Appeal details
Counselvise Citation
[2012] 119 COUNSELVISE.COM (IT) 8036 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-11-2012
Appeal Filed By
Department
Bench Allotted
C
Assessment Year
2006-2007
Appeal Filed On
20-09-2010
Judgement Text
, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [ () . .. . . .. . , ,, , , ! ''# $% ''# $% ''# $% ''# $% ] ]] ] [BEFORE HONBLE SRI C.D.RAO, AM & HONBLE SRI GE ORGE MATHAN, JM] !' !' !' !' /ITA NO.1801/KOL/2010 (%) *+/ ASSESSMENT YEAR : 2006-07 ($- / APPELLANT ) - % - ( /0$- /RESPONDENT) D.C.I.T., CIRCLE-3, M/S.SURYA ALLOYS IND USTRIES LTD. KOLKATA -VERSUS- KOLKATA (PAN: AADCS 5890 E) $- 1 2 / FOR THE APPELLANT: SHRI A.K.MAHAPATRA, CIT(DR) /0$- 1 2 / FOR THE RESPONDENT: SHRI D.S.DAMLE 3%4 1 /DATE OF HEARING : 18.10.2012. 5* 1 /DATE OF PRONOUNCEMENT : 9.11.2012. 6 / ORDER . .. . . .. . , PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER O F LD. CIT(A)-I, KOLKATA DATED 12.07.2010 FOR ASSESSMENT YEAR 2006-07. 2. THOUGH THE ASSESSEE HAS TAKEN SEVERAL GROUND IN THE MEMORANDUM OF APPEAL ATTACHED TO THE APPEAL THE ISSUES INVOLVED ARE ONLY TWO. ONE IS RELATING TO THE DELETION OF ADDITION OF RS.1,29,89,656/- MADE BY AO ON ACCOU NT OF UNDER INVOICING OF RAW MATERIALS AND THE OTHER ONE IS RELATING TO THE DELE TION OF DISALLOWANCE OF RS.49,75,587/- ON ACCOUNT OF LOSS IN TRADING OPERAT IONS. 3. THE BRIEF FACTS OF THE ABOVE TWO ISSUES ARE THA T WHILE DOING THE SCRUTINY ASSESSMENT THE AO AFTER ANALYZING THE ACTIVITIES OF THE ASSESSEE AND PURCHASES OF RAW MATERIALS MADE BY THE ASSESSEE FINALLY CONCLUDED TH AT THE ASSESSEE HAS SUPPRESSED THE PURCHASE OF RAW MATERIALS TO THE EXTENT OF RS.1,29, 89,656/- AND ADDED THE SAME U/S 69 OF THE IT ACT MAINLY BY OBSERVING AS UNDER :- ITA NO.1801/KOL/2010 2 THE ASSESSEE HAS SUBMITTED THAT THE RAW MATERIAL P URCHASED FOR SGCI INSERTS IN MEGHALAYA UNIT WAS 1029.670 MT. THE TOTAL COST OF T HE MATERIAL HAS BEEN SHOWN AT RS.77,37,615/. SGCI INSERTS ARE MANUFACTURED BY OT HER UNITS OF THE ASSESSEE COMPANY AS DISCUSSED IN PRE-PARAS. BY LETTER DT.22.12.08, T HE ASSESSEE WAS REQUESTED TO GIVE COMPLETE PURCHASE ACCOUNT OF PIG IRON & MS SCRAP I N RESPECT OF EACH UNIT OF THE ASSESSEE COMPANY. THE PURPOSE OF CALLING DETAILS WA S TO MAKE A GOOD COMPARISON OF THE PURCHASE RATES. THE ASSESSEE HAS REPLIED BY LETTER DT.23.12.08. HOWEVER, THE ASSESSEE HAS NOT GIVEN THE DETAILS AS ASKED FOR. THE NON-COOPERA TION FROM THE ASSESSEE IS TAKEN ON RECORD. SOME OF THE PURCHASE BILL OF PIG IRON AND M S SCRAP WERE EARLIER SUBMITTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. AS PER THE BILLS, IT IS SEEN THAT IN CASE OF PIG IRON, THE MEGHALAYA UNIT HAS PURCHASED PIG IRON @RS.8,468/ PER MT INCLUDING CENTRAL EXCISE, CESS AND SALES-TAX. REFERENCE IS MA DE TO THE PURCHASE BILL OF MEGHALAYA UNIT DT.21.12.05 IN WHICH 39.760 MT OF PIG IRON HAS BEEN PURCHASED FOR RS.3,36,692/ VIDE VOUCHER- NO.06008 FROM SRI RAM RUPAI BALAJI ST EEL LTD THE PURCHASE OF PIG IRON IS NORMALLY AT THIS RATE BY MEGHALAYA UNIT EXCEPT F OR THE FIRST BILL DT.07.08.05 IN WHICH THE PURCHASE RATE IS RS.15,704/- PER MT INCLUSIVE O F SALES-TAX. IT IS VERY INTERESTING TO NOTE THAT THE PIG IRON WAS PURCHASE ON 07.08.05 BY MEGHALAYA @ RS.15,704/- PER MT WHERE AS THE SAME MATERIAL HAS BEEN ALLEGEDLY PURCH ASED AT RATE AS LOW AS RS,8,468/- ON 17.08.2005 AND THEREAFTER. FROM THE PURCHASE DETAIL S, IT APPEARS AS IF THE ASSESSEE PURCHASED PIG IRON IN THE FIRST INSTANCE AT NORMAL MARKET RATE AND THEN REMINDED TO MAKE THE ALLEGED PURCHSES AT LOWER RATES. THE MARKET RATE OF PIG IRON WAS MUCH HIGHER DURING THE PERIOD. THE OTHER UNITS, I.E. THE DURGAPUR UNIT OF ASSESSE COMPANY HAS PURCH ASED PIG IRON @ RS.15,726/ PER MT FROM KIC METALIKS LTD. IN BILL DT.10.09.05 AND @ RS.15121/- PER MT FROM TATA METALIKS LTD. INCLUSIVE EXCISE DUTY AND SALES TAX I N BILL DT.29.07.05. THE PURCHASE BILLS SUMMARY OF M/C. CALCUTTA SPRINGS LTD., 18, R.N. MUKHERJEE ROAD, KOLKATA, WHO ARE MANUFACTURER OF SGCI INSERTS ARE ALSO OBTAINED. FROM THE DETAILS SUBMITTED BY M/S. CALCUTTA SPRINTS LTD. WHI CH ARE ON RECORD, THE RATE PER MT INCLUDING EXCISE DUTY AND SALES TAX IN RESPECT OF P IG IRON WAS IN THE RANGE OF RS.14,000/- TO RS.15,000/- PER MT DURING THE YEAR. IT IS UNDERS TOOD THAT THE RATES OF SUCH COMMODITY DO VARY ON DAY TO DAY BASIS BY A FEW PERCENTAGE POI NTS BUT THERE IS A FIXED MARKET RATE WHICH IS APPLICABLE THROUGH THE COUNTRY EXCEPT FOR SMALL VARIATION IN THE MARGIN OF PROFIT WHICH THE SELLER MAY TAKE. WHILE THE MARKET RATE WA S WITHIN THE RAGE OF RS.14,000/ TO RS.15,000/ PER MT DURING THE RELEVANT PERIOD IN RE SPECT OF PIG IRON, THE MEGHALAYA UNIT HAS SHOWN ALLEGED PURCHASES AT RS.8468/- PER M T. THE PURCHASES IN MEGHALAYA UNIT IN RESPECT OF PIG IRON HAVE UNDER INVOICED WIT H THE DIFFERENCE AMOUNT. IT IS NOT POSSIBLE TO CALCULATE THE DIFFERENCE TO THE EXACT R UPEE, HOWEVER, IN THE FACTS OF THE CASE, IT CAN BE SAFELY STATED THAT THE ASSESSEE HAS UNDER INVOICED PIG IRON PURCHASES AT LEAST RS.6000/ PER M.T. THE OTHER MAJOR RAW MATERIAL IS THE MS SCRAP AND CU TTINGS OF MS ROUND & DI PIPE ETC. FROM THE DETAILS SUBMITTED BY M/S. CALCUT TA SPRINGS LTD. AS WELL AS THE BILLS OF OTHER UNITS OF ASSESSEE COMPANY ITSELF I.E DURGAPUR UNIT, IT IS SEEN THAT THE UNDER INVOICING IN CASE OF THESE MATERIALS ALSO IS ABOUT RS.6000/- PER MT. THE ASSESSEE HAS ARGUED IN CASE OF SCRAP, NO SPECIFICATIONS ARC POSS IBLE AND THERE ARE VARIATIONS IN QUALITY AND SPECIFICATION OF SCRAP. THE ASSESSEES ARGUMENT IS IN PRINCIPLE CORRECT. HOWEVER, GOING BY THE MODUS OPERANDI OF ASSESSEE AND COMPARI SON OF PURCHASE RATES OF SIMILAR MATERIAL IN OTHER UNITS OF THE COMPANY AND OF OUTSI DE MANUFACTURER M/S. CALCUTTA SPRINGS LTD., IT IS A DEFINITE CONCLUSION THAT THE ASSESSEE HAS RESORTED TO UNDER INVOICING OF PURCHASES OF EACH AND EVERY ITEM OF RAW MATERIAL OF MEGHALAYA UNIT WITH A VIEW TO BRING INTO ACCOUNTS HIS UNACCOUNTED MONEYS. ITA NO.1801/KOL/2010 3 THE TOTAL PURCHASES OF PIG IRON, MS SCRAP ETC., BY THE MEGHALAYA UNIT DURING THE YEAR IS 1029.670 MT. THE UNDER INVOICING OF PURCHAS ES @ RS.6000/- PER MT IS RS.61,78,020/-. IT IS HELD THAT THE ASSESSEE HAS PA ID THE AMOUNT OF RS.61,78,020/- TO THE SUPPLIERS OUTSIDE THE BOOKS OF ACCOUNTS WITH THE MO TIVE OF INFLATING THE PROFIT IN THE MEGHALALYA UNIT ON WHICH ASSESSEE IS CLAIMING DEDUC TION OF 100% OF PROFITS. THE ASSESSEE ARGUMENT THAT ITS LIABILITY UNDER PRESUMPT IVE TAXATION U/S. 115JB(MAT) HAS GONE UP IN THE PROCESS IS OF NO CONSEQUENCE. THE AMOUNT OF RS.61,78,020/- IS ADDED IN ASSESSEES HAND U/S.69C OF THE ACT AS UNEXPLAINED PAYMENT/EXPENDITURE ON PURCHASES. IT IS POINTED OUT THAT AS PER PROVISO TO SER 69C INSERTED W.EF, 01.04.1999, SUCH UNEXPLAINED EXPENDITURE CANNOT HE CLAIMED AS DEDUCTION AND CANNOT ALLOWED AS DEDUCTION UNDER ANY HEAD OF INCOME. THEREFORE, IN RESPECT OF RAW MATERIAL PURCHASED OF ERCS AND SGCI INSERTS, TOTAL AMOUNT OF RS.1,29,89,656/- IS ADDED U/S.69C OF THE ACT AS UNACCOUNTED PAYMENT FOR PURCHASES. 3.1. AGAIN HE DISALLOWED THE TRADING LOSS OF RS.49, 75,587/- AFTER ANALYZING THE PURCHASE AS WELL AS SALES AS RECORDED AT PAGE NOS. 8 AND 9 AND FINALLY CONCLUDED THAT A PLAIN READING OF THE PURCHASE OF THE ALLEGED PUR CHASE AND SALES TRANSACTIONS OF TRADING GOODS GIVES AN IMPRESSION THAT THERE IS SOM ETHING WRONG WITH ASSESSEES CLAIM. THE TRANSACTIONS HAVE BEEN ALLEGEDLY ENTERED ONLY F ROM 01.12.2005 TO 12.12.2005. NO TRADING TRANSACTIONS HAVE BEEN SHOWN EARLIER TO THE SE DATES AND NOTHING THEREAFTER. THE PURCHASE BILL /VOUCHER NOS. ISSUED BY M/S. RAV DRAV YA PVT. LTD. ARE ALMOST CONTINUOUS. THE SALE BILL /VOUCHERS NOS. ARE CONTINUOUS FROM 00 01 TO 0020. THE PURCHASE AND SALE OF A PARTICULAR CONSIGNMENT IS ON THE VERY SAME DAY. N O BUSINESS MAN OF NORMAL PRUDENCE WOULD PURCHASE THE MATERIAL FOR HIGHER RATE AND SAL E IT ON THE SAME DAY FOR A LOWER RATE. IT IS INTERESTING TO NOTE THAT M/S. RAV DRAVYA PVT. LTD. FROM WHOM TRADING GOODS ARE ALLEGEDLY PURCHASED AND M/S RAMSARUP BARS & RODS TO WHOM ALLEGED SALE HAVE BEEN MADE ARE ENTITIES (READ COMPANIES) OF THE SAME GROU P I.E. RAMSARUP GROUP OF CASES. BOTH ARE ADDRESSED AT THE SAME PLACE. IT IS NOT UND ERSTANDABLE WHY AND HOW THE ASSESSEC CAN PURCHASE MATERIAL FROM ONE COMPANY AND SELL THE SAME MATERIAL TO THE SISTER CONCERN OF SUPPLIER COMPANY AFTER EARNING A LOSS. DURING HE ARING DT. 10. 11.2008, IN THE PROCEEDING SHEET, THE ASSESSEE WAS REQUESTED TO GIV E DETAILS OF LOADING AND UNLOADING EXPENSES RELATING TO SUCH ALLEGED TRADING TRANSACTI ONS. THE ASSESSEE HAS SUBMITTED IN LETTER DT. 15.11.2008 THAT THE COMPANY DID NOT INCU R ANY HANDLING CHARGES. GIVEN THE LARGE VOLUME OF TRANSACTIONS INVOLVING HUNDREDS AND THOUSANDS OF TONS OF STEEL, A LARGE NUMBER OF INCIDENTAL EXPENSES LIKE LOADING, UNLOADI NG ETC. WOULD BE THERE FOR WHICH THE ASSESSEE COULD NOT SUBMIT ANY EVIDENCE. FROM THE CIRCUMSTANCES OF THE CASE AS EVIDENT FROM THE ALLEGED TRANSACTIONS AND DETAILS SUBMITTED BY THE ASSESSEE, THE WHOLE IDEA A PPEARS TO BE AN AFTER THOUGHT WHICH APPARENTLY GERMINATED IN ABOUT FEB, 2006. FROM THE LEDGER ACCOUNT OF M/S. RAV DRAVYA PVT. LTD. AND M/S RAMSARUP BARS & RODS IT IS SEEN THAT THE PAYMENT FOR PURCHASE HAVE BEEN MADE BY CHEQUE STARTING FROM 13T H FEB, 2006. IT IS INTERESTING TO NOTE THAT THE PAYMENT TO M/S. RAV DRAVYA PVT. LTD. HA BEEN MADE BY THE ASSESSEE FOR THE FIRST TIME ON 13.02.2006 FOR AN AMOUNT OF RS.50 ,00,000/. THE SAME AMOUNT HAS BEEN RECEIVED FROM M/S RAMSARUP BARS & RODS ON 14.02.200 6 FOR ALLEGED SALES OF STEEL. AGAIN ON 15.02.2006 THE ASSESSEE HAS PAID AN AMOUNT OF RS.50,00,000/- TO RAV DRAVYA PVT. LTD. AND HAS RECEIVED THE SAME AMOUNT FROM RAM SARUP BARS & RODS THE NEXT DAY I.E ON 16.02.2006, AGAIN 16.02.2006, THE ASSESSEE H AS PAID RS.50,00,000/- TO RAV DRAVYA PVT. LTD. AND THE SAME AMOUNT HAS BEEN RECEI VED FROM RAMARUP BARS & RODS ON ITA NO.1801/KOL/2010 4 20.02.2006. STILL AGAIN, ON 18.02.2006, THE ASSESSE E PAID AN AMOUNT OF RS.50,00,000/ TO M/S. RAV DAVYA PVT. LTD AND THE SAME AMOUNT IS RECE IVED BACK BY THE ASSESSEE FROM RAMSARUP BARS & RODS ON 22.02.2006. IT IS IMPORTANT TO NOTE HERE THAT BOTH M/S. RAV DRAVYA PVI. LTD. M/S. RAMSARUP BAIS & RODS ARE SIST ER CONCERNS. THE CHRONOLOGY OF THE ALLEGED SALE PURCHASE TRANSACTIONS AND OF PAYMENT A ND RECEIPT BY CHEQUE SHOWS THAT A SINGLE PERSON HAS ARRANGED THE TRANSACTION OF SUCH ALLEGED SALES AND PURCHASES AND PAYMENTS ETC. TO ACCOMMODATE THE ASSESSEE IN SHOWIN G A FICTITIOUS TRADING LOSS. THE ENTIRE ALLEGED TRANSACTION IS A SHAM. TO GIVE IT A COLOUR OF GENUINENESS, THE ASSESSEE HAS DEPOSITED VALUE ADDED TAX (VAT/SALES TAX) IN RESPEC T OF THE TRANSACTIONS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS H ELD THAT THERE IS NO GENUINENESS IN THE TRANSACTIONS OF SUCH ALLEGED TRADING IN STEE L AND THE ASSESSEE HAS INTRODUCED A FICTITIOUS LOSS OF RS.49,75,587/- IN THE BOOKS OF A CCOUNT. THE INTENTION OF THE ASSESSEE APPEARS TO BE TO SUPPRESS TAXABLE PROFITS. 3.2. ON APPEAL THE LD. CIT(A) HAS DELETED THE ADDIT ION OF RS.1,29,89,656/- AND ALLOWED THE LOSS OF RS.49,75,587/- ON ACCOUNT OF TR ADING OPERATIONS AFTER TAKING INTO CONSIDERATION OF THE SUBMISSIONS OF THE ASSESSEE AN D CALLING FOR THE REMAND REPORT FROM THE AO BY OBSERVING AS UNDER :- ON ACCOUNT OF DELETION OF ADDITION MADE U/S 69C OF THE AC T 4. THE SUBMISSIONS OF THE APPELLANT AND THE DOCUME NTS FURNISHED IN SUPPORT THEREOF HAVE BEEN CONSIDERED. THE STOCK RECORDS AND BOOKS O F MEGHALAYA UNIT OF THE APPELLANT WERE TEST CHECKED. FROM A PLAIN READING OF THE IMPU GNED ORDER IT APPEARS THAT THE ONLY GROUND WHICH PROMPTED THE AO TO DRAW INFERENCE OF T HE ALLEGED SUPPRESSION OF THE PURCHASE COST OF RAW MATERIALS WAS THE LOW COST OF MATERIAL CONSUMPTION AND COMPARATIVELY HIGH NET PROFIT RATIO DISCLOSED BY TH E APPELLANTS MEGHALAVA UNIT. IN HIS ORDER, THE AO NOTED THAT FOR MANUFACTURE OF ELASTIC RAIL CLIP, PRINCIPAL RAW-MATERIAL WAS STEEL ROUNDS AND FOR PRODUCTION OF SGCI INSERT S THE PRINCIPAL RAW-MATERIAL WAS M. S. SCRAP & PIG IRON. ACCORDING TO THE AO THE APPELL ANTS MEGHALAYA UNIT PURCHASED STEEL ROUNDS FROM M/S.ADHUNIK ISPAT LTD AND SARAF I RON FOUNDRY & ROLLING MILLS PVT. LTD. AT AN AVERAGE PER TON COST OF RS.20,682/-. ON THE CONTRARY, ON EXAMINATION OF ASSESSMENT RECORDS OF M/S. CALCUTTA SPRINGS LTD, AN ASSESSEE ASSESSED TO TAX IN THE SAME RANGE THE AO FOUND THAT IT HAD PURCHASED M.S. ROUND S AT AN AVERAGE PER TON COST OF RS.32,240/-; FROM RASHTRIYA ISPAT NIGAM LTD, A PUBL IC SECTOR UNDERTAKING. IN AOS OPINION THE PRICE PAID BY THE SAID ASSESSEE TO AN P SU REPRESENTED THE TRUE, FULL AND CORRECT COST OF M.S.ROUNDS. SINCE THE AVERAGE COST OF CONSUMPTION OF MS.ROUNDS, AS PER ASSESSEES BOOKS WAS RS.20,700/- AS COMPARED WI TH RS.32,240/- THE AO PRESUMED THAT THE PRICE DIFFERENTIAL @ RS.11,530/- PER M/T W AS SPENT: BY THE APPELLANT OUTSIDE ITS REGULAR BOOKS. ACCORDING TO AO THE APPELLANT SUPPRE SSED THE COAST OF PURCHASE OF RAW MATERIALS WITH THE SOLE MOTIVE OF INFLATING THE PRO FITABILITY OF ITS MEGHALAYA UNIT WHICH QUALIFIED FOR DEDUCTION U/S 80IC OF THE ACT. WITH R EGARD TO CONSUMPTION OF M. S. SCRAPS AND PIG IRON THE AO FOUND THAT AVERAGE PER TON COST OF THESE MATERIALS AS PER THE ACCOUNTS OF MEGHALAYA UNIT WAS RS.8,468/- WHEREAS D URGAPUR UNIT OF THE APPELLANT DISCLOSED AVERAGE COST OF PURCHASE OF PIG IRON AT A BOUT RS.15,700/-. M/S.CALCUTTA SPRINGS LTD ALSO DISCLOSED AVERAGE COST OF PURCHASE OF PIG IRON AT PRICES VARYING BETWEEN RS.14,000/- TO RS.15,000/- PER MT. ON THESE FACTS THE AO PRESUMED THAT THE APPELLANT RESORTED TO UNDER INVOICING OF PIG IRON P URCHASE TO THE EXTENT OF RS.6,000/- PER ITA NO.1801/KOL/2010 5 M/T AND THE SUPPRESSED COST OF PURCHASE WAS MET OUT OF APPELLANTS UNDISCLOSED INCOME. ON THE CONTRARY, THE APPELLANTS CONTENTION THAT MERELY BECAUSE THE MEGHALAYA UNIT OF THE APPELLANT WAS ABLE TO SOURCE ITS RAW- M ATERIALS AT CHEAPER PRICES COULD NOT BE THE SOLE REASON FOR THE AO TO DOUBT THE GENUINENESS AND CORRECTNESS OF THE COST OF PURCHASE DISCLOSED IN ITS BOOKS. BEFORE ME THE A/R FILED SAMPLE COPIES OF THE INVOICES ISSUED BY M/S. ADHUNIK ISPAT LTD, M/S. SARAF IRON F OUNDRY & ROLLING MILLS PVT. LTD & M/S. SRI RAMRUPAI BALAJI STEELS LTD TO SOME OF THEI R WEST BENGAL BASED CUSTOMERS WHO COULD NOT AVAIL TAX CONCESSIONS U/S 801C OF THE ACT 5. ON CAREFUL SCRUTINY OF THESE INVOICES, IT WAS FO UND THAT THESE SUPPLIERS WERE REGISTERED WITH THE CENTRAL EXCISE & SALES TAX AUTHORITIES. ON THE GOODS SOLD TO THE APPELLANT THE SUPPLIERS WERE PAYING BOTH EXCISE DUTY & VAT. ON TH E PURCHASES MADE THE APPELLANT HAD PAID EXCISE DUTY AND THE VALUE ADDED TAX WITH R EFERENCE TO INVOICE PRICE. THERE IS NO EVIDENCE ON RECORD WOULD SHOW THAT AN ADVERSE INFER ENCES COULD BE DRAWN IN THESE REVENUE PROCEEDINGS AGAINST THE SUPPLIERS FOR CHARG ING EXCISE DUTY AND VAT WITH REFERENCE TO THE DISCLOSED INVOICE VALUE. ACCORDING TO THE AO THE APPELLANT DELIBERATELY UNDER INVOICED COST OF PURCHASES TO AVAIL HIGHER DE DUCTION U/S 80IC OF THE INCOME TAX ACT. THE (SAMPLE) INVOICE COPIES PRODUCED BEFORE ME SHOWED THAT THE SAME SET OF SUPPLIERS SOLD THE SAME MATERIAL THAT SIMILAR PRICE S TO PARTIES BASED IN WEST BENGAL WHO DID NOT QUALIFY FOR TAX CONCESSION OR EXEMPTION AND THEREFORE WOULD NOT HAVE DERIVED ANY TAX ADVANTAGE BY REDUCING THE COST OF RAW-MATER IALS. IN MY OPINION, THEREFORE THE MOTIVE OF SUPPRESSION OF COST OF PURCHASE TO INFLAT E PERMISSIBLE DEDUCTION U/S 80IC OF THE ACT WAS PRIMA FACIE INCORRECT AND PREMATURE AS THE SAME SUPPLIERS SOLD SIMILAR MATERIALS AT SIMILAR PRICES TO OTHER ENTITIES WHO D ID NOT ENJOY TAX CONCESSIONS. 6. I ALSO FIND THAT THE AO HAS DRAWN AN ADVERSE IN FERENCE BY COMPARING THE APPELLANTS COST OF PURCHASE WITH THE COST OF PURCH ASES MADE OF M/S. CALCUTTA SPRINGS LTD. IT HOWEVER TRANSPIRED THAT THE SAID ASSESSEE P URCHASED M. S. ROUNDS FROM A PRIMARY STEEL PRODUCER, WHOSE PRICES WERE ALWAYS HIGHER THA N THE PRICES OFFERED BY MEDIUM SCALE STEEL PRODUCERS. THE A/R ESTABLISHED THIS PRI CE DIFFERENCE BY PRODUCING CONTEMPORARY EVIDENCE. EVEN IN 2010 RASHTRIYA ISPAT NIGAM LTD WAS SELLING M S ROUNDS AT RS.39,750/- PER M/T WHEREAS JAI BALAJI IN DUSTRIES LTD A MEDIUM SCALE STEEL PRODUCER WAS SELLING THE SAME PRODUCT AT RS.30,200/ - PER M/T. THESE FACTS ESTABLISH THAT BROADLY COMPANIES IN THE MEDIUM SCALE SECTOR SELL S TEEL PRODUCTS AT GENERALLY 30% CHEAPER RATE THAN THE PRIMARY STEEL PRODUCERS. THE AO HAS NOT BEEN ABLE TO REBUT THESE FACTUAL ASPECT OF THE MATTER EVEN THOUGH OPPORTUNIT Y OF REBUTTAL WAS PROVIDED TO HIM. THE EMPIRICAL DATA BROUGHT ON RECORD BY THE APPELLA NT THEREFORE SHOWED THAT THE APPELLANT COULD HAVE LEGITIMATELY MADE PURCHASES FR OM UNRELATED PARTIES AT COMPARATIVELY CHEAPER PRICES. IT IS ALSO APPARENT F ROM THE A/RS SUBMISSION THAT EVEN THOUGH OPPORTUNITY OF REBUTTAL WAS PROVIDED TO HIM. THE EMPIRICAL DATA BROUGHT ON RECORD BY THE APPELLANT THEREFORE SHOWD THAT THE AP PELLANT COULD HAVE LEGITIMATELY MADE PURCHASES FROM UNRELATED PARTIES AT COMPARATIVELY C HEAPER PRICES. IT IS ALSO APPARENT FROM THE A/RS SUBMISSION THAT EVEN THOUGH THE APPE LLANT HAD PRODUCED ITS BOOKS OF ACCOUNT AND STOCK RECORDS, NO DEFECTS OR INFIRMITIE S WERE POINTED OUT OR ESTABLISHED. THE IN-PUT OUT-PUT RATIO WAS NOT DISBELIEVED NOR PROVED TO BE BOGUS OR FALSE. BOOKS OF ACCOUNT WERE NOT REJECTED NOR PROVISIONS OF SEC. 14 5 WERE INVOKED. I ALSO FIND THAT ALTHOUGH NAMES AND ADDRESSES OF THE SUPPLIERS WERE MADE KNOWN; NO ENQUIRY FROM THE SUPPLIERS WAS MADE NOR ANY ATTEMPT WAS MADE BY THE AO TO ASCERTAIN AS TO WHETHER THESE SUPPLIERS HAD SOLD THE SAME GOODS AT THE SAME TIME TO OTHER CUSTOMERS AS WELL. NO ENQUIRY OF ANY NATURE WAS CARRIED OUT BY THE AO FRO M THE SUPPLIERS OF THE RAW- MATERIALS. ON THE CONTRARY, THE APPELLANT PRODUCED BEFORE ME COPIES OF THE BILLS ISSUED BY THE SAME SUPPLIERS TO OTHER CUSTOMERS WHICH PROV ED THAT THEY SUPPLIED THE SAME ITA NO.1801/KOL/2010 6 PRODUCTS AT THE SAME TIME TO OTHER CUSTOMERS AS WEL L AND THESE CUSTOMERS DID NOT ENJOY TAX EXEMPTION AS THEY WERE LOCATED IN WEST BENGAL. WITH REFERENCE TO THE DISCLOSED INVOICE PRICES THE SUPPLIERS PAID CENTRAL EXCISE DU TY & VAT. IF FOR THE PURPOSE OF PAYING SALE TAX AND EXCISE DUTIES INVOICE VALUE A D ISCLOSED BY THE SUPPLIERS WAS ACCEPTED AS GENUINE, THE AO COULD NOT DISBELIEVE AND DISREGA RD SUCH INVOICE VALUE MERELY ON THE BASIS OF SURMISE, CONJECTURE & SUSPICION. BEFORE TH E AO MADE AN ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE IT WAS NECESSARY FO R THE AO TO BRING ON RECORD COGENT AND IRREFUTABLE EVIDENCE TO SUBSTANTIATE THE CHARGE THAT THE APPELLANT HAD ACTUALLY INCURRED BUSINESS EXPENDITURE OUTSIDE ITS REGULAR B OOKS. BEFORE DRAWING AN ADVERSE INFERENCE IT WAS INCUMBENT ON THE AO TO CONDUCT ENQ UIRIES FROM THE SUPPLIERS TO ASCERTAIN THE CORRECT COST OF PURCHASE. HOWEVER NO ENQUIRIES WHATSOEVER WERE CONDUCTED FROM THE SUPPLIERS OF THE GOODS BUT THE ENQUIRY WAS CONDUCTED FROM THE ASSESSMENT RECORDS OF ANOTHER ASSESSEE AND THAT TOO WITHOUT GI VING ANY OPPORTUNITY OF REBUTTAL TO THE ASSESSEE. MOREOVER, WHEN THE APPELLANT FURNISHED EM PIRICAL DATA AND EVIDENCE TO SUBSTANTIATE THAT THE SUPPLIERS HAD SOLD THE SAME P RODUCT AT THE SAME TIME AND AT THE SIMILAR PRICES TO OTHER CUSTOMERS AS WELL, AND THE OPPORTUNITY OF REBUTTAL WAS GRANTED TO THE AO, THERE HAD BEEN NO RESPONSE. I FURTHER FIND THAT THE ENTIRE ADDITION U/S 69C WAS PROMPTED BY THE FACT THAT THE PROFITABILITY OF MEGH ALAYA UNIT OF THE APPELLANT WAS HIGHER THAN THE APPELLANTS OTHER MANUFACTURING UNITS WHIC H DID NOT ENJOY TAX EXEMPTION. THE ADDITION WAS BASED ON THE HYPOTHOSIS THAT THE HIGHE R PROFITABILITY OF MEGHALAYA UNIT WAS ACHIEVED BY SUPPRESSING COST OF PURCHASE OF RAW MATERIALS. IN THE COURSE OF APPEAL THE A/R FOR THE APPELLANT FILED COPIES OF THE ASSES SMENT ORDERS U/S 143(3) FOR THE ASST YEARS 2007-08 & 2008-09 IN WHICH NO ADDITIONS WERE MADE ON ACCOUNT OF ALLEGED UNDISCLOSED RAW MATERIAL PURCHASES EVEN THOUGH IN T HESE YEARS ALSO MEGHALAYA UNIT OF THE APPELLANT DISCLOSED HIGH PROFIT MARGINS AS COMP ARED WITH OTHER MANUFACTURING UNITS OF THE APPELLANT. IN THE YEAR UNDER CONSIDERATION T HE OVERALL PROFIT MARGIN OF THE APPELLANT WAS 11.60% WHEREAS THE MEGHALAYA UNIT OF THE APPELLANT DISCLOSED PROFIT MARGIN OF 46.72%. IN THE SUBSEQUENT 2 YEARS THE OVE RALL PROFITABILITY OF THE COMPANY WAS L4.32% AND L4.30%, WHEREAS PROFITABILITY OF MEG HALAYA UNIT IN THESE SUBSEQUENT YEARS WAS 51.99% AND 46.89% RESPECTIVELY. PROFITABI LITY OF APPELLANTS MEGHALAYA UNIT IN THE SUBSEQUENT YEARS WAS HIGHER AS COMPARED WITH A.Y. 2006-07 AND THE HIGHER PROFITABILITY WAS ACCEPTED BY THE AO IN THE ORDERS U/S 143(3) OF THE ACT. IT THEREFORE APPEARS THAT ON SAME SET OF FACTS NO ADVERSE INFERE NCE HAS BEEN DRAWN AGAINST THE APPELLANT IN THE SUCCEEDING ASSESSMENTS. 7. IN THE CIRCUMSTANCES, I DO NOT FIND ANY JUSTIFI CATION IN AOS ACTION OF MAKING ADDITION ON ACCOUNT OF ALLEGED UNDISCLOSED PURCHASE S OF RAW-MATERIALS ONLY IN A.Y.2006-07. THE ENTIRE ADDITION IN THE IMPUGNED OR DER WAS MADE ONLY ON THEORETICAL ASSUMPTION AND WITHOUT BRINGING ON RECORD ANY CLINC HING EVIDENCE WHICH ESTABLISHED THAT THE APPELLANT HAD ACTUALLY INCURRED ADDITIONAL EXPENDITURE ON PURCHASE OF RAW- MATERIALS. FOR ALL THE REASONS SET OUT IN ABOVE, I FIND THAT THE AOS FINDING THAT THE APPELLANT HAD INCURRED UNDISCLOSED EXPENDITURE OF R S.1,29,89,656/-ON PURCHASE OF RAW MATERIALS IS HYPOTHETICAL AT BEST AND UNJUSTIFIED A T WORST. THE ADDITION MADE U/S 69C OF THE ACT IS THEREFORE DELETED. GROUND NOS.1 TO 4 ARE THEREFORE ALLOWED. 3.3. ON ACCOUNT OF TRADING OPERATION AGAIN BY OBSER VING THAT 10. I HAVE GONE THROUGH THE ORDER OF THE A.O. AS W ELL AS THE SUBMISSIONS OF THE A/R AND THE CORRESPONDENCE BETWEEN THE PARTIES IN CONNECTIO N WITH THE TRADING TRANSACTIONS RESULTING IN A LOSS OF RS.49,75,587/-. ON SCRUTINY OF THE DETAILS FURNISHED BEFORE ME, IT APPEARS THAT THE TRADING TRANSACTIONS DURING THE RE LEVANT YEAR WERE CONFINED O DECEMBER ITA NO.1801/KOL/2010 7 05. PRIOR TO DECEMBER 05 THE APPELLANT HAD NEVER ENGAGED IN TRADING BUSINESS. HAVING REGARD TO THE PRIMA-FACIE FACTS IT COULD BE SAID TH AT THE AO HAD REASONS TO INVESTIGATE THE TRADING TRANSACTIONS OF THE APPELLANT IN WHICH IT H AD SUFFERED LOSS. HOWEVER, ON PERUSAL OF THE IMPUGNED ORDER I AGREE WITH THE SUBMISSIONS OF THE A/R THAT EXCEPT FOR COLLECTING THE DETAILS OF THE TRADING TRANSACTIONS THE AO DID NOT ANY TIME REQUIRE THE APPELLANT TO EXPLAIN THE CIRCUMSTANCES IN WHICH IT HAD ENTERED I NTO THESE TRADING TRANSACTIONS. IN HIS ORDER, THE AO HAS ADMITTED THAT PRIOR TO THESE TRAN SACTIONS IN DECEMBER 2005 THE APPELLANT HAD NEVER CARRIED OUT TRADING IN STEEL PR ODUCTS. IN OTHER WORDS IN THE YEAR UNDER CONSIDERATION THE APPELLANT FIRST COMMENCED I TS STEEL TRADING BUSINESS. THE APPELLANT DID NOT THEREFORE HAVE PREVIOUS EXPERIENC E OF TRADING IN STEEL PRODUCTS. THE PRICES OF STEEL PRODUCTS SHARPLY VARIED FROM TIME T O TIME DEPENDING ON THE FORCES OF SUPPLY AND DEMAND. IN THE CIRCUMSTANCES, A NEW COME R IN THE TRADING BUSINESS WAS NOT EXPECTED TO EARN PROFIT IN THE FIRST YEAR OF OPERAT ION. THE CORRESPONDENCE BETWEEN THE PARTIES INDICATED THAT THE APPELLANT HAD ENTERED TH E TRADING BUSINESS BECAUSE IT HAD RECEIVED ORDER FROM PARTHA ISPAT (I) PVT. LTD OF DH ANBAD FOR STEEL PRODUCTS OF PARTICULAR SPECIFICATIONS WHICH WERE NOT READILY AVAILABLE THE APPELLANT IN TURN PLACED AN ORDER ON RAV DRAVYA PVT. LTD FOR SUPPLY OF SPECIALIZED ITEMS AFTER RECEIPT OF PURCHASE ORDER FROM THE SAID DHANBAD PARTY. ON PLACING OF THE ORDE R THE APPELLANT HAD ISSUED CHEQUE OF ADVANCE PAYMENT OF RS.50 LACS FOR THE SUPPLIES TO B E MADE BY RAV DRAVYA PVT. LTD. DUE TO UNFORESEEN CIRCUMSTANCES RESULTING IN THE DE LAY OF DELIVERY; M/S. PARTHA ISPAT (I) PVT. LTD CANCELLED THE PURCHASE ORDER. CONSIDERING THE LONG TERM PROSPECTS AND BUSINESS OPPORTUNITIES THE APPELLANT HONOURED ITS TRADING CO MMITMENTS WITH FAV DRAVYA PVT. LTD WHO AGREED TO ARRANGE FOR RE-PURCHASE OF THE MA TERIAL THROUGH ONE OF ITS ASSOCIATE COMPANY. HAVING REGARD TO COMMERCIAL EXPEDIENCY AND THE BUSINESS CONSIDERATIONS INVOLVED IT COULD NOT BE SAID THAT THE APPELLANTS CONDUCT OF HONOURING ITS TRADE COMMITMENTS EVEN AT THE COST OF INCURRING LOSS WAS MALAFIDE OR BOGUS. IN FACT I FIND THAT BEFORE DRAWING ADVERSE INFERENCE THE AO SHOULD HAVE GIVEN AN OPPORTUNITY OF HEARING TO THE APPELLANT TO EXPLAIN THE CIRCUMSTANCES IN WH ICH TRADING TRANSACTIONS WERE CARRIED OUT. IN THE COURSE OF APPEAL, THE APPELLANT NOT ONL Y EXPLAINED THE CIRCUMSTANCES IN WHICH TRADING TRANSACTIONS WERE CONDUCTED BUT ALSO FILED COPIES OF THE CORRESPONDENCE BETWEEN THE PARTIES WHICH EXPLAINED THE CIRCUMSTANCES LEADI NG TO LOSS BEING INCURRED BY THE APPELLANT. ALTHOUGH OPPORTUNITY OF REBUTTAL WAS GRA NTED TO THE AO FOR THE REASONS BEST KNOWN, NO COMMENTS WERE SUBMITTED BY THE AO THOUGH SUFFICIENT TIME WAS GRANTED. 11. FROM THE WRITTEN SUBMISSIONS OF THE A/R I ALSO NOTE THAT THE APPELLANT CONTINUED WITH ITS TRADING ACTIVITIES IN THE SUBSEQUENT YEARS AS WELL. IN THESE YEARS THE APPELLANT CONTINUED TO SOURCE SUPPLIES OF THE MATERIALS FROM THE SAME RAM SARUP GROUP OF KOLKATA. AFTER INCURRING LOSS IN THE INITIAL YEAR T HE ASSESSEE MADE HANDSOME PROFIT OF RS.2.59 CRORES IN A.Y.2007-08 AND RS.3.07 CRORES IN A.Y.2008-09. IN THE REGULAR ASSESSMENTS U/S 143(3) FOR THESE 2 YEARS THE APPELL ANTS TRADING TRANSACTIONS WITH THE SAME RAM SARUP HAS BEEN ACCEPTED BY THE AO WITHOUT QUESTION. HAVING REGARD TO THE TOTALITY OF CIRCUMSTANCES, THEREFORE FIND CREDENCE IN THE A/RS SUBMISSIONS THAT THE LOSS WAS INCURRED BECAUSE OF EXCEPTIONAL CIRCUMSTANCES. THE TRADING OPERATIONS WERE CARRIED ON BY THE APPELLANT DURING THE RELEVANT YEAR FOR TH E FIRST TIME AND THE LOSS OCCURRED DUE TO CIRCUMSTANCES BEYOND THE APPELLANTS CONTROL AND IN AN EXCEPTIONAL BUSINESS SITUATION. THE AO NEVER DISPUTED THAT THE SALE AND PURCHASE WA S NOT EVIDENCED BY BILLS OR THAT TRANSACTIONS WERE NOT RECORDED IN THE BOOKS OF THE SUPPLIER AND THE PURCHASER. THE PAYMENTS FOR PURCHASE & SALES WERE THROUGH PROPER B ANKING CHANNEL. IT IS ALSO NOT THE CASE OF THE AO THAT THE TRADING TRANSACTIONS WERE U NVERIFIED. HAVING REGARD TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THEREFORE I HOLD THAT THERE WAS REASONABLE CAUSE FOR THE APPELLANT TO INCUR LOSS IN ITS TRADING TRANSACTIONS AND THE LOSS ITA NO.1801/KOL/2010 8 SUFFERED WAS NEITHER SHAM NOR BOGUS BUT IT HAD OCCU RRED DUE TO EXCEPTIONAL CIRCUMSTANCES. THE LOSS SUFFERED COULD NOT THEREFOR E BE DISALLOWED FOR THE PURPOSE OF COMPUTING BUSINESS INCOME OF THE APPELLANT. I THERE FORE DIRECT THE AO TO ASSESS THE LOSS IN TRADING OPERATIONS AND DISCLOSED AT RS.49,75,587 /-. 3.4. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING THE LD. DR APPEARING ON B EHALF OF THE REVENUE VEHEMENTLY ARGUED THAT THOUGH THERE IS NO DISPUTE T HAT THE LD. CIT(A) HAS FORWARDED THE WRITTEN SUBMISSIONS AND OTHER MATERIAL PLACED B EFORE HIM BY THE ASSESSEE FOR THE REMAND REPORT OF THE AO HE HAS NOT WAITED FOR THE R EMAND REPORT AND WITHIN THE REMAND REPORT HE HAS GIVEN THE RELIEF TO THE ASSESS EE BASED ON THE SUBMISSIONS AND THE MATERIAL PLACED BEFORE THE CIT(A). IN ADDITION TO THIS, HE SPECIFICALLY POINTED OUT THAT IN THE ASSESSMENT ORDER THE AO HAS SPECIFICALL Y ASKED THE ASSESSEE TO GIVE COMPLETE ACCOUNT BY LETTER DT.22.12.08, THE ASSESSE E WAS REQUESTED TO GIVE COMPLETE PURCHASE ACCOUNT OF PIG IRON & MS SCRAP IN RESPECT OF EACH UNIT OF THE ASSESSEE COMPANY. THE PURPOSE OF CALLING DETAILS WAS TO MAKE A GOOD COMPARISON OF THE PURCHASE RATES. THE ASSESSEE HAS REPLIED BY LETTER DT.23.12.08. HOWEVER, THE ASSESSEE HAS NOT GIVEN THE DETAILS AS ASKED FOR. THEREFORE, HE REQUESTED TO SET ASIDE THE ORDERS OF THE LD. CIT(A) ON BOTH THE ISSUES AND RESTORE THE M ATTER TO THE FILE OF AO FOR FRESH ADJUDICATION. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS REFERRED TO PAGE NO.2 PARA -1 WHEREIN THE LD. CIT( A) HAS CATEGORICALLY STATED THAT THE AO WAS DIRECTED BY HIM TO FURNISH HIS REPORT WITHIN SEVEN DAYS FROM THE RECEIPT OF HIS ORDER DATED 30 TH APRIL, 2010 REMAND THEREAFTER SENT ON 23.06.2010 B UT TILL DATE I.E. DATE OF THE ORDER DT.12.07.2010 NO REPORT OR COMMENTS ON THE DOCUMENTS AND SUBMISSIONS FURNISHED BY THE ASSESSEE HAS BEEN FURNISHED BEFORE THE LD. CIT(A). IN ADDITION TO THIS HE FURTHER POINTED OUT THE VARIOUS OBSERVATIONS MAD E BY THE LD. CIT(A) WHICH WERE NOT CONTROVERTED BY THE LD. DR AT THE TIME OF HEARI NG BUT ACCEPTED BY STATING THAT THE MATTER MAY BE RESTORED TO THE FILE OF AO. SINCE THE LD. CIT(A) WHO IS HAVING CO- TERMINUS POWERS THAN THE AO HAS RIGHTLY DELETED THE ADDITIONS MADE BY AO ON ITA NO.1801/KOL/2010 9 ACCOUNT OF PURCHASE AND ALLOWED THE TRADING LOSS BY TAKING INTO CONSIDERATION THAT FROM THE SAID TRADING BUSINESS THE ASSESSEE HAS SHO WN A PROFIT OF RS.2.59 CRORES IN THE A.YR. 2007-08 AND RS.3.07 CRORES IN THE A.YR. 2008- 09 WHICH WERE ACCEPTED BY THE REVENUE. THEREFORE, HE REQUESTED THAT THERE IS NO N EED FOR SETTING ASIDE OF THE MATTER TO THE FILE OF AO. THEREFORE HE REQUESTED TO CONFIR M THE ACTION OF THE LD. CIT(A) FOR GIVING THE REASONS ON BOTH THE ISSUES. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, AS REGARDING THE ADDITION MADE BY THE AO U/S 69 OF THE IT ACT TO THE EXTENT OF RS.1,29,89,656/- IT IS OBSERVED THAT THE AO HAS ADDED THE SAME AS THE ASSESSEE HAS NOT GIVEN COMPLETE PURCHASE ACCOUNT OF PIG IRON AND M.S.SCRAP IN EACH OF THE UNITS OF THE ASSESSEE COMPANY AND IT IS FURT HER OBSERVED THAT THE AO IS OF THE PRESUMPTION THAT THE ASSESSEE COMPANY HAS SUPPRESSE D THE COST OF RAW MATERIALS WITH THE SOLE MOTIVE OF INFLATING THE PROFITABILITY OF I TS MEGHALAYA UNIT WHICH QUALIFIES FOR DEDUCTION U/S 80IC OF THE IT ACT. HOWEVER, THE ASSE SSEE HAS FURNISHED THE DETAILS AND FILED THE SAMPLE COPIES OF THE INVOICES ISSUED BY M /S.ADHUNIK ISPAT LTD.,M/S. SARAF IRON FOUNDRY & ROLLING MILLS PVT. LTD AND M/S.SRI R AMRUPAI BALAJI STEELS LTD TO SOME THEIR WEST BENGAL BASED CUSTOMERS WHO COULD NO T AVAIL TAX CONCESSIONS U/S 80 IC OF THE ACT. IT IS FURTHER OBSERVED THAT THE LD. CIT(A) ON CAREFUL EXAMINATION OF THE INVOICES FOUND THAT THESE SUPPLIERS WERE REGISTERED WITH THE CENTRAL EXCISE AND SALES TAX AUTHORITIES AND THE GOODS SOLD TO THE ASSESSEE BY THE SUPPLIERS WERE PAYING BOTH EXCISE DUTY AND VAT WITH REFERENCE TO THE INVOICE P RICE. THE LD. CIT(A) HAS FURTHER OBSERVED THAT THERE IS NO EVIDENCE ON RECORD WHICH SHOWS THAT AN ADVERSE INFERENCE COULD BE DRAWN IN THESE REVENUE PROCEEDINGS AGAINS T THE SUPPLIERS FOR CHARGING EXCISE DUTY AND VAT WITH REFERENCE TO DISCLOSED INVOICE VA LUE. IT IS FURTHER OBSERVED THAT THOUGH THE LD. CIT(A) HAS GIVEN SUFFICIENT OPPORTUN ITY TO THE AO TO COMMENT ON THE WRITTEN SUBMISSIONS AS WELL AS THE MATERIALS SUBMIT TED BY THE ASSESSEE HE HAS NOT AVAILED THE SAME TILL THE DATE OF THE IMPUGNED ORDE R I.E. OVER A PERIOD OF THREE MONTHS. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO ACCEPT THE REQUEST OF THE LD. DR TO SET ASIDE THE MATTER TO THE FILE OF AO FOR FURTHER INVE STIGATION. KEEPING IN VIEW OF THE SPECIFIC OBSERVATIONS MADE IN THIS PARAGRAPH AND TH E OBSERVATIONS MADE BY THE LD. ITA NO.1801/KOL/2010 10 CIT(A) WHICH ARE INCORPORATED AT PARA 3.2, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) TO BE INTERFERED WITH AND FURTHER THERE IS N O NEED TO SET ASIDE THE ISSUE TO THE FILE OF AO AS REQUIRED BY THE LD. DR. THEREFORE, WE CONFIRM THE ACTION OF LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUND TAKEN BY THE REVE NUE. 6.1. AS REGARDING THE DELETION OF LOSS ON ACCOUNT O F TRADING OPERATIONS, THE LD. CIT(A) HAS CATEGORICALLY OBSERVED THAT THE ASSESSEE HAS SHOWN A PROFIT OF RS.2.59 CRORES IN THE A.YR.2007-08 AND RS.3.07 CRORES IN TH E A.YR.2008-09 WHICH WERE ACCEPTED BY THE REVENUE AND THESE OBSERVATIONS HAVE NOT BEEN CONTROVERTED BY THE LD. DR. IT IS FURTHER OBSERVED THAT WHILE DONG THE DISA LLOWANCE IT SEEMS THAT THE AO HAS NOT GIVEN PROPER OPPORTUNITY OF BEING HEARD ON THE SAID ISSUE WHICH IS EVIDENT FROM THE OBSERVATIONS MADE BY AO WHICH ARE INCORPORATED IN PARA 3.1. KEEPING IN VIEW OF THE ABOVE FACTS SINCE THE ASSESSEE HAS OFFERED THE SUBSTANTIAL PROFITS IN THE SUBSEQUENT YEARS FROM THE SAME TRADING ACTIVITY WITH THE SAME PARTIES WE FIND NO JUSTIFICATION ON THE PART OF AO TO DISBELIEVE THE LOSS INCURRED BY T HE ASSESSEE ON ACCOUNT OF THE ABOVE SAID TRADING. THEREFORE, WE CONFIRM THE ACTION OF L D. CIT(A) ON THIS ISSUE ALSO AND DISMISS THE GROUND OF THE REVENUE. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE COURT ON 09.11.2012. SD/- SD/- [ .''# $% , ] [ .., ] [ GEORGE MATHAN ] [ C. D. RAO ] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( ( ) )) ) DATE: 9.11.2012. R.G.(.P.S.) ITA NO.1801/KOL/2010 11 6 1 /((7 87*9- COPY OF THE ORDER FORWARDED TO: 1. M/S. SURYA ALLOYS INDUSTRIES LTD., 1/1, CAMAC STREE T, KOLKATA-700016. 2 THE D.C.I.T., CIRCLE-3, KOLKATA. 3. THE CIT- 4. THE CIT(A)-I, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 07 /(/ TRUE COPY, 6%3/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES
