DCIT, Varanasi V. M/s Ganga Fuele (P) Ltd., Chandauli

ITA 209/ALLD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2134 (ITAT-ALLAHABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTA VA
• Keywords: Capital asset converted into stock in trade; Depreciation; Block assessment
• Section: 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NOS.209 & 210/ALLD/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 DY. COMMISSIONER OF INCOME TAX, VS. M/S. GANGA FUEL S PVT. LTD., CIRCLE-3, VARANASI. HAMEEDPUR BASANT NAGAR, RAMNAGAR, CHANDAULI. (PAN: AABCD 7096 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI Y.P. SRIVASTAVA, JCIT (D.R.) RESPONDENT BY : SHRI P.K. SINGH , C.A. DATE OF HEARING : 11.04.2013 DATE OF PRONOUNCEMENT : 01.05.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THESE ARE APPEALS FILED BY THE REVENUE AGAINST TWO DIFFERENT ORDERS, BOTH DATED 24.08.2011 PASSED BY THE LD. CIT(A), VARANASI FOR THE ASSESSMENT YEARS 2004-05 & 2005-06. 2 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 2. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS OF APPEAL :- ITA NO.209/ALLD/2011 FOR A.Y. 2004-05 1. THAT THE ORDER OF LEARNED CIT(A) IS ERRONEOUS IN LA W AND ON FACTS. 2. WHETHER, ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION OF RS.6,78,68 6/-, DISALLOWED UNDER THE HEAD MANUFACTURING EXPENSES, TO RS.25,000/- IGN ORING THE FACT THAT NO GENUINE SALE BILLS OF SSF WERE PRODUCED BEFORE T HE AO AND THAT NO MANUFACTURING ACTIVITY HAS BEEN CARRIED OUT BY THE ASSESSEE DURING THE PREVIOUS YEAR. 3. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.2,10,920/- DISALLOWED UNDER THE HEARD DEPRECIATION BY HOLDING THAT ASSESSING OFFICE RS CONCLUSION IN THIS REGARD IS NOT SUPPORTED BY EVIDENCE IGNORING T HE CONCLUSION IN THIS REGARD IS NOT SUPPORTED BY EVIDENCE IGNORING T HE FACT THAT NO GENUINENESS SALE BILLS, CASH CREDIT WERE PRODUCED B EFORE THE AO AS THE ASSESSEE COMPANY WAS NOT VIRTUALLY ENGAGED IN T HE MANUFACTURING BUSINESS OF SSF (SPECIAL SMOKELESS FUEL). 4. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT PROVISION OF SECTION 145( 3) WRONGLY INVOKED IGNORING THE FACTS THAT NO GENUINE SALE BILLS OR CA SH MEMO WERE PRODUCED BEFORE THE AO. ITA NO.210/ALLD/2011 FOR A.Y. 2005-06 1. THAT THE ORDER OF LEARNED CIT(A) IS ERRONEOUS IN LA W AND ON FACTS. 2. WHETHER, ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION OF RS.10,83,6 98/ TO RS.50,000/- IGNORING THE FACT THAT NO BOOKS OF ACCOUNTS WERE PR ODUCED BY THE ASSESSEE BEFORE THE AO AND ASSESSMENT WAS COMPLETED EX-PARTE. 3. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.15,000/- B Y HOLDING THAT DURING THE COURSE OF APPELLATE PROCEEDINGS ASSESSEE PRODUC ED BILLS AND 3 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 STATEMENT IGNORING THE FACT NO EVIDENCE OR JUSTIFIC ATION OF SUCH PROFESSIONAL FEE WERE PRODUCED BEFORE THE ASSESSING OFFICER AND ASSESSMENT WAS COMPLETED EX-PARTE. 4. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT ASSESSING OFFICER IS NOT CORRECT IN ESTIMATING THE G.P. RATE WITHOUT REJECTING THE TRADING RESULTS IGNORING THE FACTS THAT NO BOOKS OF ACCOUNTS WERE PRODUCED BY THE ASSE SSEE BEFORE THE AO, HENCE THE AO HAS ADOPTED THE G.P. RATE OF LAST YEAR @ 12.01% AND ADDED THE DIFFERENCE AMOUNT ACCORDINGLY. 3. FIRST WE TAKE UP ITA NO.209/ALLD/2011 FOR A.Y. 2 004-05. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN M ANUFACTURING OF SPECIAL SMOKELESS FUEL. DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT ONLY ONE BOOK IN RESPECT OF SALE OF UNDERSIZED COAL WAS PROD UCED. IT COULD NOT BE ASCERTAINED WHETHER IT WAS A CASH MEMO OR A CREDIT MEMO. HE FURTHER NOTICED THAT WHITE FLUID WAS USED ON ALL THE MEMOS TO CONCEAL TH E PRINTED NUMBERS AND NUMBERS WERE ENTERED BY HAND. THE A.O. FURTHER NOTICED THA T THE EMPLOYEES ATTENDANCE REGISTER WAS PRODUCED ON WHICH WHITE FLUID WAS USED TO CONCEAL THE YEAR TO WHICH IT ACTUALLY BELONGED AND NAME OF THE ASSESSEE AND 2 003-04 WAS WRITTEN IN HANDWRITING. THE A.O. FURTHER NOTICED THAT THE COS T OF FINISHED PRODUCTS WAS SHOWN LOWER THAN THE COST OF RAW MATERIAL. ON THE BASIS OF THESE EVIDENCES, THE A.O. CAME TO THE CONCLUSION THAT NO MANUFACTURING A CTIVITY HAS BEEN CARRIED OUT BY THE ASSESSEE DURING THE PREVIOUS YEAR. THE A.O. RE JECTED THE BOOKS OF ACCOUNT AND 4 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 ALL THE EXPENSES AND DEPRECIATION RELATING TO MANUF ACTURING ACTIVITIES WERE DISALLOWED. 4. THE CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF RS.25,000/- OUT OF EXPENSES AS UNDER :- (PARAGRAPH NO.6, PAGE NO.5) 6. AS REGARD, THE ADDITION MADE UNDER THE HEAD MAN UFACTURING RELATED EXPENSES RS.6,78,686/- (RS.1,45,290/- POWER & FUEL, RS.1,83,360/- WAGES AND RS.3,50,036/- TRANSPORTATION), ASSESSEE IN HIS WRITTEN SUBMISSION STATED THAT THE ASSESSEE HAS MAINTAINED ALL THE MANUFACTU RING RECORD, WHICH IS REQUIRED TO MAINTAINED IN THE REGULAR COURSE OF BUS INESS ON DAY TO DAY BASIS. THE RELEVANT BILLS AND VOUCHERS DULLY THE ENTRIES I N THE BOOKS OF ACCOUNTS. BUT THE LEARNED ASSESSING OFFICER HAS ERRED ON FACT S AND IN LAW IN DISALLOWING THE ENTIRE MANUFACTURING EXPENSES OF RS .6,78,686/- I.E. WAGES OF RS.1,83,360/-, TRANSPORTATION OF RS.3,50,036/- AND POWER AND JUST OF RS.1,45,290. DURING THE APPELLATE PROCEEDING ASSES SEE PRODUCED BILLS AND VOUCHERS AND STATEMENT OF ACCOUNT. ON PERUSAL OF AS SESSMENT ORDER, IT APPEARS THAT ASSESSING OFFICER HAS ADDED THE AMOUNT S UNDER DIFFERENT HEADS LIKE POWER & FUEL, WAGES AND TRANSPORTATION SIMPLY ON AD-HOC BASIS. ASSESSING OFFICERS CONCLUSION IN THIS REGARD IS NO T SUPPORTED BY EVIDENCE. IN VIEW OF ABOVE FACTUAL POSITION, THE ADDITION MAD E ON THIS ACCOUNT IS HEREBY RESTRICTED TO 25,000/- IN ALL HEADS. 5. THE CIT(A) DELETED THE ADDITION ON ACCOUNT OF DE PRECIATION ON ASSETS RS.2,10,920/- ON THE GROUND THAT THE A.O. ADDED THE AMOUNT OF RS.2,10,920/- ON ADHOC BASIS THE CIT(A) HAS ALSO HELD THAT THE A.O . HAS WRONGLY INVOKED PROVISION OF SECTION 145(3). THE A.O. DID NOT ATTE MPT TO FIND THE PRECISE DEMERITS OF BOOKS OF ACCOUNT. 5 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF A.O. AND SUBMITTED THAT THE ASSESSEE DID NOT PRODUCE EVIDENCE OR MATER IAL BEFORE THE A.O. BUT THE SAME WAS PRODUCED BEFORE THE CIT(A). THE CIT(A), WITHOU T EXAMINING THE SAME, DELETED THE ADDITION. 7. LD. AUTHORISED REPRESENTATIVE, ON THE OTHER HAND , SUBMITTED THAT THE ASSESSEE HAS COMPLIED WITH THE QUERY LETTER AND OTH ER QUERIES THROUGH VARIOUS ORDER SHEET ENTRIES MADE FROM TIME TO TIME. THEREFORE, T HE OBSERVATION OF THE A.O. IS NOT CORRECT. THE LD. AUTHORISED REPRESENTATIVE SUBMITT ED THAT THE A.O. HIMSELF OBSERVED AS UNDER :- (PAGE NO.41 PAPER BOOK) ..ON FIRST NOVEMBER, SHRI N.R. CHOUDHARY, ADVOC ATE APPEARED VOLUNTARILY AND FILED WRITTEN REPLY WITH OTHER PAPE R. CASH BOOK, LEDGER, COAL RECEIPT REGISTER, PRODUCTION REGISTER, ENTRY TAX CH ALLANS, PURCHASE BILLS ETC. WERE PRODUCED AND TEST CHECKED. NECESSARY NOTES WER E ALSO TAKEN THEREFROM. NO CASH/CREDIT MEMOS OF SALE OF SSF OR COAL TAX, A BYE PRODUCT, WERE PRODUCED. KILLO WATTAGE OR CONSUMPTION OF THE GENER ATOR WAS NOT INFORMED. 8. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT SUBSEQUENTLY CASH AND CREDIT MEMO WAS ALSO PRODUCED WHICH WAS EXAMINED BY THE A.O. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT REASONS GIVEN IN THE ASSESSMENT ORDER ARE FACTUALLY INCORRECT. LD. AUTHORISED REPRESENTATIVE DREW OUR ATTENTION ON PAGE 6 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 NO.42 OF THE PAPER BOOK AND SUBMITTED THE CORRECT F ACTUAL POSITION AS UNDER :- (PAGE NOS.42, 43 & 44 PAPER BOOK) OBSERVATION MADE BY LEARNED ASSESSING OFFICER CORRECT FACTUAL POSITION (1) ONLY A BOOK IN RESPECT OF SALE OF UNSIZE COKE WAS PRODUCED BUT IT WAS NOT CLEAR WHETHER IT WAS A CASH MEMO OR CREDIT MEMO. FLUIDS IS USED TO CONCEAL THE PRINTED NUMBERS. THE ASSESSEE HAS PRODUCED ALL THE BOOKS OF ACCOUNT, WHICH IS EVIDENT FROM THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER MADE IN THE FIRST PARA ITSELF AND THE SAME HAS BEEN REPRODUCED HEREINABOVE. THE NATURE OF CASH AND CREDIT MEMO IS EVIDENT FROM THE TRANSACTIONS RECORDED ITSELF, WHICH WAS DULY VERIFIED FROM THE BOOKS OF ACCOUNT. IT WAS EXPLAINED THAT IN ONE CASHMEMO BOOK, THE FLUID WAS USED IN PLACE OF OLD SERIAL NUMBERS ONLY TO USE THE OLD PRINTED BOOKS, WHICH WERE STARTED FROM SL. NO.1. THERE WAS NOTHING UNUSUAL OR ABNORMAL AS THE SALES RECORDED THEREIN WERE DULY REORDED IN THE BOOKS. (2) THE EMPLOYEES ATTENDANCE REGISTER WAS PRODUCED ON WHICH WHILE FLUID WAS USED TO CONCEAL THE YEAR TO WHICH IT BELONG THE ATTENDANCE REGISTERED WAS MAINTAINED IN THE REGULAR COURSE OF BUSINESS AND THE WAGES AND SALARIES PAID TO THE EMPLOYEES ON THAT BASIS HAS BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT FOR THE RELEVANT YEAR. THE USE OF WHICH FLUID BY THE STAFF MAINTAINING THE REGISTER TO CORRECT SOME MISTAKE CANNOT BE INTERPRETED ADVERSELY SO AS TO INFER THAT NO WAGES HAVE BEEN P AID AT ALL. LEARNED ASSESSING OFFICER SHOULD HAVE CONFRONTED THE ASSESSEE THE FACT ON THE BASIS OF WHICH HE WAS GONE TO 7 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 DRAW SOME ADVERSE INFERENCE. (3) IT IS ALSO NOT UNDERSTANDABLE AS TO HOW THE COST OF FINISHED PRODUCT WAS SHOWN LOWER THAN THE COST OF RAW MATERIAL. NO SUCH DISCREPANCY WAS CONFRONTED TO THE ASSESSEE AND THE ASSESSEE WAS NEVER ASKED TO EXPLAIN ANY SUCH DISCREPANCY IN THE BOOKS OF ACCOUNT, THE OBSERVATIONS MADE ARE INCORRECT AND DENIED. (4) AT THE TIME OF SEARCH ON 03.10.2002 A SURVEY WAS CONDUCTED U/S. 133A WHEREIN NO SIGN OF ANY MANUFACTURING ACTIVITY WAS FOUND. SIMILARLY NO STOCK OF RAW MATERIAL AND FINISHED GOODS WAS FOUND. THE OBSERVATION MADE BY LEARNED ASSESSING OFFICER PERTAINS TO THE YEAR RELEVANT TO ASSESSMENT YEAR 2003-04 AND NOT TO THE RELEVANT YEAR. MOREOVER, IN COURSE OF BLOCK ASSESSMENT PROCEEDINGS THE ASSESSEE HAS EXPLAINED AT LENGTH ABOUT THE SURVEY OPERATIONS AND NOTHING ADVERSE WAS FOUND THEREIN. THE EXPLANATIONS SO FURNISHED ARE PART OF THE RECORD AND LEARNED ASSESSING OFFICER HAS NOT BEEN ABLE TO CONTROVERT OR CONTRADICT THE EXPLANATION SO FURNISHED. THE OBSERVATION WITH REGARD TO THE STOCK IS ALSO NOT CORRECT AND IS DENIED. (5) ON THE BASIS OF ABOVE REASONS, THE TRADING RESULTS ARE REJECTED BY APPLYING PROVISIONS OF SECTION 145 AND ALL THE EXPENSES AND DEPRECATION RELATING TO MANUFACTURING ACTIVITIES ARE DISALLOWED. THE LEARNED ASSESSING OFFICER WAS NOT CORRECT IN INVOKING PROVISIONS OF SECTION 145 AS NO FINDING WITH RESPECT TO FULFILLMENT OF CONDITIONS OF APPLICABILITY OF SECTION 145 WAS GIVEN. THE BOOKS OF ACCOUNT WERE CORRECT AND COMPLETE, REFLECTING TRUE AND CORRECT AFFAIRS OF THE BUSINESS. METHOD OF ACCOUNTING AND ACCOUNTING STANDARDS NOTIFIED WERE REGULARLY EMPLOYED AND NO ADVERSE FINDING WAS RECORDED BY THE LEARNED ASSESSING OFFICER IN THIS RESPECT. THE MANUFACTURING EXPENSES WERE FULLY VOUCHED AND VERIFIABLE. ALL THE BUSINESS ASSETS WERE USED IN 8 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 BUSINESS. THE DISALLOWANCE OF MANUFACTURING EXPENSES AND DEPRECIATION ARE, THEREFORE, NOT CORRECT. 9. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT THE A.O. HAS INVOKED PROVISIONS OF SECTION 145 WITHOUT POINTING OUT THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 145 OR 145(1) OR 145(2). LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE A.O. UNDER WRONG IMPRESSION MADE THE DISALLOWANCE ON THE BASIS OF ALLEGED SURVEY WHICH WAS NEITHER RELEVANT FOR THIS YEAR NOR SUCH DISCREPANCY POINTED OUT THEREIN WAS CONFRONTED TO T HE ASSESSEE. THE SURVEY WAS RELATING TO A.Y. 2003-04 AND NO ADVERSE INFERENCE C OULD BE DRAWN IN THE RELEVANT YEAR ON THAT BASIS. 10. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE A.O. MADE THE DISALLOWANCE OF ENTIRE MANUFACTUR ING EXPENSES AS UNDER ;- I) DISALLOWANCE OF ENTIRE MANUFACTURING EXPENSES CO NSISTING OF (I) WAGES 1,83,360.00 (II) TRANSPORTATION CHARGES 3,50,036.00 (III) POWER AND FUEL 1,45,290.00 6,78,686.00 II) DISALLOWANCE OF DEPRECIATION ON ALL THE BUSINES S 2,10,920.00 ASSETS. 8,89,606.00 9 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 11. THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUN TS WHICH WAS SUBJECT TO AUDIT UNDER SECTION 44AB OF THE ACT. THE ASSESSEE COMPLIED WITH ALL QUERIES RAISED VIDE QUERY LETTER DATED 25.08.2006 ALONG WITH LETTE R DATED 12.05.2006 AND THROUGH VARIOUS ORDER SHEET ENTRIES FROM TIME TO TIME. THE A.O. HIMSELF NOTED IN HIS ORDER THAT THE ASSESSEE FILED WRITTEN REPLY WITH OTHER PA PERS, CASH BOOK, LEDGER, COAL RECEIPT REGISTER, PRODUCTION REGISTER, ENTRY TAX CH ALLAN, PURCHASE BILLS ETC. WERE PRODUCED TEST CHECKED BY THE A.O. THE BUSINESS ASS ETS WERE LIST OF CARRYING OUT THE BUSINESS THE INCOME FROM WHICH IT WAS DULY ASSESSED . INSPITE OF THE FACT, THE A.O. HAS DISALLOWED DEPRECIATION OF RS.2,10,920/-. THE CIT(A) WHILE DELETING THE ADDITION ON ACCOUNT OF EXPENSES NOTED THAT THE ASSE SSEE HAS MAINTAINED ALL THE MANUFACTURING RECORDS WHICH IS REQUIRED TO BE MAINT AINED IN THE REGULAR COURSE OF BUSINESS ON DAY TO DAY BASIS. THE CIT(A) FURTHER N OTED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE PRODUCED BILLS AND VOUCHER S AND STATEMENT OF ACCOUNT. ON PERUSAL OF THE RECORDS, THE CIT(A) NOTED THAT TH E A.O. HAS MADE ADDITION ON ADHOC BASIS OF THE ENTIRE AMOUNT OF THE EXPENSES CL AIMED WHICH IS NOT CORRECT. HOWEVER, CONSIDERING THE FACTS OF THE CASE, THE CIT (A) RESTRICTED THE ADDITION TO THE EXTENT OF 25,000/-. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,60,240/- INCLUDING PROFIT OF BUSINESS WHICH HAS BEEN ACCEPTED BY THE A.O. IT IS RELEVANT TO NOTE THAT WITHOUT INCURRING EXPEN SES SUCH INCOME OF RS.1,60,240/- IS NOT POSSIBLE. WE THEREFORE, FIND THAT THE A.O. IS NOT CORRECT IN DISALLOWING ENTIRE 10 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 EXPENSES. WE FIND THAT THE CIT(A) HAS RIGHTLY DELE TED THE ADDITION ON ACCOUNT OF EXPENSES. HOWEVER, TO COVER UP THE DEFICIENCY, THE CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF RS.25,000/-. THE ASSESSEE HAS DEM ONSTRATED THAT ALL THE RELEVANT DETAILS WERE FURNISHED BEFORE THE A.O. WHICH IS EVI DENT FROM THE FACTUAL POSITION EXPLAINED BY THE ASSESSEE AND THE SAME IS REPRODUCE D IN THIS ORDER IN PARA NO.8 OF THIS ORDER. SIMILAR IS THE POSITION IN RESPECT OF DEPRECIATION. IN THE LIGHT OF DISCUSSION, WE NOTICE THAT THE CIT(A) HAS RIGHTLY D ELETED THE ADDITION OF RS.2,10,920/- ON ACCOUNT OF DEPRECIATION. 12. AS REGARDS INVOKING OF PROVISIONS OF SECTION 14 5(3), WE FIND THAT THE A.O. HAS INVOKED SECTION 145(3) OF THE ACT WITHOUT POINT ING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED FOR THE Y EAR UNDER CONSIDERATION. IT APPEARS THAT THE A.O. ON THE BASIS OF PRESUMPTION F OR A.Y. 2003-04 WHEREIN SURVEY WAS CARRIED OUT REJECTED THE BOOKS OF ACCOUNT WHICH IS NOT BASIS FOR INVOKING SECTION 145(3) OF THE ACT. THE CIT(A) HAS RIGHTLY QUASHED ACTION OF THE A.O. IN INVOKING SECOND 145(3) OF THE ACT. 13. AS REGARDS THE SUBMISSION OF THE LD. DEPARTMENT AL REPRESENTATIVE THAT THE ASSESSEE DID NOT PRODUCE NECESSARY DETAILS BEFORE T HE A.O., THE LD. AUTHORISED REPRESENTATIVE HAS DEMONSTRATED THAT THESE DOCUMENT S WERE FURNISHED BEFORE THE 11 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 A.O. BY REFERRING VARIOUS PAGES OF ASSESSEES PAPER BOOK PARTICULARLY POINTING OUT THE CORRECT FACTUAL POSITION WHICH IS REPRODUCED AS ABOVE IN PARA NO.8 OF THIS ORDER. THE REVENUE HAS FAILED TO PINT OUT ANY CONTRARY MAT ERIAL TO THE FINDING OF CIT(A) NOR THE SAME IS AVAILABLE ON RECORD. IN THE LIGHT OF THE FACT, WE CONFIRM THE ORDER OF CIT(A). 14. NOW WE TAKE UP ITA NO.210/ALLD/2011 FOR A.Y. 20 05-06. 15. THE LD. REPRESENTATIVES OF THE PARTIES SUBMITTE D THAT FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO A.Y. 2004-05. 16. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE A.O. MADE ADDITION ON THE GROUND THAT THE LAST YEARS G.P. RATE WAS 12.01% WHEREAS IN THE YEAR UNDER CONSIDERATION THE G.P. RA TE IS 11.94%. THE A.O. MADE ADDITION OF RS.3,76,212/- ON ACCOUNT OF FUELS AND P OWER EXPENSES AT RS.1,09,872/- WAGES AT RS.84,800/- & DEPRECIATION AT RS.1,81,440/ - ON THE GROUND THAT THE ASSESSEE DID NOT CARRY OUT MANUFACTURING ACTIVITIES . THE A.O. ALSO MADE ADDITION OF RS.15,000/- OUT OF PROFESSIONAL FEES OUT OF RS.2 5,000/- CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS CLAIMED EXCESSI VE EXPENSES. THE A.O. ALSO MADE ADDITION ON ACCOUNT OF G.P. AT RS.3,416/-. TH E A.O. ALSO MADE ADDITION OF 12 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 R.1,13,929/- OUT OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE ON THE GROUND THAT THERE WAS NO NEED TO BORROW THE UNSECURED LOAN AND INTEREST PAYMENT OF RS.1,13,929/- WAS NOT JUSTIFIED. 17. THE CIT(A) RESTRICTED THE ADDITION TO THE EXTEN T OF RS.50,000/- OUT OF THE TOTAL ADDITION MADE BY THE A.O. ON ACCOUNT OF MANUF ACTURING EXPENSES RS.10,83,698/- (RS.1,09,872 FUEL & POWER, RS.84,900 /- WAGES, RS.7,07,486/- TRANSPORTATION AND RS.1,81,440/- DEPRECIATION). 18. THE CIT(A) HAS DELETED THE ADDITION OF RS.15,00 0/- MADE BY THE A.O. ON ACCOUNT OF PROFESSIONAL FEES ON THE GROUND THAT THE ASSESSEE HAS PRODUCED THE RELEVANT BILLS AND VOUCHERS AND IN VIEW OF THE FACT UAL POSITION THE ADDITION WAS NOT WARRANTED. 19. AS REGARDS THE G.P. ADDITION, THE CIT(A) DELETE D THE SAME WITH THE OBSERVATION THAT THE A.O. WAS NOT CORRECT IN ESTIMA TING THE G.P. RATE WITHOUT REJECTING THE TRADING RESULT. THE CIT(A) ALSO DEPL ETED THE ADDITION OF RS.1,13,929/- WHICH WAS DISALLOWED BY THE A.O. ON ACCOUNT OF INTE REST. THE CIT(A) OBSERVED THAT THE ASSESSEE DID NOT TAKE FRESH LOAN DURING TH E YEAR. IT WAS AN OLD BALANCE BROUGHT FORWARD FROM EARLIER YEARS AND ONLY INTERES T CREDITED AFTER TDS. THE 13 ITA NOS.209 & 210/ALLD/2011 A.YS. 2004-05 & 2005-06 CIT(A) DELETED THE ADDITION AFTER CONSIDERING FACTU AL ASPECT OF THE MATTER THAT BORROWED FUND WAS USED FOR THE PURPOSE OF BUSINESS. 20. THE LD. REPRESENTATIVES OF THE PARTIES SUBMITTE D THAT THE FACTS OF THIS A.Y. I.E. 2005-06 ARE IDENTICAL TO A.Y. 2004-05, WE THER EFORE, IN THE LIGHT OF THE DETAILED DISCUSSION MADE IN A.Y. 2004-05, CONFIRM THE ORDER OF CIT(A) FOR THIS YEAR I.E. A.Y. 2005-06 ALSO. 21. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMI SSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ALLAHABAD BENCH, ALLAHABAD 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, ALLAHABAD TRUE COPY