M/s. Jhawar International, Surat V. The Income tax Officer, Ward-2(1), Surat

ITA 1938/AHD/2008

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0230 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 26-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: R K MALPANI
• Keywords: Bogus purchase; Business expenditure; Diversion of income; Additional evidence; Reasonable cause; Corroborative evidences; Third party statement; TDS; Set aside
• Section: 80HHC; 37(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1938 & 2015/AHD/2008 ASSESSMENT YEAR: 2004-05 DATE OF HEARING:3.12.09 DRAFTED:6.01.10 M/S. JHAWAR INTERNATIONAL, 823/, ROAD NO.8, GIDC SACHIN, SURAT PAN NO.AACFJ22540E ACIT, CIRCLE-2, ROOM NO.110, 1 ST FLOOR, AAYKAR BHAVAN, MAJURA GATE, SURAT V/S . V/S . INCOME TAX OFFICER, WARD-2(1), SURAT M/S. JHAWAR INTERNATIONAL, 13/1, DOCTOR WADI, SUPREME HOUSE, NR. KRISHNA PETROL PUMP, SURAT (APPELLANT) .. (RESPONDENT) ITA NO.1941 & 2019/AHD/2008 ASSESSMENT YEAR: 2004-05 SUPREME INDIA OVERSEAS CORPORATION, 823/2, ROAD NO.8, G.I.D.C.,SACHIN, SURAT PAN NO.AAJFS5561K ACIT, CIRCLE-2, ROOM NO.110, 1 ST FLOOR, AAYKAR BHAVAN, MAJURA GATE, SURAT V/S . V/S . INCOME TAX OFFICER, WARD-2(1), SURAT M/S. SUPREME INDIA OVERSEAS CORPORATION, 823/2, ROAD NO.8, GIDC, SACHIN, SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI R.K. MALPANI, CA REVENUE BY:- SHRI RAJEEV AGARWAL, CIT DR O R D E R ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 2 PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE FOUR CROSS APPEALS BY DIFFERENT ASSESSEE AND THE REVENUE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APP EALS)-II, SURAT IN APPEAL NO.CAS/II/435-436/06-07 DATED 28-02-2008. THE ASSE SSMENTS WERE FRAMED BY THE INCOME-TAX OFFICER, WARD-2(1), SURAT U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS DIF FERENT ORDERS OF EVEN DATE 29-12-2006 FOR THE SAME ASSESSMENT YEAR I.E. AY 2004-05. FIRST WE WILL TAKE UP ASSESSEES APPEAL IN ITA NO.1 938/AHD/2008. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO DISALLOWANCE OF DEDUCTION U/S.80HHC OF THE ACT. FOR THIS, THE ASSE SSEE HAS RAISED THE FOLLOWING GROUND NO.1 & 2 :- 1. THAT THE HONBLE C.I.T.(A) HAS ERRED IN UPHOLDI NG THE DISALLOWANCE/REJECTION OF DEDUCTION U/S.80HHC OF TH E I.T. ACT, 1961 (THE ACT) BY WRONGLY INTERPRETING THE AMENDMENTS MADE BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 (THE AMENDMENT ACT). 2. THAT THE HONBLE C.I.T.(A) HAS ERRED IN UPHOLDIN G THE NIL DEDUCTION U/S.80HHC OF THE ACT, BY MIS-INTERPRETING THE PROVI SION OF THE AMENDMENT ACT. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THIS ISSUE IS NOW ADJUDICATED BY THE SPECIAL BENCH OF THIS TRIBUNAL I N THE CASE OF TOPMAN EXPORTS V. ITO (2009) 318 ITR (AT) 87 (MUM) , WHEREBY IT IS HELD THAT ONLY THE PROFIT ELEMENT OF THE SALE PROCEEDS OF THE DEPB IS TO BE EXCLUDED FOR THE PURPOSES OF COMPUTATION OF DEDUCTION U/S.80HHC OF THE ACT AND ACCORDINGLY WHET HER THE ASSESSEES CASE FALLS UNDER THE SECOND, THIRD AND FORTH PROVISO INSERTED BY THE TAXATION ACT, LAWS (AMENDMENT) ACT, 2005, W.R.E.F. 1-4-1998 OR NOT. TH E LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS ISSUE NEEDS RE-EXAMINATION IN THE LIGHT OF MUMBAI SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA). THE LD. CIT DR CONCEDED THE POSITION AND STATED THAT THIS ISSUE CAN BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION OF THIS ISSUE IN ENTIRET Y AFTER CONSIDERING THE CASE LAW OF TOPMAN EXPORTS (SUPRA). 4. WE FIND THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE MUMBAI SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA), THE PRINCIPLE LAID DOWN IN THAT ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 3 CASE SHOULD BE CONSIDERED AND THE ISSUE BE REEXAMIN ED ACCORDINGLY BY THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN SUSTAINING THE ADDITION OF RS.1,17,73,210/- OF BUS INESS EXPENDITURE OF JOB-WORK CHARGES. FOR THIS, THE ASSESSEE HAS RAISED THE FOLL OWING GROUND NO.3 :- 3. THAT ON FACTS AND IN THE CIRCUMSTANCES OF CASE, THE HONBLE C.I.T.(A) HAS ERRED IN SUSTAINING ADDITION OF RS.1,17,73,210/- OF LEGITIMATE BUSINESS EXPENDITURE OF JOB WORK CHARGES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF FABRICS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE A.O. THAT THE TOTAL JOB CHARGES CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE I S RS. 2,62,20,058/-. THE A.O. FURTHER NOTICED THAT THE ABOVE JOB CHARGES ALSO INC LUDE THE PAYMENTS MADE TO THE FOLLOWING PARTIES:- 1. M/S. VIKRAM JOB WORKS RS. 27,59,858/- 2. M/S. SHALINI SCREEN PRINTING WORKS RS. 78,34,323/- 3. M/S. PRATIKA HAND PRINTIN G WORKS RS. 11,79,029/- TOTAL RS. 1,17,73,21 0/- IT WAS FOUND BY THE A.O. THAT THE PARTIES MENTIONED AT SL. NO. 1 AND 2 WERE ASSESSED WITH THE SAME A.O, WHEREAS THE PARTY MENTIONED AT S L. NO. 3 WAS ASSESSED WITH ITO WARD 9(1), SURAT. THE CASES OF ALL THE THREE PARTIE S WERE ALSO UNDER SCRUTINY ASSESSMENTS FOR A.Y. 2004-05. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS OF THESE THREE JOB WORKERS IT WAS NOTIC ED THAT THESE PARTIES FAILED TO PROVE THE FACT THAT THEY HAD ACTUALLY DONE ANY JOB WORK. THEY FAILED TO PROVIDE THE NAMES AND ADDRESSES OF THE PERSONS WHO HAVE DONE AC TUAL JOB WORK. THE OUTGOING FUND MOVEMENT FROM THE BANK ACCOUNTS OF THESE PARTI ES LED NOWHERE AND THESE JOB WORK PARTIES FAILED TO SUBMIT THE REAL IDENTITIES O F THE PERSONS TO WHOM THEY HAVE TRANSFERRED THE FUNDS. ON THE BASIS OF ABOVE FACTS THE A.O. REACHED TO THE CONCLUSION THAT THE JOB CHARGES BILLS ISSUED BY THESE THREE PA RTIES ARE NOT IN RESPECT OF ANY ACTUAL JOB WORK DONE BY THEM BUT ARE ACCOMMODATIVE BILLS PROVIDED BY THESE PARTIES. THE A.O. FURTHER PRESUMED THAT THE AMOUNTS PAID BY THE ASSESSEE TO THESE JOB ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 4 PARTIES MUST HAVE RETURNED BACK TO THE ASSESSEE IN SUCH A MANNER THAT LITTLE EVIDENCE CAN BE FOUND IN THIS RESPECT. THE A.O. ACC ORDINGLY DISALLOWED THE JOB CHARGES PAID OF RS. 1,17,73,210/- TO ABOVE REFERRED THREE PARTIES. 7. BEFORE THE C.I.T. (A) IT WAS CONTENDED THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DETAILS AND EVIDENCES TO THE A.O. DURING A SSESSMENT PROCEEDINGS. THE EVIDENCES FURNISHED TO A.O. DURING ASSESSMENT PROCE EDINGS INCLUDE THE FOLLOWING DOCUMENTARY EVIDENCES:- JOB CHARGES INVOICES RAISED BY JOB PARTIES BANK STATEMENTS EVIDENCING PAYMENTS TO THE JOB PAR TIES BY ACCOUNT PAYEE CHEQUES. COPIES OF TDS CERTIFICATES IN RESPECT OF TDS DEDUC TED U/S. 194C FROM THESE JOB PARTIES. CONFIRMATION FROM THESE JOB PARTIES THAT THEY HAVE DONE JOB WORK OF VALUE ADDITION AND RECEIVED PAYMENT FOR IT. LEDGER ACCOUNT COPY OF THESE JOB PARTIES. IT WAS ARGUED THAT THE ASSESSEE IS AN EXPORTER OF V ALUE ADDED TEXTILE FABRICS AND PURCHASED CLOTH FROM MARKET AND GOT VALUE ADDITION WORK DONE ON JOB WORK BASIS AND THEN EXPORTED THE SAME. FOLLOWING VALUE ADDITION WO RK WAS CLAIMED TO HAVE GOT DONE FROM THESE JOB WORK PARTIES: LACE WORK CHAMKI WORK BINDI WORK GOTAN WORK GLASS WORK HIRA MOTI WORK MANY MORE FANCY AND DECORATIVE VALUE ADDITION WORK GENERALLY DONE ON THESE FABRICS. IT WAS CLAIMED THAT ABOVE JOB WORK ARE VERY COMMON FEATURE IN TEXTILE INDUSTRY IN SURAT. THE ASSESSEE ASSIGNED THESE WORKS TO THE JOB PARTIES ENGAGED IN THIS BUSINESS. THESE JOB PARTIES GET THE WORK DONE FROM A NUMBER OF SUB-JOB WORKERS WHO ARE INDIVIDUALS, SMALL GROUPS, FAMILIES ETC. TH IS IS HOME INDUSTRY OF THE CITY. THESE SUB JOB WORKERS ARE SMALL INDIVIDUALS, GROUP OF INDIVIDUALS, FAMILIES ETC. WHO ARE DOING WORK AS PER INSTRUCTIONS OF JOB WORK PART IES. THE ASSESSEE DOES NOT KNOW ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 5 THESE SUB JOB WORKERS AS THEY ARE SCATTERED OVER TH E CITY AND ASSESSEE HAS NO CONTACT WITH THEM. ASSESSEES CONTRACT WAS WITH HIS JOB WORK PARTIES (CONTRACTORS). IN RESPECT OF THESE CONTRACTORS, COMPLETE DOCUMENTARY EVIDENCES AS MENTIONED ABOVE WERE FURNISHED TO THE A.O. THE PAYMENTS WERE MADE B Y `A/C. PAYEE ONLY CHEQUES AFTER DEDUCTING DUE T.D.S. AND THERE IS NO FINDING THAT ANY PORTION OF THESE PAYMENTS RETURNED BACK TO THE ASSESSEE. THE A.O. HIMSELF HAS MENTIONED THAT OUTGOING FUNDS FROM THE BANK ACCOUNTS OF THESE CONTRACTS LEAD NOWH ERE AND THERE IS NO EVIDENCE TO THE EFFECT THAT ANY PORTION OF THE PAYMENTS MADE TO THESE CONTRACTORS RETURNED BACK TO THE ASSESSEE. ALL THE THREE PARTIES WERE ASSESSE D TO TAX AND TWO OUT OF THEM WERE ASSESSED WITH THE SAME A.O. AMOUNTS PAID BY THE ASS ESSEE AS JOB CHARGES WERE INCLUDED IN THEIR JOB CHARGES INCOME. IN SUCH A SIT UATION ASSESSEE HAS DISCHARGES HIS ONUS BY PRODUCING SUFFICIENT DETAILS, EVIDENCES AND IDENTITY OF HIS CONTRACTORS. IT WAS FURTHER CLAIMED THAT THE SUB JOB WORKERS WERE N EVER IN THE CONTACT OF THE ASSESSEE AS LOT OF SECRECIES WERE MAINTAINED IN THI S LINE. IT WAS FURTHER CONTENDED THAT THE THE PRICE REALIZATION ITSELF PROVES THAT T HE WORK WAS DONE. THE AVERAGE ANNUAL EXPORT SALES RATE IS RS. 71.71 PER MTR. AS A GAINST RAW MATERIAL COST OF RS. 52.14 PER MTR. IF DEPB IS REDUCED FROM RAW MATERIAL COST, THE AVERAGE INPUT COST WORKS OUT TO BE RS. 44.80 PER MTR. AS AGAINST THE S ALES REALIZATION OF RS. 71.71 PER MTR. IT WAS ARGUED THAT SUCH A HIGH REALIZATION CAN NOT BE ACHIEVED WITHOUT THE VALUE ADDITION WORK. THUS, SALES REALIZATION ITSELF PROVE THAT THE VALUE WAS GOT DONE ON THE FABRICS. IN SUCH A SITUATION MERELY BECAUSE THESE C ONTRACTORS COULD NOT FURNISH CERTAIN DETAILS IN THEIR ASSESSMENT PROCEEDINGS, TH E EXPENDITURE CANNOT BE HELD TO BE NON-GENUINE IN THE HANDS OF THE ASSESSEE. ASSESSEE HAD PROVED HIS SOURCE (JOB WORK PARTIES) AND CANNOT BE ASKED TO PROVE THE SOUR CE OF SOURCE. THE CIT(A), HOWEVER, DID NOT AGREE WITH THE ARGUMENTS OF THE AS SESSEE AND UPHELD THE DISALLOWANCE. IT WAS ACCEPTED BY THE CIT(A) THAT IN THE CASE OF ASSESSEE THE IDENTITY OF ALL THE PARTIES WERE ESTABLISHED AS THEY WERE AL L ASSESSED TO TAX. HOWEVER, AS IN THEIR CASES THEY FAILED TO PROVE THAT THEY HAVE ACT UALLY DONE THE JOB WORK, THE A.O. WAS CORRECT IN DISALLOWING THE JOB CHARGES IN THE H AND OF ASSESSEE. AS REGARDS THE ASSESSEES CLAIM THAT THE PAYMENTS WERE MADE TO THE SE JOB PARTIES BY `A/C. PAYEE ONLY CHEQUES AND THERE WAS NOT AN IOTA OF FINDING BY THE A.O. THAT ANY PORTION OF THESE PAYMENTS RETURNED BACK TO THE ASSESSEE, IT WA S CONCLUDED BY THE CIT(A) THAT THERE WAS NO NECESSITY TO REACH THAT LEVEL OF EVIDE NCE, WHEN BASIC EVIDENCE SHOWED ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 6 THAT THE EXPENDITURE WAS BOGUS. BY MENTIONING THESE REASONS THE CIT(A) CONFIRMED THE ADDITION. AGGRIEVED, THE ASSESSEE CAME IN SECON D APPEAL BEFORE US. 8. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE R E-ITERATED THE SAME ARGUMENTS AS WERE MADE BEFORE LOWER AUTHORITIES. TH E LD. COUNSEL FOR THE ASSESSEE ALSO ARGUED THAT IDENTICAL ADDITION MADE IN THE CAS E OF A GROUP CONCERN OF ASSESSEE HAS BEEN DELETED BY HONBLE `D BENCH OF ITAT, AHME DABAD, IN THE CASE OF AVINASH M. JHAWAR ITA. NO.1939/AHD/2008. HE THEREFORE CONTENDED THAT APPEAL OF THE ASSESSEE ON THIS ISSUE IS COVERED IN HIS FAVOUR BY THE ORDER OF THE TRIBUNAL IN ABOVE CASE. ON THE OTHER HAND, LEARNED D.R. PLACED RELIAN CE ON THE ORDERS OF LOWER AUTHORITIES AND RE-ITERATED THE SAME ARGUMENTS AS A RE MENTIONED IN THE ASSESSMENT ORDER AND ORDER OF THE CIT(A). 9. WE FIND THAT EXACTLY ON SAME FACTS THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1939/AHD/2008 DATED 26-06-2009 HAS ALLOWED THE CLAIM BY HOLDING AS UNDER:- 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE CI T(A). WE HAVE ALSO PERUSED THE PAPER BOOK FURNISHED BY THE ASSESSEE. W E FIND THAT THE ASSESSEE IS AN EXPORTER OF VALUE ADDED TEXTILE FABRICS. WE F IND THAT THE AVERAGE ANNUAL EXPORT SALES RATE IS RS.72.50 PER MTR. AS AGAINST R AW MATERIAL COST OF RS.51.74 PER MTR. IF D. E. P.B. IS REDUCED FROM RAW MATERIAL COST THE AVERAGE INPUT COST WORKS OUT TO BE RS.43.70 PER MTR. AND SALES REALIZA TION IS R.72.50 PER MTR. SUCH A HIGH REALIZATION CANNOT BE ACHIEVED WITHOUT VALUE ADDITION WORK. THE SALES REALIZATION ITSELF PROVES THAT THE VALUE ADDI TION WORK DONE ON THESE FABRICS ON BEHALF OF THE ASSESSEE. WE FURTHER FIND THAT THE FOLLOWING VALUE ADDITION WORK WAS GOT DONE FROM THIS JOB WORK PARTY : LACE WORK CHAMKI WORK BINDI WORK GOTAN WORK GLASS WORK HIRA MOTI WORK MANY MORE FANCY AND DECORATIVE VALUE ADDITION WORK GENERALLY DONE ON THESE FABRICS WE FIND FROM THE NATURE OF BUSINESS THAT THE JOB WO RK IS VERY COMMON FEATURE OF TEXTILE INDUSTRY IN SURAT. THE ASSESSEE ASSIGNED THESE WORK OF JOB PARTIES ENGAGED IN THIS BUSINESS AND THESE JOB PARTIES GET THE WORK DONE FROM NUMBER OF SUB-JOB WORKERS WHO ARE INDIVIDUALS, SMAL L GROUPS, FAMILIES ETC. THIS IS THE HOME INDUSTRY OF THE CITY OF SURAT. THE SE JOB PARTIES ASSIST THE ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 7 ASSESSEE BY CONSULTING THE TYPE OF VALUE ADDITION W ORK AND FASHION GOING ON IN THE MARKET. THEY ARE LATEST IN THIS FIELD AND CR EATE THE IDEAS. THEY LIFT THE GOODS FROM THE PREMISES OF THE ASSESSEE AND GET THE VALUE ADDITION WORK DONE FROM DIFFERENT SUB-JOB WORKERS IN THE CITY. TH ESE JOB-WORKERS ARE IN UNORGANIZED SECTOR. THEY ARE SMALL INDIVIDUALS, GRO UP OF INDIVIDUALS, FAMILIES ETC. WHO ARE DOING WORK AS PER INSTRUCTION OF JOB-W ORK PARTIES. THE ASSESSEE DOES NOT KNOW THESE SUB-JOB WORKERS AS THEY ARE SCA TTERED OVER THE CITY OF SURAT AND HE HAS NO CONTACT WITH THEM. WE FURTHER F IND THAT THE ASSESSEE DURING ASSESSMENT PROCEEDINGS HAS FURNISHED FOLLOWI NG EVIDENCES IN SUPPORT OF EXPENDITURE:- JOB CHARGES INVOICES RAISED BY JOB PARTY. BANK STATEMENTS EVIDENCING PAYMENTS TO THE JOB PART Y BY ACCOUNT PAYEE CHEQUES. COPIES OF TDS CERTIFICATES IN RESPECT OF TDS DEDUCT ED U/S 194C FROM THIS JOB PARTY. CONFIRMATION FROM THIS JOB PARTY THAT THEY HAVE DON E JOB WORK OF VALUE ADDITION AND RECEIVED PAYMENT FOR IT. LEDGER ACCOUNT COPY OF THIS JOB PARTY. WE FIND THAT THE ASSESSEE HAS DISCHARGED HIS ONUS B Y ADDUCING SUFFICIENT EVIDENCES AND IT IS WELL ESTABLISHED LAW THAT ASSES SEE IS REQUIRED TO PROVE HIS SOURCE ONLY. HE CANNOT BE EXPECTED TO PROVE THE SOU RCE OF HIS SUPPLIERS OR DEPOSITORS OF HIS DEPOSITORS. ONCE THE ASSESSEE PRO VES HIS SOURCE (SUPPLY OF SERVICE), ADDITION CANNOT BE MADE IN HIS HAND. WE A LSO FIND THAT THE JOB PARTY IS ASSESSED TO TAX AND THE JOB CHARGES RECEIVED BY HIM FROM ASSESSEE ARE INCLUDED IN THEIR TOTAL JOB RECEIPTS. THE JOB PARTY HAS CONFIRMED TO THE A. O. THAT THEY HAVE DONE JOB WORK FOR ASSESSEE. SUFFICIE NT EVIDENCES AS MENTIONED ABOVE WERE FURNISHED TO A. O. PRICE REALIZATION OF THE ASSESSEE PROVE THAT THE VALUE ADDITION WORK HAVE BEEN DONE ON THESE GOODS. IN THIS WAY THE ASSESSEE HAS DISCHARGES HIS ONUS AND PROVED THAT JOB WORK EX PENSES ARE BONA FIDE AND GENUINE IN HIS CASE. IN SUCH SITUATION, THERE REMAI NS NO BASIS WITH A.O. TO DISBELIEVE THE JOB WORK EXPENSES IN HANDS OF ASSESS EE. ASSESSEE DOES NOT KNOW THEM, HOW THEN HE CAN PRODUCE THEM OR FURNISH THE DETAILS IN RESPECT OF THEM. THEY ARE NOT IN CONTACT WITH HIM AND MERELY B ECAUSE THE ASSESSEES JOB PARTIES COULD NOT FURNISH DETAILS OF THESE SUB- JOB PARTIES IN THEIR ASSESSMENT PROCEEDINGS, HE CANNOT BE PENALIZED OR P UNISHED. THERE IS NO FAULT ON PART OF THE ASSESSEE. 8. WE FIND THAT THE ASSESSEES CASE IS COVERED BY D ECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT VS. M. K. BROTHER S 163 ITR 249 (GUJ). IN THE ASSESSMENT ORDER THE A. O. HAS PRESUMED THAT TH E PAYMENTS MADE BY THE APPELLANT FOR JOB WORK EXPENSES MIGHT HAVE BEEN BAC K INTEREST H FORM OF CROSS CHEQUES ETC. THIS IS JUST A PRESUMPTION WITHOUT ANY FINDING THE A. O. COULD HAVE VERY WELL CHECKED THE PAYMENTS MADE BY JOB PAR TIES. THERE IS NO FINDING AT ALL THAT ANY PORTION OF THESE PAYMENTS HAS COME BACK TO THE ASSESSEE. MERELY BY ARBITRARY PRESUMPTIONS IT CANNOT BE SAID THAT THE AMOUNTS MIGHT HAVE COME BACK TO ASSESSEE. THERE IS NO SUCH FINDIN G AT ALL. THERE IS NO BASIS AT ALL FOR THIS PRESUMPTION. THE A. O. MUST H AVE CHECKED THE PAYMENTS MADE BY THIS JOB PARTY AND IF AT ALL THERE WAS ANY FINDING AGAINST ASSESSEE THEN HE COULD HAVE CLEARLY BROUGHT OUT THE SAME ON RECORD. BUT THERE IS NO ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 8 SUCH FINDING AT ALL. THIS RENDERS THE ARBITRARY PRE SUMPTION OF THE A. O. TO BE COMPLETELY BASELESS AND UNSUSTAINABLE. IN THE ABSEN CE OF ANY SUCH FINDING, THE GENUINE EXPENDITURE INCURRED BY ASSESSEE FOR VA LUE ADDITION JOB WORK PAID BY A/C PAYEE CHEQUES CANNOT BE DISALLOWED. THIS ISS UE IS CLEARLY COVERED BY THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN ABOVE CASE LAW. 9. WE FURTHER FIND THAT THE SIMILAR ISSUE WAS DEALT WITH BY THE TRIBUNAL IN THE CASE OF SHALU DYEING & PRINTING MILLS PVT. LTD. VS ACIT IN ITA NO. 1491 AND 1492/AHD/2008 DATED 11-7-2008, WHEREIN RELYING ON THE CASE OF THIS TRIBUNAL IN THE CASE OF AKRUTI DYEING & PRINTING MI LLS PVT. LTD. IN ITA NO.2551 AND 2552/AHD/2006 ORDER DATED 26-10-2007 HELD THE P URCHASED AS GENUINE BY HOLDING AS UNDER: 5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE FIND THAT THIS TRIBUNAL IN THE CASE OF AKRUTI DYEING & P RINTING MILLS PVT. LTD. IN ITA NO.2551/AHD/2006 AND ITA NO.2752/AHD/2006 VIDE ORDE R DATED 26-10-2007 WHILE DEALING WITH GROUND NO.3 RELATING TO THE ADDI TION ON ACCOUNT OF BOGUS PURCHASES IN RESPECT OF COLOUR AND CHEMICALS MADE O N THE BASIS OF STATEMENT OF SHRI ROHIT PANWALA, HELD AS UNDER: 20. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES AND THE MATERIALS AVAILABLE ON RECO RD WE FIND THAT A SEARCH OPERATION WAS CARRIED OUT ON SHRI ROHIT PANW ALLA AND HIS ASSOCIATES AND OTHER PROCEEDINGS WERE ALSO TAKEN AG AINST THEM WHEREIN SHRI ROHIT PANWALLA STATED THAT HE USED TO PROVIDE ACCOMMODATION/FAKE BILLS AT THE REQUEST OF THE PART IES. ON THE BASIS OF THIS, THE A O HAS TREATED THE PURCHASES MADE BY THE ASSESSEE FROM 3 PARTIES WHICH DO NOT INCLUDE ROHIT PANWALLA FOR RS. 7,21,950/- AS BOGUS. THE ASSESSEE CLAIMED THAT THE PAYMENTS TO TH E PARTIES WERE MADE BY ACCOUNT PAYEE CHEQUES AND AGAINST RECEIPT O F GOODS. WE FIND THAT THE REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THE PURCHASES SHOWN BY THE ASSESSEE VVV ACCOMMODATION F ROM THE AFORESAID 3 PARTIES WERE NOT GENUINE AND WHERE V AC COMMODATION/FAKE BILLS SHOWN BY THE ASSESSEE. NO STATEMENT RECORDED FROM THE ABOVE 3 PARTIES BY THE REVENUE WERE BROUGHT ON RECORD. WE F IND NO MATERIAL ON THE BASIS OF WHICH IT CAN BE ALLEGED THAT THE ABOVE PARTIES ADMITTED THAT THE BILLS RAISED BY THEM AGAINST THE ASSESSEE WERE MERELY ACCOMMODATION BILLS. IN THE ABOVE CIRCUMSTANCES THE DISALLOWANCE MADE BY THE REVENUE ON THE BASIS OF SURMISES AND CO NJECTURES WITHOUT ANY POSITIVE MATERIAL ON RECORD. THEREFORE, IN OUR CONSIDERED OPINION, THE DISALLOWANCE MADE IS UNSUSTAINABLE. AC CORDINGLY, WE DELETE THE ADDITION MADE AND ALLOW THE GROUND OF AP PEAL OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE T RIBUNAL, WE DELETE THE ADDITIONS IN EACH OF THE ASSESSMENT YEARS. 10. IN VIEW OF THE ABOVE FACTS AND THE CASE LAWS DI SCUSSED ABOVE, WE ARE OF THE VIEW THAT THE JOB WORK CHARGES INCURRED BY T HE ASSESSEE IS A LEGITIMATE ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 9 BUSINESS EXPENDITURE AND ALLOWABLE. ACCORDINGLY, WE REVERSE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND THE APPEAL OF T HE ASSESSEE IS ALLOWED. 10. WE FIND THAT THE FACTS BEING EXACTLY IDENTICAL AS DISCUSSED ABOVE AND TAKING A CONSISTENT VIEW, WE ALLOW THE CLAIM OF THE ASSESSEE AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 11. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN SUSTAINING THE CHARGING OF INTEREST U/S.234B OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.4 :- 4. THAT THE HONBLE C.I.T.(A) HAS ERRED IN SUSTAIN ING CHARGING OF INTEREST U/S.234B OF THE ACT IN RESPECT OF JOB WORK EXPENSES DISALLOWED. 12. AS BOTH THE SIDES AGREED THAT THIS CHARGING OF INTEREST U/S.234B OF THE ACT IS CONSEQUENTIAL, ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CHARGE THE INTEREST AFTER GIVING APPEAL EFFECT TO THIS ORDER CONSEQUENT LY. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED CONSEQUENTLY. NOW COMING TO ASSESSEES APPEAL IN ITA NO.1941/AHD/ 2008. 13. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO DISALLOWANCE OF DEDUCTION U/S.80HHC OF THE ACT. FOR THIS, THE ASSE SSEE HAS RAISED THE FOLLOWING GROUND NO.1 & 2 :- 1. THAT THE HONBLE C.I.T.(A) HAS ERRED IN UPHOLDI NG THE DISALLOWANCE/REJECTION OF DEDUCTION U/S.80HHC OF TH E I.T. ACT, 1961 (THE ACT) BY WRONGLY INTERPRETING THE AMENDMENTS MADE BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 (THE AMENDMENT ACT). 2. THAT THE HONBLE C.I.T.(A) HAS ERRED IN UPHOLDIN G THE NIL DEDUCTION U/S.80HHC OF THE ACT, BY MIS-INTERPRETING THE PROVI SION OF THE AMENDMENT ACT. 14. WE FIND THAT WE HAVE ALREADY SET ASIDE THIS ISS UE EXACTLY ON SAME FACTS IN ITA NO.1938/AHD/2008 ABOVE IN PARA-4 , TAKING A CONSISTENT VIEW WE SET ASIDE THIS ISSUE ALSO AND ALLOWED FOR STATISTICAL PURPOSES. 15. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN SUSTAINING THE ADDITION OF RS.2,13,84,300/- OF BUS INESS EXPENDITURE OF JOB-WORK CHARGES. FOR THIS, THE ASSESSEE HAS RAISED THE FOLL OWING GROUND NO.3 :- ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 10 3. THAT ON FACTS AND IN THE CIRCUMSTANCES OF CASE, THE HONBLE C.I.T.(A) HAS ERRED IN SUSTAINING ADDITION OF RS.2,13,84,300/- OF LEGITIMATE BUSINESS EXPENDITURE OF JOB WORK CHARGES. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF FABRICS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE A.O. THAT THE TOTAL JOB CHARGES CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE I S RS. 6,80,14,180/-. THE A.O. FURTHER NOTICED THAT THE ABOVE JOB CHARGES ALSO INC LUDE THE PAYMENTS MADE TO THE FOLLOWING PARTIES:- 1. M/S. VIKRAM JOB WORKS RS. 1,10,51,848/- 2. M/S. SHALINI SCREEN PRINTING WORKS RS. 7,71,324/- 3. M/S. PRATIKA HAND PRINTIN G WORKS RS. 95,61,128/- TOTAL RS. 2,13,84,30 0/- IT WAS FOUND BY THE A.O. THAT THE PARTIES MENTIONED AT SL. NO. 1 AND 2 WERE ASSESSED WITH THE SAME A.O., WHEREAS THE PARTY MENTIONED AT SL. NO. 3 WAS ASSESSED WITH ITO WARD 9(1), SURAT. THE CASES OF ALL THE THREE PA RTIES WERE ALSO UNDER SCRUTINY ASSESSMENTS FOR A.Y. 2004-05. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS OF THESE THREE JOB WORKERS IT WAS NOTIC ED THAT THESE PARTIES FAILED TO PROVE THE FACT THAT THEY HAD ACTUALLY DONE ANY JOB WORK. THEY FAILED TO PROVIDE THE NAMES AND ADDRESSES OF THE PERSONS WHO HAVE DONE AC TUAL JOB WORK. THE OUTGOING FUND MOVEMENT FROM THE BANK ACCOUNTS OF THESE PARTI ES LED NOWHERE AND THESE JOB WORK PARTIES FAILED TO SUBMIT THE REAL IDENTITIES O F THE PERSONS TO WHOM THEY HAVE TRANSFERRED THE FUNDS. ON THE BASIS OF ABOVE FACTS THE A.O. REACHED TO THE CONCLUSION THAT THE JOB CHARGES BILLS ISSUED BY THESE THREE PA RTIES ARE NOT IN RESPECT OF ANY ACTUAL JOB WORK DONE BY THEM BUT ARE ACCOMMODATIVE BILLS PROVIDED BY THESE PARTIES. THE A.O. FURTHER PRESUMED THAT THE AMOUNTS PAID BY THE ASSESSEE TO THESE JOB PARTIES MUST HAVE RETURNED BACK TO THE ASSESSEE IN SUCH A MANNER THAT LITTLE EVIDENCE CAN BE FOUND IN THIS RESPECT. THE A.O. ACC ORDINGLY DISALLOWED THE JOB CHARGES PAID OF RS. 2,13,84,300/- TO ABOVE REFERRED THREE PARTIES. 17. BEFORE THE CIT(A) IT WAS CONTENDED THAT THE ASS ESSEE HAS FURNISHED ALL THE RELEVANT DETAILS AND EVIDENCES TO THE A.O DURING AS SESSMENT PROCEEDINGS. THE EVIDENCES FURNISHED TO A.O. DURING ASSESSMENT PROCE EDINGS INCLUDE THE FOLLOWING DOCUMENTARY EVIDENCES:- ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 11 JOB CHARGES INVOICES RAISED BY JOB PARTIES BANK STATEMENTS EVIDENCING PAYMENTS TO THE JOB PAR TIES BY ACCOUNT PAYEE CHEQUES. COPIES OF TDS CERTIFICATES IN RESPECT OF TDS DEDUC TED U/S. 194C FROM THESE JOB PARTIES. CONFIRMATION FROM THESE JOB PARTIES THAT THEY HAVE DONE JOB WORK OF VALUE ADDITION AND RECEIVED PAYMENT FOR IT. LEDGER ACCOUNT COPY OF THESE JOB PARTIES. IT WAS ARGUED THAT THE ASSESSEE IS AN EXPORTER OF V ALUE ADDED TEXTILE FABRICS. ASSESSEE PURCHASED CLOTH FROM MARKET AND GOT VALUE ADDITION WORK DONE ON JOB WORK BASIS AND THEN EXPORTED THE SAME. FOLLOWING VA LUE ADDITION WORK WAS CLAIMED TO HAVE GOT DONE FROM THESE JOB WORK PARTIES: LACE WORK CHAMKI WORK BINDI WORK GOTAN WORK GLASS WORK HIRA MOTI WORK MANY MORE FANCY AND DECORATIVE VALUE ADDITION WORK GENERALLY DONE ON THESE FABRICS. IT WAS CLAIMED THAT ABOVE JOB WORK ARE VERY COMMON FEATURE IN TEXTILE INDUSTRY IN SURAT. THE ASSESSEE ASSIGNED THESE WORKS TO THE JOB PARTIES ENGAGED IN THIS BUSINESS. THESE JOB PARTIES GET THE WORK DONE FROM A NUMBER OF SUB-JOB WORKERS WHO ARE INDIVIDUALS, SMALL GROUPS, FAMILIES ETC. TH IS IS HOME INDUSTRY OF THE CITY. THESE SUB JOB WORKERS ARE SMALL INDIVIDUALS, GROUP OF INDIVIDUALS, FAMILIES ETC. WHO ARE DOING WORK AS PER INSTRUCTIONS OF JOB WORK PART IES. THE APPELLANT DOES NOT KNOW THESE SUB JOB WORKERS AS THEY ARE SCATTERED OVER TH E CITY AND ASSESSEE HAS NO CONTACT WITH THEM. ASSESSEES CONTRACT WAS WITH HIS JOB WORK PARTIES (CONTRACTORS). IN RESPECT OF THESE CONTRACTORS, COMPLETE DOCUMENTARY EVIDENCES AS MENTIONED ABOVE WERE FURNISHED TO THE A.O. THE PAYMENTS WERE MADE B Y `A/C. PAYEE ONLY CHEQUES AFTER DEDUCTING DUE TDS AND THERE IS NO FINDING THA T ANY PORTION OF THESE PAYMENTS RETURNED BACK TO THE ASSESSEE. THE A.O. HIMSELF HAS MENTIONED THAT OUTGOING FUNDS ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 12 FROM THE BANK ACCOUNTS OF THESE CONTRACTS LEAD NOWH ERE AND THERE IS NO EVIDENCE TO THE EFFECT THAT ANY PORTION OF THE PAYMENTS MADE TO THESE CONTRACTORS RETURNED BACK TO THE ASSESSEE. ALL THE THREE PARTIES WERE ASSESSE D TO TAX AND TWO OUT OF THEM WERE ASSESSED WITH THE SAME A.O. AMOUNTS PAID BY THE ASS ESSEE AS JOB CHARGES WERE INCLUDED IN THEIR JOB CHARGES INCOME. IN SUCH A SIT UATION ASSESSEE HAS DISCHARGES HIS ONUS BY PRODUCING SUFFICIENT DETAILS, EVIDENCES AND IDENTITY OF HIS CONTRACTORS. IT WAS FURTHER CLAIMED THAT THE SUB JOB WORKERS WERE N EVER IN THE CONTACT OF THE ASSESSEE AS LOT OF SECRECIES WERE MAINTAINED IN THI S LINE. IT WAS FURTHER CONTENDED THAT THE PRICE REALIZATION ITSELF PROVES THAT THE W ORK WAS DONE. THE AVERAGE ANNUAL EXPORT SALES RATE IS RS. 67.72 PER MTR. AS AGAINST RAW MATERIAL COST OF RS. 51.37 PER MTR. IF DEPB IS REDUCED FROM RAW MATERIAL COST, THE AVERAGE INPUT COST WORKS OUT TO BE RS. 42.60 PER MTR. AS AGAINST THE SALES REALIZAT ION OF RS. 67.72 PER MTR. IT WAS ARGUED THAT SUCH A HIGH REALIZATION CANNOT BE ACHIE VED WITHOUT THE VALUE ADDITION WORK. THUS, SALES REALIZATION ITSELF PROVE THAT THE VALUE WAS GOT DONE ON THE FABRICS. IN SUCH A SITUATION MERELY BECAUSE THESE CONTRACTOR S COULD NOT FURNISH CERTAIN DETAILS IN THEIR ASSESSMENT PROCEEDINGS, THE EXPENDITURE CA NNOT BE HELD TO BE NON-GENUINE IN THE HANDS OF THE ASSESSEE. ASSESSEE HAD PROVED H IS SOURCE (JOB WORK PARTIES) AND CANNOT BE ASKED TO PROVE THE SOURCE OF SOURCE. THE CIT(A), HOWEVER, DID NOT AGREE WITH THE ARGUMENTS OF THE ASSESSEE AND UPHELD THE DISALLOWANCE. IT WAS ACCEPTED BY THE CIT(A) THAT IN THE CASE OF ASSESSEE THE IDENTITY OF ALL THE PARTIES WERE ESTABLISHED AS THEY WERE ALL ASSESSED TO TAX. HOWEVER, AS IN THEIR CASES THEY FAILED TO PROVE THAT THEY HAVE ACTUALLY DONE THE JO B WORK, THE A.O. WAS CORRECT IN DISALLOWING THE JOB CHARGES IN THE HAND OF ASSESSEE . AS REGARDS THE ASSESSEES CLAIM THAT THE PAYMENTS WERE MADE TO THESE JOB PART IES BY `A/C. PAYEE ONLY CHEQUES AND THERE WAS NOT AN IOTA OF FINDING BY THE A.O. THAT ANY PORTION OF THESE PA YMENTS RETURNED BACK TO THE ASSESSEE, IT WAS CONCLUDED BY THE CIT(A) THAT THERE WAS NO NECESSITY TO REACH THAT LEVEL OF EVIDENCE, WHEN BAS IC EVIDENCE SHOWED THAT THE EXPENDITURE WAS BOGUS. BY MENTIONING THESE REASONS THE CIT(A) CONFIRMED THE ADDITION. AGGRIEVED, THE ASSESSEE CAME IN SECOND AP PEAL BEFORE US. 18. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE RE-ITERATED THE SAME ARGUMENTS AS WERE MADE BEFORE LOWER AUTHORITIES. TH E LD. COUNSEL FOR THE ASSESSEE ALSO ARGUED THAT IDENTICAL ADDITION MADE IN THE CAS E OF A GROUP CONCERN OF ASSESSEE HAS BEEN DELETED BY HONBLE `D BENCH OF ITAT, AHME DABAD, IN THE CASE OF AVINASH ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 13 M.JHAWAR ITA.NO.1939/AHD/2008. HE THEREFORE CONTENDED THAT APPEAL OF THE ASSESSEE ON THIS ISSUE IS COVERED IN HIS FAVOUR BY THE ORDER OF THE TRIBUNAL IN ABOVE CASE. ON THE OTHER HAND, LEARNED D.R. PLACED RELIAN CE ON THE ORDERS OF LOWER AUTHORITIES AND RE-ITERATED THE SAME ARGUMENTS AS A RE MENTIONED IN THE ASSESSMENT ORDER AND ORDER OF THE CIT(A). 19. AFTER HEARING THE RIVAL CONTENTIONS AND GOING T HROUGH THE FACTS OF THE CASE, WE FIND THAT EXACTLY ON SIMILAR FACTS WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ITA NO.1938/AHD/2008 IN PARA-9 & 10 ABOVE. TAKING A CONSISTENT VIEW, WE ALLOW THIS ISSUE OF THE ASSESSE ES APPEAL. 20. THE NEXT ISSUE OF CHARGING OF INTEREST U/S.234B OF THE ACT HAS ALSO BEEN ALLOWED CONSEQUENTLY IN ITA NO.1938/AHD/2008 IN PARA-12 . TAKING A CONSISTENT VIEW, WE ALLOW THIS ISSUE OF THE ASSESSEES APPEAL CONSEQUENTLY. NOW COMING TO BOTH THE APPEALS OF THE REVENUE IN IT A NO.2015 AND 2019/AHD/2008. 21. THE ONLY COMMON ISSUE IN THESE APPEALS OF THE R EVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF DISALLOWANCE OF FOREIGNER BUYERS COMMISSION. FOR THIS, THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUND NO.1 :- IN ITA NO.2015/AHD/2008 [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALL OWANCE OF FOREIGH BUYERS AGENT COMMISSION U/S.37 (R.W.S.93) FOR RS.1,58,96,2 74/- IN ITA NO.2019/AHD./2008 [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALL OWANCE OF FOREIGH BUYERS AGENT COMMISSION U/S.37 (R.W.S.93) FOR RS.3,05,57,1 95/- SIMILARLY, THE REVENUE HAS ALSO RAISED A CONNECTED GROUND REGARDING ADMISSION OF ADDITIONAL EVIDENCES, WHICH IS COMMON IN BOTH THE C ASES AND WHICH READ AS UNDER:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE REJECTED THE ADDITIONAL EVIDENCES PRO DUCED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS. 22. WE HAVE HEARD THE RIVAL CONTENTIONS IN BOTH THE CASES AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT T HE FACTS ARE EXACTLY IDENTICAL IN BOTH THE CASES, HENCE, WE WILL TAKE THE FACTS IN AS SESSEE OF SUPREME INDIA OVERSEAS ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 14 CORPORATION AND APPLIED IN THE CASE OF M/S. JHAVAR INTERNATIONAL. THE ONLY GROUND IN DEPARTMENTS APPEAL IS AGAINST THE DELETION OF ADDI TION OF RS.3,05,57,195/- IN RESPECT OF FOREIGN BUYERS AGENTS COMMISSION DEDUCTED IN T HE EXPORTS SALES INVOICES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATI ON OF EXPORT SALES INVOICES AND BANK REALIZATION CERTIFICATES (BRCS), IT WAS FOUND BY THE A.O. THAT THE ASSESSEE FIRM HAS PAID COMMISSION ON GROSS INVOICE VALUE BY DEDUC TING THE SAME IN THE EXPORT SALE INVOICES. THE TOTAL AMOUNT OF COMMISSION SO DE DUCTED IN EXPORT SALE INVOICES WORKED OUT AT RS.3,05,57,195/- (US $ 6,75,350.36). IT WAS EXPLAINED BY THE ASSESSEE THAT AS MATTER OF PRICE FIXATION, THE PRIC ES FIXED WERE GROSS SELLING RATES LESS COMMISSION PAYABLE TO FOREIGN BUYERS AGENTS A ND THE EXPORT SALES INVOICES WERE RAISED ACCORDINGLY AND THE ASSESSEE WAS ENTITL ED TO RECEIVE ONLY NET AMOUNTS AFTER DEDUCTING COMMISSION. IT WAS FURTHER CONTENDE D THAT IT IS EVIDENT FROM THE BRCS THAT ONLY NET AMOUNT WAS RECEIVED BY THE ASSESSEE A S SALE PROCEEDS. IT WAS, THEREFORE, ARGUED BY THE ASSESSEE THAT THE COMMISSI ON DEDUCTED IN THE SALES INVOICES GOT DIVERTED AT SOURCE ITSELF AND WAS NEVE R AN INCOME OF THE ASSESSEE. THE ASSESSEE WAS ENTITLED TO RECEIVE ONLY NET AMOUNT AN D SUCH NET AMOUNT WAS THE SALES INCOME OF THE ASSESSEE. ACCORDINGLY, THE ASSE SSEE ACCOUNTED NET SALES IN HIS ACCOUNTS. THE ASSESSING OFFICER HOWEVER TOOK A VIEW THAT THE GROSS SALES AMOUNT MENTIONED IN THE EXPORT INVOICES IS THE SALES INCOM E ACCRUING TO THE ASSESSEE AND THE FOREIGN AGENTS COMMISSION DEDUCTED IN THE SALE S INVOICES IS AN APPLICATION OF SUCH INCOME. AS PER A.O. THE GROSS SALES AMOUNT IS THE SALES INCOME OF THE ASSESSEE AND ITS APPLICATION TOWARDS FOREIGN AGENT S COMMISSION IS AN EXPENDITURE OF THE ASSESSEE AND SUCH EXPENDITURE CAN BE ALLOWED ONLY IF THE ASSESSEE PROVES THAT THIS EXPENDITURE IS IN RESPECT OF SERVICES PRO VIDED TO HIM BY THE FOREIGN AGENTS. THE A.O. ALSO TOOK A VIEW THAT THE ACCOUNTING TREAT MENT DONE BY THE ASSESSEE BY ACCOUNTING ONLY NET SALES INCOME IS NOT CORRECT BUT THE ASSESSEE MUST HAVE REFLECTED GROSS SALES ON CREDIT SIDE OF TRADING A/C AND MUST HAVE DEBITED COMMISSION DEDUCTED IN THE SALES INVOICES AS HIS EXPENDITURE I N PROFIT & LOSS A/C. DURING THE ASSESSMENT PROCEEDINGS THE A.O. ASKED THE ASSESSEE TO PROVE THE SERVICES RENDERED BY THE AGENTS TO THE ASSESSEE. IN RESPONSE TO THIS, THE ASSESSEE FILED THE CONFIRMATIONS FROM THE FOREIGN BUYERS WHO CONFIRMED THAT THEY HAVE PROCURED GOODS THROUGH THE AGENTS FROM THE ASSESSEE AND THAT THEY HAVE PAID COMMISSION TO THESE AGENTS. THESE BUYERS FURTHER CONFIRMED THAT THE COM MISSION SO PAID TO THE AGENTS WAS DEDUCTED FROM EXPORT SALES INVOICES AND ONLY NE T AMOUNT WAS REMITTED TO THE ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 15 ASSESSEE. IT WAS ALSO CONFIRMED BY THE FOREIGN BUYE RS THAT THE AGENTS RENDERED THE SERVICE LIKE NEGOTIATING PRICES, QUALITY, DESIGNS, LUSTER ETC. AND GOODS WERE PROCURED THROUGH THEM AND THE ASSESSEE WAS ENTITLED TO RECEI VE ONLY NET AMOUNT AS PER INVOICES. IN THEIR CONFIRMATIONS THESE FOREIGN BUYE RS ALSO MENTIONED THE NAMES OF THE AGENTS. THE A.O. DID NOT GIVE MUCH WEIGHTAGE TO THE SE CONFIRMATION LETTERS OF FOREIGN BUYERS BY TERMING SAME TO BE VAGUE CONFIRMATION LET TERS. THE A.O. ASKED THE ASSESSEE TO FURNISH THE CONFIRMATIONS FROM THE FORE IGN AGENTS FOR WHICH ASSESSEE WANTED SOME TIME AND AS THE CASE WAS GETTING TIME B ARRED THE A.O. PASSED THE ASSESSMENT ORDER AFTER MAKING ADDITION OF ABOVE REF ERRED COMMISSION AMOUNT OF RS.3,05,57,195/- ON THE GROUND THAT THE ASSESSEE FA ILED TO PROVED THE SERVICES OF FOREIGN AGENTS. THE A.O. ALSO INVOKED THE PROVISION S OF S. 93 OF THE ACT FOR MAKING THIS ADDITION. AGGRIEVED, THE ASSESSEE PREFERRED A PPEAL BEFORE CIT(A). 23. BEFORE THE CIT (A), THE ASSESSEE CONTENDED THAT THE A.O. WAS NOT CORRECT IN TREATING THE GROSS SALES AMOUNT AS THE SALES INCOME OF THE ASSESSEE AND IN TREATING THE COMMISSION DEDUCTED THERE FROM AS APPLICATION O F INCOME. IT WAS CONTENDED THAT THE ASSESSEE WAS ENTITLED TO RECEIVE ONLY NET AMOUN T AS PER THE EXPORT SALES INVOICES AND SUCH NET AMOUNT OF SALES INVOICES ONLY ACCRUED AS SALES INCOME TO THE ASSESSEE. IT WAS ARGUED THAT ASSESSEES LEGAL RIGHT WAS TO RECEIVE ONLY NET AMOUNT AS MENTIONED IN THE SALES INVOICES AND NOT THE GROS S AMOUNT. THIS FACT WAS PROVED BY PRODUCING THE EXPORT SALES INVOICES, BRCS AND CO NFIRMATION LETTERS OF FOREIGN BUYERS. IN EXPORT SALES INVOICES THE AMOUNT CHARGEA BLE IS ONLY NET AMOUNT. GROSS AMOUNTS AND FOREIGN AGENTS COMMISSION WERE MENTION ED ONLY AS A MATTER OF PRICE FIXATION. THE PRICE FIXED WAS `GROSS RATE LESS COMM ISSION. THE ASSESSEE BROUGHT TO THE NOTICE OF THE CIT (A) CERTAIN OBSERVATIONS IN T HE ASSESSMENT ORDER IN WHICH A.O. HIMSELF ACCEPTED THAT COMMISSION AMOUNT DEDUCTED IN SALES INVOICES WAS NEITHER RECEIVED NOR IS GOING TO BE RECEIVED BY THE ASSESSE E. THE ASSESSEE ALSO PRODUCED BANK REALIZATION CERTIFICATES TO PROVE THAT ONLY NE T AMOUNT WAS RECEIVED BY THE ASSESSEE. ON THE BASIS OF ABOVE ARGUMENTS IT WAS VE HEMENTLY ARGUED ON THE BASIS OF ASSESSEE THAT ONLY NET AMOUNT OF SALES INVOICES IS THE SALES INCOME OF THE ASSESSEE. THE COMMISSION DEDUCTED IN THE SALES INVO ICES WAS NEVER AN INCOME OF THE ASSESSEE AS ASSESSEE HAD NO LEGAL RIGHT TO RECE IVE THE SAME. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE APEX COU RT IN THE CASE OF E.D. SASSON & CO. LTD. AND OTHERS VS. CIT (1954) 26 ITR 27 (SC) IN WHICH IT WAS LAID DOWN THAT AN ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 16 INCOME CAN BE SAID TO HAVE ACCRUED ONLY IF THE ASSE SSEE GETS A LEGAL RIGHT TO RECEIVE IT. AS AN ALTERNATE ARGUMENT IT WAS CONTENDED THAT EVEN IF THE SAID COMMISSION IS TO BE FIRST TREATED AS HIS INCOME AND THEN APPLICATION OF THE SAME TOWARDS COMMISSION TO FOREIGN AGENTS, THEN ALSO THE SAME IS CLEARLY A DEDUCTIBLE EXPENDITURE. IT WAS CLAIMED THAT IN SUCH A SITUATION THE COMMISSION HAS TO BE ALLOWED EITHER AS COMMISSION EXPENDITURE OR AS TRADING EXPENDITURE (B EING PART OF PRICING TERMS). BEFORE CIT (A) THE ASSESSEE ALSO FURNISHED THE CONF IRMATION LETTERS FROM THE FOREIGN AGENTS CONFIRMING THE FOLLOWING FACTS:- - THAT THEY RENDERED SERVICES IN TRANSACTIONS OF P URCHASE/ SALE BETWEEN THE ASSESSEE AND FOREIGN BUYERS. - THAT THEY RECEIVED THE COMMISSION FROM FOREIG N BUYERS. - AS A MATTER OF PRICE FIXATION THE COMMISSION W AS AGREED TO BE DEDUCTED IN THE SALES INVOICE AND THE SELLER (ASSESSEE) WA S ENTITLED TO RECEIVE ONLY NET AMOUNT. AS THESE CONFIRMATION LETTERS FROM THE FOREIGN AGEN TS WERE ADDITIONAL EVIDENCES, CIT (A) REMITTED THE MATTER TO THE A.O. FOR HIS REMAND REPORT. IN THE REMAND REPORT THE A.O. FIRST OBJECTED TO THE ADMISSION OF THESE ADDIT IONAL EVIDENCES AND THEN MENTIONED THAT THOUGH HE HAS VERIFIED WITH FOREIGN AGENTS DIRECTLY BY WRITING LETTERS TO THEM AND IN RESPONSE THESE FOREIGN AGENTS HAVE AGAI N CONFIRMED THE ABOVE FACTS, STILL THESE CONFIRMATION LETTERS CANNOT BE RELIED U PON AND SHOULD NOT BE ADMITTED IN EVIDENCE. THE CIT(A), AFTER ELABORATELY DISCUSSING ALL THE CIRCUMSTANCES, ADMITTED THE ADDITIONAL EVIDENCES. IT WAS OBSERVED BY THE CI T(A) THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSEE WAS LEFT WITH LITTLE TIME FOR FURNISHING THESE CONFIRMATION LETTERS AND WAS THEREFORE PREVENTED BY REASONABLE C AUSE FOR FURNISHING THESE CONFIRMATION LETTERS AT ASSESSMENT STAGE. IN RESPEC T OF INVOKING OF PROVISIONS OF SECTION 93 IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT THESE PROVISIONS ARE NOT AT ALL APPLICABLE TO CASE THE ASSESSEE AND ARE MIS-APP LIED TO THE A.O. IT WAS CONTENDED THAT THE ASSESSEE DID NOT GET ANY POWER TO ENJOY TH E INCOME OF NON-RESIDENT (I.E. COMMISSION INCOME OF FOREIGN AGENTS) AND THEREFORE THERE WAS NO CASE FOR INVOKING PROVISIONS OF SECTION 93 OF THE ACT. THE CIT(A) AFT ER CONSIDERING THE OBSERVATION OF A.O. IN THE ASSESSMENT ORDER AND THE REMAND REPORT AND THE LENGTHY SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE DELETED THE ADDITION . AGGRIEVED, THE REVENUE CAME IN SECOND APPEAL BEFORE US. ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 17 24. BEFORE US, AT THE OUTSET LEARNED CIT DR. FILED THE ADDITIONAL GROUND RAISING OBJECTION AGAINST THE ADMISSION OF ADDITION EVIDENC ES BY THE CIT(A). IT WAS ARGUED THAT DESPITE SUFFICIENT OPPORTUNITIES GRANTED DURIN G ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT FURNISH THESE CONFIRMATION LETTERS TO THE A.O. AND THE CASE OF THE ASSESSEE IS NOT FALLING UNDER ANY OF THE CLAUSES OF RULE 46A OF THE INCOME-TAX RULES, 1962 AND THEREFORE LEARNED CIT(A) HAS ERRED IN ADMI TTING THE ADDITIONAL EVIDENCES IN THE FORM OF CONFIRMATION LETTERS FROM THE FOREIGN A GENTS. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE ISSUE OF F OREIGN AGENTS COMMISSION WAS RAISED AT THE FAG-END OF ASSESSMENT PROCEEDINGS AND THE A.O. REQUIRED THE CONFIRMATION LETTERS FROM FOREIGN AGENTS JUST ONE O R TWO MONTHS BEFORE THE DATE OF ASSESSMENT ORDER. SINCE ALL THESE AGENTS WERE RESID ING ABROAD AND BECAUSE OF THE NATURE OF THEIR BUSINESS, THEY WERE ON TOUR MOST OF THE TIMES, IT TOOK SOME TIME IN OBTAINING CONFIRMATION LETTERS FROM THEM. THEREFORE , THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE FOR FURNISHING THESE CONFIRMATION LETTERS DURING ASSESSMENT PROCEEDINGS AND THE ASSESSEES CASE WAS SQUARELY FA LL UNDER CLAUSE (B) OF RULE 46A. IT WAS FURTHER ARGUED THAT THE CONFIRMATION LE TTERS FROM FOREIGN BUYERS WERE ALREADY FURNISHED DURING THE ASSESSMENT PROCEEDINGS AND THE A.O. HAD ERRED IN OVER LOOKING SUCH VITAL EVIDENCES BY TERMING THE SAME TO BE VAGUE CONFIRMATION LETTERS WITHOUT GIVING ANY REASONS. THE LD. COUNSEL FOR THE ASSESSEE THEREFORE ARGUED THAT CIT(A) HAD RIGHTLY ADMITTED THESE ADDITIONAL EVIDEN CES. IN ALTERNATE PLEA HE ALSO ARGUED THAT EVEN IF THESE ADDITIONAL EVIDENCES ARE NOT TAKEN INTO CONSIDERATION THEN ALSO THERE ARE SUFFICIENT EVIDENCES IN THE FORM OF EXPORT SALES INVOICES, BRCS AND FOREIGN BUYERS CONFIRMATION LETTERS WHICH PROVE THA T THE ASSESSEE WAS ENTITLED TO RECEIVE ONLY NET AMOUNTS AND THAT THE FOREIGN BUYER S PROCURED THE GOODS THROUGH THE AGENTS TO WHOM COMMISSION WAS PAID BY THE FOREIGN B UYERS WHICH WAS DEDUCTED IN SALES INVOICES AS A MATTER OF PRICE FIXATION. 25. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND SEEN FROM THE ORDER OF CIT(A) THAT THE MATTER WAS DECIDED AFTER TAKING REMAND PRO CEEDINGS FROM THE ASSESSING OFFICER. THE AO FURNISHED HIS REMAND REPORT VIDE L ETTER DATED 06-11-2007. WE FIND THAT THE CIT(A) HAS ELABORATELY DISCUSSED THIS ISSU E IN PARA 10 TO 10.4 OF HIS APPELLATE ORDER AS THE HE HAS DECIDED THE ISSUE AFT ER TAKING REMAND REPORT FROM THE ASSESSING OFFICER. WE ARE OF THE CONSIDERED VIEW T HAT THERE IS NO INFIRMITY IN ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 18 ADMITTING THE ADDITIONAL EVIDENCES. ACCORDINGLY, T HIS ISSUE OF REVENUES APPEALS IS DECIDED AGAINST. 26. COMING TO THE MERITS OF THE CASE, THE LEARNED C OUNSEL FOR THE ASSESSEE REPEATED THE SAME ARGUMENT AS WERE MADE BEFORE THE CIT(A). HE CARRIED US THROUGH THE PAPER BOOK FILE BY HIM, PARTICULARLY THE COPIES OF CONFIRMATION LETTERS FROM FOREIGN BUYERS AND FOREIGN AGENTS (PLACED ON PAGE NO. 75 TO 85) AND ALSO THROUGH THE SALES INVOICES AND BRCS AND ARGUED THAT THE ASSESSEE FIRM WAS ENTITLED TO RECEIVE ONLY NET AMOUNT AFTER DEDUCTING THE COMMISSION. HE ARGUE D THAT IT WAS EVIDENT FROM THE BRCS THAT ONLY NET AMOUNT WAS ULTIMATELY RECEIVED B Y THE ASSESSEE-COMPANY-FIRM. HE ALSO MENTIONED THAT EVEN IN THE CALCULATING DEDU CTION U/S. 80HHC OF THE ACT THE A.O. HIMSELF HAS TAKEN THE NET SALES AMOUNT AS THE EXPORT TURNOVER OF THE ASSESSEE. HE FURTHER BROUGHT TO OUR NOTICE THAT THE IDENTICAL ISSUE OF FOREIGN AGENTS COMMISSION DEDUCTED IN SALES INVOICES HAS ALREADY BEEN DECIDED BY THE BENCHES OF ITAT, AHMEDABAD IN FAVOUR OF ASSESSES IN NUMBER OF CASES. HE PLACES RELIANCE ON THE ORDERS OF ITAT, AHMEDABAD IN FOLLOWING CASES IN WHI CH IDENTICAL ADDITIONS HAS ALREADY BEEN DELETED BY THE TRIBUNAL. HE PARTICULAR LY REFERRED TO THE CASE LAW OF THIS TRIBUNAL IN THE CASE OF SHRI SAMIR A BATRA V ITO IN ITA NO.4130/AHD/2007 DATED 12-12-2008, WHEREIN IT IS HELD AS UNDER:- 25.WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. FIRST OF ALL, IT IS SEEN FROM THE ASSESSEES PAPER BOOK IN THE CASE OF GURIA TEXTILES AT PAPER BOOK PAGE 494 TO 519 THAT COMMISSION WAS PAYABLE TO THEM BY THE BUYER AND SUC H SUMS WERE TO BE DEDUCTED FROM THE GROSS INVOICE ALOES SO THAT THE SELLER WAS ENTITLED TO RECEIVE ONLY THE NET AMOUNT AFTER DEDUCTING THE COM MISSION IN RESPONSE OF EACH TRANSACTION. THEREFORE, THE RECEIPT OF THE CO MMISSION AMOUNT HAD BEEN DULY CONFIRMED BY THE AGENTS, WHICH IN TURN MEANT T HAT THE AMOUNTS WHICH WERE DEDUCTED FROM THE INVOICE VALUES ACTUALLY REPR ESENTED COMMISSION PAYMENTS WHICH WERE FINALLY RECEIVED BY THE AGENT. THIS FACT CLEARLY ESTABLISHED THE GENUINENESS OF THE TRANSACTIONS AND WHAT IS IMPORTANT IS THAT THIS WAS DONE IN ACCORDANCE WITH THE TERMS AND COND ITIONS AGREED UPON BETWEEN THE BUYERS AND SELLER, EVEN THOUGH THERE WA S NO FORMAL AGREEMENT AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE. WE F IND THAT THE AGENTS HAD UNEQUIVOCALLY CONFIRMED AND RECONFIRMED THE NATURE OF THE TRANSACTIONS, AND IN THE ABSENCE OF ANY FORMAL AGREEMENT, IT COULD NO T BE HELD AS A GROUND TO DISMISS THE CLAIM OF THE ASSESSEE. THERE WERE CLEAR CONTRA CONFIRMATIONS FROM THE AGENTS, WHICH SIMPLY COULD NOT BE WHISKED AWAY BY THE LOWER AUTHORITIES FOR THE DISALLOWANCE OF COMMISSION EXPE NDITURE. THUS, ONCE THE GENUINENESS OF THE COMMISSION PAYMENTS AS WELL AS I TS JUSTIFICATION OF HAVING BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOS E OF ASSESSEES BUSINESS, ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 19 THE SAME BECOMES ADMISSIBLE AS DEDUCTION U/S. 37(1) OF THE ACT. WE FIND THAT THE AO HAS RELIED UPON THE CONTENTS OF THE ACCOUNTI NG STANDARD-I, WHICH HOWEVER WAS NOT APPLICABLE TO THE ASSESSEES CASE, GIVEN THE NATURE OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. THE AO HAS ALSO REFERRED TO SEC. 5 OF THE ACT WHICH DEFINES TOTAL INCOME. IT IS OBV IOUS IN THE CIRCUMSTANCES AND THE NATURE OF TRANSACTIONS WHICH HAVE BEEN DISCUSSE D ABOVE IN DETAILS, THAT, WHAT MAY HAVE ACCRUED TO THE ASSESSEE WAS THE GROSS INVOICE VALUES, YET, THE ASSESSEE UNDER THE TERMS OF THE AGREEMENT OR UN DERSTANDING WITH THE BUYER, HAD TO DEDUCT FROM THE INVOICES THE AMOUNT O F COMMISSION PAYABLE. IN THE BACKGROUND OF SUCH FATS, IT COULD NOT BE HELD T HAT THE GROSS INVOICE AMOUNTS WERE WHAT HAD ACCRUED TO THE ASSESSEE, AND THESE WERE THE AMOUNTS ON WHICH THE ASSESSEE SHOULD HAVE BEEN ASSE SSED. THE OUTGOING COMMISSION FROM THE INVOICE VALUES WOULD HAVE TO B E REDUCED FROM THE GROSS AMOUNTS, AND THE NET AMOUNT WHICH WAS THE ACTUAL SUM RECEIVED BY THE ASSESSEE IN INDIA, AND WHICH WAS DULY CERTIFIED A ND PERMITTED BY THE RBI AND ITS AUTHORIZED DEALER, WAS WHAT HAD BEEN EARNED BY THE ASSESSEE FROM SUCH TRANSACTIONS. WE FIND, THAT THE AO HIMSELF HAD NOTE D IN THE ASSESSMENT ORDER THAT THE AMOUNTS DEDUCTED AS COMMISSION FROM THE SA LE INVOICES WERE NEITHER RECEIVED BY THE ASSESSEE DURING THE YEAR, NOR WAS I T EVER GOING TO BE RECEIVED IN FUTURE. IF THIS WAS THE VIEW OF THE AO , THEN HE CONTRADICTED HIMSELF BY TAXING AMOUNTS WHICH HAD NOT BEEN RECEIVED AT AL L, NOR DID THE ASSESSEE HAVE ANY LEGAL RIGHT TO RECEIVE SUCH AMOUNTS. 26. WE FIND THAT THE COMMISSION WAS NOT DEDUCTED FROM THE EXPORT INVOICES IN AN AD HOC MANNER AND IT WAS CLEARLY UND ER AN AGREEMENT BETWEEN THE BUYER AND THE SELLER, AS ALSO BETWEEN THE BUYER AND THE AGENT. CONSEQUENTLY, THE ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT COMMISSION FROM THE GROSS INVOICE VALUES. IN THE PRESENT CASE, THERE WAS A COMPULSION TO DEDUCT THE COMMISSION FROM THE EXPORT INVOICES WHIC H WAS CLEARLY INDICATED IN THE CONFIRMATION LETTERS OF THE AGENTS, THE INGREDI ENTS WHICH WERE NECESSARY FOR SUCH DEDUCTION OF COMMISSION TO BE TREATED AS D IVERSION OF INCOME BY OVERRIDING TITLE WAS CLEARLY PRESENT. IN THE CASE OF CIT V. MADRAS RACE CLUB (2002) 255 ITR 98, THE HON. COURT OBSERVED THAT IN ORDER TO DECIDE WHETHER THERE HAS BEEN DIVERSION OF INCOME BY OVERRIDING TI TLE, THE TRUE TEST IS WHETHER THE AMOUNT SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER R EACH THE ASSESSEE AS HIS INCOME. WHEREBY AN OBLIGATION, INCOME IS DIVERTED B EFORE IT REACHES THE ASSESSEE, IT IS DEDUCTIBLE, BUT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION AFTER SUCH INCOME REACHES T HE ASSESSEE, THE SAME CONSEQUENCE IN LAW DOES NOT FOLLOW. IN THE PRESENT CASE THE GROSS EXPORT PROCEEDS NEVER REACHED ITS HANDS, NO SUCH INCOME HA D THEREFORE ACCRUED TO THE ASSESSEE AND THIS WAS BECAUSE OF AN OBLIGATION OR COMPULSION TO DEDUCT THE COMMISSION FROM THE EXPORT INVOICES WHICH CLEAR LY SHOWED THIS TO BE A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE. TH E AMOUNTS DEDUCTED FROM THE EXPORT INVOICES WERE THUS CLEARLY ALLOWABLE AS DEDUCTION. THE LOWER AUTHORITIES HAVE NOTED THAT MOST OF THE SO-CALLED C ONFIRMATIONS ARE ON PAPER AND DOES NOT BEAR THE LETTER HEAD OF THE SAID BUYER S. THIS IS PARTLY CORRECT BECAUSE PLAIN PAPER CONFIRMATION WAS IN REFERENCE T O ONE PARTY MOHMED ABDULA OF DUBAI I.E. AT ASSESSEES PAPER BOOK PAGE NO. 509, WHICH IS ON PLAIN PAPER. HOWEVER, IN SUCH SITUATION THE AO OUGHT TO H AVE MAKE INQUIRY IF HE HAS ANY DOUBT IN THIS REGARD. BUT HE SIMPLY CONCLUDE D THAT IT IS ON A PLAIN PAPER ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 20 AND DID NOT BELIEVE THE AFORESAID COMMISSION PAYMEN T, PARTICULARLY WHEN THE ASSESSEE IS HAVING SUPPORTING EVIDENCE IN REFEREN CE TO THE CONFIRMATION LIKE, SALES INVOICES, EXCHANGE CONTROL COPY OF SHIPPING B ILLS AND BANK REALIZATION CERTIFICATE . ALL THESE EVIDENCE GOES WITHOUT SAYIN G THAT DE FACTO COMMISSION HAS BEEN PAID BY ASSESSEES BUYER TO THE AGENTS DIR ECTLY. THE OTHER CONFIRMATION IS FROM AL AHED JAHID TEXTILES OF KUVA IT IS ENCLOSED AT PAPER BOOK PAGE NO. 508 WHICH IS ON LETTER HEAD, THEN P.T . SINAR OF INDONESIA IS AGAIN ON LETTER HAD AT PAPER BOOK PAGE NO. 511 TO 515, THEN AGAIN AL AHEED ALJAHEED OF KUVAIT IS ON LETTER HEAD AT PAPER BOOK PAGE NO. 508, THEN AGAIN P.T. SINAR IS ON LETTER HEAD AT PAPER BOOK PAGE NO. 511 TO 515, JAY PRAKASH TRADING OF DUBAI IS AGAIN ON LETTER HEAD AT PAPER B OOK PAGE NO. 504 TO 506, THEN LIPINGE TEXTILE OF DUBAI IS AGAIN ON LETTER HE AD AT PAPER BOOK PAGE NO. 516 AND 518 AS WELL AS IN THE CASE OF SAUDI EXTENSI ON AGENCY AT PAPER BOOK PAGE 507. SO EXCEPT ONE PARTY NAMELY, MOHMED ABDULL A OF DUBAI AS MENTIONED ABOVE, ALL OTHER CONFIRMATIONS WERE ON LE TTER HEAD OF THE RESPECTIVE PARTIES. 27. WE FIND FROM THE RECORDS AS WELL AS THE ARGUMEN TS OF BOTH THE SIDES THAT NONE OF THE PAYMENT HAS COME BEYOND SIX MONTHS BUT IT WAS WITHIN SIX MONTHS AS CAN BE VERIFIABLE FROM BANK REALIZATION C ERTIFICATE ENCLOSED AT PAPER BOOK PAGE NO. 390 TO 451. THE ASSESSEE HAS RECEIVED THE AFORESAID PAYMENT WITHIN SIX MONTHS AS PER RBI RULES AND GUIDELINES. THE AO HAS PRESUMED THAT ASSESSEES BUYER HAS TO PAY COMMISSION AS AND WHEN BUYER RECEIVED THE PAYMENT FROM THE ASSESSEE, WHICH IS NOT CORRECT BECAUSE IN ANY CASE THE ASSESSEE HAVE RECEIVED THE NET PAYMENT I.E. AFTER DEDUCTING COMMISSION AND PAYMENT OF COMMISSION IS NEVER DEPENDENT ON PAYMENT TO BE RECEIVED BY THE ASSESSEE. SO IT HAS NO CONNECTION WITH THE REALIZ ATION OR SIX MONTHS CRITERIA. IN VIEW OF THE ABOVE FACTS, NOW WE WILL DISCUSS THE PRINCIPLE LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION (SUPRA). AS HELD BY THE HON'BLE HIGH CO URT, THE INGREDIENTS OF WHAT IS COMMISSION ARE CONTAINED IN THE EXPLANATION TO SECT. 194H. THERE HAS TO BE RENDERING OF SERVICES, SUCH SERVICES HAVE TO BE RENDERED IN THE COURSE OF BUYING AND SELLING OF GOODS OR IN RELATIO N TO ANY TRANSACTION INVOLVING ANY ASSET, VALUABLE ARTICLE OR THING. TH ERE HAS TO BE AN ELEMENT OF AGENCY IN THE RENDERING OF ALL SUCH SERVICES OR TRA NSACTIONS AND THE AGENT SHOULD HAVE BEEN AUTHORIZED TO BUY OR SELL ON BEHAL F OF THE PRINCIPAL. WHILE THE TRANSFEREE OR THE BUYER IS LIABLE TO THE TRANSF EROR OR THE SELLER TO PAY THE PRICE FOR THE GOODS, THE LIABILITY OF THE AGENT IS TO ENSURE THE DELIVERY OF THE GOODS TO THE BUYER NOT AS HIS OWN PROPERTY BUT AS T HE PROPERTY OF THE PRINCIPAL OR THE SELLER/TRANSFEROR. IF SUCH PRINCIPLES AS E NUNCIATED BY THE HON. COURTS ARE TO BE APPLIED IN THE CASE OF THE ASSESSEE, IT W ILL BE SEEN THAT ALL THE ELEMENTS WHICH ARE REQUISITE FOR ANY TRANSACTION IN VOLVING PAYMENT OF COMMISSION, WERE PRESENT. FIRSTLY, EACH OF THE TRAN SACTIONS BETWEEN THE ASSESSEE AS THE SELLER AND THE TWO BUYERS WERE MEDI ATED BY AGENTS, WHOLE EXISTENCE WAS ESTABLISHED BEYOND DOUBT, BY THE CONF IRMATION LETTERS. SECONDLY, THERE WAS RENDERING OF SERVICES. THE AGEN TS HAD CLEARLY WRITTEN THAT THEY HAVE RENDERED SERVICES; IN PROCURING SAMP LES, DECIDING THE ORDERS AND SETTLING ALL MATTERS BETWEEN THE BUYERS AND SE LLER INCLUDING PAYMENTS BY THE BUYERS TO THE SELLER. CONSIDERING THE NATURE O F SUCH SERVICES RENDERED BY THE AGENTS, EVEN IF THEY WERE APPOINTED BY THE BUYE RS, SERVICES WERE ITA NO.1938 & 2015/AHD/2008 & 1941 & 2019/AHD/2008 A.Y 2004-05 M/S. JHAWAR INTERNATIONAL & SUPREME INDIA OVERSEAS CORPN. V. ITO, WD-2(1) SURAT PAGE 21 INDIRECTLY RENDERED TO THE ASSESSEE AS THE SELLER S WELL. THE SAMPLES WERE PRODUCED BY THEM FROM THE ASSESSEE, THEY DECIDED ON THE QUANTUM OF THE ORDER AND THE PRICE, THEY SETTLED ALL DISPUTES BETW EEN THE BUYERS AND THE SELLER, AND THEY ALSO ENSURED THE PAYMENTS TO THE S ELLER. THE EXISTENCE OF THE AGENTS AND THEIR FUNCTIONING WAS FOR THE BENEFIT OF THE ASSESSEE AS WELL. THEREFORE, THE EVIDENCE PRODUCED BY THE ASSESSEE CA NNOT BE WISHED AWAY ON THE GROUND THAT THE AGENTS ONLY PROVIDED SERVICE S TO THE BUYER AND NOT TO THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND CIRCU MSTANCES, WE ARE OF THE VIEW THAT THE COMMISSION PAYMENT IS TO BE ALLOWED T O THE ASSESSEE AND ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE, AN D THE ORDERS OF THE LOWER AUTHORITIES ARE REVERED. THIS ISSUE OF THE ASSESSE ES APPEAL IS ALLOWED. 27. AS THE FACTS ARE EXACTLY IDENTICAL IN THE PRESE NT CASE AS NARRATED ABOVE TO THE FACTS OF CASE OF SHRI SAMIR A BATRA (SUPRA), RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DECISION, WE CONFIRM THE ORDER OF CIT(A) DELE TING THE ADDITION. THIS ISSUE OF THE REVENUES APPEALS IS DISMISSED. 28. IN THE RESULT, ASSESSEES APPEALS ARE PARTLY ALLOWE D AS INDICATED ABOVE AND THAT OF REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08/01/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 08/01/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-II, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD