Commex Corporation, Kolkata V. DCIT, Circle - 34, Kolkata, Kolkata

ITA 2083/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2468 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 08-12-2009
• Court: TRIBUNAL
• Department Lawyers: D R SINDHAL
• Assessee Lawyers: R DHAR
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C BENCH : KOLKATA (BEFORE SRI B.R.MITTAL, J.M. AND SRI C.D.RAO, A.M. ) I.T.A. NO. 2083 /KOL/2009 ASSESSM ENT YEAR : 2005-06 COMMEX CORPORATION VS. D CIT, CIRCLE-34, KOLKATA (PAN NO. AACFC 4567 E) (APPELLANT) (RESPONDENT) ITA N O. 2093(KOL)/09 ASSESSME NT YEAR : 2005-06 DCIT, CIR. 34, KOLKATA VS M/S COMMEX CORPORATION (APPELLANT) (RESPONDENT) ITA NO. 2084(KOL)/2009 ASSESSMENT YEAR : 2006-2007 COMMEX CORPORATION VS DCIT, CIR. 34, KOLKATA (APPELLANT) (RESPONDENT) ASSESSEE BY : SRI R. DHAR. DEPARTMENT BY: SRI D. R.SINDHAL, CIT. O R D E R PER SHRI C.D.RAO, A.M. THE FIRST TWO APPEALS ARE CROSS APPEALS, ONE BY TH E ASSESSEE AND THE OTHER BY THE DEPARTMENT AND ARE AGAINST THE ORDER OF THE LE ARNED CIT(A) DATED 18 TH SEPTEMBER, 2009 FOR THE ASSESSMENT YEAR 2005-06. THE THIRD APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEAR NED CIT(A) DATED 18 TH SEPTEMBER, 2009 FOR THE ASSESSMENT YEAR 2006-07. 2. IN THE CROSS APPEAL FOR THE ASSESSMENT YEAR 200 5-06 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS : 1. FOR THAT, THE LD. CIT(A) WAS NOT JUSTIFIED TO CONFIRM ADDITION OF RS.70,03,710 ALLEGEDLY U/S 40A(2)(B) OF THE I.T.A CT, 1961 BASED ON SUSPICION & SURMISE ONLY. 2 2. FOR THAT LD. CIT(A) SHOULD NOT HAVE RETAI NED DISALLOWANCE OF 10% OUT OF MISC. EXPENSES. 3. FOR THAT THE LD. CIT(A) SHOULD HAVE HELD THA T MEMBERSHIP SUBSCRIPTION OF RS.41,490/- WAS FOR THE PURPOSE OF ITS BUSINESS ONLY AND SHOULD HAVE DELETED IT ENTIRELY ON THE FACTS AND CIRCUMSTANCES OF CASE. 4. FOR THAT LD. CIT(A) SHOULD NOT HAVE RETAIN ED DISALLOWANCE OF RS.2,00,000/- OUT OF FOREIGN TRAVEL EXPENSES. 3. IN THE CROSS APPEAL THE DEPARTMENT HAS TAKEN TH E FOLLOWING GROUNDS : 1. THE LD. CIT(A)-XX, KOLKATA HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.4,20,472/- IN RESPECT OF EXCESS CASH FOUND DURING THE COURSE OF SURVEY. 2. THE LEARNED CIT(A)-XX, KOLKATA HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.43,27,248/- ON ACCOUNT OF LOW PROFIT. 3. THE LD. CIT(A)-XX, KOLKATA HAS ERRED ON FACT S AND IN LAW IN DELETING THE ADDITION OF RS.20,19,277/- IN RESPECT OF DIS ALLOWANCE OF EXPENSES ON TRANSPORTATION , LOADING/UNLOADING AND PACKING. 4. IN THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2006-07 THE FOLLOWING TWO GROUNDS ARE TAKEN : 1. FOR THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS.61,646/- AND RS.3,014/- WRONGLY ADDED BY LD. DCIT, CIRCLE-34, KOLKATA ALLEGING DIFFERENCE IN BALANCES IN RESPECT OF M/S TATA METTALICS LTD. & M/S ASHA ROAD CARRIERS (P) LTD. WHEN RECONCI LIATION OF THE ACCOUNTS EXPLAINED. 2. FOR THAT THE LD. CIT(A) SHOULD NOT HAVE RETAIN ED DISALLOWANCE OF RS.1,10,000/- OUT OF FOREIGN TRAVEL EXPENSES. 5. IN THE CROSS APPEAL OF THE ASSESSEE THE FIRST GR OUND IS RELATING TO THE ADDITION OF RS.70,03,710 U/S 40A(2)(B) OF THE INC OME TAX ACT, 1961. BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE HAS MADE PAYMEN T OF RS.2,70,05,849 ON ACCOUNT OF FABRICATION, CONVERSION AND PROCESSING CHARGES T O ITS SISTER CONCERN M/S UMA IRON AT RS.5,500 PER M.T. THE A.O. FOUND THAT T HE PAYMENTS TO THE SISTER CONCERN IN THE PRECEDING ASSESSMENT YEARS WAS AT RS.3,400 TO RS.4,500 PER M.T. ACCORDING TO THE A.O., THE ASSESSEE HAS FAILED TO J USTIFY THE STAND RAISED IN THE RATE AT WHICH THE PAYMENTS WERE MADE TO THE SISTER C ONCERN. THEREFORE,HE CONCLUDED THAT THE PAYMENT AT RS.4000 PER M.T. WILL BE SUFFI CIENT FOR THE WORK DONE BY THE 3 SISTER CONCERN. THEREFORE, HE ADDED AN AMOUNT OF RS.70,03,710 BY APPLYING THE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME TA X ACT. 6. ON APPEAL, THE LEARNED CIT(A) HAS CONFIRMED THE SAME BY OBSERVING THAT I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSE E. THE A.O. HAS ALSO ALLOWED PAYMENT OF RS.4000 PER M.T. WHICH TAKES CARE O F THE RATE IN THE PRICE OF CAST IRON AND HARD COKE. 7. AGGRIEVED BY THIS , THE ASSESSEE IS IN APPEAL B EFORE US. AT THE TIME OF HEARING , THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE A.O. HAS HIMSELF ACCEPTED THAT THE ASSESSEE HAS MADE THE PAYMENT TO THE SISTER CONCERN AT RS.4,500 PER M.T. IN THE PRECEDING ASSESSMENT YE ARS, HOWEVER HE REDUCED THE SAME TO RS.4000 PER M.T. IN THE IMPUGNED ASSESSMEN T YEAR WHICH IS NOT JUSTIFIED. HE FURTHER COTENDED THAT THERE IS NO DISALLOWANCE U/S 40A(2)(B) IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR, I.E. 2006 -07 WHICH IS ALSO UNDER SCRUTINY. THEREFORE, HE CONTENDED THAT THE REVENU E IS NOT JUSTIFIED TO DISALLOW RS.70,03,710 BY APPLYING THE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME TAX ACT. 8. ON THE OTHER HAND, THE LEARNED D.R. RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREF UL PERUSAL OF THE MATERIALS ON RECORD, KEEPING IN VIEW OF THE FACT THAT THE REV ENUE HAS NOT BROUGHT ON RECORD THAT THE PAYMENTS MADE TO THE SISTER CONCERN WE RE IN EXCESS TO THE MARKET CONDITIONS. IT IS FURTHER OBSERVED THAT THE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEARS , THE ASSESSEE HAD PAID RS.4,500 PER M.T. T O THE SISTER CONCERN. WE FIND NO REASON TO REDUCE THE SAME AT RS.4000 PER M.T. FOR THE IMPUGNED YEAR. IT IS FURTHER OBSERVED THAT IN THE IMMEDIATELY SUCCEEDIN G YEAR NO DISALLOWANCE IS MADE U/S 40A(2)(B) OF THE INCOME TAX ACT. IN THESE CIR CUMSTANCES , WE FIND NO JUSTIFICATION ON THE PART OF THE REVENUE TO DISALL OW AN AMOUNT OF RS.70,03,710 BY APPLYING THE PROVISIONS OF SECTION 40A(2)(B). TH EREFORE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND DIRECT THE A.O. TO DELETE THE AMOUNT OF RS.70,03,710. 10. THE SECOND GROUND RELATES TO THE DISALLOWANCE OF 10% OF THE MISC. EXPENSES. BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE CLAIMED MISC. EXPENDITURE 4 AT RS.13,37,497 DURING THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR. THE A.O. IS OF THE VIEW THAT THE EXPENSES ARE NOT PR OPERLY VOUCHED AND ARE MOSTLY SUPPORTED BY SELF-MADE VOUCHERS. THEREFORE, HE DI SALLOWED 25% OF THE EXPENSES. 11. ON APPEAL, THE LEARNED CIT(A) HAS RESTRICTED TH E DISALLOWANCE TO 10%. 12. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BE FORE US. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THE DISALLOWANCE OF 10% IS EXCESS. THEREFORE, HE RE QUESTED TO DELETE THE SAME. 13. ON THE OTHER HAND, THE LEARNED D.R. RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 14. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD KEEPING IN VIEW OF THE FACT THA T THE ASSESSEE COULD NOT BRING ANY MATERIAL NOR ANY NEW COMPARATIVE MISC. EXPENDIT URE IN THE PRECEDING ASSESSMENT YEARS. WE ARE OF THE VIEW THAT THE DISA LLOWANCE OF 10% FOR WANT OF PROPER VOUCHERS IS JUSTIFIED. THEREFORE, WE CONFI RM THE ORDER OF THE CIT(A) ON THIS ISSUE. THIS GROUND OF THE ASSESSEE IS, THEREF ORE, DISMISSED. 15. THE THIRD ISSUE RELATES TO THE MEMBERSHIP SUBSC RIPTION OF RS.41,490. THE A.O. HAS NOTED THAT THESE EXPENSES ARE INCURRED IN PAYING MEMBERSHIP OF RS.41,490. THE A.O. HAS NOTED THAT THESE EXPENSES ARE INCURRED IN PAYING MEMBERSHIP SUBSCRIPTIONS OF VARIOUS CLUBS AND ARE PERSONAL IN NATURE. 16. ON APPEAL, THE LEARNED CIT(A) HAS ALSO CONFIRME D THE SAME. 17. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BE FORE US. 18. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE EXPENSES ARE INCURRED FOR THE PURPOSE OF BUSINESS ONLY AND TO INCREASE THE BUSINESS ACTIVITY. THEREFORE, NO DI SALLOWANCE OF THESE EXPENSES SHOULD BE JUSTIFIED. THEREFORE, HE REQUESTED TO ALLOW THE SAME. 19. ON THE OTHER HAND, THE LEARNED D.R. RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW TH E FACT THAT THE ASSESSEE COULD NOT FURNISH THE DETAILS OF EXPENDITURE OF RS.41,490. WE FIND NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES TO DISALLOW THE SAME. THIS GROUND OF THE ASSESSEE IS, THEREFORE, DISMISSED. 5 20. AS REGARDS THE DISALLOWANCE OF RS.2,00,000 OUT OF FOREIGN TRAVELLING EXPENDITURE , THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE SAME. THEREFORE, WE DISMISS THIS GROUND OF THE ASSESSE E AS NOT PRESSED. 21. IN THE RESULT, ITA NO. 2083(KOL)/2009 IS ALLO WED IN PART 22. FIRST GROUND RAISED BY THE ASSESSEE IN ITA N O. 2084(KOL)/2009 FOR THE ASSESSMENT YEARS 06-07 RELATES TO THE CONFIRMATIO N OF ADDITION OF RS.61,646 AND RS.3,014 ON ACCOUNT OF ALLEGED DIFFERENCE IN BALAN CES IN RESPECT OF M/S TATA METALICS LTD. AND M/S ASHA ROAD CARRIERS PVT. LT D. 23. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAR EFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD INCLUDING THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) , IT IS OBSERVED THAT T HE LEARNED CIT(A) HAS CONFIRMED THESE DISALLOWANCES BY OBSERVING THAT THE ASSESSEE THOUGH FILED RECONCIALIATION STATEMENT COULD NOT FILE DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CONTENTIONS. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASI DE ORDER OF THE CIT(A) ON THIS ISSUE AND REMIT BACK THE SAME TO THE FILE OF THE A.O. WITH THE DIRECTION TO THE ASSESSEE TO SUBSTANTIATE THE RECONCILIATION STATEM ENT FILED BEFORE THE LEARNED CIT(A) WITH SUPPORTING DOCUMENTARY EVIDENCES. TH EREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 24. THE SECOND GROUND IS RELATING TO THE DISALLO WANCE OF RS.1,01,000 OUT OF FOREIGN TRAVEL EXPENSES. THE SAME WAS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THEREFORE, THE SAME IS DISMISSED BEI NG NOT PRESSED. 25. IN THE RESULT, THE APPEAL IN ITA NO. 2084(KOL) /2009 IS ALLOWED IN PART FOR STATISTICAL PURPOSES. REVENUES APPEAL 26. THE FIRST GROUND TAKEN BY THE REVENUE IS REGAR DING THE DELETION OF ADDITION OF RS.4,20,472 ON ACCOUNT OF SHORTAGE OF CASH AT T HE TIME OF SURVEY. BRIEF FACTS OF THIS CASE ARE THAT WHILE DOING SURVEY U/S 133 A ON 18.3.2005. AT THE BUSINESS PREMISES OF THE ASSESSEE CASH OF RS.1000 WAS FOU ND BUT AS PER THE BOOKS OF ACCOUNT THE CLOSING CASH BALANCE AS ON THE DATE OF SURVEY WAS RS.5,20,471. SRI K.K.AGARWAL , PARTNER, CLARIFIED HIS STATEMENT RE CORDED U/S 131 THAT THE BALANCE 6 CASH OF RS.4,21,472 WAS LYING IN HIS RESIDENCE. A CCORDING TO THE A.O. THE ASSESSEE IS A REGULAR DEFAULTER IN PREPARATION O F ACCOUNTS. THE ASSESSEE HAS NOT COMPLETED THE PREPARATION OF ACCOUNTS FOR THE ASSE SSMENT YEARS 2002-03, 03-04 AND 04-05 ON THE DATE OF SURVEY. THEREFORE, HE DOES NOT BELIEVE THE CONTENTION OF THE PARTNER THAT THE BALANCE CASH WAS AVAILABLE AT THE RESIDENCE. THEREFORE, HE ADDED AN AMOUNT OF RS.4,20,472. 27. ON APPEAL, THE LEARNED CIT(A) HAS DELETED THE SAME BY OBSERVING THAT NO EXCESS CASH WAS FOUND IN THE SURVEY. THE A.O. HA S HIMSELF ADMITTED IN THE ASSESSMENT ORDER THAT NO ADVERSE MATERIAL WAS F OUND DURING THE SURVEY. THE ASSESSEE HAS CLARIFIED THAT BALANCE CASH WAS KEPT IN THE RESIDENCE AND THE A.O. HAS BROUGHT NO MATERIAL ON RECORD TO DISPROVE THE SAME. NO EXCESS CASH WAS FOUND IN THE SURVEY, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. 28. AGGRIEVED BY THIS , NOW THE REVENUE IS IN APP EAL BEFORE US. 29. AT THE TIME OF HEARING BEFORE US, THE LEARNED D.R. HAS REITERATED THE OBSERVATIONS MADE BY THE A.O. AND FURTHER CONTENDE D THAT THE LEARNED CIT(A) FACTUALLY IS INCORRECT IN SHIFTING THE BURDEN FROM THE SHOULDERS OF THE ASSESSEE WHICH IS NOT CORRECT AND PROPER. THEREFORE, HE R EQUESTED TO REVERSE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THAT OF THE A.O. 30. ON THE OTHER HAND, THE LEARNED A.R. RELIED ON THE ORDER OF THE CIT(A). 31. AFTER HEARING THE RIVAL SUBMISSIONS AND ON A CAREFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, WE ARE OF THE CONSI DERED VIEW THAT THE ASSESSEE HAS NOT FINALISED THE ACCOUNTS FOR THE ASSESSMENT YEA RS 2002-03, 03-04 AND 04-05. AT THE TIME OF SURVEY, NEITHER THE A.O. NOR THE S URVEY TEAM COULD POINT OUT ANY MISTAKE IN THE CASH BOOK MAINTAINED BY THE ASSESS EE. WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND THERE IS NO REASO N TO DISBELIEVE THE CONTENTION OF THE ASSESSEE. IN THE ABSENCE OF THE CONTRARY M ATERIAL, THEREFORE, WE CONFIRM THE SAME BY DISMISSING THE GROUND OF THE REVENUE. 32. THE SECOND ISSUE RAISED BY THE REVENUE IS REG ARDING THE DELETION OF ADDITION OF RS.43,27,248 ON ACCOUNT OF LOW PROFIT. BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE IS AN EXPORTER OF CI AND LEATHER GOOD S. ACCORDING TO THE A.O., THERE WAS NO SALE OF LEATHER GOODS DURING THE YEAR AND THERE WERE 7146 PIECES OF LEATHER GOODS IN THE OPENING STOCK AS WELL AS IN THE CLOSING STOCK. THE ASSESSEE 7 MADE SALES OF 65,026 PIECES OF CIS FOR RS.12,87, 87,139 AT AN AVERAGE RATE OF RS.1980.55 PER PIECE. THE CLOSING STOCK OF CIS WAS 2271 PIECES. THE A.O. THEN OBSERVED THAT IF THE COST PRICE WAS ESTIM ATED AT RS.1500 PER UJNIT, THE VALUE OF THE CLOSING STOCK OF 9417 UNITS (7146 + 2271) WORKS OUT TO RS.1,41,25,500, BUT THE ASSESSEE HAS SHOWN THE VALU E OF THE CLOSING STOCK AT RS.27,54,755 ONLY. THE A.O. THEN INFERRED THAT THE GROSS PROFIT RATE OF RS.11.64% AS SHOWN BY THE ASSESSEE WAS NOT ACCE PTABLE. IF THE DIFFERENCE WAS ADDED, THE ADDITION WOULD BE RS.1,13,70,745. BUT THEN, IN ORDER TO MEET THE END OF JUSTICE, THE A.O. ESTIMATED THE GROSS PR OFIT @ 15% AND MADE AN ADDITION OF RS.43,27,248. 33. THE LEARNED A.R. SUBMITTED BEFORE THE CIT(A) THAT THE A.O. HAS FOUND NO DEFECTS IN THE AUDITED BOOKS OF THE ASSESSEE. E VEN, DURING THE SURVEY NO ADVERSE MATERIAL WAS FOUND AGAINST THE ASSESSEE. THE VALUE OF THE CLOSING STOCK DETERMINED BY THE A.O. IS ARBITRARY AND WITHOUT ANY BASIS. THE A.O. HAS NOT CLARIFIED THE BASIS FOR ESTIMATING THE COST AT RS.1 500 PER UNIT. SECONDLY, WITHOUT MENTIONING ANYTHING ABOUT THE COST OR SELLING PRICE OF LEATHER GOODS, HE HAS APPLIED THE ESTIMATED COST OF RS.1500 PER UNIT TO 7146 PIECES OF LEATHER GOODS. 34. THE CIT(A) CONSIDERED THE VIEW OF THE A.O. AND ALSO THE SUBMISSIONS OF THE ASSESSEE AND DELETED THE ADDITION MADE BY T HE A.O. BY OBSERVING THAT THE A.O. HAS FAILED TO FIND ANY DEFECT IN THE AU DITED BOOKS OF THE ASSESSEE. NO ADVERSE MATERIAL WAS FOUND EVEN DURING THE COURSE O F SURVEY. THE CIT(A) INCLINED TO AGREE WITH THE ASSESSEE THAT THE A.O. HAS NOT MENTIONED ABOUT THE COST OR SELLING PRICE OF THE LEATHER GOODS. THE V ALUATION OF THE LEATHER GOODS , BY APPLYING THE ESTIMATED COST OF RS.1500 PER UNIT, IS FAULTY AND WITHOUT ANY BASIS, WHICH IS POSSIBLY THE REASON BEHIND THE ABNORMALLY HIGH VALUE OF THE CLOSING STOCK AS DETERMINED BY THE A.O. EVEN OTHERWISE , THE VALUATION DONE BY THE A.O. IS BASED ONLY ON PRESUMPTIONS AND NOT ON ANY MATERIAL OR EVIDENCE ON RECORD. THE VALUATION OF CLOSING STOCK , AS DONE BY THE A.O., DOES NOT APPEAR TO BE JUSTIFIED AND CANNOT BE MADE A BASIS FOR E STIMATING THE PROFIT OF THE ASSESSEE. THE ADDITION MADE BY THE A.O. IS ARBITR ARY AND WITHOUT ANY BASIS AND IS, THEREFORE, DIRECTED TO BE DELETED. 8 35. AGGRIEVED BY THIS, NOW THE REVENUE IS IN APPE AL BEFORE US. 36. AT THE TIME OF HEARING BEFORE US, THE LEARNED D .R. , APPEARING ON BEHALF OF THE DEPARTMENT, HAS CONTENDED THAT THE A.O. FOUN D DEFECTS IN THE BOOKS OF ACCOUNT. HE CONTENDED THAT THE OBSERVATIONS OF THE CIT(A) ARE INCORRECT. AS PER THE TAX AUDIT REPORT ,THE VALUATION OF CLOSING STOCK HAD BEEN TAKEN AT ESTIMATED COST AND NO VALUATION OF CLOSING STOCK OF FINISHED GOODS HAD BEEN SUBMITTED FOR CI GOODS AND LEATHER GOODS, EXCEPT THEIR QUANTITY. IN THESE FACTS, THE A.O. LEFT WITH NO ALTERNATIVE BUT TO WORK OUT THE SALE PRICE PER U NIT ON THE BASIS OF MATERIAL BROUGHT BEFORE HIM BY THE ASSESSEE AS UNDER : TOTAL SALE TOTAL QUANTITY OF SOLD RS.12,87,87,139 61256 = RS.1980.55/- THE A.O. CAME DOWN FURTHER FROM RS.1980.55 PER UNIT SALE PRICE WORKED OUT BY HIM AS ABOVE TO RS.1500 PER UNIT AND OBSERVED THAT IF THIS VALUATION HAD BEEN ADOPTED THEN THERE WAS A HEAVY ADDITION OF RS.1,13, 70,745. HOWEVER, THE A.O. ADOPTED QUITE JUDICIOUS APPROACH AND DID NOT MAKE MUCH HEAVY ADDITION, BUT HE MADE THE ADDITION OF RS.43,27,248 AFTER ADDING THE G.P. @ 3.36%. HENCE, THE CIT(A) WAS WRONG IN HIS OBSERVATION THAT THE A.O. HAD NOT MENTIONED ABOUT THE COST OR SALE PRICE OF THE LEATHER GOODS. THE OBSER VATION WAS WRONG BECAUSE THE A.O. HAD WORKED OUT THIS VALUATION AT RS.1980.50 P ER UNIT BUT HE CAME DOWN TO RS.1500/- PER UNIT. HE HAD FURTHER CAME DOWN FOR M AKING THE ADDITION. SO, THE CIT(A)S OBSERVATION IS TOTALLY WRONG BECAUSE THE A.O. HAD WORKED OUT THE SELLING COST PER UNIT BUT HE HAD NOT ADOPTED TH E VALUATION OF RS.1,500 PER UNIT OTHERWISE HEAVY ADDITION OF RS.1,13,70,745 COULD HAVE BEEN MADE WHEREAS HE HAD MADE THE ADDITION ONLY OF RS.43,47,248. FROM THE ABOVE, IT IS CLEAR THAT THE ITOS WORKING WAS NOT FAULTY AND NOT WITHOUT ANY BASIS. THE A.O. HAD NOT MADE THE ADDITIONS ON PRESUMPTION AND SURMISES BUT ON THE BASIS OF MATERIAL BROUGHT ON RECORD BY HIM. THE ASSESSEE FAILED TO P RODUCE ANY EVIDENCE REGARDING THE VALUE OF THE CLOSING STOCK EITHER AS PER MARKE T PRICE OR AT THE PURCHASE PRICE BUT HE ADOPTED THE VALUATION ONLY ON ESTIMATED BAS IS. THE A.O. LEFT WITH NO 9 ALTERNATE BUT TO ADOPT A REASONABLE APPROACH IN THO SE FACTS AND CIRCUMSTANCES. SO, THE A.O. HAD TAKEN THE RIGHT APPROACH AND MADE MOST REASONABLE , LOW AND JUSTIFIED ADDITIONS IN THOSE FACTS AND CIRCUMSTA NCES. HENCE, CIT(A)S OBSERVATION IS NOT ACTUALLY CORRECT AND HENCE NOT ACCEPTABLE. 37. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDERS OF THE LEARNED CIT(A). 38. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW THE FACT THA T THE ASSESSEE HAS NOT MADE ANY SALE OF LEATHER GOODS DURING THE YEAR AND THERE WER E 7146 PIECES OF LEATHER GOODS IN THE OPENING STOCK AS WELL AS IN THE CLOSING ST OCK. WE FIND NO JUSTIFICATION ON THE PART OF THE A.O. TO ENHANCE THE COST OF THE SA ME BY APPLYING TOTAL UNIT COST AS CALCULATED IN THE ASSESSMENT ORDER AND FURTHER ESTI MATED THE GROSS PROFIT AT 15% WHICH IS NOT JUSTIFIABLE. IN OUR CONSIDERED OPINION THE SUBMISSIONS OF THE LEARNED D.R. ARE NOT APPRECIABLE WHEN ONCE THE A.O. HAS HI MSELF ACCEPTED THAT THERE ARE NO SALES OF LEATHER GOODS DURING THE YEAR, THEREFOR E, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) WHO RIGHTLY DELETED THE ADDITION BY OBSERVING THAT THE VALUATION DONE BY THE A.O. IS BASED ON ONLY PRESUMPTIONS A ND NOT ON ANY MATERIAL OR ANY EVIDENCE ON RECORD. THIS GROUND OF THE REVENUE I S, THEREFORE, DISMISSED. 39. LAST GROUND OF THE REVENUE IS RELATING TO THE DELETION OF THE ADDITION OF RS.20,19,277 IN RESPECT OF DISALLOWANCES OF EXPEN SES ON TRANSPORTATION , LOADING AND UNLOADING AND PACKING. AFTER HEARING THE RIV AL SUBMISSIONS AND ON CAREFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD KEEP ING IN VIEW THE FACT THAT THE LEARNED CIT(A) HAS DELETED THE ADDITION BY OBSERVIN G THAT THE COMPARATIVE CHART IN RESPECT OF THE ASSESSMENT YEARS 2003-04, 04-05 AND 05-06 SHOWS THAT THERE IS NO UNUSUAL INCREASE IN THE CLAIM OF THE EXPENSES . IN FACT, THE PERCENTAGE OF EXPENDITURE FOR THE ASSESSMENT YEAR 2005-06 IS ONLY 5.22% WHEREAS FOR THE ASSESSMENT YEAR 2004-05 IT WAS 5.27% AND FOR THE ASSESSMENT YEAR 2003-04 IT WAS 5.38%. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THIS GROUND OF THE REVENUE IS, THEREFORE, DISMISSED . 40. IN THE RESULT, ITA NO. 2083(KOL)/2009 IS ALLO WED IN PART, ITA NO. 2084(KOL)/09 IS ALLOWED IN PART FOR STATISTICAL PUR POSES, WHEREAS ITA NO. 2093(KOL)/2009 IS DISMISSED. 10 ORDER PRONOUNCED IN THE OPEN COURT 30.07.2010 SD/- SD/- (B.R.MITTAL) (C.D.RAO ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30.07.2010 COPY FORWARDED TO :- 1) DCIT, CIRCLE-34, KOLKATA. 2) COMMEX CORPORATION, 17, BRABOURNE ROAD, 4 TH FLOOR, KOLKATA. 3) CIT(A), KOLKATA. 4) CIT, KOLKATA. 5) D.R., ITAT, KOLKATA BY ORDER DY REGISTRAR I.T.AT., KOLKATA. BCD