Beetal Silk Mils Pvt.Ltd., Surat V. The Addl.CIT., Range-1, Surat

ITA 1888/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6798 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANISTA
• Keywords: Rejection of books of accounts; Fair market value; Corroborative evidences; Sham transactions
• Section: 133(6); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.1888/AHD/2007 A. Y.: 2004-05 BEELAL SILK MILLS PVT. LTD., T-1118-19, SURAT TEXTILE MARKET, RING ROAD, SURAT VS THE ADDL. C. I. T., RANGE-1, SURAT PA NO. AAACB 9578 K (APPELLANT) (RESPONDENT) ITA NO.2359/AHD/2007 A.Y.: 2004-05 THE ADDL. C. I. T., RANGE-1, SURAT VS BEELAL SILK MILLS PVT. LTD., T-1118-19, SURAT TEXTILE MARKET, RING ROAD, SURAT PA NO. AAACB 9578 K (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI VARTIK CHOKSI, AR DEPARTMENT BY SHRI R.K. DHANISTA, DR O R D E R PER BHAVNESH SAINI: BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, SURAT DA TED 20-03-2007 FOR ASSESSMENT YEAR 2004-05. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. BOTH THE APPEALS ARE DECIDED AS UNDER. ITA NO.1888/AHD/2007 (ASSESSEES APPEAL) ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 2 3. ON GROUND NO.1 OF THE APPEAL, THE ASSESSEE CHALL ENGED THE ADDITION OF RS.6,20,523/- ON ACCOUNT OF HIGHER WAST AGE. IN THE ASSESSMENT THE AO HAS STATED THAT THE ASSESSEE HAS SHOWN SHORTAGE AT THE RATE OF 4.16% IN PRODUCTION OF GREY CLOTH FROM YARN. THE SHORTAGE DURING THE PRECEDING YEAR WAS AT THE R ATE OF 2.82% AND THE SHORTAGE IN THE SUCCEEDING YEAR I.E. ASSESSMENT YEAR 2005-06 IS 3.09% AS PER THE RETURN FILED. THE AO ASKED THE ASS ESSEE TO EXPLAIN SUCH EXCESSIVE SHORTAGE. THE ASSESSEE REPLIED TO TH E AO THAT THE MAIN REASON FOR INCREASE IN WASTAGE WAS ON ACCOUNT OF NEW JACKQUARD MACHINES PURCHASED DURING THE YEAR WHERE THE WASTAGE WAS MORE AS THE LABOUR WAS NOT FULLY TRAINED TO RUN SUCH QUALITY MACHINES. THE AO DID NOT ACCEPT THIS EXPLANATION OF THE ASSESSEE AS IT WAS A VERY GENERAL REPLY. THE ASSESSEE ALSO STAT ED THAT DURING THE YEAR UNDER CONSIDERATION THE FABRIC WAS MANUFACTURE D ON JOB WORK BASIS FROM OUTSIDE PARTIES AND THE WASTAGE WAS MORE BECAUSE OF THIS REASON. THE AO AGAIN REJECTED THIS ARGUMENT AS IT W AS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. THE ASSESSEE ALSO STAT ED THAT DURING THE FIRST 45 DAYS OF THE FINANCIAL YEAR THERE WAS S TRIKE OF THE WEAVERS AS A RESULT OF WHICH THE MACHINERIES WERE DAMAGED L EADING TO INCREASE IN WASTAGE PERCENTAGE. THE AO VERIFIED THE DETAILS FURNISHED AND FOUND THAT THERE WAS NO BASIS FOR THIS CONTENTI ON BECAUSE THE WASTAGE IN ALL THE 12 MONTHS OF THE YEAR REMAINED A LMOST 4.16% AND THERE WAS NOT MUCH VARIATION COMPARED TO THE FIRST TWO MONTHS AS CLAIMED BY THE ASSESSEE. THE ASSESSEE FURTHER ARGUE D THAT ITS UNIT WAS LOCATED AT A PLACE WHERE NUMBER OF PROCESS HOUS ES WERE LOCATED WHICH EMITTED COAL ASH AS A RESULT OF WHICH ITS MACHINERIES WERE DAMAGED RESULTING INTO HIGHER RATE OF WASTAGE PERCENTAGE. THE ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 3 AO HAS STATED THAT THE ARGUMENT IS AGAIN MEANINGLES S BECAUSE SUCH A SITUATION EXISTED BOTH IN THE PREVIOUS YEAR AND T HE SUBSEQUENT YEAR. THE AO FURTHER STATED THAT A NOTICE U/S 133(6) WERE ISSUED TO SOME OF THE SALES AND DEBTOR PARTIES WHICH WERE EITHER RETU RNED WITH THE REMARK THAT THE PARTY HAS LEFT OR NO SUCH PERSON FO UND OR NO REPLY WAS RECEIVED. IN VIEW OF THESE REASONS THE AO HAS STATE D THAT THE PERCENTAGE OF WASTAGE SHOWN IN THE IMMEDIATE PRECED ING YEAR AS WELL AS IMMEDIATE SUCCEEDING YEAR IS 2.82% AND 3.09 % RESPECTIVELY GIVING AN AVERAGE OF 2.96%. AS AGAINST THIS, IN THE CURRENT YEAR THE ASSESSEE HAS SHOWN A MUCH HIGHER WASTAGE OF 4.16%. THE DIFFERENCE OF 1.2% WASTAGE AMOUNTS TO 5437.46 KGS. OF YARN SHOWN AS EXCESS WASTAGE DURING THE CURRENT YEAR. THE AO H AS STATED THAT ON THE BASIS OF AVERAGE RATE OF CLOSING STOCK OF YE ARN AND ON THE BASIS OF GP DISCLOSED BY THE ASSESSEE, THE SALE RAT E WORKS OUT TO RS.114.12 PER KG. THIS SHORTAGE THEREFORE, AMOUNTS TO SALES OUTSIDE BOOKS AMOUNTING TO RS.6,20,523/- WHICH WAS ADDED BA CK AS INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS SHORTAGE. BEFO RE THE LEARNED CIT(A), THE ASSESSEE REITERATED THE SAME SUBMISSION S MADE BEFORE THE AO AND FURTHER SUBMITTED THAT THE AO HAS NOT FO UND ANY DEFECT IN THE BOOKS OF ACCOUNTS AND THEREFORE, NO SUCH ADDITI ON SHOULD BE MADE. THE ASSESSEE HAS FURTHER SUBMITTED THAT THE A O HAS NOT REJECTED THE BOOKS OF ACCOUNTS AND THE GP RATE IS H IGHER DURING THE CURRENT YEAR COMPARED TO LAST YEAR AND THEREFORE, T HE ADDITION MADE BY THE AO HAS NO BASIS. ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 4 4. THE LEARNED CIT(A) HOWEVER, CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 3.3 OF THE IMPUGNED ORDER ARE REPRODUCED AS UN DER: 3.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATION OF THE AO. THE REASONS GI VEN BY THE APPELLANT BEFORE THE AO AND REPEATED DURING THE APPELLATE PROCEEDINGS ARE WITHOUT ANY BASIS AS HAS BEEN ARGUED BY THE AO AND QUOTED IN PARA 3.1. THE APPELL ANT HAS MISERABLY FAILED TO EXPLAIN THE SHORTAGES DURIN G THE YEAR COMPARED WITH THE SHORTAGE IN THE IMMEDIATELY PRECEDING AND IMMEDIATELY SUCCEEDING YEAR. THE REAS ON FOR STRIKE BY THE WORKERS GIVEN BY THE APPELLANT FA LLS FLAT IN VIEW OF THE FACT THAT THE VARIATION OF SHORTAGES WI TH RESPECT TO THE FIRST TWO MONTHS IS NOT MUCH WHEN TH ERE WAS STRIKE. THE SHORTAGES WERE ALMOST SAME DURING T HE ENTIRE PERIOD OF 12 MONTHS. SIMILARLY THE OTHER REA SONS LIKE COAL,, ASH ETC. FALLING ON MACHINES FROM THE C HIMNEYS IS MEANINGLESS BECAUSE THIS ENVIRONMENT WAS PRESENT IN EVERY YEAR. THE ARGUMENT OF THE APPELLANT THAT THE TRAINING OF LABOURERS WAS NOT ADEQUATE FOR THE NEW MACHINES IS ALSO MEANINGLESS BECAUSE NO DIFFERENCE IN PRODUCTION IS SEEN FROM MONTH TO MONTH. INITIALLY, THERE CAN BE MORE SHORTAGE BECAUSE OF INADEQUATE TRAINING BUT AFTER A FEW MONTHS NO SUCH THING SHOULD BE VISIBLE. THE DATE PROVIDED TO THE AO DOES NOT SHOW THIS. SINCE N O EXPLANATION HAS BEEN GIVEN BY THE APPELLANT THE ADD ITION MADE BY THE AO IS SUSTAINED AND THIS GROUND OF APPE AL IS DISMISSED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND SUBM ITTED THAT NEW MACHINERY WAS PURCHASE DURING THE YEAR, THEREFORE W ASTAGE WAS MORE AND LABOURERS WERE NOT FULLY TRAINED TO RUN SU CH QUALITY MACHINE. FURTHER, THERE WAS STRIKE BY THE WORKERS A ND FURTHER SOME MACHINERY WAS DAMAGED. THEREFORE, THERE WAS EXCESSI VE WASTAGE IN ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 5 THE YEAR UNDER CONSIDERATION. HE HAS SUBMITTED THAT BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE AO AND THAT IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS SHOW N HIGHER GP RATE OF 18.63% AS AGAINST 16,78% SHOWN IN THE PRECE DING ASSESSMENT YEAR. THE SALES ARE ALSO HIGHER AS COMPA RED TO THE EARLIER YEARS AND THE DETAILS OF THE SAME ARE REFER RED AT PAGE 12 OF THE PAPER BOOK. HE HAS RELIED UPON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SIDDHESWARI COTT ON MILLS PVT. LTD. VS CIT 117 ITR 953 IN WHICH IT WAS HELD THAT TEXTILE MILLS PRODUCTION ACCOUNT INDICATED MORE WASTAGE THAN IN T HE PRECEDING YEAR. EXPLANATION OF THE ASSESSEE REJECTE D AND ADDITION WAS MADE. NO REJECTION OF BOOKS OF ACCOUNT AND NO BASIS SHOWN FOR THE AMOUNT ADDED BY THE TRIBUNAL ON ASSUMING PROJECTION OF CLOTHES. ADDITION NOT JUSTIFIED. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON OTHER DEC ISIONS REFERRED IN THE PAPER BOOK. ON THE OTHER HAND, THE LEARNED DR R ELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IN THE WHOLE YEAR THERE WAS HIGHER WASTAGE AS COMPARED TO THE LAST YE AR; THEREFORE, ADDITION HAS BEEN RIGHTLY MADE. HE HAS RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT REPORTED IN 194 ITR 1 97. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION IS CLEARLY UNJUSTIFIED. IN THE AS SESSMENT YEAR UNDER APPEAL THE ASSESSEE HAS SHOWN SHORTAGE/WASTAGE @ 4. 16% IN THE PRODUCTION OF GREY CLOTHES IN YEAR WHICH WAS ON C OMPARISON FOUND TO BE EXCESSIVE. THE ASSESSEE EXPLAINED THE REASONS THAT SINCE NEW MACHINE WAS PURCHASED, THEREFORE, WORKERS COULD NOT HANDLE IT ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 6 PROPERLY AND FURTHER THERE WAS STRIKE BY THE LABOUR ERS AND FURTHER FABRICS MANUFACTURED ON JOB WORK BASIS FROM OUTSIDE PARTIES. IT WAS ALSO EXPLAINED THAT THE MACHINERY ALSO GOT DAMAGED DUE TO STRIKE. THE AO INSTEAD OF VERIFYING THESE FACTS, MERELY GON E BY THE FACT THAT THE WASTAGE IS EXCESSIVE AS COMPARED TO EARLIER YEA RS. IT IS, THEREFORE, NOT A DENYING FACT THAT IN THE BUSINESS OF THE ASSESSEE SHORTAGE/WASTAGE IS BOUND TO BE THERE. THERE WAS A SLIGHT MORE SHORTAGE/WASTAGE IN THE YEAR UNDER CONSIDERATION AS COMPARED TO THE PRECEDING YEAR. IT IS ALSO A FACT THAT THE SALES AN D GP RATE OF THE ASSESSEE IS HIGHER IN THE ASSESSMENT YEAR UNDER APP EAL AS COMPARED TO THE PRECEDING ASSESSMENT YEAR. THE AO H AS NOT FOUND ANY DEFECTS IN THE ACCOUNTS OF THE ASSESSEE AND NO MATERIAL HAS BEEN BROUGHT ON RECORD TO PROVE THAT HOW THE ASSESS EE HAS CLAIMED EXCESSIVE WASTAGE WHICH IS NOT SUPPORTED THROUGH EV IDENCES AND MATERIAL ON RECORD. MERELY BECAUSE THE SHORTAGE/WAS TAGE IS SLIGHTLY HIGHER AS COMPARED TO THE PRECEDING ASSESSMENT IS N O GROUND TO MAKE ADDITION. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. IN THE RESULT, GROUN D NO.1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. ON GROUNDS NO.2 AND 3, THE ASSESSEE CHALLENGED T HE ADDITION OF RS.2,22,887/- FOR DIFFERENCE IN STOCK STATEMENT GIVEN TO THE BANK AND THE STOCK AS PER THE BOOKS OF ACCOUNTS. IN THE ASSESSMENT ORDER, THE AO HAS STATED THAT DURING THE YEAR THE STOCK AS PER BOOKS OF ACCOUNTS IS LESS AS COMPARED TO STOCK REPORTED TO T HE BANK AND THE DIFFERENCE IS 1201.354 IN QUANTITY IN THE CASE OF Y ARN. IN THE CASE OF GREY STOCK THE STOCK AS PER BOOKS OF ACCOUNTS IS LE SS AS COMPARED TO ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 7 STOCK REPORTED TO THE BANK IN THE MONTH OF JUNE, JU LY, AUGUST, SEPTEMBER, OCTOBER, NOVEMBER, DECEMBER AND FEBRUARY . THE MAXIMUM EXCESS OF THE STOCK IS REPORTED IN THE MONT H OF OCTOBER IS 8358.27 IN QUANTITY. THE ASSESSEE WAS ASKED TO EXPL AIN THE DIFFERENCE. THE ASSESSEE EXPLAINED TO THE AO THAT T HE DIFFERENCE IN STOCK GIVEN TO THE BANK ON THE LAST FRIDAY OF THE M ONTH IS ON AD HOC BASIS AND THE BOOKS OF ACCOUNTS ARE MAINTAINED 15 K MS. AWAY FROM THE MARKET AND THE CHALLANS ARE RECEIVED AFTER 2-3 DAYS TIME. ACCORDING TO THE ASSESSEE THIS IS THE REASON FOR DI FFERENCE. THE AO DID NOT ACCEPT THE REPLY AND RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF RECON MACHINE T OOLS PVT. LTD. 286 ITR 637. THE AO, THEREFORE, STATED THAT THE VAL UE OF YARN AS PER VALUATION OF CLOSING STOCK WAS RS.95/- AND IT WAS R S. 13/- IN THE CASE OF GREY CLOTH. HE, THEREFORE, WORKED OUT THE EXCESS STOCK OF BOTH YEARN AND GREY CLOTH TO RS. 1,14,146/- AND RS.1,08, 741/- RESPECTIVELY AND MADE ADDITION OF RS.2,22,887/-. BEFORE THE LEAR NED CIT(A), THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND SUBMITTED THAT THE BANK REQUIRED THE STATEMENT OF S TOCK ON EVERY LAST FRIDAY OF THE MONTH. THE ACCOUNTANT GAVE THE STATEM ENT TO THE BANK ON FRIDAY MORNING WITHOUT INCORPORATING THE TRANSAC TION OF FRIDAY. 8. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE DISMISSED THESE GROUNDS OF APPEAL OF THE A SSESSEE. HIS FINDINGS IN PARA 4.3 OF THE APPELLATE ORDER ARE REP RODUCED AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATIONS OF THE AO. THE APPELLANT HAS FAILED TO EXPLAIN THROUGH SUPPORTING EVIDENCE AS TO WHY ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 8 THERE WAS DIFFERENCE IN THE QUANTITY OF STOCK GIVEN TO THE BANK OR WITH THE STOCK IN THE BOOKS OF ACCOUNTS. IT IS POSSIBLE THAT FOR THE PURPOSE OF OBTAINING CREDIT T HE APPELLANT MAY SHOW LESSER STOCK TO THE BANK IF ITS PURPOSE IS SERVED WITH THAT MUCH OF STOCK BUT IT CANNOT BE EXPLAINED AS TO HOW THE APPELLANT CAN SHOW MORE STO CK TO THE BANK COMPARED TO THE STOCK IN THE BOOKS OF ACCO UNT. HOW CAN THE ASSESSEE SHOW HIGHER STOCK TO THE BANK WHEN IT DOES NOT EXIST? IT LEADS TO ONLY ONE CONCLU SION THAT THE ASSESSEE HAS NOT BEEN SHOWING CORRECT STOC K IN THE BOOKS OF ACCOUNTS. IN THE CASE OF RECON MACHINE TOOLS PVT. LTD. (SUPRA) THE HONBLE KARNATAKA HIGH COURT STATED THAT NO ACCEPTABLE EVIDENCE WAS PLACED BY TH E ASSESSEE TO DISBELIEVE THE BANK STATEMENT AS RIGHTL Y HELD BY THE AUTHORITIES IN THE CASE ON HAND. IN FACT, TH E ENTIRE AMOUNT SHOWN PERTAINS ONLY TO THE RAW MATERIALS. IN SO FAR AS THE RAW MATERIALS ARE CONCERNED, THE SAME ARE REQUIRED TO BE SUPPORTED BY VARIOUS STATUTORY REGIS TERS AS RULED BY THE AUTHORITIES. IN THE CIRCUMSTANCES, IN THE ABSENCE OF ACCEPTABLE MATERIAL, IT IS NOT POSSIBLE FOR THIS COURT TO DISLODGE THE FINDINGS OF FACTS, PARTICULAR LY ION THE LIGHT OF THE BANKS STATEMENT WHICH IS UNDISPUTED B Y THE ASSESSING AUTHORITY. FROM THE ABOVE IT IS CLEAR THA T THE ADDITION MADE BY THE AO IS CORRECT AND THE APPELLAN T HAS FAILED TO SHOW WHY HIGHER STOCK WAS SHOWN TO THE BA NK WHEN THE SAME DID NOT EXIST IN THE BOOKS OF ACCOUNT S. NO MATERIAL EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE APPELLANT TO RECONCILE THE GAP AS STATED BY THE APP ELLANT THAT THE ACCOUNTANT DID NOT INCLUDE THE MATERIALS PURCHASED OR SOLD ON THE LAST FRIDAY OF THE MONTH. IN VIEW OF THE ABOVE THE ADDITION MADE BY THE AO IS CONFIRM ED AND THIS GROUND OF APPEAL IS DISMISSED. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT SINCE THE STATEMENT GIVEN TO THE BANK WAS ONLY ON A D HOC BASIS AND NO DIFFERENCE WAS FOUND IN THE STOCK STATEMENT AND QUANTITATIVE DETAILS AS PER THE BOOKS OF ACCOUNT, THEREFORE, MER ELY EXCESS STOCK IN ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 9 AMOUNT REPORTED TO THE BANK IN THE MONTH OF OCTOBER IS NO GROUND TO MAKE THE ADDITION. HE HAS FILED SUMMARY OF DIFFEREN CES BETWEEN THE BOOK STOCK AND THE STOCK AS PER BANK STATEMENT (ANN EXURE I) AND SUBMITTED THAT FOR YARN THE QUANTITY OF STOCK AS PE R BOOK IS 1202401.329 AND AS PER BANK STATEMENT 1006360.780 A ND FOR GREY QUANTITY AS PER BOOKS IS 4571620.16 AND AS PER BANK STATEMENT IT IS 4528550.67. THE DETAILS PRODUCED TO THE BANK AND HY POTHECATED IN ANNEXURE II IS ALSO FILED. HE HAS, THEREFORE, SUBM ITTED THAT THE QUANTITY OF STOCK AS PER BOOKS WAS HIGHER AS COMPAR ED TO THE BANK STATEMENT. HE HAS SUBMITTED THAT THE MATTER REQUIRE S RECONSIDERATION AT THE LEVEL OF THE AO. THE LEARNED DR ALSO SUGGEST ED THAT THE MATTER MAY BE RESTORED TO THE AO FOR RECONSIDERATION. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. THE HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS PUNJAB RICE AND GENERAL MILLS 264 IT R 582 CONSIDERING IDENTICAL ISSUE HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT THE COMMISSIONER (APPEALS) HAD FOUND THAT THE APPELLANT-FIRM HAD GIV EN REASONS FOR NOT REPLYING UPON THE STOCK STATEMENTS AS GIVEN TO THE BANK. THE STATEMENTS HAD BEEN GIVEN OVER A LONG PERIOD OF TIME. THERE WAS NO BIFURCATIO N OF RICE AND PADDY AND THE ENTIRE STOCKS HAD BEEN VALUED AT A CONSTANT RATE. THE FINDING RECORDED BY THE COMMISSIONER (APPEALS) WHICH WAS CONFIRMED BY THE TRIBUNAL THAT THERE WAS NO SIGNIFICANT DISCREPANCY BETWEEN THE STOCK MAINTAINED BY THE ASSESSEE AND THE BANK STATEMENT DID NOT SUFFER FROM ANY PATENT LEGAL INFIRMITY. NO MATERIAL WAS PRODUCED BY THE DEPARTMENT TO SHOW THAT THE ASSESSEE HAD DELIBERATELY OVERVALUED THE STOCK OF THE PURPOSE OF ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 10 SECURING HIGHER CREDIT FROM THE BANK. THEREFORE, TH E SO-CALLED DISCREPANCY BETWEEN THE BANK STATEMENT AND THE ACCOUNT BOOKS COULD NOT BE MADE THE BASIS FOR MAKING ADDITIONS IN THE DECLARED INCOME OF THE ASSESSEE. IN THIS CASE, THE ASSESSEE FILED REPLY BEFORE THE A O ALONG WITH THE STOCK STATEMENT AND QUANTITATIVE DETAILS OF STOCK A VAILABLE WITH THE ASSESSEE AS PER BOOKS OF ACCOUNTS AS WELL AS FILED TO THE BANK. THE AO FOUND FROM THE BANK STATEMENT THAT THERE WAS EXC ESS STOCK REPORTED IN SOME OF THE MONTHS & MAXIMUM IN OCTOBER . ON THE OTHER HAND , THE ASSESSEE EXPLAINED THAT STOCK STATEMENT TO THE BANK WAS GIVEN ON LAST FRIDAY OF THE MONTH WHICH WAS ON AD HOC BASIS AND BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED AT 15 KM FROM THE MAR KET AND CHALLANS ARE RECEIVED IN 2/3 DAYS TIME. THE AO INST EAD OF APPRECIATING THE EXPLANATION OF THE ASSESSEE IN PRO PER PERSPECTIVE HAS GONE BY THE DIFFERENCE IN THE QUANTITATIVE DETA ILS OF STOCK PREPARED AS PER THE BOOKS OF ACCOUNTS AND STOCK STA TEMENT FILED TO THE BANK, IN WHICH ALSO ACCORDING TO THE LEARNED CO UNSEL FOR THE ASSESSEE ULTIMATELY THE QUANTITY OF STOCK IN THE BO OKS OF ASSESSEE WAS HIGHER AS COMPARED TO THE QUANTITY REPORTED TO THE BANK, A ND RELYING UPON THE DECISION IN THE CASE OF RECON MACHINE TOOLS PVT . LTD. (SUPRA) PROCEEDED TO MAKE THE ADDITION. THE AO HAS NOT VERI FIED THE EXPLANATION OF THE ASSESSEE AND HAS ALSO NOT VERIFI ED THE FACT THAT WHETHER THERE WAS ANY STOCK DIFFERENCE IN THE HAND OF THE ASSESSEE IN AND OF YEAR . NO MATERIAL WAS BROUGHT ON RECORD BY THE AO TO SHOW THAT THE ASSESSEE HAD DELIBERATELY OVERVALUED THE STOCK. THE REFORE, THE FINDINGS OF THE AUTHORITIES SUFFER FROM PATENT LEGA L INFIRMITY. THE MATTER, THEREFORE, REQUIRES RECONSIDERATION WHICH I S ALSO SUGGESTED BY ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 11 BOTH THE PARTIES. WE ACCORDINGLY, SET ASIDE THE ORD ERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF THE AO WITH DIRECTION TO RE-DECIDE THIS ISSUE IN THE LIGHT OF T HE OBSERVATIONS MADE ABOVE AND IN THE LIGHT OF THE DECISION IN THE CASE OF PUNJAB RICE AND GENERAL MILLS (SUPRA). IN THE RESULT, GROUNDS NO.2 AND 3 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE S. 11. ON GROUND NO.4, THE ASSESSEE CHALLENGED THE DIS ALLOWANCE OF RS.2,07,145/- ON ACCOUNT OF INTEREST PAID TO BANK O N CC. THE AO NOTED THAT THE ASSESSEE HAS MADE FD WITH THE BANK. IT WAS NOTED THAT IN THE LAST YEAR SIMILAR ADDITION WAS MADE WHI CH IS CONFIRMED BY THE LEARNED CIT(A). THE LEARNED CIT(A) REJECTED THI S GROUND OF APPEAL BY FOLLOWING HIS APPELLATE ORDER FOR ASSESSMENT YEA R 2003-04 DATED 21-11-2006. THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT IN THE PRECEDING ASSESSMENT YEAR 2003-04 THE MATTER TR AVELED TO THE ITAT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESS EE IN ITA NO.350/AHD/2007 AND THE TRIBUNAL VIDE ORDER DATED 0 7-05-2010 DELETED SIMILAR ADDITION (PB 35 AND 36). THE LEARNE D DR CONCEDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL ABOVE. 12. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE ADDITION CANNOT BE SUSTAINED. THE AO NOTED THAT SIM ILAR ADDITION IS MADE IN THE PRECEDING YEAR WHICH IS ALSO CONFIRMED. SINCE THE TRIBUNAL HAS DELETED THE IN THE ASSESSMENT YEAR 200 3-04, THEREFORE, THE ORDERS OF THE AUTHORITIES BELOW WOULD NOT SURVI VE. BY FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2003-04 ( SUPRA), WE SET ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 12 ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELET ED THE ADDITION. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASSESSEE I S ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO.2359/AHD/2007 (DEPARTMENTAL APPEAL) 14. ON GROUND NO.1, THE REVENUE CHALLENGED THE DELE TION OF ADDITION RS.18,55,861/- ON ACCOUNT OF SALE AT A LOW ER RATE TO THE SPECIFIED PERSONS. IN THE ASSESSMENT ORDER THE AO S TATED THAT THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF SALES TO SPECIFIED PERSONS. ACCORDING TO THE AO THE ASSESSEE HAS MADE SALES OF 4.11 LACS IN QUANTITY AT THE AVERAGE RATE OF RS.33.05 FOR A TOTA L CONSIDERATION OF RS.117.10 LACS. THE AO HAS STATED THAT THE ASSESSEE HAS ALSO SOLD 37.46 LACS IN QUANTITY AT THE AVERAGE RATE OF RS.37 .56 FOR A CONSIDERATION OF RS.1407.27 LACS. THE AO ASKED THE ASSESSEE AS TO WHY THE SALES WERE MADE TO SPECIFIED PERSONS AT A L ESSER RATE. THE RATE AT WHICH THE GOODS WERE SOLD TO SPECIFIED PERS ONS WAS LESS BY RS.4.51 ON AN AVERAGE SHOWING LESSER SALES BY RS.18 .56 LACS. THE AO ASKED AS TO WHY THIS AMOUNT BE NOT ADDED BACK BE CAUSE THE ASSESSEE HAS SOLD GOODS AT A LOWER PRICE TO SPECIFI ED PERSONS. THE ASSESSEE EXPLAINED TO THE AO THAT THE ASSESSEE COMP ANY HAD SOLD THE GOODS TO THE SPECIFIED PERSONS ON THE SAME RATE AS HAS BEEN SOLD TO OTHER PARTIES. THE QUALITY OF THE MATERIAL DEALT WITH IS DIFFERENT FOR OUTSIDE PARTIES WITH RESPECT TO THE SPECIFIED PARTI ES. THE ASSESSEE ENCLOSED COPIES OF BILLS IN ITS SUPPORT. THE ASSESS EE ARGUED THAT THE PAYMENTS MADE BY THE SISTER CONCERNS WERE PASSED CO MPARED TO OTHER PARTIES AND THE ASSESSEE COMPANY ALSO SAVED O N BROKERAGE ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 13 AND PACKING IN SUPPLYING GOODS TO THE SISTER CONCER NS. THE AO DID NOT ACCEPT THIS EXPLANATION AND MADE AN ADDITION OF RS.18,55,861/- IN THE INCOME OF THE ASSESSEE AS DIVERTING THE INCOME TO THE SISTER CONCERN. BEFORE THE LEARNED CIT(A) THE ASSESSEE SU BMITTED THAT IT APPEARS THAT THE AO HAS APPLIED THE PRINCIPLE OF SE CTION 40A(2)(B) OF THE IT ACT TO SALES WHEREAS THE PROVISIONS OF SECTI ON 40A(2)(B) OF THE IT ACT ARE APPLICABLE TO PURCHASES OR EXPENSES INCU RRED WITH RESPECT TO THE SPECIFIED PERSONS. THE ASSESSEE HAS ARGUED T HAT THERE IS NO PROVISION IN THE ACT WHEREBY THE AO CAN MAKE AN ADD ITION OF SALE AMOUNT SAYING THAT THE GOODS HAS BEEN SOLD AT A LES SER RATE. THE ONLY PROVISION UNDER THE IT ACT IS SECTION 40A (2) (B) WHERE ANY EXPENDITURE PAID TO SPECIFIED PARTIES OR PURCHASED MADE FROM SPECIFIED PARTIES CAN BE EXAMINED WITH RESPECT TO T HE FAIR MARKET VALUE. THERE IS NO PROVISION IN THE IT ACT WHERE SA LES TO SISTER CONCERNS HAS BEEN COMPARED TO WITH RESPECT TO THE F AIR MARKET VALUE. THE ASSESSEE ARGUED THAT THIS IS NOT A CASE OF EXPE NDITURE INCURRED OR PAYMENT MADE TO SPECIFIED PERSONS AND HENCE IT I S NOT COVERED BY SECTION 40A (2) (B) OF THE IT ACT. THE ASSESSEE HAS FURTHER ARGUED THAT ON PAGE 2 OF THE ASSESSMENT ORDER THE AO HIMSE LF HAS STATED THAT DURING THE YEAR THE SALES IS RS.1637.58 LACS A S COMPARED TO RS.1225.49 LACS IN THE LAST YEAR AND THE GP RATE DU RING THE YEAR IS 18.63% AS COMPARED TO 16.78% IN THE LAST YEAR. HENC E, THE SALES AS WELL AS GP RATE BOTH ARE HIGHER THAN IN THE LAST YE AR. THE ASSESSEE HAS ARGUED THAT THE QUALITY OF CLOTH SOLD TO SISTER CONCERN IS DIFFERENT FROM THE QUALITY OF CLOTH SOLD TO OTHER PARTIES AND THEREFORE, THERE IS NO SALE AT A LOWER RATE BUT THE SAME IS AS PER THE QUA LITY SOLD. THE ASSESSEE HAS ARGUED THAT NO SUCH ADDITION CAN BE MADE BY TAKING OUT ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 14 AVERAGES. THE ASSESSEE HAS FURTHER ARGUED THAT THE JACKQUARD CLOTH SOLD TO SISTER CONCERN WAS AT RS.83.43 PER METRE AN D TO OTHER PEOPLE AT RS.101.50 PER METRE. IN RESPECT OF OTHER SALES, THE SALES MADE TO SPECIFIED PERSON IS AT RS.33.61 PER METRE AND TO OT HER PARTIES AT RS.34.39 PER METRE ON AN AVERAGE. THE ASSESSEE HAS ARGUED THAT THE SALES MADE TO SPECIFIED PERSON IS AT LOWER RATE BECAUSE IT WAS WITHOUT PACKING BOX COST OF WHICH IS RS.10 PER NORM AL SAREE AND RS.25 PER JACKQUARD SAREE AND FURTHER BROKERAGE IS PAID AMOUNTING TO 1 TO 1.5% OF SALE PRICE IN RESPECT OF SALES MADE TO OUTSIDE PARTIES WHICH IS SAME IN RESPECT OF SPECIFIED PERSONS. HENC E, ACCORDING TO THE ASSESSEE IF THIS FACT IS TAKEN INTO ACCOUNT THE N THE SALE HAS NOT BEEN MADE AT A LOWER RATE TO SPECIFIED PERSON. THE ASSESSEE HAS FURTHER STATED THAT AS PER THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS CALCUTTA DISCOUNT CO. LTD. 91 ITR 8 WHERE A TRADER TRANSFER ITS GOODS TO ANOTHER TRADER AT A PR ICE LESS THAN THE MARKET PRICE AND THE TRANSACTION IS A BONA FIDE ONE , THE TAXING AUTHORITY CANNOT TAKE INTO ACCOUNT THE MARKET PRICE OF GOODS IGNORING THE REAL PRICE FETCHED TO ASCERTAIN NOTIONAL OR FIC TIONAL PROFIT FROM THE TRANSACTION. THE DECISION OF THE HONBLE MADRAS HIG H COURT IN THE CASE OF SHRI RAMALINGA CHOODAMBAKIA MILLS LTD. VS C IT 28 ITR 592 WAS ALSO RELIED UPON BY THE ASSESSEE WHEREIN IT HAS BEEN STATED THAT IN ABSENCE OF EVIDENCE TO SHOW EITHER THAT THE SALE S WERE SHAM TRANSACTIONS OR THAT THE MARKET PRICE WERE IN FACT PAID BY THE PURCHASER, THE MERE FACT THAT THE GOODS WERE SOLD A T A CONFESSIONAL RATE TO BENEFIT THE PURCHASERS AT THE EXPENSES OF T HE ASSESSEE COMPANY WOULD NOT ENTITLE THE INCOME-TAX DEPARTMENT TO ASSESS THE DIFFERENCE BETWEEN THE MARKET PRICE AND THE PRICED PAID BY THE ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 15 PURCHASERS AS THE PROFITS OF THE COMPANY. FURTHER, THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS A. RAMAN & CO. 67 ITR 11 WHERE IN IT HAS BEE N HELD THAT THE LAW DOES NOT OBLIGE A TRADER TO MAKE THE MAXIMUM PR OFIT THAT HE CAN MAKE OUT OF HIS TRADING TRANSACTION. INCOME WHICH A CCRUES TO A TRADER IS TAXABLE IN HIS HANDS. INCOME WHICH HE COULD HAVE , BUT HAS NOT EARNED, IS NOT MADE TAXABLE AS INCOME ACCRUED TO HI M. 15. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE DELETED THE ADDITION. HIS FINDINGS IN THE APPELLATE ORDER IN PARA 2.5 ARE REPRODUCED AS UNDER: 2.5 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATION OF THE AO. THE AO HAS NOT GONE INTO THE QUALITY OF GOODS SOLD BY THE APPELLAN T EITHER TO THE SISTER CONCERN OR TO THE OUTSIDE PARTIES. NO SUCH COMPARISON QUALITY-WISE OR PRODUCT-WISE HAS BEEN MA DE. THE AO HAS MERELY SEEN SOME AVERAGES AND STATED THA T THE APPELLANT HAS SOLD GOODS AT A LOWER RATE TO THE SISTER CONCERN THAN TO THE OUTSIDE PARTIES. THE AO HAS STA TED THAT THE APPELLANT SHOULD NOT HAVE SOLD THE GOODS A T A LOWER RATE TO THE SISTER CONCERN AND HAS THEREFORE MADE AN ADDITION OF DIFFERENCE IN THE AVERAGE RATE OF GO ODS SOLD TO THE SISTER CONCERN AND GOODS SOLD TO THE OUTSIDE PARTIES. THE AO HAS NOT SPECIFIED ANY PROVISION UND ER THE ACT OR ANY CASE LAW TO SHOW THAT SUCH AN ADDITION I S WARRANTED. THE AO SEEMS TO HAVE FOLLOWED THE PRINCI PLES OF SECTION 40A (2) (B) WHICH IS APPLICABLE ONLY IN RESPECT OF PAYMENTS MADE TO SISTER CONCERNS OR PURCHASES MA DE FROM SISTER CONCERN. THERE IS NO PROVISION UNDER TH E INCOME-TAX ACT WHEREBY GOODS SOLD AT A LOWER RATE T O SISTER CONCERN CAN BE TREATED AS DIVERSION OF INCOM E. THE ONLY WAY THE AO COULD HAVE CONSIDERED MAKING ADDITI ON IN THIS REGARD WAS TO PROVE THAT IN FACT HIGHER AMO UNT OF MONEY HAS BEEN PAID BY THE PURCHASER TO THE ASSESSE E ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 16 COMPANY AS DECIDED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SHRI RAMALINGA CHOODMBIKAIA MILLS (SUPR A). THE AO HAS NO JURISDICTION TO GO INTO THE RATE OF S ALES TO SISTER CONCERN AND SEE ITS VALUE WITH RESPECT TO TH E SALE MADE TO OUTSIDE PARTIES AS STATED BY THE HONBLE SUPREME COURT IN THE CASE OF CALCUTTA DISCOUNT CO. (SUPRA). THE AO HAS BROUGHT NOTHING ON RECORD TO SH OW THAT IN FACT HIGHER AMOUNT WAS RECEIVED BY THE ASSE SSEE COMPANY FROM THE PURCHASERS. THE AO HAS ALSO NOT MA DE UP ANY CASE OF COLLUSION TO DEFRAUD THE REVENUE. IN VIEW OF THESE REASONS THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE AND HENCE IT IS DELETED. THIS GROUND OF APPEAL IS THEREFORE ALLOWED. 16. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE AO DID NOT APPLY THE PROVISIONS OF SECTION 40A(2) (B) OF THE IT ACT AND THAT SALES HAVE BEEN MADE TO THE SISTER CON CERN AT LOWER RATES, THEREFORE, THE LEARNED CIT(A) WAS NOT JUSTIF IED IN DELETING THE ADDITION. ON THE OTHER HAND, THE LEARNED COUNSEL FO R THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. 17. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE ON THIS GROUND. THE AO HAS NOT GONE INTO THE QUALITY OF THE GOODS SOLD BY THE ASSE SSEE EITHER TO THE SISTER CONCERN OR TO THE OTHER PARTIES. NO COMPARIS ON OF QUALITY AND QUANTITY HAS BEEN MADE. MERELY IT WAS STATED THAT T HE GOODS WERE SOLD AT LOWER RATE TO THE SISTER CONCERN WHICH ITSE LF IS NO GROUND TO MAKE THE ADDITION BECAUSE IT IS THE PREROGATIVE OF THE BUSINESSMAN TO SEE AS TO AT WHICH PRICE HE HAS TO SELL HIS GOODS. THE ASSESSEE EXPLAINED BEFORE THE AO THAT QUALITY AND MATERIAL W AS DIFFERENT TO THE SISTER CONCERN AND THE OUTSIDERS AND THAT WHEN SALE S WERE MADE TO THE SISTER CONCERN, THE ASSESSEE SAVED BROKERAGE AN D PACKING ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 17 EXPENSES IN SUPPLYING THE GOODS. THESE FACTORS WER E OVERLOOKED BY THE AO AND HE HAS GONE ONLY BY SALE RATES. THE LEAR NED DR STATED THAT THE AO HAS NOT APPLIED THE PROVISIONS O F SECTION 40A (2) (B) OF THE IT ACT. THE LEARNED CIT(A) HAS, THEREF ORE, CORRECTLY NOTED THAT NO SUCH ADDITION CAN BE MADE WITHOUT APPLYING THE ABOVE PROVISIONS IN CASE OF SALES MADE TO SISTER CONCERN. MOREOVER, THE PRINCIPLE OF SECTION 40A (2) (B) OF THE IT ACT IS W ITH RESPECT TO THE EXCESSIVE OR UNREASONABLE PAYMENT MADE FOR EXPENSES TO THE SPECIFIED PERSONS. EVEN THAT PROVISION WOULD NOT AP PLY IN THE CASE OF THE ASSESSEE. THE LEARNED CIT(A) ALSO CORRECTLY NOT ED THAT THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT HIG HER AMOUNT WAS RECEIVED BY THE ASSESSEE COMPANY FROM THE PURCHASER S. SINCE IN THE YEAR UNDER CONSIDERATION THE SALES AND THE GP RATE IS HIGHER AS COMPARED TO THE EARLIER YEARS AND THE ASSESSEE HAS SHOWN HIGHER GP IN LACS OF RUPEES, THEREFORE, WE DO NOT FIND IT TO BE A CASE OF COLLUSION TO DEFRAUD THE REVENUE DEPARTMENT. THE LE ARNED CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY DELETED THE ADDITION. WE, THEREFORE, DO NOT FIND ANY MERIT IN T HIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 19. ON GROUND NO.2, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.67,240/- ON ACCOUNT OF NOT CHARGING OF INTEREST ON ADVANCES. THE AO NOTED THAT THE ASSESSEE HAS NOT CH ARGED INTEREST FROM THE ADVANCES GIVEN TO M/S. VIAPI TEXTILES, SUR ESH SILK INDUSTRIES, M/S. VIMAL ENTERPRISES AND M/S. H. S. K OTHARI TOTALING TO RS.4,80,289/- AND ACCORDINGLY DIRECTED AS TO WHY IN TEREST BE NOT DISALLOWED BECAUSE THE ASSESSEE HAS BEEN PAYING IN TEREST TO THE ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 18 BANK ON CC LIMIT. ADDITION WAS ACCORDINGLY MADE. TH E ASSESSEE EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE ASSESS EE WAS MANUFACTURING CLOTHES ON JOB WORK BASIS FROM SOME O F THE PARTIES AND THUS ADVANCES HAVE BEEN GIVEN TO THEM FOR BUSINESS PURPOSES. THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSES SEE AND NOTED HAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD T O SHOW THAT THE PARTIES TO WHOM ADVANCES WERE GIVEN WERE SISTER CON CERNS HAVING NO BUSINESS PURPOSES. THE LEARNED CIT(A) FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S. A. BUILDERS LTD. 288 ITR 1 DELETED THE ADDITION. 19. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE LEARNED DR MERELY RELIED UPON THE ORDER OF THE AO AND HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). NO MATERIAL IS BROUGHT ON RECORD TO SHOW ANY INFIRMITY IN THE FINDINGS OF THE LEARNED C IT(A). WE ACCORDINGLY, DO NOT FIND ANY JUSTIFICATION TO INTER FERE WITH THE FINDINGS OF THE LEARNED CIT(A). WE CONFIRM HIS FINDINGS AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 20. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. ITA NO.1888 AND 2359/AHD/2007 BEELAL SILK MILLS PVT. LTD. 19 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED WHEREAS THE DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-04-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 21-04-2011 LAKSHMIKANT/ LAKSHMIKANT/ LAKSHMIKANT/ LAKSHMIKANT/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD