The ITO, Ward-12(1), Ahmedabad V. M/s. Vinod Textiles, Ahmedabad

ITA 147/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63236 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: S N DIVETIA
• Keywords: Unexplained investment; Principle of natural justice; Deemed to accrue or arise in india; Additional evidence
• Section: 143(3); 194C

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH BEFORE S/SHRI D.K. TYAGI, JUIDICAL MEMBER AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.147/AHD/2010 [ASSTT.YEAR : 2006-2007] ITO, WARD-12(1) AHMEDABAD. /VS. M/S.VINOD TEXTILES INDIAN GINNING PRESS NARODA ROAD, AHMEDABAD. PAN : AABFV 2697 P ( (( ( / APPELLANT) ( (( ( / RESPONDENT) !'/ REVENUE BY : SHRI D.K. SINGH $%& !'/ ASSESSEE BY : SHRI S.N. DIVETIA !'( &)*/ DATE OF HEARING : 16 TH OCTOBER, 2012 +,- &)*/ DATE OF PRONOUNCEMENT : 14-12-2012 '. / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XX, AHMEDABAD FOR THE ASSESSMENT YEAR 2006-2007. 2. THE FACTS AS CULLED OUT FROM THE ORDERS OF AUTHO RITIES BELOW ARE AS UNDER: ITA NO.147/AHD/2010 -2- 3. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F TRADING OF COTTON AND YARN WASTE. IT FILED ITS RETURN OF INCOM E ON 1.12.2006 DECLARING TOTAL INCOME OF RS.1,39,790/-. THE CASE W AS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U /S 143(3) VIDE ORDER DATED 23.12.2008 AND THE TOTAL INCOME WAS DET ERMINED AT RS.33,62,281/- AFTER MAKING VARIOUS ADDITIONS/DISAL LOWANCES. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE HIS ORDER DATED 2 3.1.2009 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. IT IS AGAINST T HE AFORESAID ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 5. THE AO ON PERUSING THE TAX AUDIT REPORT OBSERVED THAT THE CLOSING STOCK AS REFLECTED IN THE ACCOUNTS WAS ON T HE BASIS OF CERTIFICATION OF THE PARTNERS. ASSESSEE WAS ASKED T O FILE THE DETAILS OF STOCK ALONGWITH THE RATE ADOPTED FOR WORKING OUT IT S VALUE. ASSESSEE FILED VALUEWISE DETAILS OF PURCHASES AND SALES IN R ESPECT OF EACH QUARTER ON THE BASIS OF SALES TAX RETURN FILED BY I T. ON THE BASIS OF DETAILS FURNISHED, AO WORKED OUT THE DETAILS OF PUR CHASE OF SALES AS UNDER: PARTICULARS QUANTITY VALUE AVERAGE RATE PURCHASES 20,85,552 KG. RS.5,36,48,184/- RS.25.72/- SALES 20,89,705 KG. RS.5,72,54,544/- RS.27.30/- AND WORKED OUT THE STOCK QUANTITY AS UNDER: PARTICULARS QUANTITY OPENING STOCK 1,09,116 KG. ADD: PURCHASES 20,85,552 KG. LESS: SALE 20,89,705 KG. CLOSING STOCK 1,04,963 KG. CLOSING TOCK SHOWN BY ASSESSEE 1,25,400 KG. EXCESS STOCK SHOWN BY ASSESSEE 20,437 KG. ITA NO.147/AHD/2010 -3- 6. ON THE BASIS OF THE FIGURES DERIVED, AO CONCLUDE D THAT THE ASSESSEE HAD SHOWN EXCESS STOCK OF 20437 KG. HE ALS O OBSERVED THAT AVERAGE PURCHASE PRICE IN THE MONTH OF MARCH 2006 W AS RS.21/KG AND AVERAGE SALE PRICE WAS RS.27.30/KG. SINCE NO SATISF ACTORY EXPLANATION WAS OFFERED BY ASSESSEE WITH RESPECT TO EXCESS STOC K, AO WORKED OUT THE INVESTMENT OF UNRECORDED PURCHASE ON THE BASIS OF AVERAGE PURCHASE RATE OF RS.21/KG AT RS.4,29,127/- AND CONS IDERED IT TO BE DEEMED INCOME U/S 69. ON THE BASIS OF HIS AFORESAID FINDING, HE FURTHER CONCLUDED THAT THE BOOK RESULTS OF THE ASSE SSEE CANNOT BE ACCEPTED AS TRUE, CORRECT AND COMPLETE AND THEREFOR E APPLYING PROVISIONS OF S. 145(3) REJECTED THE BOOK RESULTS. THEREAFTER ON THE BASIS OF GP DECLARED BY DIFFERENT ASSESSEES IN THE SAME TRADE (LISTED AT PAGE 5 OF THE ORDER) AND AFTER CONSIDERING THE GP O F THE ASSESSEE, WORKED OUT THE GP RATE OF 8.18% WHICH THE ASSESSEE OUGHT TO HAVE DISCLOSED BUT HOWEVER THOUGHT THAT 7% GP RATE WOULD BE APPROPRIATE IN THE CASE OF THE ASSESSEE. HE ACCORDINGLY WORKED THE ESTIMATED SALES ON THE BASIS OF FOLLOWING FORMULA AND ACCORDINGLY M ADE ADDITION OF RS.12,16,534/- TO SALES AND GROSS PROFIT. ESTIMATED SALES = (OP. STOCK + PURCHASES + EXP. C L. STOCK) X 100 (100 G.P. RATE TO BE ADOPTED) = 5,43,78,103 X 100 (100-7) = 5,84,71,078/- (40,92,975 28,76,441 = 12,16,534 IS THE ADDITION TO BE MADE) 7. AO OBSERVED THAT ASSESSEE HAS DEBITED OCTROI AND FREIGHT OF RS.18,07,205/- ACCORDING TO AO THE ASSESSEE DID NOT FILE DETAILS OF THE EXPENSES. HE WORKED OUT THE OCTROI EXPENSES @ 2% ON THE BASIS OF PURCHASES MADE BY THE ASSESSEE FROM OUTSIDE AHMEDAB AD AT RS.2,30,334/- AND THE BALANCE AMOUNT OF RS.15,76,83 0 (RS.18,07,205 ITA NO.147/AHD/2010 -4- LESS 2,30,334) WAS CONSIDERED TO BE FREIGHT EXPENSE S WHICH WERE THEREAFTER CONSIDERED TO BE FALLING WITHIN THE PURV IEW OF S. 194C AND THEREFORE COVERED BY S. 40(A)(IA) AND HE ACCORDINGL Y DISALLOWED THE SAME. AGGRIEVED BY THE AFORESAID ACTION OF AO, ASSE SSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITIONS MADE BY THE AO AND THEREFORE THE REVENUE IS NOW IN APPEAL BEFORE U S. 8. THE GROUND NO 1 & 1.2 BEING INTER CONNECTED ARE CONSIDERED TOGETHER. THEY READ AS UNDER: THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,29,127/- MADE BY T HE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN EXCESS STOCK, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. IN DOING SO, THE LD. CIT(A) HAS ERRED IN LOW AND ON FACTS IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THERE WAS A CLERICAL MISTAKE IN COMPUTATION OF TOTAL QUANTITY OF PURCHAS ES BY RELYING ON A REGISTER PREPARED MANUALLY, WITHOUT APPRECIATI NG THAT NO SUCH DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 9. BEFORE CIT(A), ASSESSEE MADE DETAILED EXPLANATIO N AND ALSO SUBMITTED ADDITIONAL EVIDENCE. AFTER CONSIDERING TH E EXPLANATION AND THE REMAND REPORT SUBMITTED BY THE AO, CIT(A) DELET ED THE ADDITION BY HOLDING AS UNDER: 4.2 I HAVE CONSIDERED THE WRITTEN SUBMISSIONS GIVE N BY THE APPELLANT AND HAVE ALSO PERUSED THE ASSESSMENT ORDE R AS WELL AS REMAND REPORT SUBMITTED BY THE AO. IT IS NOTICED THAT THE AO HAS MADE ADDITION OF RS.4,29,127/- MAINLY ON THE GR OUND THAT THE VERIFICATION OF SALES/PURCHASE REGISTER SHOWED THAT CLOSING STOCK WAS OVER STATED BY 20,437 KGS, THE AO HAS FUR NISHED ITS WORKING ON PAGE-2 & 3 OF THE ORDER. HOWEVER, THE AP PELLANT HAS CONTENDED THAT THERE WAS A MISTAKE IN COMPUTATI ON OF TOTAL QUANTITY OF PURCHASES IN THE SECOND AND THIRD QUART ER OF THE FINANCIAL YEAR. THE DETAILS GIVEN ON PAGE 66 OF THE PAPER BOOK ITA NO.147/AHD/2010 -5- SHOWS THAT THERE WAS A MISTAKE IN THE AGGREGATE PUR CHASES FOR THE SECOND AND THIRD QUARTER IN AS MUCH AS THE CORR ECT PURCHASES WERE 517483 AND 608638 KGS. AS AGAINST 50 2483 KGS. AND 598638 KGS. TAKEN AS PER MANUAL STOCK REGI STER. THUS, THERE WAS A MISTAKE OF 25000 KGS. WHICH RESULTED IN AO TAKING THE AGGREGATE PURCHASES FOR THE YEAR AT 2085552 KGS . AS AGAINST 2110552 KGS, WHICH IN CONSEQUENCE RESULTED INTO CLO SING STOCK OVER STATED BY 25000 KGS. THE APPELLANT HAS ALSO EX PLAINED THAT THE CLERICAL MISTAKE WAS MODE BY HIS STAFF IN TOTAL ING THE PURCHASES FOR THE MONTH OF SEPTEMBER AND NOVEMBER, 2005 WHICH IS CLEARLY EVIDENT FROM THE RELEVANT PAGES OF MANUAL STOCK REGISTER FURNISHED IN THE PAPER BOOK. THE TOT AL QUANTITY OF PURCHASES FOR SEPTEMBER, 2005 WAS WRITTEN AS 104241 KGS. AS AGAINST 119241 KGS.AND SIMILARLY FOR THE MONTH OF N OVEMBER, 2005, TOTAL QUANTITY WAS WRITTEN AT 192736 KGS. AS AGAINST 202736 KGS. THE APPELLANT HAS ALSO EXPLAINED THIS D ISCREPANCY BY FURNISHING THE FIGURES OF SALES/PURCHASES SUBMIT TED TO LOCAL SALES TAX AUTHORITY AND COPY OF THE ORDER PASSED BY SALES TAX OFFICER. THE APPELLANT HAS FURTHER STATED THAT THE CORRECT CLOSING STOCK WOULD WORK OUT AT 129963 KGS. AS AGAI NST 125400 KGS. SHOWN IN THE BOOKS WHEREAS 104963 KGS. WAS WOR KED OUT BY AO. THERE WOULD, THEREFORE, BE SHORTAGE OF 4563 KGS. I.E. ABOUT 0.2%. SINCE THE APPELLANT HAS EXPLAINED AND R ECONCILED THE ALLEGED DISCREPANCY IN THE CLOSING STOCK AND TH E AO HAS NOT MADE ANY ADVERSE COMMENTS ON THIS RECONCILATION THE ADDITION MADE BY A.O. OF RS.4,29,127/- TOWARDS UNDISCLOSED I NCOME IS HEREBY DELETED. 10. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF AO. ON THE OTHER HAND, THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A). HE THUS SUPPORTED THE ORDER OF CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT WHILE MAKING THE IMPUGNED A DDITION, THERE WERE CERTAIN CLERICAL MISTAKES WHICH RESULTED IN IN CREASED DISALLOWANCE ON ACCOUNT OF CLOSING STOCK. CIT(A) WH ILE DELETING THE ADDITION HAS GIVEN A FINDING THAT THE CLERICAL MIST AKES HAVE BEEN FULLY EXPLAINED BY THE ASSESSEE AND HAD ALSO RECONCILED I T WITH THE SALES ITA NO.147/AHD/2010 -6- FIGURE ACCEPTED BY THE SALES TAX AUTHORITIES. CIT(A ) HAS GIVEN REASONS FOR DELETING ADDITION. LD.D.R. COULD NOT BR ING ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF THE CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF CIT(A). WE THUS UPHOLD HIS ORDER ON THIS ISSUE AND THUS THE GROUND OF THE REVENUE IS DISMISSED. 12. THE GROUNDS NO 2, 2.2 2.3 READS AS UNDER: 2. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.12,16,534/- MA DE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 2.2 IN DOING SO THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE PROVISIONS OF SECTION 145(3) OF THE ACT WERE RIGHTLY INVOKED BY THE AO IN VIEW OF THE V ARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNTS AS DISCUSSED IN DETAIL BY THE AO IN THE ASSESSMENT ORDER. 2.3 IN DOING SO. THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN NOT APPRECIATING THAT THE GP RATE ADOPTED BY THE AO AFTER REJECTING THE BOOK RESULTS OF THE ASSESSEE WAS JUST IFIED IN VIEW OF THE VARIOUS COMPARABLE CASES MENTIONED BY THE AO IN THE ASSESSMENT ORDER. SINCE THE GROUNDS ARE INTERCONNECTED THEY ARE CONSI DERED TOGETHER FOR DISPOSAL. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AFT ER PERUSING THE DETAILS, AO OPINED THAT THE GP RATE DECLARED BY THE ASSESSEE CANNOT BE ACCEPTED FOR THE REASON THAT THE QUANTITATIVE DETAI LS OF STOCK WORKED OUT DID NOT TALLY WITH THOSE REFLECTED IN THE BOOKS OF ACCOUNTS. HE THEREFORE HELD THAT THE BOOK RESULTS CANNOT BE ACCE PTED TO BE TRUE, CORRECT AND COMPLETE. HE ACCORDINGLY APPLYING THE P ROVISIONS OF S. ITA NO.147/AHD/2010 -7- 145(3) REJECTED THE BOOK RESULTS AND MADE ESTIMATIO N OF PROFITS AFTER TAKING INTO CONSIDERATION THE GP OF DIFFERENT PARTI ES ENGAGED IN THE SAME LINE OF BUSINESS. AFTER CONSIDERING THE SUBMI SSIONS MADE BY THE ASSESSEE, CIT(A) HELD THAT THE REASONS FOR REJECTIN G THE BOOK RESULTS DOES NOT SURVIVE AND THEREBY DELETED THE ADDITION O F RS.12,16,534/- BY HOLDING AS UNDER: 5.3 I HAVE CONSIDERED THE SUBMISSIONS MADE, EVIDE NCES FILED IN THE PAPER BOOK BY THE APPELLANT AND THE OBSERVAT IONS MADE BY THE AO BOTH IN ASSTT. ORDER AND REMAND REPORT FO R REJECTING THE BOOK RESULT AND MAKING ADDITION OF RS.12,16,534 /- IT IS FOUND THAT AO HAS REJECTED THE BOOK RESULT MAINLY O N THE GROUND THAT THE EXCESS CLOSING STOCK AS DISCUSSED H EREINABOVE WAS FOUND, DETAILS OF WAGES, OCTROI ETC. WERE NOT F ILED AND G.P. DISCLOSED BY THE APPELLANT AT 5% WAS LOW AS COMPARE D TO FOUR DIFFERENT PARTIES AS STATED IN THE ORDER. SINCE THE AO HAD NOT ALLOWED OPPORTUNITY TO THE APPELLANT TO EXPLAIN AS TO WHY THE BOOK RESULT SHOULD BE REJECTED AND G.P. SHOULD BE E STIMATED AT 7%, A REMAND REPORT WAS CALLED FOR FROM THE A.O. IN RESPECT OF THIS GROUND OF APPEAL ALSO. THE A.O. HAS STATED IN HIS REMAND REPORT THAT THE STATUTE DOES NOT PROVIDE FOR GIVING OPPORTUNITY TO THE APPELLANT BEFORE REJECTING THE BOOKS OF ACCO UNT AND VIDE ORDER SHEET ENTRY DT.24.11.2008, DETAILS RELATING T O QUANTITY STATEMENT, ETC. WERE CALLED FOR WHICH WERE NOT FILE D BY THE APPELLANT. THE CONTENTION RAISED BY THE A.O. IN THE REMAND REPORT CANNOT BE ACCEPTED BECAUSE THE PRINCIPLES OF NATURAL JUSTICE REQUIRED THAT THE APPELLANT SHOULD BE HEARD BEFORE ANY ADVERSE VIEW IS TAKEN AND THERE WAS NO POINT IN GIV ING OPPORTUNITY OF HEARING ONCE THE BOOKS OF ACCOUNT HA VE BEEN REJECTED. AS REGARDS THE ORDER SHEET ENTRY DT. 24.1 1.2008, I FIND FROM THE SAID ORDER SHEET ENTRY WHICH IS PART OF TH E LETTER GIVEN BY A.O. AND EVEN FILED BY THE APPELLANT IN ITS PAPE R BOOK AT PAGE 7 TO 9 THAT THE A,O. HAD SIMPLY CALLED FOR DET AILS RELATING TO SALES/PURCHASE, STOCK INVENTORY, ETC. BUT THERE IS NO ENTRY WHEREBY THE APPELLANT WAS ASKED TO EXPLAIN THE G.P. RATE OR WHY HIS BOOKS SHOULD BE REJECTED. THE ORDER SHEET E NTRY DT. 24.11.2008 READS AS UNDER XXXX ITA NO.147/AHD/2010 -8- UNDER THE CIRCUMSTANCES, THERE IS NO SUBSTANCE IN T HE CONTENTION OF THE A.O. THAT OPPORTUNITY WAS ALLOWED TO THE APPELLANT IN THIS REGARD. NOW COMING TO THE MERITS OF THE ADDITION, I FIND THAT THE APPELLANT HAS DISCLOSED G .P. AT 5%, ON THE TOTAL TURNOVER OF RS.5.72 CRORES IN THE YEAR UN DER APPEAL AS AGAINST G.P. RATE OF 4.27% ON TURNOVER OF RI4.66 CR ORES IN THE LAST YEAR. THUS, THERE IS AN INCREASE OF ABOUT 23% IN THE TURNOVER AND EVEN G.P. RATE AS COMPARED TO THE LAST YEAR. THE PAST RECORDS OF LAST THREE YEARS ALSO SHOW THAT THE APPELLANT HAS DISCLOSED MAXIMUM G.P. OF 5.47% IN A.Y.2004-05 ON T URNOVER OF RS.4.25 CRORES. THUS, THE RECORD OF THE APPELLAN T ITSELF SHOWS THAT THE G.P. DISCLOSED THIS YEAR IS FAIR AND REASO NABLE. IT IS NOTICED THAT A.O. HAS COMPARED THE G.P. ROTE DISCLO SED BY M/S.SHRIGIRI AT 7.45% WHICH CANNOT BE SAID TO BE A COMPARABLE INSTANCE BECAUSE THE TURNOVER IS NOT AS HIGH AS THE APPELLANT'S NOR DETAILS AS TO THE NATURE OF TRADING, QUALITY OF GOODS. ETC. HAVE BEEN STATED BY A.O. AND EVEN THE AVERAGE RATE OF THE SAID PARTY WOULD WORK OUT TO 8.98%. IT IS ALSO FOUND THA T THE A.O. HAS NOT ONLY ESTIMATED G.P. BUT EVEN SALES ALSO WHI CH IS NOT JUSTIFIED BECAUSE THERE IS NO MATERIAL ON RECORD TO PROVE THAT THE APPELLANT HAD NOT MADE ANY UNRECORDED SALES NOR THERE IS EVEN ANY BASIS FOR ESTIMATING THE SALES. I ALSO FIN D THAT THE REASONS ADVANCED BY AO OF EXCESS CLOSING STOCK AND WANT OF DETAILS OF WAGES. OCTROI, ETC. DO NOT SURVIVE NOW B ECAUSE THE APPELLANT HAS RECONCILED THE SO-CALLED EXCESS CLOSI NG STOCK WORKED OUT BY THE AO AND EVEN FURNISHED DETAILS OF WAGES. FREIGHT, ELECTRIC EXPENSES, ETC.(WHICH IS CONSIDERE D IN THE GROUND OF APPEAL). THEREFORE, THERE DOES NOT SURVIV E ANY REASONS FOR REJECTING THE BOOK RESULT OF THE APPELL ANT. UNDER THE CIRCUMSTANCES, THE ADDITION OF RS.12,16,534/- M ADE BY THE AO IS HEREBY DELETED. 14. BEING AGGRIEVED BY THE ACTION OF CIT(A), REVENU E IS NOW IN APPEAL BEFORE US. BEFORE US, LD D.R. SUPPORTED THE ORDER OF AO. ON THE OTHER HAND LD.A.R. SUBMITTED THAT ON THE FACTS OF THE CASE, CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE B Y AO. HE THUS SUPPORTED THE ORDER OF CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ONE OF THE MAIN REASON CONS IDERED BY AO FOR ITA NO.147/AHD/2010 -9- REJECTING THE BOOK RESULTS WAS NON RECONCILIATION O F QUANTITATIVE DETAILS OF STOCK. HE THEREAFTER ESTIMATED THE GP OF THE ASSESSEE BY CONSIDERING THE GP OF DIFFERENT ASSESSEES OPERATING IN THE SIMILAR BUSINESS. WHILE DECIDING GROUND NO 1 ABOVE, WE HAVE AFFIRMED THE ORDER OF CIT(A) THAT THERE WAS NO MATERIAL DISCREPA NCY IN THE QUANTITATIVE RECORDS OF STOCK AND THE DISCREPANCY W AS FULLY EXPLAINED AND WAS ACCEPTED. CIT(A) WHILE DELETING THE ADDITIO N HAS INTER ALIA GIVEN FINDING THAT THE GP WAS COMPARABLE WITH ITS O WN GP OF EARLIER YEARS. HE HAS FURTHER OPINED THAT THERE WAS NO MATE RIAL ON RECORD TO PROVE THAT ASSESSEE HAS MADE UNRECORDED SALE OR THE RE WAS ANY BASIS FOR ESTIMATING SALES. BEFORE US, REVENUE HAS NOT BR OUGHT OUT ANY MATERIAL TO CONTROVERT THE FINDINGS OF CIT(A). IN V IEW OF THE TOTALITY OF FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS UPHOLD HIS ORDER ON THIS GROUND. THUS THIS GROUND O F THE REVENUE IS DISMISSED. 16. THE GROUND NO 3, 3.2 3.3 READS AS UNDER: 3. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN RESTRICTING THE DISALLOWANCE OF RS.15,76,8 30/- MADE BY THE AO U/S. 40(A)(IA) OF THE ACT TO RS.1,68,381 /- ONLY, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 3.2 IN DOING SO, THE LD. CII(A) HAS ERRED IN LAW AN D ON FACTS IN ADMITTING THE ADDITIONAL EVIDENCES IN VIOLATION OF THE PROVISIONS OF RULE 46 OF THE I.T. RULES. 3.3 IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN NOT APPRECIATING THAT THE TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE BY THE ASSESSEE ON THE FREIGHT PAYMENTS AND NOT BY THE CONSIGNEE/PURCHASER. SINCE THE GROUNDS ARE INTERCONNECTED THEY ARE CONSI DERED TOGETHER FOR DISPOSAL. ITA NO.147/AHD/2010 -10- 17. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO OBSERVED THAT ASSESSEE HAS DEBITED OCTROI AND FREIGHT OF RS.18,07 ,205/- ACCORDING TO AO THE ASSESSEE DID NOT FILE DETAILS OF THE EXPENSE S. HE ACCORDINGLY WORKED OUT THE OCTROI EXPENSES @ 2% ON THE BASIS OF PURCHASES MADE BY THE ASSESSEE FROM OUTSIDE AHMEDABAD AT RS 2,30,3 34/- AND THE BALANCE AMOUNT OF RS.15,76,830 (RS.18,07,205 LESS 2 ,30,334) CONSIDERED TO BE FREIGHT EXPENSES WHICH WERE THEREA FTER CONSIDERED TO BE FALLING WITHIN THE PURVIEW OF S. 194C AND THEREF ORE COVERED BY S. 40(A)(IA) AND DISALLOWED THE SAME. CIT(A) AFTER CON SIDERING THE SUBMISSIONS AND THE REMAND REPORT DELETED THE ADDIT IONS BY HOLDING AS UNDER: 6.3 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE APPELLANT AND HAVE ALSO CAREFULLY G ONE THROUGH THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER, IT IS NOTICED FROM THE ASSESSMENT ORDER THAT THE AO HAS MADE THE DISALLOWANCE OF RS.15,76,830/- TOWARDS THE FREIGHT CHARGES BY OBSERVING THAT THE APPELLANT HAD NOT FURNISHED DETA ILS/BREAK UP OF FREIGHT AND OCTROI WHICH WOULD BE COVERED SECTIO N 194C AND IN ABSENCE OF THE PARTICULARS, THE FREIGHT EXPENSES WERE WORKED OUT BY THE AO BY DEDUCTING 2% OF THE PURCHASES I.E. RS.2,30,334/- FROM THE TOTAL FREIGHT AND OCTROI EXP ENSES OF RS.18,07,205/- AND THEREFORE, THE BALANCE OF RS.15, 76,830/- WAS DISALLOWED. ON THE OTHER HANDS, THE APPELLANT HAS C ONTENDED THAT THE .DETAILS OF FREIGHT AND OCTROI EXPENSES WE RE NOT CALLED FOR BY THE AO. IT IS CONTENDED THAT THE AO IN HIS N OTICE U/S.142(1) DATED 11-11-07 SIMPLY ASKED, 'WHETHER SE CTION 40(A)(IA) HAD BEEN COMPLIED WITH OR NOT AND TDS HAD BEEN DEDUCTED IN RESPECT OF THE ITEMS/EXPENSES WHERE THE TDS IS DEDUCTIBLE.' THE APPELLANT FURNISHED REPLY DATED 14 -11-08 STATING THAT FORM NO.26Q WAS FILED AND THEREAFTER, NO QUERY WAS RAISED. THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT BY WAY OF DETAILS OF FREIGHT EXPENSES, CONSIGNEE NO TES, TDS CERTIFICATES AT PAGES 150 TO 274 OF THE PAPER BOOK HAS BEEN ADMITTED FOR THE REASONS STATED HEREINABOVE. I FIND THAT THE DETAILS GIVEN BY THE APPELLANT TOWARDS THE FREIGHT AND OCTROI ITA NO.147/AHD/2010 -11- CAN BE SUMMARIZED AS UNDER: XXXXX THE FREIGHT EXPENSES OF RS.3,69,731/- WHICH IS CLAI MED TO HAVE BEEN INCURRED ON THE PURCHASES MADE BY THE APPELLAN T AND THE SOME DOES NOT EXCEED RS.20,000/- AS PER THE DETAILS GIVEN ON PAGE 155-156 OF THE PAPER BOOK AND THEREFORE, NO TD S WAS REQUIRED TO BE MADE ON THESE PAYMENTS. NOW AS REGAR DS THE FREIGHT CHARGES RELATING TO SALES, IT IS NOTICED TH AT TDS HAS BEEN MADE BY THE CONSIGNEE/PURCHASER FROM THE PAYMENTS M ADE TO THE TRUCK OPERATORS AND THE TRUCK FREIGHT IS OF RS. 8,54,306/- AS PER THE DETAILS GIVEN AT PAGES 161-229. IT IS ALSO FOUND THAT ONE PARTY VIZ. NIRMALA CARGO MOTORS ORS HAS SUBMITTED F ORM NO.15I ALONG WITH AFFIDAVIT AND PAN SO THAT NO TAX WAS REQUIRED TO BE MADE FROM THE PAYMENTS AGGREGATING T O RS.1,21,022/- MADE. AS REGARDS THE FREIGHT CHARGES OF RS.2,73,765/-, IT IS NOTICED FROM THE DETAILS GIVEN AT PAGES 252- 274 ALONG WITH CONSIGNEE NOTES, ETC. THAT THE FREIG HT CHARGES PAID TO THESE PARTIES ARE BELOW RS.50,000/- AS UNDE R: I) BHURA ROADLINES RS.36,465/- II) SHREE GIRIRAJ TRANSPORT RS.23,800/- III) BALAJI CARGO CARRIERS RS.26,000/- IV) BALAJI FREIGHT CARRIERS RS.46,500/- V) GEET JAT ROADLINES RS.40,000/- VI) MISC. PARTIES RS.1,01,000/- (EIGHT PARTIES) RS.2,73,765/- ========= THEREFORE, ON THE BALANCE FREIGHT CHARGES OF RS.1,6 8,381/-, THE APPELLANT WAS REQUIRED TO MAKE THE TDS U/S.194C WHI CH HAS NOT BEEN MADE BY THE APPELLANT THOUGH THE TAX WAS D EDUCTIBLE AND HENCE, THE DISALLOWANCE MADE BY THE AO IS CONFI RMED TO THIS EXTENT. THE APPELLANT, THUS, GETS A RELIEF OF RS.14,08,449/-. 18. AGAINST THE ORDER OF CIT(A) REVENUE IS NOW IN A PPEAL BEFORE US. BEFORE US LD.D.R RELIED ON THE ORDER OF AO AND ON THE OTHER HAND THE LD.A.R. SUPPORTED THE ORDER OF CIT(A). 19. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT OUT OF THE TOTAL EXPENSES ITA NO.147/AHD/2010 -12- PERTAINING TO OCTROI AND FREIGHT, THE AO WORKED OUT THE AMOUNT OF OCTROI ON THE BASIS OF OCTROI RATE OF 2% ON THE PUR CHASES MADE FROM PARTIES SITUATED OUTSIDE AHMEDABAD. THE BALANCE AMO UNT WAS CONSIDERED BY HIM AS FREIGHT EXPENSES. THEREUPON, H E CONCLUDED THAT SINCE TDS WAS NOT DEDUCTED BY ASSESSEE ON FREIGHT, THE ENTIRE FREIGHT EXPENSES WAS TO BE DISALLOWED CONSIDERING THE PROVI SIONS OF S. 40(A)(IA). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT SUBMITTED BY AO, HAS GIVEN A FINDING THAT ON FREIGHT CHARGES OF RS.1,68,381/- ASSESSEE WAS REQUI RED TO DEDUCT TDS U/S 194C. SINCE THE ASSESSEE HAD NOT DEDUCTED TDS H E RESTRICTED THE DISALLOWANCE U/S 40(A)(IA) TO RS.1,68,381/-. CIT(A) HAD ALSO ADMITTED THE ADDITIONAL EVIDENCE FOR THE REASONS STATED IN H IS ORDER. BEFORE US, THE LD.D.R. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). IN VIEW OF THE TOTALITY OF FACT , WE ARE OF THE VIEW THAT IN THE PRESENT CIRCUMSTANCES, NO INTERFERENCE TO THE ORDER OF CIT(A) IS CALLED FOR. WE THUS UPHOLD THE ORDER OF C IT(A) ON THIS GROUND. THUS THE GROUND OF REVENUE IS REJECTED. 20. OTHER GROUNDS ARE GENERAL IN NATURE AND THEREFO RE NOT ADJUDICATED. 21. IN THE RESULT, THE REVENUE IS REJECTED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- (D.K. TYAGI) JUDICIAL MEMBER ANIL CHATURVEDI) ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A)