET (I.E. CLOSEST TO T HE APPELLANT COMPANY IN PUNE). THE APPELLANT HAD SOLD FERROUS SCRAP AN AVE RAGE PRICE OF RS.12,389/- PER MT. CONSIDERING THE MARGINS FOR TH E SCRAP DEALERS AND THE TRANSPORTATION INVOLVED THERE IS NOT MUCH DIFFE RENCE BETWEEN THE PRICE SOLD BY THE APPELLANT COMPANY AND THE VALUE IN THE MUMBAI MARKET. 5.10.3 IN THE MATTERS OF TAXATION, THE INCOMES HAVE TO BE ARRIVED BASED ON THE AMOUNTS RECEIVED BY THE PARTY AND NOT ON THE AM OUNTS THAT OUGHT TO HAVE BEEN REALIZED BY THE PARTY. IF THERE IS ANY D OUBT REGARDING THE GENUINENESS OF THE TRANSACTIONS ENTERED BY THE PART Y, IT IS INCUMBENT ON THE AO TO MAKE FURTHER INQUIRIES AND REASONABLY ARR IVE THAT THE PARTY HAD RECEIVED AMOUNTS MORE THAN SPECIFIED IN THE CONTRAC T. ONLY IN SUCH CASES, THE ADDITIONAL AMOUNTS SO RECEIVED CAN BE BROUGHT T O TAX. THE AO CANNOT SIT IN JUDGMENT OVER THE MANNER IN WHICH THE ASSESS EE SHOULD CARRY HIS BUSINESS. HE ALSO CANNOT SIT IN JUDGMENT THAT THE ASSESSEE SHOULD SELL THE GOODS AT CERTAIN RATES. THERE COULD BE HUNDREDS OF REASONS AS TO WHY THE ASSESSEE HAD TO SELL THE GOODS AT THE PRICE WHICH H E FEELS APPROPRIATE. THE AO CAN ONLY INTERFERE IN THE TRANSACTION ENTERE D BY THE ASSESSEE, IF HE FINDS IT TO BE COLLUSIVE TRANSACTION. IN THE PRESE NT CASE THE AO HAS NOT ESTABLISHED IT TO BE COLLUSIVE TRANSACTION BETWEEN THE APPELLATE COMPANY AND THE SCRAP PURCHASERS, SO AS TO ALTER THE TRANSA CTIONS SAYING THAT THE COMPANY SHOULD HAVE SOLD IT FOR A HIGHER PRICE. TH E AO HAS ALSO NOT ESTABLISHED THAT THE APPELLANT COMPANY OR ITS DIREC TORS/EMPLOYEES HAVE RECEIVED MONEY MORE THAN WHAT IS MENTIONED IN THE B OOKS OF ACCOUNTS. SO THE ADDITION MADE BY THE AO ON CONJECTURES AND SURM ISES CANNOT BE SUSTAINED. THE ADDITION MADE ON THIS GROUND IS DEL ETED. 23. WE FIND THE REASONING GIVEN BY THE CIT(A) IS BASED ON P ROPER APPRECIATION OF FACTS. WE ALSO PERUSED THE LEDGER EXTRACT FURNISHED BY THE ASSESSEE WHICH ARE PLACED AT PAGES 8 TO 24 AS WELL AS PAGES 59 TO 84 OF THE PAPER BOOK. WE HAVE ALSO PERUSED THE METALLURGICA L GUIDELINES ISSUES BY THE MINISTRY OF MINES IN THE INDIAN MINERALS YEARB OOK, 2011 WHERE THE MELTING SCRAP FOR THE YEAR 2009-10 IS INDICATE D AS 19133 PER TONNE. CONSIDERING THE SAME, THE RATES OF SCRAP PER MET RIC TONNE SHOWN BY THE ASSESSEE ARE WITHIN THE PRESCRIBED LIMITS. WE ALSO PERUSED THE COMPARATIVE CHART ON SALE OF SCRAP (PAGE 88 OF THE PAPER BOOK) BY UNITED STEEL, R. M. PATHAK, GEMS ENTERPRISES, PATHAK STEEL INDUST RIES, GEETA STEELS AND NAGESHWAR STEELS AS WELL AS THE COMPARATIVE QUOTES OF VA RIOUS SCRAP DEALERS PLACED AT PAGES 88 TO 112 OF THE PAPER BOOK. 10 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., CONSIDERING ALL THE ABOVE EVIDENCES PLACED BY THE ASSESSE E, WE HOLD THAT ASSESSEE HAS NOT UNDERSTATED THE SALE OF SCR AP IN ANY MANNER AND AO FAILED TO ESTABLISH WITH COGENT EVIDENCES. AO ONLY PROCEEDED TO MAKE ADDITION ON SURMISES AND CONJECTURES. THEREFORE, WE UPHOLD THE ORDER OF CIT(A) DELETING THE ADDITION ON THIS ISSUE. ACCORDIN GLY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 24. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. NOW WE SHALL TAKE UP THE CROSS APPEALS FOR A.Y. 2011-12. ITA NO.1206/PUN/2016 BY ASSESSEE A.Y. 2011-12 25. WE FIND THE GROUNDS, ISSUES, DECISION OF AO/CIT(A), ARGUME NTS OF THE PARTIES ARE COMMON TO THE APPEAL OF THE ASSESSEE FO R A.Y. 2010-11. THEREFORE, OUR DECISIONS IN APPEAL NO.1205/PUN/2016 SHALL A PPLY TO THIS ASSESSMENT YEAR AS WELL. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED PRO TANTO. 26. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1413/PUN/2016 BY REVENUE A.Y. 2011-12 27. WE FIND THE GROUNDS, ISSUES, DECISION OF AO/CIT(A), ARGUME NTS OF THE PARTIES ARE COMMON TO THE APPEAL OF THE REVENUE FO R A.Y. 2010-11. THEREFORE, OUR DECISIONS IN APPEAL NO.1412/PUN/2016 SHALL A PPLY TO THIS ASSESSMENT YEAR AS WELL. ACCORDINGLY, THE GROUND NO.1 RAISED BY 11 ITA NOS 1205 & 1206/PUN/2016 & ITA NOS. 1412 & 1413/PUN/2016 FORCE MOTORS LTD., THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO .2 RAISED BY THE REVENUE DISMISSED. 28. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. 29. TO SUM UP, THE APPEALS OF THE ASSESSEE ARE PARTLY A LLOWED AND THE APPEALS OF THE REVENUE ARE ALSO PARTLY ALLOWED FOR STATISTICAL PURPOSE S. ORDER PRONOUNCED ON 18 TH DAY OF JULY, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER / PUNE; / DATED : 18 TH JULY, 2018. SATISH ' ) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-6, PUNE 4. THE PR. CIT-5, PUNE , , # , / DR, ITAT, B BENCH, PUNE. 6. & / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.