ACIT Cir-I Aurangabad, Aurangabad V. M/s Barkha Farms P Ltd, Aurangabad

ITA 256/PUN/2012

• Counselvise Citation: 25624514 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-09-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 07-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHETAN KARIA
• Keywords: Business income; Depreciation; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 256/PN/2012 (ASSTT.YEAR : 2003-04) ACIT, CIRCLE-I, AURANGABAD .. APPELLANT VS. M/S. BARKHA FARMS PVT. LTD., NATH HOUSE, PAITHAN ROAD, AURANGABAD .. RESPONDENT PAN NO.AABCB4676P APPELLANT BY : SMT. SHAILJA RAI RESPONDENT BY : SHRI CHETAN KARIA DATE OF HEARING : 30-09-2013 DATE OF PRONOUNCEMENT : 29-11-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 28-11-2011 OF THE CIT(A), AURANGABAD RELATING TO AS SESSMENT YEAR 2003- 04. 2. THIS IS THE SECOND ROUND OF LITIGATION BEFORE TH E TRIBUNAL. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SALE OF FLOWERS AND TRADING IN SEEDS. THE ASSESSEE FILED RETURN OF INCOME ON 20-10-2003 DECLARING LOSS OF RS.(-) 3,39,900/-. DU RING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE TRADING AND PROFIT & LOSS ACCOUNT OF THE ASSESSEE COMPANY REFLE CTS TRADING IN SEEDS. THIS TRADING ACTIVITY WAS THEN SUBJECTED TO DETAILED VER IFICATION. IT WAS NOTED THAT WHILE THE SEEDS WERE CLAIMED TO HAVE BEEN PURCHASED FROM QUITE A FEW VENDORS, THE ASSESSEE SOLD ALL THESE SEEDS TO ONE N ATH SEEDS LIMITED. WHEN THE PURCHASE BY THE ASSESSEE WERE PROBED FURTHER, T HE PURCHASES AMOUNTING 2 TO RS.1,28,56,193/- WERE FOUND TO BE BOGUS. EITHER THOSE VENDORS DID NOT EXIST, OR THEY DENIED HAVING HAD ANY TRANSACTIONS W ITH THE ASSESSEE. IT WAS MAINLY IN THIS BACKDROP THAT THE ASSESSING OFFICER DISALLOWED RS.1,28,56,913/- OUT OF THE PURCHASES. HOWEVER, WH EN ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), THE ASSESSEE CL AIMED THAT IN FACT THE PURCHASES WERE MADE DIRECTLY BY NATH SEEDS LTD. AND THE ACCOUNTING OF THESE PURCHASES WERE ROUTED THROUGH THE ASSESSEE COMPANY ONLY AS A MEASURE OF, WHAT WOULD BE TERMED AS, WINDOW DRESSING. THE ASSE SSEE ALSO FILED ADDITIONAL EVIDENCES TO SUPPORT THIS NEW PLEA. THI S PLEA, HOWEVER, DID NOT FIND FAVOUR WITH THE CIT(A). HE DECLINED TO ADMIT THE ADDITIONAL EVIDENCE, AND HE FURTHER ADDED THAT IN ANY EVENT THIS NEW PLE A CANNOT BE ENTERTAINED AT THIS STAGE AS IT WOULD SET AT NAUGHT ALL THE ASSESS MENT AND INVESTIGATION WORK CARRIED OUT BY THE REVENUE AUTHORITIES. HE THUS CO NFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 2.1 THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL A ND THE TRIBUNAL VIDE ORDER DATED 26-10-2007 RESTORED THE MATTER BACK TO THE FILE OF CIT(A) FOR DECIDING THE APPEAL AFRESH BY HOLDING AS UNDER : 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AND A LSO THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT THE ASSESSEES CLAIM OF WINDOW DRESSING T HE BOOKS OF ACCOUNTS CANNOT BE SIMPLY BRUSHED ASIDE, AS THE CIT(A) H AS CHOSEN TO DO. THE INCOME TAX PROCEEDINGS ARE NOT, UNLIKE CIVIL DISPUTES , ADVERSARIAL PROCEEDINGS. THESE ARE THE PROCEEDINGS TO GET AT THE TRUTH. WE HAVE NOTED THAT THE ASSESSEE IS MAKING AN EFFORT, FOR WHATEVER REASO NS AND UNDER WHATEVER PRESSURES, TO COME CLEAN AND ADMIT THAT THERE WERE NO PURCHASES AND SALES, AND ALL THESE ENTRIES WERE SIMPLY ACCOUNTING JUGGLERIES. IN THE COURSE OF HEARING, LEARNED COUNSEL POINTED OUT THAT T HE ASSESSEE HAS SIMPLY ADOPTED THE DEBTORS OF NATH SEEDS LIMITED FOR THESE PU RCHASES, AND SHOWN THE PURCHASES AS ASSESSEE'S OWN PURCHASES. THERE ARE OTHER L AWS TO TAKE CARE OF SUCH MANIPULATIONS, BUT, AS FAR AS INCOME-TAX LEGISLA TION IS CONCERNED, IT CANNOT TAX A NON EXISTENT INCOME MERELY BECAUSE THE ASSESSEE HAS BEEN UNSCRUPULOUS OR WANTING IN HIS CONDUCT. IT IS ONLY AN INCOME WHICH CAN BE TAXED BY THE ASSESSING OFFICER, AND IN A SITUATION AN ASSE SSEE CAN DEMONSTRATE THAT HE DID NOT EARN ANY INCOME FROM CERTAIN ENTRIE S REFLECTED IN HIS BOOKS OF ACCOUNTS, THE ASSESSING OFFICER CANNOT TAX SUCH TRANSACTIO NS. ONE HAS TO GET AT THE TRUTH OF THE TRANSACTION. AS OBSERVED BY A CO ORDI NATE BENCH IN THE CASE OF 3 ELECTRA (JAIPUR) PVT. LTD VS IAC (26 ITD 236),THE ASSE SSEE'S INABILITY TO LEAD EVIDENCE EARLIER SHOULD NOT BE HELD AGAINST THE ASSESSEE. IF THE EVIDENCE IS WORTH BEING ACCEPTED, IT CAN BE ACCEPTED. IF IT IS N OT, LET IT BE REJECTED ON MERITS. HOWEVER, JUST BECAUSE DID NOT FOLLOW THE PATH OF TRUTH AND HONESTY EARLIER AND PARTICULARLY WHEN HE SEEKS TO FOLLOW THE RIGHT PATH AT LEAST NOW, THE ASSESSEE'S CASE CANNOT BE REJECTED AT THE THRESHOLD IT SELF. IN OUR CONSIDERED VIEW, THE CLAIM OF THE ASSESSEE THAT THERE W ERE NO REAL TRANSACTIONS NEEDS TO BE EXAMINED ON MERITS. WE ARE INC LINED TO ACCEPT ASSESSEE'S PLEA FOR HIS BEING GIVEN AN OPPORTUNITY TO CO ME CLEAN AND PLACE ALL THE RELEVANT FACTS BEFORE THE CIT(A). LET THE MATTER BE EXAMINED ON MERITS. WE, THEREFORE, DEEM IT FIT AND PROPER TO REMIT .THE MATTER TO THE FILE OF THE CIT(A) FOR ADJUDICATION DE NOVO, 'AFTER ADMITTING A DDITIONAL EVIDENCES, AND ON MERITS OF THE CASE. WE ORDER SO. THE MATTER THUS STANDS R ESTORED TO THE FILE OF THE CIT(A) WITH DIRECTIONS AS ABOVE. 6. WE ALSO MAKE IT CLEAR THAT THE ASSESSEE MUST FULLY CO OPERATE IN EXPEDITIOUS DISPOSAL OF THE APPEAL AND SHARE FULLY AND TRULY ALL THE RELEVANT FACTS. THE ASSESSEE SHALL APPROACH THE CIT(A) ON HIS OWN, WITHIN 30 DAYS OF RECEIVING THIS ORDER, AND SHALL NOT SEEK ANY ADJOURNME NTS ON FRIVOLOUS GROUNDS. IN CASE THE ASSESSEE'S CONDUCT OR COOPERATION IS FOUND WANTING, THE CIT(A) SHALL BE AT LIBERTY TO TAKE SUCH ACTION AS HE M AY DEEM FIT INCLUDING, BUT NOT LIMITED, DECIDING THE MATTER ON THE BASIS OF MATE RIAL ALREADY ON RECORD. WE ALSO MAKE IT CLEAR THAT WE ARE NOT INCLINED TO AC CEPT THE ASSESSEES REQUEST FOR SETTING ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, AS IT WILL PROVIDE YET ANOTHER OPPORTUNITY TO THE ASSESSEE, WHOSE PAST CONDUCT IS LESS THAN IMPRESSIVE, TO ADOPT DILATORY TACTICS IN ALLOWING THE MATTER TO REACH FINALITY. WE HOPE THAT THIS OPPORTUNITY GIVEN TO TH E ASSESSEE TO COME CLEAN WILL NOT BE FRITTERED AWAY BY THE ASSESSEE. WE LEAVE I T AT THAT. 3. DURING THE PROCEEDINGS BEFORE THE CIT(A) AFTER T HE TRIBUNAL RESTORED THE ISSUE BACK TO HIS FILE, THE ASSESSEE FILED SUBM ISSION DATED 15-07-2009 ALONG WITH THE COPY OF THE PAPER BOOK FILED BEFORE THE TRIBUNAL AND A COPY OF THE REMAND REPORT DATED 29-11-2006 SUBMITTED BY THE ASSESSING OFFICER BEFORE THE CIT(A) AURANGABAD IN THE APPELLATE PROCE EDINGS. 3.1 THE SUBMISSION OF THE ASSESSEE WAS FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS, WHO VIDE HIS REPORT DATED 19-02-2010 FILED HIS REPORT. IN THE SAID REPORT, THE ASSESSING OFFICER STATED THAT THE CONTENTION OF THE ASSESSEE THAT ON ACCOUNT OF WINDOW DRESSING (I. E. SHOWING SALES RETURNS BY CUSTOMERS OF NATH SEEDS LTD. AS PURCHASES FROM T HE SAID CUSTOMERS AND SHOWING THEM AS SALES TO NATH SEEDS LTD.) THE PROFI T OF THE ASSESSEE IS NOT AFFECTED IS INCORRECT. THE A.O. FURTHER STATED THAT THE ASSESSEE COMPANY HAS CLAIMED TOTAL EXPENDITURE INCLUDING SALES RETURN OF NATH SEEDS TREATED AS 4 PURCHASES AT RS.6,79,20,829/- (RS.6,76,68,453/- + R S.2,52,376/-) WHEREAS THE SALES SHOWN TO NATH SEEDS WERE RS.6,78,72,071/- WHI CH HAS RESULTED INTO LOSS OF RS.48,578/-. THE A.O. ALSO STATED IN THE REMAND REPORT THAT THE EXPENSES CLAIMED BY THE ASSESSEE AT RS.2,52,376/- IS BOGUS. THE A.O. FURTHER STATED IN THE REMAND REPORT THAT THE FINDING OF ITAT IN THIS CASE THAT 'THE DEPARTMENT CANNOT TAX NON-EXISTENT INCOME IN THE HANDS OF THE ASSESSEE, MERELY BECAUSE THE ASSESSEE HAS BEEN UNSCRUPULOUS OR WANTING IN HI S CONDUCT' IS NOT APPLICABLE. 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AS WELL AS THE SUBMISSIONS MADE AND THE COMMENTS OF THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS THE LD.CIT(A) DELETED AN AMOUNT OF RS.1 ,28,06,913/- BY HOLDING AS UNDER : 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS AND PARTICULARLY THE ORDER OF THE HON'BLE ITAT, PUN E AND DIRECTIONS GIVEN THEREIN WHICH ARE BINDING ON LOWER AUTHORITIES. ON PERUSAL OF THE MATERIAL ON RECORD, THE CONTENTION OF THE APPELLANT HAS BEEN NOTICED THAT TH E FLAGSHIP COMPANY OF NATH GROUP I.E. NATH SEEDS LTD., HAS SOLD SUBSTANTI AL QUANTUM OF SEEDS IN THE MARKET WHICH HAS BEEN RETURNED BY VARIOUS CUSTOMERS OF THE SAID COMPANY DUE TO GERMINATION PROBLEM OF THE SEEDS SOLD. THE SAI D SALES RETURNED WERE TO THE TUNE OF RS.6 TO 7 CRORES. IN ORDER TO MAINTAIN THE TURNOVER AND CREDIBILITY OF THE FLAGSHIP COMPANY THE SAID SALES RETURNS HAVE BE EN SHOWN AS PURCHASES BY THE APPELLANT COMPANY AND THE SAID PURCHASES HAVE B EEN SHOWN AS SOLD TO NATH SEEDS LTD. THE TRANSACTION IS ONLY BOOK ENTRY AND THE GROSS PROFIT @0.3% HAS BEEN SHOWN ON TOTAL SALES OF RS.6.78 CRORES TO COVE R-UP ADMINISTRATIVE AND OTHER EXPENSES TO GIVE EFFECT TO THIS TRANSACTION. THE APPELL ANT CLAIMED THAT THERE IS NO DISTORTION OF PROFIT DECLARED IN THE RETURN OF IN COME ON ACCOUNT OF ABOVE PURCHASES AND SALES SHOWN BY BOOK ENTRIES. THE ABOV E CONTENTION OF THE APPELLANT IS SUPPORTED BY PARA-6 OF THE REMAND REPO RT DATED 29/11/2006 OF THE A.O. SUBMITTED IN THE FIRST INNING OF LITIGATION WITH CIT(APPEALS), AURANGABAD. THE SAME IS REPRODUCED BELOW : '6, WITHOUT PREJUDICE TO ABOVE, IT IS FOUND THAT, P URCHASE RETURNS OF NATH SEEDS LTD. ARE TALLYING WITH PURCHASES MADE BY BARK HA FARMS PVT. LTD. IT IS IMPORTANT THING TO NOTE THAT, ACCOUNTS OF THE PE RSONS FROM WHOM PURCHASE RETURNS HAVE BEEN MADE HAVE NOT BEEN CREDI TED BY PURCHASE RETURNS. INSTEAD OF THIS WAS SHOWN AS PURCHASES OF BARKHA FARMS PVT. LTD. THE PERSONS FROM WHOM SO CALLED PURCHASES HAVE BEEN MADE, THEIR CREDIT BALANCES WITH BARKHA FARMS PVT. LTD. WERE TR ANSFERRED TO NATH SEEDS LTD. BY JV. THIS AMPLY PROVES THAT THE ACCOUNTS OF THIS GROUP ARE NOT CORRECT.' 6.1 THE EVIDENCE FILED BEFORE THE CIT(A) AND THE A BOVE OBSERVATION OF THE A.O. IN THE REMAND REPORT HAS NOT BEEN CONSIDERED BY THE THEN CIT(A)-I, AURANGABAD AS HE HAS DECLINED TO ADMIT THE ADDITIONAL EVIDENCE STATING THAT IN ANY EVENT THIS NEW PLEA CANNOT BE ENTERTAINED AT T HIS STAGE. THE HON'BLE ITAT HAS, HOWEVER, DIRECTED THAT THE CLAIM OF THE ASS ESSEE THAT THERE ARE NO 5 REAL TRANSACTIONS NEEDS TO BE EXAMINED ON MERITS AFTE R ADMITTING ADDITIONAL EVIDENCES FILED BY THE APPELLANT. IN VIEW OF THE ABOVE FACTS, THE ADDITIONAL EVIDENCES WHICH HAVE NOT BEEN ADMITTED BY THE CIT(A )-I, AURANGABAD HAVE BEEN ADMITTED. 6.2 FROM PARA-6 OF THE REMAND REPORT OF THE A.O. D ATED 29/11/2006, IT HAS BEEN NOTICED THAT THE GOODS RETURNED BY THE CUSTOMER S OF NATH SEEDS HAVE BEEN SHOWN AS PURCHASES BY THE APPELLANT COMPANY. IT HAS ALSO BEEN NOTICED FROM THE AVAILABLE RECORD THAT THE APPELLANT COMPAN Y HAS SHOWN THE SAID GOODS RETURNED AS PURCHASES AND THE SAID PURCHASES HAVE BE EN SHOWN AS SOLD TO NATH SEEDS LTD. AT MEAGER PROFIT. IN VIEW OF THE ABOVE FACTS, THE CONTENTION OF THE APPELLANT IS FOUND TO BE CORRECT A ND ACCEPTABLE. THE ABOVE BOOK ENTRIES PASSED BY THE APPELLANT COMPANY WITHOUT PURCHASING OR SELLING GOODS DID NOT RESULT INTO SUPPRESSION OF PROFIT BY THE A PPELLANT COMPANY TO THE EXTENT OF RS.1,28,56,913/- AS HELD BY THE A.O. IN THE ASSESSMENT ORDER. 6.3 IN THE REMAND REPORT THE A.O. HAS CLAIMED THAT THE EXPENSES CLAIMED BY THE APPELLANT IN RESPECT OF TRANSACTIONS OF SALES R ETURNS OF NATH SEEDS LTD. SHOWN AS PURCHASES FROM THE SAID CUSTOMERS OF NATH SEEDS L TD. AND AGAIN SHOWN AS SALE TO NATH SEEDS LTD. RESULTED INTO LOSS OF RS. (-)48,578/-. THE A.O. HAS ALSO STATED IN THE REMAND REPORT THAT THE EXPENSES C LAIMED BY THE APPELLANT TO THE EXTENT OF RS.2,52,376/- ARE BOGUS. I N THIS REGARD, THE APPELLANT HAS SUBMITTED THAT ITS CLAIM IS SUPPORTED BY THE LEDGER EXTRACTS OF VARIOUS EXPENSES ACCOUNTS AND ALSO AUDITED FINAL STATEMENTS OF ACCO UNTS SHOWING DETAILS OF THE VARIOUS EXPENSES. ON PERUSAL OF AUDITED FINAL STATEMENTS OF ACCOUNT AND OTHER RECORD, IT HAS BEEN NOTICED THAT THE APPELLANT HAS ALSO PURCHASED AND SOLD GOODS OTHER T HAN THOSE SHOWN AS PURCHASES FROM CUSTOMERS OF NATH SEEDS LTD. THE A. O. HAS NOT BROUGHT ON RECORD ANY SPECIFIC EVIDENCE THAT THE EXPENSES CLAIMED BY THE APPELLANT COMPANY ARE NOT GENUINE. HOWEVER, CONSIDERING THE TOTALITY OF THE F ACTS THE EXPENSES CLAIMED BY THE APPELLANT ARE DISALLOWED TO THE EXTENT OF RS.50 ,000/- TO WHICH THE AR OF THE APPELLANT HAS ALSO AGREED. IN VIEW OF THE ABOVE FAC TS AND DISCUSSION, THE ADDITION OF RS.1,28,56,913/- ON ACCOUNT OF ALLEGED INFLATED PURCHASES IS DELETED AND EXPENSES ARE DISALLOWED TO THE EXTENT OF RS.50,000/ -. THE APPELLANT GETS RELIEF OF RS.1,28,06,913/-. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE CIT(A) IS CORRECT IN DELETING THE ADDITION MADE ON ACCOUNT OF BOGUS P URCHASES. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) IS CORRECT IN DELETING THE ADDITION WITHOUT CONSIDERING THE R EMAND REPORT AND FACTS THEREIN. 3. THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT(A) BE VACATED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY GROUNDS OF APPEAL. 6 6. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELI ED ON THE ORDER OF THE ASSESSING OFFICER. REFERRING TO THE COMMENTS O F THE ASSESSING OFFICER FILED IN THE STATEMENT OF FACTS ATTACHED WITH THE G ROUNDS OF APPEAL THE LD. DEPARTMENTAL REPRESENTATIVE DREW THE ATTENTION OF T HE BENCH TO THE SAME WHICH READ AS UNDER : THE DECISION OF THE CIT(A) IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: THE CIT(A) HAS ACCEPTED THE ADDITIONAL GROUND OF AP PEAL AND DELETED THE ADDITION MADE BY THE AO, HOWEVER, THE CIT(A) HA S NOT CONSIDERED THE REMAND REPORT SUBMITTED ON 19-02-2010 AFTER PROP ER VERIFICATION OF FACTS. THE CIT(A) HAS ALSO IGNORED THE FINDING OF ASSESSMENT ORDER WHERE IT WAS PROVED THAT THE PURCHASES ARE NOT GENUINE IN THE HANDS OF THE ASSESSEE. AS DISCUSSED ABOVE, THE ASSESSING OFFICER HAS O BSERVED THAT THE ASSESSEE COMPANY TRADED IN SEEDS, HENCE, THE DET AILS WAS CALLED FOR. DURING THE COURSE OF PROCEEDINGS THE ASSESSE E EXPLAINED THAT THE COMPANY HAD PURCHASED CERTIFIED SEEDS FROM VA RIOUS FARMERS/SEEDS GROWERS AT DIFFERENT PLACES. THE SEEDS SO PURCHASED WAS SOLD TO NATH SEEDS LIMITED, AN ASSOCIATE CONCERN AMO UNTING TO RS.6,76,48,453/-. THE AO CALLED THE DETAILS OF SEEDS GR OWERS FROM THE ASSESSEE AND ACCORDINGLY ISSUED LETTERS TO ASCERTAIN THE C ORRECTNESS OF TRANSACTIONS/PURCHASES SHOWN BY THE ASSESSEE. THE DETAILS OF THE SAME ARE GIVEN AS UNDER : I N R E S P O N S E , IN RESPONSE, THREE GROWERS DENIED HAVING SOLD ANY SEED S TO THE ASSESSEE AND THE BALANCE LETTERS WERE RETURNED UN-SERVED. ON VERIFICATION OF PURCHASE INVOICES REVEALED THAT THE I NVOICES CONTAINS THE DETAILS OF CROP AND VARIETY OF COTTON SEEDS AND OT HER SEEDS SOLD BY M/S.NATH SEEDS LTD. FURTHER, THE AO OBSERVED THAT THE PURCHASES MADE BY THE COMPANY WERE NOT OF THE SEEDS BUT THE SEED S ALREADY AVAILABLE IN VARIOUS PACKINGS WITH THE ASSESSEE. AS SUCH, T HE AO HELD THAT THE ASSESSEE HAS INFLATED THE PURCHASES TO THE EXTE NT OF RS.1,28,56,913/- (RS.34,01,403/- + RS.94,55,513/-) AS M ENTIONED ABOVE. SR. NO. NAME OF PARTY DATE OF RECEIPT OF REPLY AMOUNT OF PURCHASE RS. SANJIVANI AGRO CHEMICALS, BALEGAON 13-02-2006 8,89,198/- M/S. BASEGANNY SEEDS FARM, BELLARI 15-02-2006 10,20,037/- VIJAY SHREE AGRI SERVICES 21-02-2006 14,92,168/- TOTAL 34,01,403/- DATE OF RECEIPT OF UNSERVED LETTER ANJI REDDY SEEDS 13-02-2006 11,18,040/- LAXMI FERTILIZERS, VARANGAL 15-02-2006 9,81,888/- UJWALA SEEDS 06-09-2005 26,08,572/- HARSHA SEEDS, VARANGAL 12-09-2005 47,47,010/- TOTAL 94,55,510/- 7 FURTHER THE GIST OF THE REMAND REPORT IS AS UNDER: 'AFTER GOING THROUGH RECORDS, BALANCE SHEET AND PROF IT AND LOSS ACCOUNT IT WAS FOUND THAT CONTENTION OF THE ASSESSEE IS NOT CORRECT REGARDING THE ISSUE THAT THERE IS NO IMPACT IN PROFIT/ LOSS DUE TO WINDOW DRESSING IN THE ASSESSEE 'S CASE. AS PER PROFIT AND LOSS ACCOUNT, ASSESSEE PURCHASED TOTAL S EEDS WHICH IS CONTESTED BY ASSESSEE WAS AS SALE RETURN OF NATH SE EDS PVT. LTD. OF RS.6,76,68,453/-. THEREAFTER ASSESSEE SOLD THE SA ME TO NATH SEEDS LTD. OF RS. 6,78,72,071/-. THE ASSESSEE HAS DEBITED EXPENDITURE AS SEED EXPENSES OF RS.2,52,376/-. SO TOTAL EXPENDITURE ON TOTAL PURCHASE IS RS.6,79,20,89/-. THEREFORE, THE ASSESSEE SOLD THE SAME ON LOSS WHICH IS NOW CLAIMING AS IT IS NOTHING BUT WINDOW DRESSING. SO ALTHO UGH THERE IS MISMATCH OF PURCHASE AND SALE FIGURES, FOR A TIME BEING EVEN IT IS CONSIDERED THAT IT MIGHT BE ALLOWED BUT ONLY IF THER E IS NO IMPACT ON INCOME OF THE ASSESSEE. BUT AS PER FACTS THERE IS SUB STANTIVE IMPACT OF WINDOW DRESSING ON PROFIT OF THE ASSESSEE. TOTAL EXPENDITURE ON I) DIRECT MANUFACTURING EXPENSES (EXCLUDING DEPRECIATION) : RS.7,73,751/- II) ADMINISTRATIVE & SELLING EXPENSES : RS.4,50,9 36/- IT SHOULD BE NOTED ON MANUFACTURING TOTAL EXPENSES , A SSESSEE HAS INCURRED EXPENSES ON FARM EXPENSES, CHARGES, FERTILIZERS , HAMALI CHARGES WHICH WAS INCURRED FOR SEEDS MANUFACTURING/PRO CESSING. HOWEVER, AS PER ASSESSEES CLAIM IF ACCEPTED THERE SHOULD BE NO EXPENSES, BECAUSE IN FACT NO PURCHASES WAS DONE. SIMILARLY IN THE CASE OF SELLING EXPENSES, ASSESSEE HAS DEB ITED EXPENSES ON SUCH AS FREIGHT OUTWARD, SALES PROMOTION, TRAVELLING EXPENSES WHICH IS ALSO BOGUS AS THERE IS NO PURCHASE AND SALE OCCURRED DU RING THE YEAR FURTHER, ASSESSEE HAS CLAIMED DEPRECIATION OF RS.15,05,56 2/-. THE ASSET IN WHICH DEPRECIATION MAINLY CLAIMED IS PLANT & MACHINERY : RS. 6,31,559/- AGRICULTURAL EQUIPMENT : RS. 27,570/- PLANTING MATERIAL : RS. 5,46,344/- TOTAL : RS. 12,05,473/- WHICH IS USED EXCLUSIVELY FOR SEEDS MANUFACTURING. SO I F THERE IS ONLY WINDOW DRESSING, NO ACTUAL PURCHASE OR SALE DONE THEN D EPRECIATION ON PLANTING MATERIAL, EXPENDITURE, ETC. DOES NOT ARI SE DISCUSSED ABOVE CANNOT BE ALLOWED. IT SHOULD ALSO BE NOTED THAT WHOLE PURCHASES WAS AS CLAIM ED BY ASSESSEE AS SALE RETURN OF NATH SEEDS ONLY. SO CHANCE OF THESE EXPENDITURE MIGHT BE INCURRED RELATED TO OTHER PURC HASE AND SALE IS RULED OUT. NET IMPACT OF WINDOW DRESSING IN THIS CASE I S 8 RETURNED INCOME AS PER ASSESSEE : (-) RS. 3,39,8 96/- ADD :I) MANUFACTURING EXP. NOT GENUINE : RS. 7 ,77,551 /- II) ADVERTISEMENT & SELLING EXPENSES : RS. 4,50,986/- III) SEEDS EXPENSES : RS. 2,52,376/- IV) DEPRECIATION RELATED TO ASSETS NOT USED IN MANUFACTURING ACTIVITY AT ALL : RS. 12,05,473/- : RS.23,40,490/- SO, FROM ABOVE DISCUSSION, IT IS CLEAR THAT DUE TO WIN DOW DRESSING ASSESSEE HAS INCURRED LOSS, OTHERWISE ASSESSEE HAS PROFIT OF R S.23.4 LACS. AS PER ITAT'S FINDING IN THIS CASE THAT DEPARTMENT CANNOT TAX A NON-EXISTENT INCOME MERELY BECAUSE THE ASSESSEE HAS BEEN UNSCRUPULOUS OR IS NOT APPLICABLE. ' SHE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT (A) BE RESTORED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO & CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN THE ORIGINAL ASSESSMENT O RDER THE ASSESSING OFFICER HAD DISALLOWED AN AMOUNT OF RS.1,28,56,913/- ON ACC OUNT OF INFLATED PURCHASES. WE FIND WHEN THE MATTER TRAVELLED UPTO THE TRIBUNAL, THE TRIBUNAL VIDE ORDER DATED 26-10-2007 RESTORED THE M ATTER TO THE FILE OF THE CIT(A) WITH CERTAIN DIRECTIONS WHICH ARE ALREADY IN CORPORATED IN PARA 2.1 OF THE IMPUGNED ORDER. THE REVENUE HAS NOT CHALLENGED THE ORDER OF THE ITAT WHEREIN IT WAS HELD THAT THE ASSESSEES CLAIM OF WI NDOW DRESSING CANNOT BE SIMPLY BRUSHED ASIDE. WE FIND THE CIT(A) ON THE BA SIS OF THE DIRECTION OF THE TRIBUNAL, THE SUBMISSIONS BY THE ASSESSEE AND O N THE BASIS OF THE REMAND REPORT OF THE ASSESSING OFFICER DELETED THE ADDITIO N. THE ORDER OF THE LD. CIT(A) IS BASED ON FACTUAL POSITION AS SUBMITTED BY THE ASSESSEE. THE SALES 9 OF THE ASSESSEE ARE NOT DOUBTED BY THE AO UNDER SIM ILAR CIRCUMSTANCES WHEREAS HE HAS DOUBTED ONLY THE PURCHASES STATING T HE SAME TO BE BOGUS. WE FIND THE LD.CIT(A) WHILE ADJUDICATING THE ISSUE HAS CONSIDERED THE REMAND REPORT OF THE AO DATED 29-11-2006 WHEREIN THE ASSES SING OFFICER HAD STATED THAT PURCHASE RETURNS OF NATH SEEDS LTD. ARE TALLYI NG WITH PURCHASE MADE BY BRAKHA FARM LTD. THE LD. DEPARTMENTAL REPRESENTATIV E COULD NOT CONTROVERT ANY OF THE FINDINGS GIVEN BY CIT(A). IN OUR OPINIO N, THE ORDER OF THE CIT(A) IS A REASONED ONE BASED ON FACTS WHICH NEEDS NO INT ERFERENCE FROM OUR SIDE. WE ACCORDINGLY UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29-11-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 29 TH NOVEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE