The ACIT, Circle-7, Ahmedabad V. Shri Rajesh Shankarlal Shah, Ahmedabad

ITA 1970/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9335 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-08-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 04-06-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Keywords: Unexplained cash credit; Business income
• Section: 142(1); 143(2); 68; 144

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI D.C.AGRAWAL IN ITA NO.1970/AHD/2004 (ASSESSMENT YEAR : 2000-01) ACIT, CIRCLE-7, AHMEDABAD VS. SHRI RAJESH SHANKARLAL SHAH PROP. EVEREST EXPORTS, S-1, DIAMOND SQUARE, NAVJIVAN PRESS ROAD, NAVRANGPURA, AHMEDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GOVIND SINGHAL, SR. D.R. RESPONDENT BY : SHRI DHIREN SHAH, A.R. ( (( ( )/ )/)/ )/ ORDER PER KARWA, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF CIT(A)-XIII, AHMEDABAD DATED 10.3.2004 RELATING TO ASSESSMENT YEAR 2000-01. 2. GROUND NOS. 1 AND 2 OF THE APPEAL READ AS UNDER: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OF FICER THAT THE LOSS OF RS. 2,83,03,857/- CLAIMED BY THE ASSESSEE IN HI S PROFIT AND LOSS A/C BE IGNORED AND TO BE TAKEN AS NIL INSTEAD O F NET PROFIT OF RS. 15,53,042/-WORKED OUT BY THE ASSESSING OFFICER ESTI MATING THE G.P @ 10%. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, AHMEDABAD HAS ALSO ERRED IN LAW AND ON FACTS IN ALLOWING THE REL IEF WITHOUT EXAMINING THE TRADING TRANSACTIONS EITHER BY HIMSELF OR THROUGH THE ASSESSING OFFICER TO FIND OUT THE CORRECT FACT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DONE BUSINESS OF T RADING IN KIRANA AND AGRO PRODUCTS. FOR THE ASSESSMENT YEAR 2000-01 , THE ASSESSEE FILED RETURN OF INCOME ON 27.10.2000 SHOWING TOT AL INCOME OF 2 RS.(-)2,83,03,858/-. THE ASSESSING OFFICER ISSUED NOTICE U/S 143(2) ON 15.10.2001. THE ASSESSING OFFICER ALSO ISSUED DETAILED QUEST IONNAIRE DATED 8.1.2002 ASKING THE ASSESSEE FOR FILING CERTAIN DE TAILS MENTIONED IN QUESTIONNAIRE. THE ASSESSING OFFICER OBSERVED THAT VIDE NO TICE U/S 143(2) THREE OPPORTUNITIES WERE GIVEN TO THE ASSESSEE AND CASE W AS FIXED FOR HEARING ON 11.2.2002, 13.1.2003 AND 24.1.2003. THER E WAS NO COMPLIANCE ON THESE DATES AND NO REQUEST FOR ADJOURNMEN T WAS MADE BY THE ASSESSEE. THE CASE WAS FINALLY FIXED FOR HEARING ON 6 .2.2003 AND FOR THIS NOTICE U/S 143(2) AND 142(1) OF THE ACT DATED 27.1 .2003 WAS SERVED UPON THE ASSESSEE ALONG WITH THE SHOW CAUSE NOTICE INFORMI NG THE ASSESSEE THAT IF NO BOOKS OF ACCOUNT ETC. ARE PRODUCED ON 6. 2.2003, ASSESSMENT SHALL BE COMPLETED U/S 144 OF THE ACT. THERE WA S NO COMPLIANCE AND, THEREFORE, THE ASSESSING OFFICER COMPLETE D THE ASSESSMENT U/S 144 OF THE ACT, BY REJECTING THE BOOKS OF ACCO UNT OF THE ASSESSEE AND RECASTING THE TRADING ACCOUNT AND ESTIMATING GR OSS PROFIT AT 10% OF THE TOTAL SALES OF RS.8,33,37,619/- AND ARRIVIN G AT A NET PROFIT OF RS.15,53,042/-. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT ESTIMATION OF GROSS PROFIT AT 10% BY THE ASSESSING OFFICER WAS MERELY ON SURMISES AND CONJECTURES AND BY BRUSHING ASIDE THE VARIOUS FACTS AVAILABLE ON RECORD. DURING THE YEAR UNDE R CONSIDERATION, THE ASSESSEE HAS SHOWN OPENING STOCK OF RS.5,35,296/- AND PU RCHASES OF RS.8,74,63,962/- AND CORRESPONDING SALES OF RS.8,33,37,6 19/-, CLOSING STOCK OF RS. NIL AND GROSS LOSS OF RS. 46,61,639/-. IT WAS SU BMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSING OFFICER FAILE D TO ISSUE ANY SPECIFIC SHOW CAUSE NOTICE CONVEYING HIS INTENTION TO ESTIMAT E GROSS PROFIT AT 10% OF TOTAL SALES OF RS.8,33,37,619/-. THE ASSESSEE AL SO SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAS NOT BROU GHT ON RECORD 3 ANY COMPARATIVE ANALYSIS TO SUBSTANTIATE THE GROSS PROFI T ESTIMATED BY HIM. IN ABSENCE OF SUCH ANALYSIS, GROSS PROFIT ESTIMATED B Y THE ASSESSING OFFICER IN THE ACCOUNT OF BUSINESS OF ASSESSEE WAS MERELY A G UESS WORK AND NOT SUSTAINABLE UNDER THE I.T.ACT. IT WAS ALSO SUBMIT TED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSING OFFICER WHILE CONSIDERING THE SALES AND DERIVING THE GROSS PROFIT @10% HAS FAILED TO BRING ON RECORD THAT THE PURCHASES SHOWN BY THE ASSESSEE WERE NOT GENUINE AND WERE ON A HIGHER SIDE. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT T HE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE WITH REGARD TO ESTIMATION OF GROSS PROFIT @10% AND HAS MERELY ON HIS OW N SURMISES AND CONJECTURES AS WELL AS THE PRESUMPTION ESTIMATED THE GROSS P ROFIT @10%. IT WAS ALSO SUBMITTED THAT ONCE THE ASSESSING OFFICER HAS TAK EN INTO CONSIDERATION THE SALE PRICE MENTIONED IN THE TRADING ACCOUNT OF THE ASSESSEE, HE OUGHT TO HAVE TAKEN INTO CONSIDERATION THE P URCHASE PRICE ALSO. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE CIT( A) THAT WHILE ESTIMATING THE GROSS PROFIT, THE ASSESSING OFFICER HAS NOT B ROUGHT ON RECORD ANY COMPARATIVE CASE FOR ESTIMATING THE GROSS PROFI T RATE. RELIANCE WAS PLACED ON CERTAIN DECISIONS WHICH ARE MENTIONED IN P ARA 2.3 OF THE IMPUGNED ORDER. FURTHER, THE ASSESSEE HAS ALSO ARGUED BEF ORE THE CIT(A) THAT THE ASSESSING OFFICER HAS ERRED IN LAW AND FACTS IN N OT CONSIDERING THE FACT THAT ALONG WITH THE RETURN OF INCOME, THE ASSE SSEE HAS ALSO SUBMITTED THE AUDITED ACCOUNTS AS WELL AS THE TAX AUDIT R EPORT IN FORM NO. 3CB AND 3CD SHOWING THE COMPLETE QUANTITATIVE DETAILS . THE ASSESSING OFFICER HAS WRONGLY IN THE ABSENCE OF ANY DEFECTS IN THE BOOKS OF ACCOUNT ESTIMATED THE GROSS PROFIT AT 10%. IN VIEW OF THE ABOV E, THE ASSESSEE SUBMITTED THAT THE CIT(A) HELD THAT NET PROFIT CALCULA TED BY THE ASSESSING OFFICER AS TAKEN INTO CONSIDERATION THE GROSS PROFIT RATE OF 10% OF TOTAL SALES IS WHOLLY UNJUSTIFIED AND BAD IN LAW. 5. THE CIT(A) DIRECTED THE ASSESSING OFFICER THAT THE SALE S OF 4 RS.2,83,03,857/- CLAIMED BY THE ASSESSEE IN HIS PROFIT AN D LOSS ACCOUNT BE IGNORED AND TO BE TAKEN AS NIL INSTEAD OF NET PROF IT OF RS.15,53,422/- WORKED OUT BY THE ASSESSING OFFICER ESTIMATING THE GROSS PR OFIT @10%. RELEVANT FINDINGS OF THE CIT(A) ARE AS UNDER: 2.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE AND ALSO THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IN RESPECT OF FIRST GROUND OF APPEA L ,I FIND THAT ON 20.2.2002 THE APPELLANT HAD FURNISHED BEFORE THE ASSESSING OFFICER VARIOUS DETAILS LIKE COMPARATIVE CHART OF GROSS PR OFIT AND NET PROFIT FOR CURRENT YEAR AND EARLIER TWO YEARS, HAD F URNISHED PARTICULARS OF MONTHWISE SALES, PURCHASES, AND STOCK SUMMAR Y , QUANTITY DETAILS IN RESPECT OF OPENING STOCK AND CLOSING STOCK AND DETAILS OF INTEREST EXPENSES, DETAILS OF UNSECURED LOANS A ND LOANS AND ADVANCES, ADDRESSES_OF_CREDITORS, DEBTORS, COPIES OF ACCOUNTS OF GHATLODIA AND SHAHIBAUG BRANCHES OF MMC BANK, COP IES OF DEBIT NOTES RAISED FOR RATE DIFFERENCES BY VARIOUS PARTIES SUCH AS MADHUKANT AGROTECH LTD., MADHUKANT EXPORT LTD. ,SNE H TRADELINK PVT.LTD., SHREEJI KRUPA TRADERS & ANMOL ENTERPRISE WH ICH HAVE BEEN COMPILED BY THE AUTHORISED REPRESENTATIVE ' IN PA PER BOOK AT PAGES 25 TO 87 . FROM PERUSAL OF THE SSMENT RECORDS AVAI LABLE WITH THE ASSESSING OFFICER ,1 HAVE FOUND THAT THE SAID DETAIL S HAD BEEN FILED BEFORE THE A.O. TEWFEYER AS THE APPELLANT HAD NOT PRODUCED BOOK% PF ACCOUNTS BEFORE THE ASSESSING OFFICER , THE ASSESSING OFFICER HAS RIGHTLY INVOKED THE' [PROVISIONS OF SECTION 145(2) OF THE4TEEF ACT AND ESTIMATED THE G.P. EVEN THOUGH THE A SSESSING OFFICER MAY BE JUSTIFIED IN ESTIMATING THE GROSS PROFIT AS NO BOOKS OF ACCOUNTS WERE PRODUCED BEFORE HIM, HE SHOULD NOT HAVE EST IMATED THE GROSS PROFIT AT AN ARBITRARY RATE . IT HAS BEEN HE LD BY IT AT DELHI BENCH IN THE CASE OF ITO VS. JITENDRA MEHRA REPORTED IN 53 ITD 396 (DELHI) THAT WHERE AN EXPARTE ASSESSMENT HAS TO BE MADE IT HAS TO BE REASONABLY BASED ON MATERIAL AVAILABLE ON RECORDS, IT CAN NOT BE ARBITRARY, CAPRICIOUS. AS REGARDS THE ESTIMATE OF G.P. M ADE BY THE ASSESSING OFFICER IT IS FOUND THAT THE RATE OF GROSS PROFIT ESTIMATED BY THE ASSESSING OFFICER IS NOT BASED ON ANY COMPARABLE CASE IN THE SIMILAR TRADE AND EVEN IN THE CASE OF THE APPELLANT TH ERE WAS GROSS LOSS IN A.Y. 99-2000. AND GROSS PROFIT OF 3.9 % IN A.Y. 1998-99 RESPECTIVELY. EVEN THE ITEMS TRADED IN THE IMMEDIATE LY PRECEDING YEAR ARE NOT SAME AS THE ITEMS TRADED DURING THE YEAR IN APPEAL ,AS IN THE EARLIER YEAR THE APPELLANT HAD SOLD JAGGERY , SOYABEAN CYLINDERS AND DURING THE YEAR IN APPEAL THE APPELLANT HAS SOLD GUNNY BAGS , CHILLI SEEDS AND HALDAR APART FROM COMMON ITEMS OF AMLI, CHILLIES THEREFORE THE AUTHORISED REPRESENTATIVE HAS CONTENDED 5 THAT THE TRADING RESULTS OF THE EARLIER YEARS CANNOT B E TAKEN AS GUIDELINE FOR ESTIMATING THE GROSS PROFIT FOR THIS YEAR . THE APPELLANT HAS GOT PURCHASE BILLS AND SALES BILLS AND ALSO COMPLETE BOO KS OF ACCOUNTS WHICH WERE PRODUCED AT THE TIME OF APPEAL HEARI NG. THE ASSESSING OFFICER WAS ALSO PRESENT AT THE TIME OF APPEAL HE ARINGS AND THE CASE WAS DISCUSSED WITH HIM . THE SUMMARY OF PURCHASE BILLS AND SALES BILLS HAD ALSO BEEN FILED BEFORE THE ASSESSI NG OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS ALONG WITH ADDRESSES O F SUNDRY CREDITORS , BUT THE ASSESSING OFFICER HAS NOT INQUIRE D INTO THE PURCHASES BEFORE REJECTING THE BOOK RESULTS. THE ASSESSIN G OFFICER HAS ALSO NOT ISSUED ANY SHOW CAUSE NOTICE BEFORE ESTI MATING G.P.AT 10%. IN RESPECT OF THE PURCHASE AND SALE TRANSACTI ONS MADE BY THE APPELLANT IT IS FOUND THAT MOST OF THE PURCHASES AND SALES HAVE BEEN MADE ON THE SAME DAY FROM AND TO SISTER CONCE RNS AND ON THE TOTAL TURNOVER OF RS.8.33 CRORES THE APPELLANT HAS NOT SHOWN/CLAIMED ANY TRANSPORTATION CHARGES , ONLY COLD ST ORAGE RENT OF RS.62830/- HAS BEEN DEBITED . THUS IT IS CLEAR THAT A CTUAL DELIVERY OF GOODS HAS NOT TAKEN PLACE AND PURCHASE AND SALES CONSIDER ATION HAVE ALSO NOT PASSED ON I.E. MONEY TRANSACTIONS HAVE NO T TAKEN PLACE WITH THE PARTIES FOR PURCHASES AND SALES AND ONLY JO URNAL ENTRIES HAVE BEEN PASSED IN THE ACCOUNTS OF THE PARTIES FO R PURCHASES AND SALES . THEREFORE, THE TRANSACTIONS OF PURCHA SE AND SALES ENTERED INTO BY THE APPELLANT WITH THE SISTER CON CERNS ARE FOUND TO BE ONLY PAPER TRANSACTIONS WHERE NO GOODS HAVE BEEN EXCHANGED. THE ONLY SALES MADE TO OUTSIDE PARTIES ARE OF SALE OF GUNNY BAGS WHICH HAVE BEEN MADE IN CASH SALES FOR RS.5, 60,500/- . THE APPELLANT HAS SHOWN GROSS LOSS OF RS.46,61,639/- AS WOR KED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER . IN TH E TRADING CUM PROFIT AND LOSS ACCOUNT THE APPELLANT HAS SHO WN NET LOSS OF RS.2,83,03,857/-WHICH MAINLY ARISES BECAUSE OF DEBI T OF RATE DIFFERENCE OF RS. 1,68,61,500/- AND IF THE RATE DIFFE RENCE IS EXCLUDED THE NET LOSS IS REDUCED TO RS.46,61,639/- AS WORKED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER . IF THE TRADING A CCOUNT IS RECAST BY CONSIDERING OPENING STOCK OF GUNNY BAGS OF RS.5 ,35,296/- AND SALE OF GUNNY BAGS OF RS.5,60,500/-AND BY EXCLUDING THE SALES AND PURCHASES EFFECTED WITH SISTER CONCERNS ,AS THE PURCHASES A ND SALES HAVE BEEN MADE IN BULK FROM AND TO SISTER CONCERNS , BY ASSUMING THAT EITHER NO TRANSACTIONS HAVE TAKEN PLACE OR THAT THE SAME HAVE TAKEN PLACE ON NO PROFIT NO LOSS BASIS, THE GR OSS PROFIT WORKS OUT TO RS.25,204/- WHICH IN EFFECT MEANS ENHANCEMEN T OF G.P. BY RS.46,86,843 /- WITHOUT TAKING INTO ACCOUNT RA TE DIFFERENCE OF RS. 1,68,61,500/- AND THE NET LOSS WORKS OUT TO RS.67 ,55,514/- WHICH ARISES AS A RESULT OF INTEREST PAYMENT OF RS.43,93,2 17/- TO BANK AND INTEREST OF RS.21,25,859/- TO OTHERS . THIS AL SO MEANS REDUCTION OF NET LOSS BY RS.2,15,48,343/- I.E. FROM RET URNED LOSS OF 6 RS.2,83,03,857/- TO RS.67,55,5147- COMPUTED AS ABOVE. HO WEVER AS THE PURCHASES AND SALES HAVE BEEN MOSTLY MADE FROM AND TO THE SISTER CONCERNS AND THERE IS NO ACTUAL PROOF OF DELIVERY O F GOODS, EVEN THE LOSS SO ARRIVED I.E. LOSS OF RS.67,55,514/- IS NO T ACCEPTED . THUS THE LOSS CLAIMED BY THE APPELLANT OF RS.2,83,03,857 /- IN P& L ACCOUNT IS IGNORED AND DIRECTED TO BE TAKEN AS NIL. NOW, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AG AINST THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI GOVIND SI NGHAL, THE LD. D.R. VEHEMENTLY ARGUED THAT DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER HAS ALLOWED SUFFICIENT OPP ORTUNITY TO THE ASSESSEE TO FILE THE DETAILS AND PRODUCE THE BOOKS OF ACCOUNT. ACCORDING TO LD. D.R., THE ASSESSEE FAILED TO DO SO AND, THEREFORE, THE ASSESSMENT HAS BEEN MADE U/S 144 OF THE ACT. HE FURTHER SUB MITTED THAT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN REJECTING THE BOOK RESULTS OF THE ASSESSEE AND ESTIMATING THE NET PROFIT @10% OF THE TURNOVER OF TH E ASSESSEE THEREBY COMPUTING INCOME OF THE ASSESSEE AT RS.15,53,043/- IN PLACE OF LOSS OF RS.2,83,03,858/-. SHRI DHIREN SHAH, THE LEARNED COUNSE L FOR THE ASSESSEE PRODUCED A COPY OF ORDER DATED 26.6.2009/30.6.2009 IN THE CASE OF DCIT CIRCLE 7, AHMEDABAD V. SMT. RITABEN HEMANTKUMAR SHAH IN ITA NO.436/AHD/05 RELATING TO ASSESSMENT YEAR 2001-02. IN SIMILAR SET OF FACTS, THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE CIT( A) OBSERVING AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE O RDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE DECLARED GROSS LOSS OF RS. 9,21,749/ - AND NET LOSS OF RS. 63,59,552/- IN THE RETURN FILED. T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE BOOKS O F ACCOUNTS DURING THE COURSE OF THE ASSESSMENT HEARING AND THEREFORE, REJECTED THE RESULTS SHOWN IN THE RETURN '' AND ESTIMATED GROSS PROFIT OF THE ASSESSEE @ 10% ON TOTAL TURNOVER OF R S. 7 7,42,830/- AND AFTER ALLOWING DEDUCTION FOR EXPENSES OF RS. 54,37,801/-INCOME SHOWN BY THE ASSESSEE AT RS. 1.71 LAKHS DETERMINED THE INCOME OF THE ASSESSEE AT RS. 19,88,482/ -. IN APPEAL, THE LD. CIT (A) OBSERVED THAT DUE TO NON PRO DUCTION OF BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT HEARING, TH E ASSESSING OFFICER WAS JUSTIFIED IR REJECTING THE BOOK RESULT S, BUT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ARBITRARILY ESTI MATING THE GROSS PROFIT @ 10% AND THAT TOO WITHOUT ISSUANCE OF SHOW CAUSE NOTICE. THE UJ. CIT (A) ON VERIFICATION OF BOOKS OF ACCO UNTS PRODUCED BEFORE HIM FOUND THAT THE BOOKS OF ACCOUNTS WER E SUPPORTED BY THE PURCHASE BILLS AND SALES BILLS ETC. HE A LSO OBSERVED THAT THE ASSESSING OFFICER HAS ALSO GONE THROUGH T HE AUDITED BOOKS OF ACCOUNTS. CONSIDERING, THE ASSESSEE WAS TRA DING IN WHOLE SALE BASIS HE OPINED THAT NORMALLY GROSS PROF IT RATE IN SUCH WHOLESALE TRADE BUSINESS VARY FROM 1% TO 2% , HE THER EFORE, ESTIMATED GROSS PROFIT @ 1.5% WHICH WORKED OUT TO RS. 11 .13 LAKHS AND AFTER ALLOWING DEDUCTION OF EXPENSES OF RS. 56 .09 LAKHS THE NET LOSS COMES TO RS. 44.96 LAKHS AND AFTER REDUCING OTHER INCOME OF RS. 1.71 LAKHS FROM THE SAME, HE DIRECTED THE ASSESSING OFFICER TO ACCEPT THE INCOME OF THE ASSESSEE AT NIL. IN OT HER WORDS THE ASSESSING OFFICER ACCEPTED THE GROSS PROFIT OF THE ASSESSEE AT RS, 54.38 LAKHS WHICH WORKS OUT TO 7.33% OF THE TURNOV ER. WE FIND THAT THE REVENUE HAS FILED APPEAL AGAINST THE SAI D ORDER ON THE GROUND MENTIONED HEREIN ABOVE. THE ASSESSEE HAS NOT PREFERRED ANY APPEAL AGAINST THE ORDER OF THE LD. CI T (A) ON THIS ISSUE. WE LD. CIT (A) ALSO DID NOT ACCEPT THE BOOKS OF A CCOUNTS PRODUCED BEFORE,JIIRRJLAOD HAS. UPHEKLTHE REJECTION OF BOOK RESULTS AS-MADE BY THE ASSESSING OFFICER. IN THE ABOVE CIRCUMSTANCE S, THE LD. D.R COULD NOT POINT OUT ANY ERROR IN THE ORDER O F THE LD. CIT (A) AS THE BOOK TRANSACTIONS WERE ALSO NOT ACCEPTED BY THE LD. CIT (A). WE THUS DO NOT FIND ANY FORCE IN THIS GROUND OF A PPEAL OF THE REVENUE AND THE SAME IS DISMISSED. IN THE CASE OF SMT. RITABEN IN THE RETURN FILED, THE ASSESSEE HAS SHOWN LOSS OF RS.63,59,552/- FOR THE ASSESSMENT YEAR 2001-02. IN THAT CASE ALSO, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 144 O F THE ACT, BY REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE AND/R ECASTED THE TRADING ACCOUNT AND ESTIMATING GROSS PROFIT AT 10% OF THE TOTAL SALES OF RS.7.,42,62,830/- AND ARRIVING AT NET PROFIT OF RS.19,88,482/-. ON APPEAL, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO COMPUTE THE NET PROFIT AT NIL AS AGAINST THE NET PROFIT OF RS.98,8 8,244/-. THE 8 REVENUE PREFERRED THE APPEAL BEFORE THE TRIBUNAL AN D THE TRIBUNAL CONFIRMED THE ORDER OF CIT(A). IN VIEW OF THE ORDER OF THE TRIBUNAL (SUPRA), WE HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFI ED IN ARBITRARILY ESTIMATING THE GROSS PROFIT @10% AND THAT TOO WITHOUT ISSUANCE OF SHOW CAUSE NOTICE. IT IS SEEN THAT THE ASSESSEE HA S FURNISHED BEFORE THE ASSESSING OFFICER VARIOUS DETAILS LIKE COMPARATIVE CHART OF GROSS PROFIT AND NET PROFIT FOR CURRENT YEAR A ND EARLIER TWO YEARS, HAD FURNISHED PARTICULARS OF MONTHWISE SALES, PURC HASES, AND STOCK SUMMARY, QUANTITATIVE DETAILS IN RESPECT OF OPENING AND CLOSING STOCK AND DETAILS OF INTEREST EXPENSES, DETAILS OF UNSECURED LOANS AND LOANS AND ADVANCES, ADDRESSES OF CREDITORS, DEBTORS, COPIES O F ACCOUNTS OF GHATLODIA AND SHAHIBAUG BRANCHES OF MMC BA NK, COPIES OF DEBIT NOTES RAISED FOR RATE DIFFERENCES BY VARIOUS PA RTIES SUCH AS MADHUKANT AGROTECH LTD., MADHUKANT EXPORT LTD., SNE H TRADELINK PVT. LTD., SHREEJI KRUPA TRADERS & ANMOL ENTERPRISE. THE L D. CIT(A) HAS CATEGORICALLY HELD THAT THE ABOVE DETAILS HAD BEEN FIL ED BEFORE THE ASSESSING OFFICER. IN THE CASE OF ITO V. JITENDRA MEHRA RE PORTED IN 53 ITD 396 (DELHI), WHEREIN IT HAS BEEN HELD THAT WHERE AN EX PARTE ASSESSMENT HAS TO BE MADE, IT HAS TO BE REASONABLY BASED O N MATERIALS AVAILABLE ON RECORD, IT CANNOT BE ARBITRARY, CAPRICIOUS. IN THE INSTANT CASE, THE ESTIMATE OF GROSS PROFIT MADE BY THE ASSE SSING OFFICER IS NOT BASED ON ANY COMPARABLE CASE IN THE SIMILA R TRADE AND EVEN IN THE CASE OF ASSESSEE THERE WAS GROSS LOSS IN ASSESSMENT YE AR 1999-2000 AND GROSS PROFIT OF 3.9% IN ASSESSMENT YEAR 19 98-99, RESPECTIVELY. THE LD. CIT(A) CATEGORICALLY STATED THAT EVEN IN ITEMS TRADED IN THE IMMEDIATELY PRECEDING YEAR WERE NOT SAM E AS THE ITEMS TRADED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. FU RTHERMORE, THE CIT(A) FOUND THAT THE ASSESSEE HAS GOT PURCHASE BILLS AND SALE BILLS AND ALSO COMPLETE BOOKS OF ACCOUNT WHICH WERE PRODUCED BEF ORE HIM. THE CIT(A) HAS NOT ALLOWED THE LOSS CLAIMED BY THE ASSESSEE OF 9 RS.2,83,03,857/- IN THE PROFIT AND LOSS ACCOUNT. ADMITTE DLY, THE ASSESSEE IS NOT IN APPEAL AGAINST THE SAID ACTION OF THE CI T(A). THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESEN T CASE, WE DO NOT SEE ANY VALID GROUND IN INTERFERING WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT( A) AND DISMISS GROUND NOS. 1 AND 2 OF THE REVENUES APPEAL. 7. GROUND NOS. 3 AND 4 OF THE APPEAL READ AS UNDER: 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, AHMEDABAD HAS FURTHER ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.37,25,334/- HOLDING THAT CONFIRMAT ION HAVE BEEN FILED BY THE ASSESSEE AT THE APPEAL STAGE. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ADMITTING T HE NEW EVIDENCE IN VIOLATION OF RULE 46A OF I.T.RULES, 1 962. 8. THE ASSESSING OFFICER MADE THE ADDITION OF RS.37,25,33 4/- OBSERVING AS UNDER: 5. AS PER STATEMENT NO.1 ENCLOSED WITH AUDIT REPORT, ASSESSEE HAS ACCEPTED THE FOLLOWING DEPOSITS DURING THE YEAR: MADHAVPURA TRADERES PVT. TD. 4774 MADHUKANT EXPORT LTD. 2655000 SHAH TRADING CO. 1065560 3725334 BECAUSE NO CONFIRMATORY LETTERS HAVE BEEN FILED IN RESP ECT OF ABOVE UNSECURED LOANS, GENUINENESS OF ABOVE LOANS AND CAPACITY OF THE PERSONS TO GIVE THESE LOANS TO ASSESSEE CANNOT BE ACCEPTED AND THEREFORE RS.37,25,334/- IS ADDED IN TOTAL INCOME OF A SSESSEE U/S 68 OF THE I.T.ACT AS UNEXPLAINED CASH CREDITS. (ADDITION RS.37,25,334/-) 9. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THE DETAILS OF CREDITORS AND DEBTORS WERE FILED BEFORE THE ASSESSING OFFICER. IT IS EVIDENCE THAT 10 M/S MADHAVPURA TRADERS PVT. LTD. AND MADHUKANT EXPORT LTD. ARE CREDITORS AND M/S SHAH TRADING CO. IS A DEBTOR PARTY AN D, THEREFORE, NO CONFIRMATION OF THE SAID PARTY WAS REQUIRED. HOWEVER, T HE ASSESSING OFFICER HAS NOT CONSIDERED THE SAME AND HAS ALLEGED THAT THE ASSESSEE HAS NOT PROVIDED THE CONFIRMATION FROM THE SAID PARTY AND MADE THE ADDITION. IT WAS ALSO STATED BEFORE THE CIT(A) THAT TH E ASSESSING OFFICER IN PARA 3 OF THE ASSESSMENT ORDER HAS MENTIONED THAT THE ASSE SSEE HAD DEBITED A DIFFERENCE OF RS. 1,68,61,500/- AND THAT TH E SAID RATE DIFFERENCE WAS IN RESPECT OF BULK IMPORT OF PAMOLEIN, WHICH WAS SOL D TO MADHUKANT EXPORT LTD., MADHUKANT AGROTECH. LTD. AND SNEH TRADE LINK PVT. LTD. ETC. THUS, ON ONE PARA, THE ASSESSING OFFICER IS TREATING THE AMOUNT RECEIVED AS DEPOSITS AND MAKING NON-RECEIPT OF CONFIRMATION U/S 68 AND ON THE OTHER SIDE THE RATE DIFFERENCE PERTAINS TO GOODS SOLD TO THOSE PARTIES. THUS, ONCE THE ASSESSING OFFICER WAS HAVING MATERIAL EVID ENCE THAT THE ASSESSEE WAS HAVING TRADE/BUSINESS RELATION WITH SUCH PARTI ES, THEN THE TRADE DEPOSIT RECEIVED FROM THE SAID PARTIES WAS REQUIRE D TO BE CONSIDERED AS TRADE DEPOSIT. ACCORDINGLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAS MAD E THE ADDITION U/S 68 WAS ON A WRONG FOOTING AND HENCE, REQU IRED TO BE DELETED. THE ASSESSING OFFICER HAS ALSO NOT CARRIED OUT AN Y SEPARATE ENQUIRY FOR DOUBTING THE GENUINENESS OF THE PARTY AND GETTING CLARIFICATION FOR HIS PRESUMPTIONS. SUBSEQUENTLY, THE ASSESSEE SUBMITTED T HE ORIGINAL COPIES OF CONFIRMATIONS RECEIVED FROM THE SAID PARTIES. 10. THE CIT(A) DELETED THE ADDITION OBSERVING AS UNDE R: 4.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AU THORISED REPRESENTATIVE AND ALSO THE OBSERVATIONS OF THE PARTIE S SUBMITTED BY THE AUTHORISED REPRESENTATIVE. THE AUTHORISED REPR ESENTATIVE WAS ASKED TO FILE COPIES OF BALANCE SHEETS OF THE DEPOSI TORS AND COPIES OF ACKNOWLEDGEMENTS OF HAVING FILED RETURNS OF IN COME BY THE DEPOSITORS. THE AUTHORISED REPRESENTATIVE HAS FILED COPIES OF BALANCE SHEETS OF MADHUKANT EXPORTS LTD. AND M/S SHAH TRADING CO. FOR A.Y. 2000-01 AND ALSO COPY OF ACKNOWLEDGEMENT OF RETURN 11 FILED BY SRI KIRIT KANTILAL SHAH, PROPRIETOR OF SHA H TRADING CO. FOR HAVING FILED RETURN OF INCOME ON 5.7.2001 WITH OLD I TO WARD 1(6). THE ASSESSING OFFICER WAS ALSO PRESENT AND THE CASE WAS DISCUSSED WITH HIM. AS PER THE BALANCE SHEET OF SHAH TRADING CO ., EVEREST EXPORTS I.E. THE APPELLANT APPEARS AS SUNDRY CREDITOR WI TH BALANCE OF RS.48,17,100/- AND IN THE BALANCE SHEET OF THE APPELL ANT SHAH TRADING CO. HAS DEBIT BALANCE TO THAT EXTENT. THUS THI S IS NOT A CASH CREDIT. AS REGARD THE OTHER CREDITOR MADHUKANT EXPORTS LTD, THE SAID PARTY IS ASSESSED TO TAX IN CIRCLE 4, AHMEDABAD AND ITS P AN HAS BEEN FILED AND AS PER THE ACCOUNT COPY THE AMOUNT HAS BE EN RECEIVED BY CHEQUE AND THE OTHER TRANSACTIONS WITH THE S AID PARTY HAVE BEEN MADE TOWARDS RATE DIFFERENCE. AS THERE IS TR ADING TRANSACTION WITH THE SAID PARTY AND THE AMOUNT HAS BEEN RECEIVED BY CHEQUE AND THE PARTY IS ASSESSED TO TAX AND IT IS A TR ADE DEPOSIT AND NOT CASH CREDIT, THE CREDIT IS ACCEPTED AS GENUINE. THA T LEAVES BALANCE AMOUNT OF RS.4,774/- FROM MADHAVPURA TRADERS P VT. LTD. AS ACCOUNT COPY AND CONFIRMATION HAS BEEN FILED FROM THE SAID PARTY AND THE AMOUNT HAS BEEN RECEIVED BY CHEQUE, THE CREDIT IS ACCEPTED AS GENUINE. THUS THE ADDITION OF CASH CREDITS O F RS.37,25,334/- IS DELETED. 11. THE CIT(A) HAS CATEGORICALLY STATED THAT THE ASSESSIN G OFFICER WAS ALSO PRESENT AND THE CASE WAS DISCUSSED WITH HIM. THE CIT(A) HAS OBSERVED THAT AS PER THE BALANCE SHEET OF SHAH TRADIN G CO. EVEREST EXPORTS, THE ASSESSEE APPEARED AS SUNDRY CREDITOR WITH A BA LANCE OF RS.48,70,100/- AND IN THE BALANCE SHEET OF THE ASSESSEE, SHAH TRADING CO. HAS DEBIT BALANCE TO THIS EXTENT. THUS, THE CIT(A) HAS CATEGORICALLY STATED THAT THIS IS NOT THE CASH CREDIT BUT A TRADE DEPOSI T AND HENCE, SEC. 68 OF THE ACT CANNOT BE INVOKED. AS REGARDS THE OTHER CREDITOR, MADHUKANT EXPORTS LTD., THE CIT(A) HAS OBSERVED THAT THE SAID FIRM IS ASSESSED TO TAX AND AS PER THE COPY OF ACCOUNT, THE AMOUNT HAS BEEN RECEIVED BY CHEQUE AND THE OTHER TRANSACTIONS WITH THE SA ID PARTY HAS BEEN MADE TOWARDS RATE DIFFERENCE, AS THERE WAS TRADE TRANSACTION WITH THE SAID PARTY AND THE AMOUNT HAS BEEN RECEIVED BY CHE QUE AND, THEREFORE, EXPLANATION FURNISHED BY THE ASSESSEE IS SATISFA CTORY. AS REGARDS THE AMOUNT OF RS.4774/-,THE AMOUNT WAS RECEIVED BY CHEQUE AND THERE WAS NO JUSTIFICATION IN TREATING THE SAME AS NON-G ENUINE. IN OUR 12 VIEW, THERE IS NO MERIT IN THIS CONTENTION OF THE REVE NUE THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMITTING THE NEW EV IDENCE IN VIOLATION OF RULE 46 OF THE I.T. RULES, 1962. FIRSTLY, IT IS SEEN TH AT THE ASSESSING OFFICER WAS PRESENT BEFORE THE CIT(A) DURING THE COURSE OF HEARING. SECONDLY, THERE IS NO MATERIAL ON RECORD TO REBUT THE FINDINGS OF THE CIT(A). THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE, WE DO NOT FIND ANY VALID GROUND FOR INTE RFERING WITH THE ORDER OF THE CIT(A) AND ACCORDINGLY, WE UPHOLD THE SAM E. 12. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21.8. 2009. SD/- (D.C.AGRAWAL) ACCOUNTANT MEMBER SD/- (H.L.KARWA) JUDICIAL MEMBER AHMEDABAD, DATED:21.8.2009 PSP* COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.