The ACIT, 3 (1), V. M/s Rishman Liquors Pvt Ltd,

ITA 258/IND/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9511 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2011
• Assessment Year: misc
• Appeal Filed On: 02-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K SINGH; PRADEEP KUMAR MITRADRS
• Assessee Lawyers: GIRISH AGRAWAL; H P VERMA ASHISH GOYAL
• Keywords: Business income; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Onus to prove
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.258/IND/2008 A.Y. 2004-05 ACIT-3(1), BHOPAL APPELLANT VS. M/S. RISHMAN LIQUORS PVT. LTD., 2-A, SADANA TOWER, MEZZANINE FLOOR, MP NAGAR, BHOPAL RESPONDENT PAN AABCR 7810 P APPELLANT BY : S/SHRI K.K. SINGH & PRADEEP KUMAR MITRA,DRS RESPONDENT BY : S/SHRI H.P.VERMA, ASHISH GOYAL AND GIRISH AGRAWAL ORDER PER R.C. SHARMA, A.M : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-II, BHOPAL, DATED 25.2.2008 FOR THE A Y 2004-05 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE I.T. A CT, 1961. THE FOLLOWING GROUNDS HAVE BEEN RAISED: -: 2: - 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN 1. HOLDING THAT THE AO FAILED TO CONFRONT THE ISSUE TO THE ASSESSEE AND THE ASSESSEE HAS DISCHARGED ITS ONUS BY PROVIDING IDENTITY, CAPACITY & GENUINENESS OF THE TRANSACTION, EVEN WHEN NO COMPLIANCE WAS MADE BY THE CREDITORS AND THE ASSESSEE ITSELF HAS NOT PROVIDED THE CONFIRMATION OF THESE CREDITORS, THE GENUINENESS OF THE TRANSACTION WAS THEREFORE NOT PROVED. 2. HOLDING THAT AO WAS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE CREDITORS WERE BOGUS, WITHOUT PUTTING THE REPLIES RECEIVED FROM THOSE CREDITORS TO THE ASSESSEE FOR REBUTTAL AND THE ADDITION WAS MADE IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, EVEN WHEN NO REPLIES TO LETTERS ISSUED U/S 133(6) AT ALL WERE RECEIVED FROM THESE TRADE CREDITORS AND ASSESSEE HAS ALSO NOT -: 3: - 3 DISCHARGED ITS ONUS AND DID NOT SUBMIT THE CONFIRMATION OF THE TRANSACTION. 3. HOLDING THAT THE ASSESSEE HAS NO ROLE FOR EARNING BUSINESS INCOME OUT OF THE TRANSACTION BETWEEN THE PRINCIPAL AND ITS CUSTOMERS BUT EARNS BROKERAGE, COMMISSION ETC. FOR SERVICE RENDERED AS A C & F AGENT, EVEN WHEN MAJOR DISCREPANCIES IN THE TRANSACTION WERE PROVED BEYOND DOUBT IN THE BOOKS OF ACCOUNTS MAINTAINED AND THE ASSESSEE ITSELF FAILED TO JUSTIFY THE SAME. LATER ON, ACIT-3(1), BHOPAL, VIDE LETTER DATED 14.5 .2010, FILED ADDITIONAL GROUNDS, WHICH READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS.60,52,425/- MADE BY THE AO TREATING THE LIABILITY AS INCOME OF THE ASSESSEE U/S 41(1)(A) OF THE I.T. ACT. 2. DELETING THE ADDITION OF RS.23,13,716/- MADE BY THE AO ON ACCOUNT OF COMMISSION EXPENSES. -: 4: - 4 3. DELETING THE ADDITION OF RS.13,42,068/- MADE BY THE AO ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 3. THE FACTS, IN BRIEF, ARE THAT ASSESSEE IS WORKING AS C & F AGENT FOR M/S. KHODEY INDIA LIMITED AND IS HAVING INCOME ON ACCOUNT OF COMMISSION FROM SALE OF FOREIGN LIQUOR IN THE TERRITORY OF RAJASTHAN AS PER TERMS AND AGREEMENT WITH M/S. KHODEY INDIA LTD. AS PER AGREEMENT BETWEEN THE ASSESSEE AND M/ S. KHODEY INDIA LTD., DATED 24.6.2000 AND 12.6.2001 , ASSESSEE IS ACTING AS SALES PROMOTER FOR PRODUCTS OF KHODEY INDIA LTD, IN THE TERRITORY OF RAJASTHAN SINCE 1.7.2000. AS PER TERMS AN D CONDITIONS OF AGREEMENT DATED 12.6.2001 WITH M/S. KHO DEY INDIA LTD., THE AO FOUND THAT THE ASSESSEE IS A C & F AGENT F OR M/S. KHODEY INDIA LIMITED. ASSESSEE IS REQUIRED TO MAKE ADVANCE PAYMENTS TO M/S. KHODEY INDIA LIMITED FOR ITS -: 5: - 5 GOODS, THE MOMENT THE STOCK REACHES AT THE GODOWN FOR SELLING BY WAY OF UNDATED CHEQUES. LIKEWISE, ASSESSE E IS ALSO GETTING ADVANCE PAYMENTS FROM THE TRADERS TO WHOM L IQUOR WAS SOLD. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT U/S 143(3) , O N VERIFICATION OF BALANCE SHEET FILED ALONGWITH THE RETURN IT WAS FOUND BY AO THAT ASSESSEE HAS SHOWN HUGE LIABIL ITY IN THE NAME OF VARIOUS PARTIES. DETAILS OF LIABILITIES SHO WN IN VARIOUS SCHEDULES OF BALANCE SHEET AS ON 31.03.2004 ARE AS UNDER :- I) SCHEDULE -D CURRENT LIABILITIES & PROVISIONS: TRADE CREDITORS RS.1,20,64,348/- II) SCHEDULE-E OTHER LIABILITIES & PROVISION: A) ADVANCE FROM CUSTOMER OTHER RS. 6,33,367/- LIABILITIES B) OTHER LIABILITIES RS. 83,71,233/- AS PER ABOVE DETAILS, ASSESSEE HAS SHOWN TOTAL TRAD E LIABILITY -: 6: - 6 OF AROUND 2 CRORES. THE AO FURTHER OBSERVED THAT AG AINST THE ABOVE LIABILITIES THERE ARE NO TRADE DEBTORS. ALL T HE FUNDS INCLUDING SHARE CAPITAL AND RESERVES WERE INVESTED IN LOANS & ADVANCES TO THE SISTER CONCERNS AND FAMILY MEMBERS OF THE ASSESSEE. THERE WAS ALSO CASH & BANK BALANCES INCLU DING FDRS TO THE TUNE OF RS. 1 CRORE. THIS STATE OF AFFA IRS OF BALANCE SHEET GAVE AN APPREHENSION OF BOGUS LIABILI TIES BEING SHOWN IN THE NAME OF VARIOUS TRADE CREDITORS. 5. THE ASSESSEE WAS ASKED TO PROVE GENUINENESS OF CASH CREDITORS ALONGWITH THEIR CONFIRMATIONS, BUT NO CON FIRMATION WAS FURNISHED BY THE ASSESSEE. 6. THE AO FURTHER OBSERVED THAT ON VERIFICATION OF AUDITED BALANCE SHEET FILED WITH THE RETURN OF INCOME IT IS FOUND THAT ASSESSEE HAS SHOWN TRADE LIABILITIES IN THE NAME OF FOLLOWING PARTIES :_ S.NO. NAME OF CREDITORS BALANCE AS 1 ARR KAY SUN (SPENCER 13,88,492 2 CHATTISGARH DIST LTD. 3,49,725 3 KANIKA METALS PVT LTD. 1 , 26 , 188 4 M / S RELIABLE TRADERS 1,14,765 5 TILAK NAGAR, DIST. & 9,70,010 6 UNIVERSAL WINE TRADERS 5 , 44 , 552 7 K S SINGH 1,07,887 8 PRAVEEN KUMAR 1,08,230 9 R SHARMA 2,28,439 -: 7: - 7 10 TRILOK CHOWKSEY, ITARSI 1,88,180 11 REAL WINES DUNGARPUR 60,600 12 M/S. INERTIA IND IA LTD. 16,33,028 TOTAL 58,20,096 7. ON VERIFICATION OF COPY OF ACCOUNT OF THE ABOVE CR EDITORS IN THE BOOKS OF ASSESSEE, THE AO FOUND THAT ASSESSE E HAS SHOWN OPENING BALANCES IN THE ABOVE ACCOUNTS AND TH ERE WAS NO TRANSACTION DURING THIS ASSESSMENT YEAR AND IN E ARLIER ASSESSMENT YEARS ALSO. ASSESSEE WAS ASKED TO FURNIS H CONFIRMATION OF ALL THE ABOVE CREDITORS TO ASCERTAI N THE GENUINENESS OF LIABILITY, BUT ASSESSEE DID NOT FURN ISH CONFIRMATION OF ANY OF THE CREDITORS. ALL THE ABOVE CREDITORS WERE ALSO SENT LETTER BY AO U/S 133(6) OF THE IT ACT, ASKING THEM TO SEND THE COPY OF ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT, BUT NONE OF THEM SUBMITTED ANY INFORMATION IN THIS REGARD. ASSESSEE HAS ALSO NOT F URNISHED THE CONFIRMATION OF ALL THE ABOVE CREDITORS TILL THE DATE OF ORDER BY THE AO. IN VIEW OF THESE OBSERVATIONS, THE AO HE LD THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THE -: 8: - 8 GENUINENESS OF ALL THE ABOVE CREDITORS, THEREFORE, THE AO IT IS TREATED THAT THE LIABILITY AMOUNTING TO RS. 58,20,096/- SHOWN IN THE NAME OF ABOVE CREDITORS HAS CEASED TO EXIST AND THE SAME IS TREATED AS INCOME OF THE ASSE SSEE U/S 41(1)(A) OF THE IT ACT AND AN ADDITION OF RS. 58,20,096/- WAS MADE TO ITS INCOME. 5) ON VERIFICATION OF AUDITED BALANCE SHEET FILED WITH THE RETURN OF INCOME IT WAS ALSO FOUND THAT ASSESSEE HA D FOLLOWING LIABILITY AS ON 01.04.03. (I) INDEGE INDIA LIMITED RS. 1,05,546/- (II) UNITED AGENCIES RS. 1,26,783/- INFORMATION U/S 133(6) WAS CALLED BY AO FROM THE ABOVE PARTIES IN ORDER TO EXAMINE THE GENUINENESS O F LIABILITIES SHOWN BY THE ASSESSEE. AS PER INFORMATI ON SENT BY THE ABOVE PARTIES THERE WERE NO OUTSTANDING BALANCES IN THEIR BOOKS OF ACCOUNTS IN THE NAME OF THE ASSESSEE. -: 9: - 9 6. IN VIEW OF THE ABOVE, THE AO STATED THAT THERE WAS NO LIABILITY OF THE ABOVE PARTIES AND ASSESSEE HAD BEE N SHOWING THE LIABILITY WHICH HAS CEASED TO EXISTS. ASSESSEE WAS GIVEN COPY OF REPLIES OF THE ABOVE MENTIONED PARTIES BUT NO EXPLANATION WAS OFFERED BY HIM REGARDING GENUINENES S OF THE LIABILITY. 7. IN VIEW OF THE ABOVE, THE AO HELD THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THE GENUI NENESS OF BOTH THE ABOVE CREDITORS, THEREFORE, IT IS TREATED THAT THE LIABILITY AMOUNTING TO RS. 2,32,329/- SHOWN IN THE NAME OF ABOVE CREDITORS HAS CEASED TO EXIST AND THE SAME IS TREATED AS INCOME OF THE ASSESSEE U/S 41(1)(A) OF THE INCOME-T AX ACT, 1961, AND AN ADDITION OF RS. 2,32,329/- IS MADE TO ITS INCOME. 8. AS PER TERMS OF AGREEMENT BETWEEN THE ASSESSEE AND M/S. KHODEY INDIA LIMITED, THE AO OBSERVED THAT THE ASSESSEE IS RECEIVING COMMISSION ON SALES MADE ON BEHALF OF M/S. KHODEY INDIA LIMITED AND ASSESSEE IS EMPOWERED TO D EDUCT ITS -: 10: - 10 COMMISSION FROM REMITTANCES OF SALE RECEIPTS OF THE COMPANY THUS THE ASSESSEE IS REMITTING THE SALE PROCEEDS TO THE COMPANY AFTER DEDUCTING ITS COMMISSION. IT WAS FOUN D THAT THE ASSESSEE HAS RECEIVED INCOME ON ACCOUNT OF COMM ISSION FROM M/S. KHODEY INDIA LIMITED AT RS. 1,46,64,320/- . THE ASSESSEE HAS SHOWN INCOME FROM COMMISSION, NET OFF ALL THE EXPENSES, IN PROFIT AND LOSS ACCOUNT AT RS. 22,86,6 50/-. IT WAS EXPLAINED STATED THAT THE ASSESSEE IS ALSO PAYING COMMISSION/INCENTIVE TO ITS DEALERS WHICH HAS BEEN CREDITED IN THE FORM OF CREDIT NOTES IN THE ACCOUNT OF VARIO US DEALERS , THEREFORE, THE BALANCE RECEIPT FROM THE COMMISSION HAS BEEN SHOWN IN PROFIT AND LOSS ACCOUNT. 9. ON VERIFICATION OF ACCOUNT OF M/S. RIDDHI SIDDHI WINES, SIROHI IN THE BOOKS OF THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE HAS CREDITED TOTAL AMOUNT OF RS. 11,13 ,900/- IN THE FORM OF CREDIT NOTES OUT OF WHICH AN AMOUNT OF RS. 3,55,514/- IS SHOWN TO HAVE BEEN PAID IN CASH. DETA ILS OF ABOVE ACCOUNT IS AS UNDER :- -: 11: - 11 ACCOUNT OF M/S. RIDDHI SIDDHI WINES IN THE BOOKS OF ASSESSEE S.NO. DATE PARTICULARS C.B.FOLIO DEBIT CREDIT 1. 01.04.03 BY OPENING BALANCE 23,11,514 2. 30.06.03 BY CREDIT NOTE 037 SP/3 1,21,200 3. 02.07.03 TO 15.07.03 TO CASH PAID 70 TO 78 132714 4. 31.07.03 BY CREDIT NOTE 047 SP/4 115200 5. 31.08.03 BY CREDIT NOTE 055 SP/5 121200 6. 02.09.03 TO 15.09.03 TO CASH PAID 110 TO 120 136400 7. 30.09.03 BY CREDIT NOTE 065 SP/6 157600 8. 31.10.03 BY CREDIT NOTE 079 SPI7 157600 9 30.11.03 BY CREDIT NOTE 092 SP/8 121200 10 03.01.04 TO 12.01.04 TO CASH PAID 194 TO 200 86400 11 29.02.04 BY CREDIT NOTE 136 SP11 135580 12 30.03.04 TO CH. NO. 042818 255A 3069900 13 31.03.04 BY CREDIT NOTE 146 SP/12 184320 3425414 3425414 ACCOUNT STATEMENT OF THE ASSESSEE WAS CALLED BY AO FROM -: 12: - 12 M/S. RIDDHI SIDDHI WINES IN ITS BOOKS OF ACCOUNT. ON VERIFICATION OF ABOVE ACCOUNT STATEMENT OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF M/S RIDDHI SIDDHI WINES FOR THE ABOVE PERIOD IT WAS FOUND THAT THERE WAS NO ENTRY OF ANY OF THE CREDIT NOTES ISSUED BY THE ASSESS EE. THIS SHOWS THAT BY CREDITING THE ACCOUNT OF M/S. RIDDHI SIDDHI WINES, THE AMOUNT OF COMMISSION IN THE FORM OF CREDIT NOTES, ASSESSEE IS INFLATING ITS EXPEN SES TO THAT EXTENT. SUCH CREDIT NOTES WERE NEVER ISSUED BY THE ASSESSEE TO M/S. RIDDHI SIDDHI WINES. NOT A SINGLE AMOUNT OF CREDIT NOTE WAS FOUND IN THE BOOKS OF ACCOUNT OF M/S. RIDDHI SIDDHI WINES. ASSESSEE HAS NOT EVEN MADE TDS ON SUCH CREDIT OF COMMISSION IN THE ACCOUNT OF M/S. RIDDHI SIDDHI WINES. 10. IN VIEW OF THE ABOVE DISCUSSION, THE AO HELD THAT ASSESSEE IS NOT REFLECTING ITS CORRECT STATE OF AF FAIRS AND SUPPRESSING ITS PROFIT BY CLAIMING BOGUS -: 13: - 13 EXPENDITURE BY CREDITING THE ACCOUNT OF M/S. RIDDHI SIDDHI WINES, THE SALES COMMISSION, WHICH WAS NEVER PAID. THEREFORE, THE COMMISSION EXPENSES CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 11,13,900/- WHICH IS SHOWN TO HAVE BEEN PAID TO M/S. RIDDHI SIDDHI WINES, WAS TREATED AS BOGUS EXPENDITURE AND AN ADDITION OF RS.11,13,900/- WAS MADE TO THE INCOME OF ASSESSEE. 11. ON FURTHER VERIFICATION OF ACCOUNT STATEMENT SENT B Y M/S. RIDDHI SIDDHI WINES IT WAS FOUND THAT THERE WAS ZER O DEBIT BALANCE OF THE ASSESSEE IN THE BOOKS OF ACCOU NT OF M/S. RIDDHI SIDDHI WINES AS ON 01.04.03 AND CREDIT BALAN CE OF RS.13,42,068/- AS ON 31.03.04 I.E. M/S. RIDDHI SIDDHI WINES HAD A LIABILITY OF RS.13,42,068/- AS ON 31.03.2004 WHICH WAS TO BE PAID TO THE ASSESSEE. ON THE CONTRARY TO THE ABOVE FACTS, ASSESSEE HAS SHOWN CREDIT BALANCE OF RS. 23,11,514/ - OF M/S. RIDDHI SIDDHI WINES IN ITS BOOKS OF ACCOUNT AS ON 0 1.04.2003 AND AN AMOUNT OF RS.30,69,900/- IS SHOWN TO HAVE BEEN PAID ON 30.03.2004 BY CHEQUE AND BALANCE AS ON 31.03.200 4 HAS -: 14: - 14 BEEN SHOWN AT NIL. IN THE BANK RECONCILIATION STATE MENT SUBMITTED BY THE ASSESSEE IT HAS SHOWN THAT THE CHE QUE OF ABOVE AMOUNT WAS NOT PRESENTED IN THE BANK BECAUSE THERE VAS NO BALANCE AND ENTRY WAS REVERSED IN NEXT ASSES SMENT YEAR. THUS IN FACT THERE WAS CREDIT BALANCE OF RS.30,69,900/- OF M/S. RIDDHI SIDDHI WINES IN THE BOOKS OF THE ASSESSEE AS ON 31.03.2004 WHEREAS M/S. RIDDHI SIDDHI WINES IS SHOWING CREDIT BALANCE OF THE ASSESSEE AT RS. 13,42,068/- AS ON 31.03.2004. THUS THE BOOKS OF ACCOUNT OF THE ASSESS EE IS NOT REFLECTING CORRECT STATE OF AFFAIRS OF ITS BUSINESS . AS PER ACCOUNT STATEMENT OF M/S. RIDDHI SIDDHI WINES ASSESSEE SHOULD HAVE SHOWN AN AMOUNT OF RS.13,42,068/- AS RECEIVABLE FRO M M/S. RIDDHI SIDDHI WINES IN ITS BALANCE SHEET WHICH HAS NOT BEEN SHOWN. THUS THERE WAS EXCESS OF ASSET OVER LIABILIT Y TO THE EXTENT OF RS. 13,42,068/- AND THE SAME IS TREATED AS INCOME FROM UNDISCLOSED SOURCES AND AN ADDITION OF RS. 13, 42,068/- IS MADE TO THE INCOME OF THE AS SESSEE. 12. ON VERIFICATION OF ACCOUNT OF M/S. CHAMUNDA WINES IN THE BOOKS OF THE ASSESSEE, IT WAS FOUND THAT -: 15: - 15 ASSESSEE HAS CREDITED TOTAL AMOUNT OF RS. 11,99,826 /- IN THE FORM OF CREDIT NOTES OUT OF WHICH AN AMOUNT OF RS. 2,64,379/- IS SHOWN TO HAVE BEEN PAID IN CASH. DETAILS OF ABOVE ACCOUNT IS AS UNDER: A/C . OF M/S. CHAMUNDA WINES IN THE BOOKS OF ASSESSEE S . DATE PARTICULARS C .B. DEBIT CREDIT NO. FOLIO 1 01.04.03 BY OPENING BALANCE 206985 3 2 02.04.03 TO CH. NO. 34107 02 575000 3 30.04.03 BY CREDIT NOTE SP/1 157600 4 30.06.03 BY CREDIT NOTE SP/3 130300 5 02.07.03 TO TO CASH PAID 70 TO 81 182753 21.07.03 6 31.07.03 BY CREDIT NOTE 044 SP/4 263150 7 31.10.03 BY CREDIT NOTE SP/7 143950 8 30.11.03 BY CREDIT NOTE SP/8 68426 9 31.12.03 BY CREDIT NOTE 103 SP/9 306100 10 03.01.04 TO CASH PAID 194 TO 81626 14.01.04 202 11 15.01.04 BY CREDIT NOTE SP/LO 130300 12 30.03.04 TO CH. NO. 91259 255A 24303000 3269679 326967 13. ACCOUNT STATEMENT OF THE ASSESSEE WAS CALLED FROM M/S. CHAMUNDA WINES IN ITS BOOKS OF ACCOUNT. ON VER IFICATION OF THE ACCOUNT STATEMENT OF THE ASSESSEE IN THE BOO KS OF ACCOUNT OF M/S CHAMUNDA WINES FOR THE ABOVE PERIOD IT WAS FOUND THAT THERE WAS NO ENTRY OF ANY OF THE CREDIT NOTES ISSUED BY THE ASSESSEE. THIS SHOWS THAT BY CREDITING THE A CCOUNT OF -: 16: - 16 M/S. CHAMUNDA WINES, THE AMOUNT OF COMMISSION IN THE FOR M OF CREDIT NOTES, ASSESSEE IS INFLATING ITS EXPENSES TO THAT EXTENT. SUCH CREDIT NOTES WERE NEVER ISSUED BY THE ASSESSEE TO M/S. CHAMUNDA WINES. NOT A SINGLE AMOUNT OF CREDIT NOTE WAS FOUND IN THE BOOKS OF ACCOUNT OF M/S. CHAMUNDA WINES. ASSESSEE HAS NOT EVEN MADE TDS ON SUCH CREDIT OF COMMISSION IN THE ACCOUNT OF M/S. CHAMUNDA WINES. 14. IN VIEW OF THE ABOVE THE AO HELD THAT THE ASSESSEE IS NOT REFLECTING ITS CORRECT STATE OF AFFAIRS AND SUP PRESSING ITS PROFIT BY CLAIMING BOGUS EXPENDITURE BY CREDITING T HE ACCOUNT OF M/S. CHAMUNDA WINES, THE SALES COMMISSION; WHICH WAS NEVER PAID. THEREFORE, THE COMMISSION EXPENSES CLAI MED BY THE ASSESSEE AMOUNTING TO RS. 11,99,826/- WHICH IS SHOWN TO HAVE BEEN PAID TO M/S. CHARNUNDA WINES, WAS TREATED AS BOGUS EXPENDITURE AND AN ADDITION OF RS. L1,99,826/ - WAS MADE TO THE INCOME OF ASSESSEE. 15. IN AN APPEAL FILED BEFORE THE CIT(A), THE ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 41(1) AMOUNTI NG TO RS. 58,20,096/- WAS DELETED BY THE LD. CIT(A) AFTER HAV ING THE FOLLOWING OBSERVATIONS :- -: 17: - 17 I HAVE SEEN THE MANNER IN WHICH ADDITION HAS BEEN MADE BY THE AO AND THE SUBMISSIONS OF THE AR. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND ALSO THE MATERIAL PLACED BEFORE ME. AS RIGHTLY POINTED OUT BY THE AR, THERE IS NO SCOPE FOR ADDITION OF OPENING BALANCES OF THE CREDITORS, WITHOUT BRINGING ANY MATERIAL ON RECORD, AS TO HOW SUCH AN ACTION OF THE AO IS JUSTIFIED. THE FACT THAT THE APPELLANT HAS PROVIDED THE NAMES, ADDRESSES, P.A NUMBERS ETC., OF THE CREDITORS IS A SUFFICIENT COMPLIANCE TO DISCHARGE HIS ONUS. THE FACT THAT NONE OF THE CREDITORS HAVE COMPLIED TO THE NOTICES GIVEN U/S 133(6) IS NOT CONCLUSIVE AND THE AO IS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE, CREDITORS WERE BOGUS. ISSUE OF NOTICES U/S 133(6) IS ONE OF THE FIRST STEPS -: 18: - 18 AVAILABLE TO THE AO IN THE MATTER OF MAKING VERIFICATIONS, IN COURSE OF THE ASSESSMENT PROCEEDINGS. IN CASE THE PERSONS HAVE NOT COMPLIED WITH, NEXT STEP IS TO COMPEL THEIR ATTENDANCE, WHICH HAS NOT BEEN DONE BY THE AO. EVEN OTHER WISE ALSO, BEFORE SUBJECTING CREDIT BALANCES TO TAX, IT IS THE DUTY OF THE AO TO CALL FOR COMMENTS, IF ANY, FOR HIS PROPOSED ACTION, WHICH IS ALSO LACKING IN THIS CASE AND AS SUCH THE ADDITION WAS MADE DENYING NATURAL JUSTICE IN THE MATTER. ANY ADDITION MADE WITH OUT AFFORDING AN ADEQUATE OPPORTUNITY OF BEING HEARD, CANNOT BE SUSTAINED AND IT HAS TO BE DELETED. ABOVE ALL, IT I S BEYOND MY COMPREHENSION, AS TO HOW THE OPENING BALANCES HAVE BEEN SUBJECTED TO ADDITION, WITH OUT BRINGING ANY MATERIAL ON RECORD TO JUSTIFY THE SAME BY THE AO. IN MY OPINION, -: 19: - 19 EVEN WHEN THE AO HAS PROVED THE BOGUS NATURE OF THE OPENING BALANCE OF A CREDITOR, THEN ALSO, UNDER CERTAIN CIRCUMSTANCES, ADDITION IS POSSIBLE NOT FOR THE CURRENT ASSESSMENT YEAR, BUT IN THE CONCERNED ASSESSMENT YEAR, DURING WHICH THE TRANSACTION HAS BEEN CARRIED OUT. IN VIEW OF THE ABOVE, THE APPEAL OF THE APPELLANT ON THIS ADDITION IS ALLOWED. 16. ADDITION MADE BY AO ON ACCOUNT OF LIABILITIES PERTAINING TO M/S. INDEGE INDIA LIMITED RS. 1,05, 546/- AND M/S. UNITED AGENCIES RS. 1,26,783/- WAS DELET ED BY THE LD. CIT(A) AFTER HAVING THE FOLLOWING OBSERVATI ONS :- I HAVE SEEN THE MANNER IN WHICH ADDITION HAS BEEN MADE BY THE AO AND THE SUBMISSIONS OF THE AR. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND ALSO THE MATERIAL PLACED BEFORE ME. AS RIGHTLY POINTED OUT BY THE AR, THERE IS NO SCOPE FOR ADDITION OF OPENING -: 20: - 20 BALANCES OF THE CREDITORS, WITHOUT BRINGING ANY MATERIAL ON RECORD, AS TO HOW SUCH AN ACTION OF THE AO IS JUSTIFIED. THE FACT THAT THE APPELLANT HAS PROVIDED THE NAMES, ADDRESSES, P.A NUMBERS ETC., OF THE CREDITORS IS A SUFFICIENT COMPLIANCE TO DISCHARGE HIS ONUS. THE FACT THAT BOTH OF THE CREDITORS HAVE COMPLIED TO THE NOTICES GIVEN U/S 133(6), IS NOT CONCLUSIVE AND THE AO IS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE CREDITORS WERE BOGUS, WITH OUT PUTTING THE REPLIES RECEIVED FROM THOSE CREDITORS TO THE APPELLANT FOR REBUTTAL, WHICH IS ALSO LACKING IN THIS CASE AND AS SUCH THE ADDITION WAS MADE DENYING NATURAL JUSTICE IN THE MATTER. ANY ADDITION MADE WITH OUT AFFORDING AN ADEQUATE OPPORTUNITY OF BEING HEARD AND IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE CANNOT BE SUSTAINED AND IT HAS TO BE DELETED. ABOVE ALL, IT IS BEYOND MY -: 21: - 21 COMPREHENSION, AS TO HOW THE OPENING BALANCES HAVE BEEN SUBJECTED TO ADDITION, WITH OUT BRINGING ANY MATERIAL ON RECORD TO JUSTIFY THE SAME BY THE AO. IN MY OPINION, EVEN WHEN THE AO HAS PROVED THE BOGUS NATURE OF THE OPENING BALANCE OF A CREDITOR, THEN ALSO, UNDER CERTAIN CIRCUMSTANCES, ADDITION IS POSSIBLE NOT FOR THE CURRENT ASSESSMENT BUT IN THE CONCERNED ASSESSMENT YEAR, DURING WHICH THE TRANSACTION HAS BEEN CARRIED OUT. IN VIEW OF THE ABOVE, THE APPEAL OF THE APPELLANT ON THIS ADDITION IS ALSO ALLOWED . REGARDING COMMISSION EXPENSES DISALLOWED AT RS. 23,13,726/- PERTAINING TO TWO PARTIES VIZ., RIDDHI SIDDHI WINES (RS. 11,13,900/-) AND CHAMUNDA WINES (RS. 11,99,826/-), T HE LD. CIT(A) HAD DELETED THE SAME AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE SEEN THE MANNER IN WHICH THE ADDITION -: 22: - 22 HAS BEEN MADE BY THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE AR. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND ALSO PERUSED THE MATERIAL PLACED BEFORE ME. IT MAY BE NOTED HERE THAT FOR THE CREDIT NOTES ISSUED TO THE ABOVE TWO CUSTOMERS, THE APPELLANT HAS DEBITED SUCH AMOUNTS IN ITS ACCOUNTS AND SERVED THE SAME ON ITS CUSTOMERS, AS ACKNOWLEDGED BY THE AUTHORIZED SIGNATORIES OF THE CUSTOMERS CONCERNED. BUT, HOWEVER, IN THE ACCOUNT COPIES OF THE APPELLANT AS APPEARING IN THE BOOKS OF THE CUSTOMERS, AS SUPPLIED BY THE CUSTOMERS TO THE AO, THE SAID CREDIT NOTES HAVE FOUND NO PLACE. AT THIS STAGE, THE AO IS DUTY BOUND TO CONFRONT THE APPELLANT AND ITS TWO CUSTOMERS BY SUPPLYING THE COPIES OF THE ACCOUNT COPIES TO THE APPELLANT SO AS TO ARRIVE AT A CORRECT CONCLUSION IN THE MATTER. BUT, INSTEAD THE AO HAS CHOSEN TO ACCEPT THE INFERENCE -: 23: - 23 DRAWN FROM SUCH ACCOUNT COPIES, WHILE IGNORING ALTOGETHER THE PLEA OF THE APPELLANT IN THE MATTER OF CREDIT NOTES SAID TO HAVE BEEN ISSUED TO ITS CUSTOMERS ON A MONTHLY BASIS. THUS, THE DECISION OF THE AO BEING ONE SIDED AND WITH OUT ADHERING TO THE PRINCIPLES OF NATURAL JUSTICE IN AS MUCH AS THE CLAIM OF THE APPELLANT IS CONCERNED, AND THE ADDITION MADE BY THE AO UNDER SUCH CIRCUMSTANCES CANNOT BE SUSTAINED AND AS SUCH THE SAME HAS TO BE DELETED AND IN THE PROCESS THE APPEAL OF THE APPELLANT STANDS ALLOWED . 17. WITH REGARD TO THE ADDITION MADE ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES AT RS. 13,42,068/- WITH REGARD TO ACCOUNT OF M/S. RIDDHI SIDDHI WINES, THE LD. CIT(A) DELETED THE SAME AFTER HAVING THE FOLLOWING OBSERVATIONS :- -: 24: - 24 I HAVE SEEN THE MANNER IN WHICH THE ADDITION HAS BEEN MADE BY THE AO AND THE SUBMISSIONS OF THE AR. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND ALSO PERUSED THE MATERIAL PLACED BEFORE ME. IT MAY BE NOTED HERE THAT THE APPELLANT IS A C & F AGENT, WHOSE MAIN ROLE IS FACILITATOR OF TRADE BETWEEN THE PRINCIPAL AND ITS CUSTOMERS. HE HAS NO ROLE FOR EARNING BUSINESS INCOME OUT OF TRANSACTIONS BETWEEN THE PRINCIPAL AND ITS CUSTOMERS, BUT EARNS BROKERAGE, COMMISSION ETC FOR THE SERVICES RENDERED AS A C & F AGENT. IN THE GIVEN FACTS AND THE CIRCUMSTANCES OF THE CASE, IT HAS TO BE ACCEPTED THAT THE SAID BALANCE OF RS 13,42,068/- DOES NOT RELATE TO THE ASSESSEE DIRECTLY, AND AS SUCH THE -: 25: - 25 ADDITION MADE BY THE AO IN THE HANDS OF THE APPELLANT CANNOT BE SUSTAINED AND IT HAS TO BE DELETED AND THUS THE APPEAL OF THE ASSESSEE IS ALLOWED . 18. AGGRIEVED BY THE ABOVE ORDER OF THE LD. CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 19. IT WAS ARGUED BY THE LD. SENIOR D.RS. THAT THE ASSESSEE HAS NOT FURNISHED CONFIRMATION OF ACCOUNT WITH REGARD TO THE CREDITS APPEARING IN ITS BOOKS OF ACC OUNT SINCE LONG BACK AND EVEN IN THE CONFIRMATION/STATEMENT OF ACCOUNT DIRECTLY CALLED FROM THE RESPECTIVE PARTIES , THEY HAVE CLEARLY DECLINED TO HAVE ANY LIABILITY DUE FROM THE ASSESSEE. IT WAS FURTHER SUBMITTED BY THE LD. SENIOR D.R. THA T WHILE ASKING FOR THE REMAND REPORT BY THE LD. CIT(A), THE AO WAS NOT AUTHORIZED TO MAKE ANY QUERY. AS NONE OF THE C REDITORS HAVE COMPLIED TO THE NOTICES GIVEN U/S 133(6), THE AO WAS PERFECTLY JUSTIFIED IN DRAWING ADVERSE INFERENCE AN D THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION J UST BY -: 26: - 26 STATING THAT THE ASSESSEE HAS PROVIDED THE NAMES, A DDRESS AND P.A.NUMBERS OF THE CREDITORS AND TO TREAT IT AS A SUFFICIENT COMPLIANCE IN DISCHARGE OF ITS ONUS. 20. ON THE OTHER HAND, IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT U/S 250(4), THE LD. CIT(A) HAS POWER TO ASK THE AO TO MAKE FURTHER ENQUIRY AND IF THE AO HAS NOT MADE FURTHER ENQUIRY, THE ASSESSEE CANNO T BE BLAMED. WITH REGARD TO THE QUERY RAISED BY THE ASSE SSING OFFICER, ON 29.12.2006, IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT ON THE VERY SAME DAY , ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER AND , THUS, THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO SUBST ANTIATE ITS CLAIM OF GENUINENESS OF THE CREDITORS. 21. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FIND FROM THE RECORD THAT THERE WAS HUGE CREDIT BALANCE OF TRADE CREDITORS IN THE BOOKS OF ACCOUNT, ACCORDINGLY, THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATION OF THESE TRADE CR EDITORS AND OTHER LIABILITIES, BUT THE ASSESSEE FAILED TO F URNISH THE -: 27: - 27 SAME. TO FURTHER VERIFY THE FACTUAL POSITION, THE A O HAS ISSUED NOTICE U/S 133(6) DIRECTLY TO THESE PARTIES, BUT THE STATEMENT SENT BY THESE PARTIES IN THEIR BOOKS REFL ECTED ENTIRELY DIFFERENT POSITION OF ACCOUNT, WHICH WAS R EVERSE TO THE POSITION SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE ASSESSEE WAS SHOWING OPENING BALANCE IN RESPECT OF THESE PARTIES IN THEIR BOOKS OF ACCOUNT AND THERE W AS NO TRANSACTION DURING THE ASSESSMENT YEAR NOR IN THE E ARLIER ASSESSMENT YEARS, SINCE THE ASSESSEE HAD NOT SUPPLI ED CONFIRMATION OF THESE PARTIES NOR THESE PARTIES HAV E SENT THEIR CONFIRMATION EVEN AFTER ASKING BY THE ASSESSI NG OFFICER BY ISSUING OF NOTICE U/S 133(6), THE ONUS OF THE AS SESSEE TO SUBSTANTIATE GENUINENESS OF THE TRADE AND OTHER CRE DITORS WERE NOT DISCHARGED. ACCORDINGLY, THE AO MADE ADDIT ION IN RESPECT OF THESE CREDITORS, THE GENUINENESS OF WHIC H WAS NOT PROVED NOR THEIR CONFIRMATIONS WAS FURNISHED EITHER BEFORE THE AO OR BEFORE THE CIT(A). 22. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E LD. CIT(A) HAS CALLED FOR A REMAND REPORT AND IN CO MPLIANCE -: 28: - 28 TO THE SAME, THE AO HAS STATED FOR MAKING FURTHER SCRUTINY AND NO POSITIVE REPORT WAS SENT BY THE ASSESSING OF FICER. EVEN THE LD. CIT(A) HAS NOT GIVEN ANY POSITIVE FIND INGS TO CONCLUDE THAT CREDITORS WERE GENUINE AND THERE WAS NO CESSATION OF LIABILITY. THE POWERS OF CIT(A) IS COT ERMINUS WITH THAT OF AO AND IF THE AO HAS FAILED TO DO ANY THING, THE LD. CIT(A) IS EQUALLY COMPETENT TO DO THE SAME. MER ELY BY RELYING ON THE SUBMISSION OF THE LD. AUTHORIZED REPRESENTATIVE TO THE EFFECT THAT THERE WAS NO FRES H TRANSACTION DURING THE YEAR UNDER CONSIDERATION WIT H THESE PARTIES AND ASSESSEE WAS NOT GIVEN PROPER OPPORTUNI TY, , IT IS NOT PROPER TO DELETE THE ADDITION WHEN THE GENUINEN ESS OF CREDITORS ITSELF WAS NOT ESTABLISHED AND CLEAR CONT RADICTION WAS FOUND IN THE ENTRIES RECORDED IN ASSESSEES BOO KS OF ACCOUNT VIS--VIS STATEMENT OF ACCOUNT SENT BY THES E PARTIES AS PER THEIR BOOKS OF ACCOUNT. EVEN THE COPIES OF T HESE STATEMENTS WERE SUPPLIED BY THE ASSESSING OFFICER T O THE ASSESSEE, BUT THE ASSESSEE COULD NOT CONTROVERT THE SAME. IN THE INSTANT CASE, THE AO HAS DISALLOWED TRADE CREDI TORS OF -: 29: - 29 RS. 60.52 LAKHS ON ACCOUNT OF CESSATION OF LIABILIT Y U/S 41(1)(A), THE BENEFIT OF WHICH HAS ALREADY BEEN TAK EN BY THE ASSESSEE IN EARLIER YEAR BY DEBITING EXPENDITURE IN RESPECT OF SUCH TRADE LIABILITY. HOWEVER, THE CIT(A) HAS TREAT ED IT AS ADDITION GENERALLY MADE ON ACCOUNT OF UNEXPLAINED C ASH CREDIT U/S 68. WE FOUND THAT AFTER CONDUCTING FULL ENQUIRY, THE AO HAD FOUND THAT CREDIT BALANCE IN THE HANDS O F SEVERAL CREDITORS WERE SHOWN OUTSTANDING WITHOUT ANY CHANGE FOR LAST SEVERAL YEARS. EVEN THE QUERY LETTER SENT BY T HE ASSESSING OFFICER TO THESE CREDITORS REMAINED UN-SE RVED OR UN-RESPONDED. IN THE ABSENCE OF SUCH CONFIRMATION, THE AO HAS TREATED THESE CREDIT BALANCES AS HAVING BEEN AC TUALLY DISCHARGED BY THE ASSESSEE OUT OF THE INCOME NOT DI SCLOSED TO THE DEPARTMENT. THE ADDITION WAS DELETED BY THE LD. CIT(A) BY OBSERVING THAT THERE WAS ONLY OPENING BAL ANCE OF CREDIT IN THE ASSESSMENT YEAR UNDER CONSIDERATION A ND NO SEPARATE AMOUNT WAS BROUGHT IN THE BOOKS. HE ALSO MENTIONED THAT THE ADVERSE INFERENCE DRAWN BY THE ASSESSING OFFICER WAS NOT CONFRONTED TO THE ASSESSE E FOR HIS -: 30: - 30 RESPONSE. THIS OBSERVATION OF THE CIT(A) IS FACTUAL LY IN CORRECT IN SO FAR AS THE ASSESSEE WAS CONFRONTED WI TH ALL THE EVIDENCES BROUGHT ON RECORD BY THE ASSESSING OFFICE R VIDE ORDER SHEET DATED 29.12.2006 IN RESPONSE TO IT, SHR I PAREKH, A. R. OF THE ASSESSEE WAS ASKED TO EXPLAIN THE DISC REPANCY IN THE BALANCES AND ACCOUNT SHOWN BY THE ABOVE PART IES. HE WAS ALSO GIVEN PHOTOCOPIES OF THE STATEMENTS SENT B Y THESE PARTIES. SHRI PAREKH STATED IN REPLY THAT IT IS NOT POSSIBLE TO EXPLAIN THE DIFFERENCE IN SUCH A SHORT TIME. 23. WITH REGARD TO COMMISSION EXPENSES OF RS. 23.13 LAKHS, WE FOUND THAT THE ASSESSEE WAS IN RECEIPT OF COMMISSION ON SALE ON BEHALF OF M/S. KHODEY INDIA L IMITED. ACTUAL REMITTANCE TO THE COMPANY WAS AFTER DEDUCTIN G SUCH SALES COMMISSION ON THE OTHER HAND ASSESSEE WAS ALS O PAYING COMMISSION/REBATE TO THE PARTIES TO WHOM SAL ES WAS AFFECTED. WE FOUND THAT AT THE END OF EVERY MONTH, THE ASSESSEE HAD SENT DEBIT NOTE TO M/S. KHODEY INDIA L IMITED IN RESPECT OF COMMISSION ACCRUED TO IT DURING THE R ELEVANT MONTH. IT WAS ALSO SENDING CREDIT NOTE TO ITS RESPE CTIVE -: 31: - 31 BUYERS FOR THE COMMISSION/REBATE EARNED BY THEM. HO WEVER, ON VERIFICATION OF ACCOUNT STATEMENT OF ASSESSEE IN THE BOOKS OF M/S. RIDDHI SIDDHI WINES, IT WAS FOUND THAT THER E WAS NO ENTRY OF ANY CREDIT NOTES ISSUED BY THE ASSESSEE. I T CLEARLY SHOWS THAT BY CREDITING THE ACCOUNT OF RIDDHI SIDDH I WINES IN RESPECT OF COMMISSION ACCRUED TO RIDDHI SIDDHI W INES, THE ASSESSEE HAS INFLATED TO ITS EXPENSES TO THAT E XTENT. THE AO FOUND THAT SUCH CREDIT NOTE WAS NEVER ISSUED BY THE ASSESSEE TO M/S. RIDDHI SIDDHI WINES NOR A SINGLE A MOUNT OF CREDIT WAS FOUND BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT OF M/S. RIDDHI SIDDHI WINES. SIMILARLY, ON VERIFICATION OF CHAMUNDA WINES IN THE BOOKS OF ASSE SSEE, THE AO FOUND THAT THE ASSESSEE HAS CREDITED AN AMOU NT OF RS. 11.99 LAKHS IN THE FORM OF CREDIT NOTES OUT OF WHICH AN AMOUNT OF RS. 2.64 LAKHS WAS SHOWN TO HAVE BEEN PAI D IN CASH. ON THE CONTRARY, WHILE VERIFYING THE ABOVE AC COUNT STATEMENT OF THE ASSESSEE IN THE BOOKS OF M/S. CHAM UNDA WINES, IT WAS FOUND THAT THERE WAS NO ENTRY OF ANY OF THE CREDIT NOTES ISSUED BY THE ASSESSEE. THUS, BY CREDI TING THE -: 32: - 32 ACCOUNT OF CHAMUNDA WINES FOR THE CREDIT NOTES ON A CCOUNT OF COMMISSION, THE ASSESSEE HAS INFLATED ITS EXPENS ES TO THAT EXTENT. IT WAS CATEGORICALLY NOTED BY THE ASSESSING OFFICER THAT SUCH CREDIT NOTES WERE NEVER ISSUED BY THE ASS ESSEE TO M/S.CHAMUNDA WINES NOR A SINGLE AMOUNT OF CREDIT NO TE WAS FOUND IN THE BOOKS OF ACCOUNT OF M/S.CHAMUNDA W INES. WITHOUT CONTROVERTING ALL THESE FINDINGS OF THE AO , THE LD. CIT(A) HAS DELETED THE ADDITION JUST BY STATING THA T THE AO HAS NOT MADE FURTHER ENQUIRY. IT IS PERTINENT TO ME NTION HERE THAT POWERS OF THE CIT(A) ARE CO-TERMINUS WITH THAT OF THE AO AND WHAT THE AO HAS FAILED TO DO, HE IS FULL Y COMPETENT TO DO THE SAME, HOWEVER, DELETING SUCH AD DITION JUST BY POINTING OUT LAPSES IN AOS ACTION AND WITH OUT GIVING ANY POSITIVE FINDING, THE LD. CIT(A) WAS NOT JUSTIF IED IN DELETING THE SAME. ON PERUSAL OF THE STATEMENT, WE FOUND THAT THE ASSESSEE HAD ISSUED CREDIT NOTES TO THESE TWO PARTIES BUT THE BOOKS OF ACCOUNT OF THESE PARTIES D ID NOT REFLECT THE SAME. UNDER THESE CIRCUMSTANCES, THE AO HAD NO CHOICE BUT TO ADD THE AMOUNT IN ASSESSEES INCOME. THE LD. -: 33: - 33 CIT(A) HAS DELETED THE ADDITION JUST BY STATING THA T IF THE PARTIES HAVE NOT DISPLAYED THE CREDIT NOTES IN THEI R ACCOUNT, IT IS NOT THE FAULT OF THE ASSESSEE. WE DO NOT FIND ANY MERIT IN THE ACTION OF CIT(A). 24. WITH REGARD TO THE ADDITION OF RS. 13,42,068/- ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES, IT WAS FOUND ON VERIFICATION BY THE ASSESSING OFFICER THAT THERE WAS ZERO BALANCE OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF M/S. RIDDHI SIDDHI WINES AS ON 1.4.2003 AND CREDIT BALAN CE OF RS. 13,42,068/- AS ON 31.3.2004. THUS, M/S. RIDDHI SIDDHI WINES HAD A LIABILITY OF RS. 13,42,068/- AS ON 31.3 .2004, WHICH WAS TO BE PAID TO THE ASSESSEE. HOWEVER, ON T HE CONTRARY, THE ASSESSEE HAD SHOWN CREDIT BALANCE OF RS. 23,11,514/- OF M/S. RIDDHI SIDDHI WINES IN ITS BOOK S OF ACCOUNT AS ON 1.4.2003 AND AN AMOUNT OF RS. 30,69,9 00/- WAS SHOWN TO BE PAID ON 30 TH MARCH, 2004, BY CHEQUES AND BALANCE AS ON 31.3.2004 HAS BEEN SHOWN AT NIL. ON VERIFICATION OF BANK RECONCILIATION STATEMENT, IT W AS FOUND THAT THERE WAS NO ENTRY IN THE BANK STATEMENT ON TH E PLEA -: 34: - 34 THAT CHEQUES WAS NOT PRESENTED BECAUSE THERE WAS NO BALANCE. THIS ENTRY WAS REVERSED BY ASSESSEE IN ITS BOOKS OF ACCOUNT ON THE NEXT DATE FALLING IN THE NEXT ASSESS MENT YEAR. THUS, IN FACT, THERE WAS A CREDIT BALANCE OF RS. 30,69,900/-OF M/S. RIDDHI SIDDHI WINES IN THE BOOKS OF THE ASSESSEE AS ON 31.3.2004, WHEREAS M/S. RIDDHI SIDDH I WINES WAS SHOWING CREDIT BALANCE OF RS. 13,42,068/- IN ITS BOOKS OF ACCOUNT AS ON 31.3.2004. UNDER THESE CIRCUMSTANCES, THE AO INFERRED THAT THERE WAS EXCES S OF ASSETS OVER LIABILITY TO THE EXTENT OF RS. 13,42,06 8/- AND THE SAME WAS ADDED IN THE ASSESSEES INCOME. THE LD. CI T(A) HAS DELETED THE SAME JUST BY STATING THAT THE ASSESSEE IS ONLY A C & F AGENT OF THE PRINCIPAL M/S. KHODEY INDIA LIMI TED AND THE PARTY ISSUES CHEQUES IN ITS NAME. HOWEVER, ON T HE CONTRARY, THE CHEQUES WERE ACTUALLY ISSUED IN FAVOU R OF THE ASSESSEE FOR THE GOODS SOLD AND THE ASSESSEE HAD IS SUED CHEQUES TO M/S. KHODEY INDIA LIMITED FOR THE GOODS PURCHASED BY IT. THUS, ON THE WRONG FACTUAL FINDING , THE LD. CIT(A) HAS DELETED THE ADDITION. BEFORE PARTING WIT H THE -: 35: - 35 ISSUE, IT IS PERMITTED TO MENTION THAT BENCH HAS CATEGORICALLY ASKED THE A.R. TO STATE THE CURRENT S TATUS OF TRADE CREDITORS AS TO WHETHER THESE WERE PAID SUBSE QUENTLY. BUT THE LD. AUTHORIZED REPRESENTATIVE SHOWN HIS INA BILITY TO STATE THE CURRENT STATUS OF CREDITORS. UNDER THESE CIRCUMSTANCES, WE DO NOT ENDORSE THE ACTION OF CIT( A) IN DELETING THE ADDITIONS SO MADE. 25. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF THE LD. CIT(A), IN SO FAR AS HE HAS NEITHER CONTROVERTED THE FINDINGS RECORDED BY THE A SSESSING OFFICER NOR GIVEN HIS INDEPENDENT FINDINGS JUSTIFYI NG DELETION OF VARIOUS ADDITIONS. KEEPING IN VIEW TOTALITY OF F ACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF CIT(A) FOR DECIDING THE ENTIRE ISSUE AFRESH AFTER UNDERTAKING THE EXERCISE WHICH H E ALLEGED ON AOS PART, IN TERMS OF OUR ABOVE OBSERVATIONS. 26. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. -: 36: - 36 THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15 TH MARCH, 2011. CPU* 1416