The ITO, Ward-9(3), Surat V. Shri Nareshbhai M. Patel, Surat

ITA 2526/AHD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0361 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-05-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: ASHWIN PAREKH
• Keywords: Unexplained cash credit; Bad and doubtful debts; Set aside
• Section: 40A(3); 143(3); 133(6); 208; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI P.K.BANSAL, ACCOUNTANT MEMBER DATE OF HEARING : 7.08.09 DRAFTED ON: 29.09.09 ITA NO.2526/AHD/2008 ASSESSMENT YEAR : 2005-2006 INCOME TAX OFFICER WARD-9(3), SURAT ROOM NO.420, 4 TH FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS. SHRI NARESHBHAI M. PATEL A/8, SHIVNAGAR CO. OP. HOUSING SOCIETY LTD., VARACHHA ROAD, SURAT. PAN/GIR NO. : ADLPP 8405 A (APPELLANT) .. (RESPONDENT) ITA NO.2527/AHD/2008 ASSESSMENT YEAR: 2005-2006 INCOME TAX OFFICER WARD-9(3), SURAT ROOM NO.420, 4 TH FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS. SHRI MADHUBHAI G. PATEL A/8, SHIVNAGAR CO-OP. HOUSING SOCE. VARACHHA ROAD, SURAT. PAN/GIR NO. : ACVPP 4251 P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.C.PANDIT SR. D. R. RESPONDENT BY: SHRI ASHWIN PAREKH O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER :- THESE APPEALS FILED BY THE REVENUE ARE ARISING OUT OF ORDERS OF CIT(APPEALS)-V, SURAT, IN APPEAL NOS.CAS-V/185-186/ 07-08 DATED 30.04.2004. THE ASSESSMENTS IN BOTH THE CASES WERE FRAMED BY THE INCOME TAX OFFICER, WARD-9(3), SURAT UNDER SECTION 143(3) OF THE ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 2 - INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) FOR THE ASSESSMENT YEAR 2005-06 VIDE HIS ORDER OF EVEN DATE 28.12.2007. 2. THE FIRST ISSUE IN ITA NO.2526/AHD/2008 OF THE R EVENUES APPEAL IS AGAINST THE ORDER OF COMMISSIONER OF INCO ME TAX (APPEALS) IN DELETING THE ADDITION OF RS.1 LAC MADE BY THE AS SESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSING OFFICER, DURING THE COURSE OF THE ASSESSM ENT PROCEEDINGS, NOTICED FROM THE ACCOUNT OF ASSESSEE THAT THE ASSES SEE HAS OBTAINED UNSECURED LOAN OF RS.1 LAC FROM SHRI RAKESHBHAI D. PATEL. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PROVE TH AT THIS LOAN IS GENUINE AND REQUIRED TO FILE CONFIRMATION OF PARTY ALONG WITH THE BANK STATEMENT. THE ASSESSING OFFICER FROM THE BANK STAT EMENT NOTICED THAT IN THE BANK ACCOUNT OF SHRI RAKESHBHAI D. PATE L, THERE WAS CASH DEPOSIT IMMEDIATELY BEFORE ISSUANCE OF CHEQUE TO TH E ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER REQUIRED THE ASS ESSEE TO PRODUCE SHRI RAJKESHBAI D. PATEL FOR EXAMINATION. SIMULTANE OUSLY, SUMMONS UNDER SECTION 131 OF THE ACT WAS ALSO ISSUED. THE A SSESSING OFFICER NOTED IN THE ASSESSMENT ORDER THAT THE ONUS LIES ON THE ASSESSEE TO PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE DEPOSITORS BUT THE ASSESSEE HAS MISERABLY FAILED TO DISCHARGE THE ONUS CAST UPON HIM. ACCORDINGLY, HE ADDED THE SUM OF RS.1 LAC AS UNEXPLAINED DEPOSIT TO THE RETURNED INCOME OF THE ASSESSEE. AGG RIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER O F INCOME TAX ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 3 - (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY GIVING FOLLOWING FINDINGS IN HIS APPELL ANT ORDER. I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE ASSESSING OFFICER. I HAVE PERUSED THE DETAIL S FILED BY THE APPELLANT AND FIND THAT THE APPELLANT HAS DISCHARGE D THE ONUS LYING ON HIM UNDER SECTION 68 OF THE ACT. THE DEPOSITORS IS EXISTING ASSESSEE ASSESSED TO TAX, WHICH ESTABLISHES THE IDE NTITY OF THE DEPOSITOR. THE LOAN IS BY A/C. PAYEE CHEQUE AND SUB MISSION OF BANK STATEMENT OF DEPOSITOR INDICATES THAT THE TRANSACTI ON IS GENUINE AND APPELLANT NEVER INTENDED NOT TO COMPLY THE TERMS OF SECTION 68 OF THE ACT. THE ONLY GROUND OF ADDITION, AS RECORDED ON PA GE 3 IS THE NON PRODUCTION OF DEPOSITOR. FROM THE EVIDENCES SUBMITT ED ON PAGE 8 TO PAGE 14 OF THE PAPER BOOK THE DEPOSITOR HAD, DURING THE YEAR THE INCOME OF RS.2,11,434/-. THE OPENING CAPITAL OF THE DEPOSITOR IS RS.10,63,614/- WHICH IS SUFFICIENT TO GIVE A LOAN O F RS.1,00,000/-. I AM THEREFORE, IN AGREEMENT WITH THE APPELLANT THAT IDENTITY OF DEPOSITOR, GENUINENESS OF TRANSACTION AND CAPACITY OF THE CREDITOR TO ADVANCE LOAN ARE ESTABLISHED IN VIEW OF THE DECISIO N OF HON'BLE GUJARAT HIGH COURT IN DCIT VS. ROHINI BUILDERS REP ORTED AT 256 ITR 360 AND THE DECISIONS OF ITAT AHMEDABAD IN DCIT VS . AGRAWAL PAPER MILLS PVT. LTD. IN ITA NO.4752/A/96 DATED 28. 02.2003. THE DECISION RELIED ON BY ASSESSING OFFICER ON PAGE 3 O F THE ASSESSMENT ORDER ARE NOT APPLICABLE TO THE FACTS OF THE CASE OF APPELLANT. THE ASSESSING OFFICERS RELIANCE ON THE DECISION IN CIT VS. PRECISION FINANCE PVT. LTD. REPORTED AT 208 ITR 465 IS NOT CO RRECT AS THIS DECISION RELATES TO ADDITION ON ACCOUNT OF DIVIDEN D INCOME. I THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE T HE ADDITION OF RS.1,00,000/-. 4. AGGRIEVED, THE REVENUE CAME IN APPEAL BEFORE US. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY AR GUED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE CASH CREDITOR I. E. SHRI RAKESHBHAI D. PATEL BEFORE THE ASSESSING OFFICER AND EVEN THE ASSESSING OFFICER ISSUED SUMMONS UNDER SECTION 131 OF THE ACT TO SHRI RAKESHBHAI D. PATEL BUT HE NEVER TURNED UP FOR PERSONAL EXAMINATI ON TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANS ACTION. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE BE FORE US STATED ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 4 - THAT THE ASSESSEE HAS SATISFIED ALL THE THREE CONDI TIONS NAMELY IDENTITY OF THE DEPOSITORS, GENUINENESS OF TRANSACT IONS AND CREDITWORTHINESS AS THE ASSESSEE IS INSURANCE AGENT IN THE MAX NEW YORK INSURANCE COMPANY AND EXISTING ASSESSEE. IT WA S STATED BY THE LEARNED COUNSEL THAT THE LOAN WAS RECEIVED BY ACCOU NT PAYEE CHEQUE AND TRANSACTION IS THROUGH NORMAL BANKING CHANNEL A ND EVEN THE COPIES OF THE BANK STATEMENT OF THE DEPOSITOR, CONF IRMATION, BALANCE SHEET, CAPITAL ACCOUNT AND ACKNOWLEDGEMENT OF I.T. RETURN OF DEPOSITOR WERE FILED BEFORE THE ASSESSING OFFICER A ND FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). IN VIEW OF TH ESE ARGUMENTS, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT M ERELY NON PRODUCTION OF THE CREDITOR DOES NOT ENABLE THE ASSE SSING OFFICER TO COME TO THE CONCLUSION THAT THE DEPOSITOR IS NOT HA VING CAPACITY OR GENUINENESS OF THE TRANSACTION OR THE IDENTITY. AC CORDINGLY, HE RELIED ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS ). 5. AFTER HEARING THE RIVAL CONTENTIONS AND GOING T HROUGH THE RECORDS, WE FIND THAT IN THE BANK ACCOUNT OF THE DE POSITOR SHRI RAKESHBHAI D. PATEL DURING THE YEAR A TOTAL DEPOSIT WAS TO THE TUNE OF RS.12,21,640/- IN CASH, BUT THERE IS NOT SOURCE FOR THIS DEPOSIT. EVEN BEFORE ISSUING CHEQUE TO THE ASSESSEE, IMMEDIATE BE FORE THAT DATE, THE ASSESSEE HAS DEPOSITED CASH OF RS.1,00,000/- AN D ISSUED CHEQUE TO THE ASSESSEE AMOUNTING TO RS.1,00,000/-. NO DOU BT, ASSESSEE HAS DISCHARGED THE INITIAL BURDEN BUT THE ASSESSING OFFICER HAS SPECIFICALLY REQUIRED THE ASSESSEE TO PRODUCE THE D EPOSITOR SHRI RAKESHBHAI D. PATEL TO EXPLAIN THE IDENTITY, GENUIN ENESS OF THE TRANSACTION AND CREDITWORTHINESS BUT THE ASSESSEE F AILED TO DO SO. ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 5 - 6. MERELY, PRODUCING THE CONFIRMATION, BANK STATEME NT AND THE DEPOSITOR IS ASSESSED TO INCOME TAX, IT CANNOT BE S AID THAT THE DEPOSITOR HAS A SOURCE OF INCOME FOR PARTICULAR TRA NSACTION RATHER THE DEPOSITOR HAS TO EXPLAIN THE SOURCE OF THE ENTRY. M ERELY DISCHARGE INITIAL ONUS, THE BURDEN SHIFTS ON THE ASSESSING OF FICER AND IN THE PRESENT CASE, THE ASSESSING OFFICER REQUIRED THE AS SESSEE TO PRODUCE THE DEPOSITOR. AGAIN BURDEN SHIFTS ON THE ASSESSEE AND THE ASSESSEE HAS TO DISCHARGE THE ONUS BY PRODUCING THE CREDITOR /DEPOSITOR FOR EXAMINATION, BUT IN THE PRESENT CASE, ASSESSEE FAIL ED TO PRODUCE THE DEPOSITOR. THE ASSESSING OFFICER HAS NO ALTERNATIVE EXCEPT TO ADD THE AMOUNT. WE FIND THAT ON THE SAME EVIDENCES, WHICH W ERE PRODUCED BEFORE THE ASSESSING OFFICER, THE COMMISSIONER OF I NCOME TAX (APPEALS) HAS DELETED THE ADDITION WITHOUT ELABORAT ING HOW THE ASSESSEE HAS DISCHARGED THE ONUS, EVEN HE HAS NOT P RODUCED THE CREDITOR/DEPOSITOR BEFORE THE ASSESSING OFFICER, DE SPITE ISSUANCE OF SUMMONS UNDER SECTION 131 OF THE ACT. AS THE ASSESS EE FAILED TO PRODUCE THE CREDITOR/DEPOSITOR BEFORE THE ASSESSING OFFICER, THIS BEING A CURABLE DEFECT, WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER, SO THE ASSESSEE CAN PRODUCE CRED ITOR BEFORE ASSESSING OFFICER FOR EXAMINATION. THE ASSESSING OF FICER AFTER EXAMINING THE CREDITOR CAN DECIDE WHETHER THE CASH CREDIT IS GENUINE OR NOT, AS PER SECTION 68 OF ACT. 7. IN VIEW OF THIS, WE SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 6 - BEING HEARD TO THE ASSESSEE. THIS ISSUE OF THE ASS ESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. COMING TO THE SIMILAR ISSUE RAISED BY REVENUE IN ITA NO.2527/AHD/2008 BY WAY OF FOLLOWING GROUND NO.1: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,46,000/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT, VIDE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE I .T.ACT DATED 28.12.2007. 9. AT THE OUTSET, IT IS TO BE STATED THAT IN THIS A PPEAL OF THE REVENUE ALSO THE FACTS AND CIRCUMSTANCES BEING IDEN TICAL, TAKING A CONSISTENT VIEW AS ABOVE, WE SET ASIDE THIS ISSUE T O THE FILE OF THE ASSESSING OFFICER. THIS ISSUE OF THE REVENUES APP EAL IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 10. THE SECOND ISSUE IN ITA NO.2526/AHD/2008 IN TH E APPEAL OF REVENUE IS AGAINST THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF CASH DEPOSIT IN THE BANK TREATED AS UNEX PLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT, AMOUNT TO RS.1 2,21,640/-. 11. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS REQUIRED THE ASSESSEE TO EXPLAIN THE CASH DEPOSIT M ADE IN THE BANK ACCOUNT AMOUNTING TO RS.12,21,640/-. THE ASSESSEE C ONTENDED THAT THE CASH DEPOSIT IN THE BANK ACCOUNT IS ON ACCOUNT OF CASH SALES MADE BY HIM. THE ASSESSING OFFICER REQUIRED THE ASS ESSEE TO PRODUCE THE CASH BOOK AND CO-RELATE CASH DEPOSIT WI TH THE SALES. THE ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 7 - ASSESSING OFFICER ALSO REQUIRED THE ASSESSEE TO PRO DUCE THE SALE BILLS AND VOUCHERS EFFECTING CASH SALES. THE ASSESSING OF FICER NOTICED FROM THE COPIES OF THE BILLS THAT THERE WAS NO NAME AND ADDRESSES OF THE PERSONS TO WHOM CASH SALES WERE EFFECTED. EVEN THE ASSESSEE WAS ASKED TO FILE CONFIRMATION FROM THE DEBTORS BUT NO SUCH CONFIRMATIONS WERE FILED. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED AS TO WHY CASH DEPOSITS APPEARING IN THE BAN K ACCOUNT SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT. IN RESPO NSE TO SHOW CAUSE NOTICE, THE ASSESSEE SIMPLY FILED XEROX COPY OF THE SALE BILLS WHICH DOES NOT CARRY NAMES AND ADDRESSES OF THE PARTIES T O WHOM THE SALES ARE MADE. ACCORDINGLY, THE CLAIM OF THE ASSESSEE AS REGARD TO THE SALE AND CASH DEPOSIT ON ACCOUNT OF SALES EFFECTED WAS REJECTED AND ADDITION WAS MADE AMOUNTING TO RS.12,21,640/- AS UN EXPLAINED CASH DEPOSITS UNDER SECTION 68 OF THE ACT TO THE RETURNE D INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY GIVING FOLLOWING FINDINGS IN HIS APPELLATE ORDER:- I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE ASSESSING OFFICER. I HAVE PERUSED THE DETAIL S FILED BY THE APPELLANT AND FIND THAT THE APPELLANT HAS DISCHARGE D THE ONUS LYING ON HIM BY FILING THE COPIES OF SALES BILLS WITH NAM E & ADDRESS OF THE CUSTOMER PRINTED ON THE BOTTOM SIDE OF EACH BILL AN D THE STOCK REGISTER OF GREY CLOTH WHICH BEAR THE ENTRY OF EACH SALES BILL RECORDED. I AGREE WITH THE CONTENTION OF APPELLANT THAT THE ASSESSING OFFICER SHOULD HAVE INQUIRED WHY THE CUSTOMER PURCH ASED GREY CLOTH IN A SUM EXCEEDING RS.20,000/- TO MAKE DISALLOWANCE UNDER SECTION 40A (3) OF THE ACT BY REPORTING TO CONCERNED ASSESS ING OFFICERS HAVING JURISDICTION OVER THE CASE OF CUSTOMERS. THE APPELLANT HAD ALREADY RECORDED THE ENTRIES OF CASH SALES DIRECTLY IN THE BANK BOOK IN ORDER TO AVOID REPEATED ENTRY IN CASH BOOK AND B ANK BOOK. I FIND THAT THE ASSESSING OFFICER DID NOT RECAST THE TRADI NG A/C., REDUCED ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 8 - THE SALES AND INCREASED THE CLOSING STOCK WHILE MAK ING ADDITIONS OF SALES AS CASH CREDIT. THEREFORE, THE ASSESSING OFFI CER ACCEPTED THE CLOSING STOCK OF APPELLANT. FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT REPORTED AT 284 ITR 61 REPLIED ON BY ASS ESSING OFFICER AND IN VIEW OF THE FACTS THAT THE CASH SALES IS GEN UINE, LAW DOES NOT PREVENT THE TRANSACTIONS OF CASH SALES AND THE ASSE SSING OFFICERS FAILURE TO VERIFY THE CUSTOMERS AS PER THE NAME AND ADDRESS PRINTED ON SALES BILLS SUBMITTED BY APPELLANT FOR THE PURPO SE OF DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT IN THE CASE OF BUYE RS OF APPELLANT, THE ADDITION OF RS.12,21,640/- IS DELETED. 12. AGGRIEVED, THE REVENUE CAME IN SECOND APPEAL BE FORE US. BEFORE US, LEARNED DEPARTMENTAL REPRESENTATIVE ARGU ED THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE THAT CASH D EPOSIT IN THE BANK ACCOUNT IS ON ACCOUNT OF SALES EFFECTED. EVEN, THERE IS NO RECORDING OF THE ENTRIES IN THE CASH BOOKS RELATING TO SALES EFFECTED. IN VIEW OF THIS ARGUMENT, LEARNED DEPARTMENTAL REPR ESENTATIVE REQUIRED THE BENCH TO CONFIRM THE ASSESSMENT ORDER AND HE STATED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS W RONGLY ALLOWED THE CLAIM OF THE ASSESSEE. ON THE OTHER HAND, LEARN ED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND STATED THAT IN THE SALE BILLS THE NAM ES AND ADDRESSES OF THE CUSTOMERS ARE PRINTED IN THE BOTTOM OF THE B ILLS, WHICH WERE SHOWN TO THE ASSESSING OFFICER. IT WAS ARGUED BY T HE LEARNED COUNSEL THAT THE CASH SALES WERE MADE TO NON-REGULA R CUSTOMERS IN ORDER TO AVOID BAD DEBTS, WHICH GENERALLY OCCURS IN TEXTILE BUSINESS. HE STATED THAT EVEN THOUGH, THE NAMES AND ADDRESSES OF THE CUSTOMERS WERE AVAILABLE ON THE COPIES OF THE SALES BILLS, THE ASSESSING OFFICER DID NOT MAKE ANY INQUIRY UNDER SE CTION 133(6) AND 131 OF THE ACT. IN VIEW OF THIS, HE STATED THAT COM MISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY DELETED THE ADDITION. ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 9 - 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD INCLUDING ASSESSMENT ORDER AND THE ORDER OF COMMISS IONER OF INCOME TAX (APPEALS) AND PAPER BOOK OF THE ASSESSEE CONTAI NING PAGE NOS.1 TO 70. WE FIND FROM THE SALE BILLS THAT THE SAME CA RRIES NAMES OF VARIOUS CUSTOMERS WHICH ARE COMPUTER GENERATED COPI ES OF THE BILLS AND ARE ATTACHED AT PAGE NOS.17 TO 62, BUT WE FIND ONE THING UNIQUE THAT THE ADDRESSES OF THE PARTIES TO WHOM SALE IS M ADE, THE ADDRESSES ARE RECORDED BELOW THE BILL AND THE ASSES SING OFFICER HAS CATEGORICALLY GIVEN FINDINGS THAT THERE IS NO NAMES AND ADDRESSES ON THE BILLS AND THE ASSESSEE HAS SIMPLY FILED XEROX C OPIES OF THE SALE BILLS, WHICH DOES NOT CARRY THE NAMES AND COMPLETE ADDRESSES OF THE PARTIES TO WHOM SALE IS EFFECTED. AS THE CONTROVERS Y IS ARISEN BEFORE US, AS TO WHAT TYPE OF SALES BILLS WERE PRODUCED BE FORE THE ASSESSING OFFICER, WHERE NO NAMES AND ADDRESSES OF THE PARTIE S TO WHOM THE ASSESSEE HAS EFFECTED THE SALES HAS MENTIONED OR NO T? THIS FACT REALLY REQUIRED VERIFICATION AT THE LEVEL OF THE AS SESSING OFFICER AND IN CASE THE ASSESSEE IS ABLE TO PRODUCE THESE PARTIES AS RECORDED IN SALE BILLS AT PAGE NOS.17 TO 62 OF ASSESSEES PAPER BOOKS, THE ASSESSING OFFICER AFTER VERIFICATION AND EXAMINATIO N OF THE PARTIES DECIDE THE CLAIM. IN VIEW OF THE ABOVE, WE ARE OF T HE VIEW THAT THIS ISSUE CANNOT BE DECIDED AT THIS STAGE, AS IT REQUIR ES LOT OF VERIFICATION AT THE END OF THE ASSESSING OFFICER. HENCE, THIS IS SUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. ACCORDINGLY THI S ISSUE OF THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 14. COMING TO THE SIMILAR ISSUE RAISED BY REVENUE I N ITA NO.2527/AHD/2008 BY WAY OF FOLLOWING GROUND NO.2: ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 10 - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS13,17,998/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CASH DEPOSITED IN T HE BANK TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT, VIDE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE I.T.AC T DATED 28.12.2007. 15. AT THE OUTSET, IT IS TO BE STATED THAT IN THIS APPEAL OF THE REVENUE ALSO THE FACTS AND CIRCUMSTANCES BEING IDEN TICAL, TAKING A CONSISTENT VIEW AS ABOVE, WE SET ASIDE THIS ISSUE T O THE FILE OF THE ASSESSING OFFICER. THIS ISSUE OF THE REVENUES APP EAL IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 16. THE THIRD ISSUE IN ITA NO.2526/AHD/2008 OF REVE NUES APPEAL IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE OF RS.64,705 MADE BY THE ASSESSING OFFICER OUT OF THE WEAVING LABOUR EXPENSES. 17. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. T HE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSING O FFICER DISALLOWED THE WORKERS SALARY AT 20% OF RS.6,47,049/- ONLY ON ONE PREMISE THAT IN MANY OF THE CASES, SIGNATURE OF RECIPIENT WORKER S OF WAGE REGISTER WERE MISSING. ACCORDING TO THE ASSESSING OFFICER WA GE REGISTER DO NOT MENTION RATE PER METER PAID FOR WEAVING. ACCORD INGLY, HE DISALLOWED 20% I.E. RS. 1,29,410/-. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE AT 10% BY GIVING FOLLOWING FINDINGS. ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 11 - I HAVE GONE THROUGH THE SUBMISSIONS OF APPELLANT A ND CONTENTIONS OF ASSESSING OFFICER. I FIND THAT THE WAGE REGISTER WAS NOT PROPERLY MAINTAINED, SIGNATURE OF WORKERS DO NOT APPEAR TO B E IN ORDER AND BASIS OF WAGE PAYMENT HAVE NOT BEEN STATED IN THE M ONTH OF JUNE 2004. THEREFORE, THE ELEMENT OF DISALLOWANCE EXIST. HOWEVER, THE RATE OF WAGE IN ALL THE 12 MONTHS ARE UNIFORM PER M ETER WHICH PROVES THAT 20% DISALLOWANCE FOR SOME MISTAKE IN ONE MONTH DOES NOT APPEAR TO BE CORRECT. I THEREFORE, DIRECT TO DISALL OW 10% OF WAGES PAID BY THE APPELLANT WHICH WORKS OUT TO RS.64,705/ -. ACCORDINGLY, THE ADDITION OF RS.64,704/- IS DELETED AND ADDITION OF RS.64,705/- IS CONFIRMED. 18. WE FIND THAT EVEN THE ASSESSING OFFICER HAS MAD E THE ESTIMATED DISALLOWANCE AT 20% AND COMMISSIONER OF I NCOME TAX (APPEALS) HAS RESTRICTED DISALLOWANCE TO 10% BY STA TING THE REASON THAT THE WAGE REGISTER WAS NOT PROPERLY MAINTAINED AND SIGNATURE OF WORKER DO NOT APPEAR TO BE IN ORDER AND BASIS OF WA GE PAYMENT HAVE NOT BEEN STATED FOR THE MONTH OF JUNE 2004, AND ACC ORDINGLY, HE IS NOT DENYING THAT THERE IS NO ELEMENT OF HIGHER WAGE S BUT HE RESTRICTED 10% BY STATING THE REASON THAT RATE OF WAGE IN ALL 12 MONTHS ARE UNIFORM PER METER, WHICH PROVES THAT THE 20% DISALL OWANCE FOR ALL MONTHS IS A MISTAKE AND THAT CAN BE APPLIED FOR ONL Y FOR ONE MONTH, AND THAT APPEARS TO BE CORRECT. WE FIND THAT THE CO MMISSIONER OF INCOME TAX (APPEALS)S FINDINGS ARE REASONABLE AND ESTIMATE MADE BY HIM SEEMS CORRECT. WE UPHOLD THE ESTIMATE MADE B Y HIM AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 19. COMING TO THE SIMILAR ISSUE RAISED BY REVENUE I N ITA NO.2527/AHD/2008 BY WAY OF FOLLOWING GROUND NO.3: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE DISALLOWANCE OF RS.46,705 /- MADE BY THE A.O. OUT OF WEAVING LABOUR EXPENSES, VIDE ASSESSMEN T ORDER UNDER SECTION 143(3) OF THE I.T.ACT DATED 28.12.2007. ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 12 - 20. AT THE OUTSET, IT IS TO BE STATED THAT IN THIS APPEAL OF THE REVENUE ALSO THE FACTS AND CIRCUMSTANCES BEING IDEN TICAL, TAKING A CONSISTENT VIEW AS ABOVE, WE DISMISS THIS ISSUE OF THE REVENUES APPEAL. THIS ISSUE OF THE REVENUES APPEAL IS ALSO DISMISSED. 21. COMING TO THE NEXT ISSUE IN ITA NO.2527/AHD/200 8 RAISED BY WAY OF FOLLOWING GROUND NO.4: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.43,364/- MADE BY THE A.O. UNDER SECTION 143(3) OF THE I.T.ACT DATED 24.12.200 7 BE RESTORED. 22. AFTER HEARING THE RIVAL CONTENTIONS AND GOING THROUGH THE ORDER OF CIT(A), WE FIND THAT THE CIT(A) HAS SIMPLY MENTI ONED THAT THE ASSESSEE HAS FOLLOWED A CORRECT METHOD OF VALUATION OF STOCK OF RAW MATERIAL. THE RELEVANT FINDINGS OF CIT(A) IN HIS AP PELLATE ORDER READS AS UNDER: I HAVE GONE THROUGH THE SUBMISSIONS OF APPELLANT A ND CONTENTIONS OF ASSESSING OFFICER. I FIND THAT THE APPELLANT HAD VALUED THE CLOSING STOCK OF YARN ON THE BASIS OF LAST QUANTITY OF PURC HASE OF YARN THAT REMAINED IN STOCK AND APPLIED THE DIRECT COST OF PU RCHASE OF SUCH QUANTITY IN STOCK. THIS IS A CORRECT METHOD OF VALU ATION OF STOCK OF RAW MATERIAL. WHEN DIRECT COST CAN BE ASCERTAINED F ROM RECORDS, THE AVERAGE COST APPLIED BY ASSESSING OFFICER IS NOT A CORRECT BASIS OF VALUATION OF STOCK. THE ADDITION OF 43,364/- IS HER EBY DELETED. 23. WE FIND THAT THE ASSESSING OFFICER HAS RECORDED A CATEGORICAL FINDING THAT THE ASSESSEE HAS STOCK OF YARN OF 565 KG., WHICH WAS VALUED AT THE RATE OF RS.104.25 PER KG. THE ASSESSI NG OFFICER HAS APPLIED THE AVERAGE OF RS.181.05/- PER KG ON THE BA SIS OF LAST PURCHASE BILLS WHICH VARIES FROM RS.178 TO RS.185 P ER KG. ON THE BASIS OF A SCIENTIFIC METHOD. BUT THE CIT(A) HAS PA SSED A NON ITA NO.2526/AHD/200 &ITA 2527/AHD/200 8 M/S.SHRI NARESHBHAI M. PATEL & MADHUBHAI G. PATEL ASST.YEAR -2005-06 - 13 - SPEAKING ORDER HENCE, WE ARE NOT IN A POSITION TO D ECIDE THIS ISSUE. ACCORDINGLY THIS ISSUE IS SET ASIDE TO THE FILE OF CIT(A). 24. IN THE RESULT, THE APPEALS OF THE REVENUE ARE P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 09/10/2009. SD/- SD/- (P.K.BANSAL) ( MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD; DATED 09/10/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, /TRUE COPY/ / (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD