Shantai Exim Ltd., Ahmedabad V. Deputy Commissioner of Income Tax, Circle-2(1)(2), Surat

ITA 273/SRT/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2130 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINIWAS T BIDANI
• Assessee Lawyers: AMAN SHAH
• Keywords: Bogus purchase; Search and seizure; Loose papers; Earning of tax free income; Proportionate interest; Bad and doubtful debts; Rule 8D; Set aside
• Section: 44AD; 143(3); 133A; 14A; 133(6); 250; 131; 68; 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH : SURAT BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ITA.NO.273/SRT/2018 ASSESSMENT YEAR 2012-2013 M/S. SHANTAI EXIM LIMITED, SURAT. PAN AAECM1115D C/O. KETAN H. SHAH, ADVOCATE, 903, SAPPHIRE COMPLEX, C.G. ROAD, NAVRANGPURA, AHMEDABAD. VS. THE DCIT, CIRCLE-2(1)(2), SURAT. (APP ELL ANT) (RESPONDENT) ITA.NO.436/SRT/2018 ASSESSMENT YEAR 2012-2013 THE ACIT, CIRCLE-2(1)(2), ROOM NO.205, AAYAKAR BHAVAN, MAJURAGATE, SURAT. VS. M/S. SHANTAI EXIM LIMITED, SURAT. PAN AAECM1115D C/O. KETAN H. SHAH, ADVOCATE, 903, SAPPHIRE COMPLEX, C.G. ROAD, NAVRANGPURA, AHMEDABAD. (APP ELL ANT) (RESPONDENT) FOR ASSESSEE : SHRI KETAN SHAH AND SHRI AMAN SHAH, ADVOCATES FOR REVENUE : SHRI SRINIWAS T. BIDANI, CIT - D.R. DATE OF HEARING : 25 .0 7 .201 9 DATE OF PRONOUNCEMENT : 27 .0 8 .201 9 2 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ORDER PER BHAVNESH SAINI, J.M. BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-2, SURAT, DATED 20 TH MARCH 2018, FOR THE A.Y. 2012-2013. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BOTH THE CROSS APPEALS ARE DECIDED AS UNDER. ITA.NO.273/SRT/2018 : [ASSESSEES APPEAL] : 3. ON GROUND NO.1, ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.38.81 CRORES ON ACCOUNT OF UNEXPLAINED PURCHASES. THE ASSESSEE COMPANY FILED RETURN OF INCOME OF RS.97,09,650/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF TRADING, MANUFACTURING AND EXPORT OF FABRICS. A SURVEY UNDER SECTION 133A OF THE INCOME-TAX ACT, 1961 WAS CONDUCTED ON THE ASSESSEE COMPANY ON 11 TH JULY, 2011 AT BUSINESS PREMISES OF THE ASSESSEE COMPANY. AFTER AFFORDING FULL AND ADEQUATE 3 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. OPPORTUNITY TO THE ASSESSEE, THE ASSESSMENT PROCEEDINGS HAVE BEEN COMPLETED. THE ASSESSING OFFICER NOTED THAT DURING THE COURSE OF SURVEY PROCEEDINGS CERTAIN LOOSE PAPERS WERE FOUND, INVENTORIED AND IMPOUNDED AS A BF (DIFFERENT COLOURED) HIMALAYA FILES SEL-I TO SEL-X AND LOOSE PAPER FILES SEL-XII, XIII AND XIV, COMPUTER BACKUP SEL CD- 1 WERE ALSO IMPOUNDED. THE DETAILS OF THE SAME ARE MENTIONED IN PARA 3 OF THE ASSESSMENT ORDER. THE ABOVE IMPOUNDED MATERIAL CONSISTS OF FILES. MORE IMPORTANTLY THE LOOSE PAPER FILE SEL-XIV CONSISTS OF 187 PAGES, OUT OF WHICH, PAGES FROM 1 TO 169 AND 173 TO 187 ARE LEDGER COPIES OF VARIOUS TRANSACTIONS MADE BY THE COMPANY. PAGES FROM 170 TO 172 PERTAIN TO CORRESPONDENCE REGARDING SEARCH CARRIED OUT BY COMMERCIAL TAX DEPARTMENT. ON PERUSAL OF THESE DOCUMENTS, IT REVEALED THAT THE COMPANY HAD MADE PURCHASES FROM THE FAMILY CONCERNS OF THE EMPLOYEE OF THE ASSESSEE COMPANY SHRI SHAILESH DAMOR. ALL THE CONCERNS ARE OPERATED FROM THE RESIDENTIAL ADDRESS OF SHRI SHAILESH DAMOR, 56, POONAM NAGAR SOCIETY, BHATAR ROAD, SURAT. THE ASSESSEE WAS ASKED TO FILE DETAILS OF PURCHASES WITH PARTIES 4 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. RUNNING FROM THE AFORESAID ADDRESS NAMELY R.J.D. CREATION, SJD ORGANIZERS, JD ENTERPRISE, MJD ENTERPRISE, NIRMALA ENTERPRISE, ZENIFER ENTERPRISE ETC., [REFERRED TO AS DAMOR FAMILY] AND CORRESPONDING SALES THERETO. THE ASSESSEE WAS ALSO REQUESTED TO FILE DETAILS WITH SUPPORTING MATERIAL INCLUDING BILLS AND INVOICES WITH RESPECT TO PURCHASES MADE BY THE DAMOR FAMILY. THE ASSESSING OFFICER IN VIEW OF THE DOCUMENTS ON RECORD, SHOW CAUSED THE ASSESSEE AS TO WHY THE PURCHASES MADE FROM DAMOR FAMILY SHOULD NOT BE TREATED AS BOGUS PURCHASES. THE ASSESSEE FILED DETAILED REPLY WHICH IS REPRODUCED IN THE ASSESSMENT ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT THERE WAS SURVEY PROCEEDINGS ON 11 TH JULY, 2011 I.E., IN THE ASSESSMENT YEAR UNDER APPEAL, THERE WAS SOME DOCUMENT FOUND. HOWEVER, ALL THESE SO-CALLED INVOICES ARE ACCOUNTED IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS ALREADY FILED BILLS AND INVOICES IN REFERENCE TO THE PURCHASES MADE FROM DAMOR FAMILY. THE ASSESSEE DID NOT MAKE ANY BOGUS PURCHASES FROM THE PARTIES. THERE IS ONE SHRI SHAILESH DAMOR EMPLOYEE OF THE ASSESSEE WHO HAD BEEN MAKING REQUEST TO PROVIDE FINANCIAL 5 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. HELP TO HIS RELATIVE/BROTHER, TO WHICH, THE ASSESSEE DENIED, BUT, IT WAS STATED TO FIND OUT SOME BUSINESS, FOR WHICH, ASSESSEE WOULD HELP. THEY WERE INTERVIEWED. HOWEVER, IT WAS THE FIRST CONDITION OF THE ASSESSEE THAT THEY SHOULD NOT DEAL WITH ANY OTHER PARTY AND/OR TO PROVIDE/SELL THE FINISHED GOODS, WHICH THEY USED TO SELL TO THE ASSESSEE, TO WHICH, THEY HAVE AGREED. THEREFORE, THE ASSESSEE STARTED BUSINESS TRANSACTION WITH ALL THESE FIRMS. THESE PARTIES ARE NOT RELATED TO THE ASSESSEE. IT WAS AGREED BETWEEN THE PARTIES THAT THE SELLER I.E., DAMOR GROUP WILL ASK THEIR SELLER TO MAKE THE DELIVERY AT THE PREMISES OF THE ASSESSEE. THIS FACT WAS ALSO DISCLOSED DURING THE COURSE OF SURVEY PROCEEDINGS. THIS IS GENERAL PRACTICE OF DELIVERY EMPLOYED AND/OR ADOPTED ALL OVER SURAT. THE PARTIES HAVE PROVIDED THEIR RESIDENTIAL ADDRESSES, WHICH ITSELF WILL NOT CONCLUSIVELY PROVED THAT PURCHASES ARE BOGUS. IT IS NOT ALWAYS NECESSARY TO HAVE SEPARATE OFFICE PREMISES BECAUSE IN THIS CASE DELIVERY WAS MADE AT THE DOOR STEP OF THE ASSESSEE. FURTHER IN SURAT KEEPING A GODOWN IS VERY EXPENSIVE. SINCE THE ASSESSEE RECEIVED THE GOODS AT ITS OWN PREMISES AND MADE EXPORTS 6 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. WHICH ARE NOT IN DISPUTE, THEREFORE, PURCHASES COULD NOT BE TREATED AS BOGUS. WITHOUT PURCHASES, SALES/EXPORTS COULD NOT HAVE BEEN MADE. IF THERE IS NO DELIVERY OF PURCHASES, CORRESPONDING SALES BE EXCLUDED. THE PURCHASES ARE SUPPORTED BY BILLS AND VOUCHERS ALONG WITH QUANTITATIVE DETAILS DULY AUDITED WHICH ARE MENTIONED IN THE AUDIT REPORT ALSO. ALL THE PARTIES ARE ASSESSED TO TAX. MERELY BECAUSE EMAIL ADDRESS OF SHRI VIRAL VORA HAVE BEEN MENTIONED IS NO GROUND TO REJECT THE EXPLANATION OF ASSESSEE. ALL THE PURCHASES ARE MADE THROUGH BANKING CHANNEL. THE SELLER IS ALSO REGISTERED UNDER SHOP AND ESTABLISHMENT ACT AND REGISTRATION CERTIFICATE HAVE BEEN ISSUED. BECAUSE OF THE SURVEY, THE PARTIES ARE AFRAID TO COME BEFORE THE INCOME TAX DEPARTMENT. THAT IS WHY THEY MAY NOT BE RESPONDING TO THE NOTICES ALTHOUGH THEY HAVE ASKED FOR THE ADJOURNMENTS. IT WOULD, THEREFORE, PROVE THE EXISTENCE OF THE SELLER PARTIES. SINCE THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL AND THAT THERE IS NO EVIDENCE THAT AMOUNTS HAVE RETURNED BACK TO THE ASSESSEE WOULD PROVE GENUINE PURCHASES WHICH ARE EXPORTED BY THE ASSESSEE. IN SOME 7 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. CASES, ON THE BILLS NO STAMP AFFIXED WHICH IS NOT A CRITERIA TO DECIDE WHETHER THE PURCHASE IS GENUINE OR NOT. THE TOTAL FINISHED GOODS EXPORTED IN QUANTITY IS 1,73,63,638 METRES EQUAL TO EXPORT SALES OF RS.89.52 CRORES AND AS AGAINST THIS, THE PURCHASES MADE BY THE ASSESSEE FROM THESE NON- COOPERATIVE PARTIES IN QUANTITY IS ONLY 50,58,416 METRES AND IN RUPEES IT IS RS.31,98,03,057/-. IT WAS, THEREFORE, SUBMITTED THAT IN CASE THESE PURCHASES ARE CONSIDERED UNACCOUNTED, THERE WOULD BE EFFECTIVE GROSS PROFIT RATE @ 41.4% WHICH WOULD BE VERY HIGH-PITCHED AND ABNORMAL GROSS PROFIT. IN THIS LINE OF BUSINESS, SUCH A HUGE EARNING OF GROSS PROFIT IS IMPOSSIBLE. THEREFORE, THERE SHOULD NOT BE ANY DOUBT ON THE PURCHASES OF THE ASSESSEE. IT WAS, THEREFORE, PRAYED THAT PROPOSED ACTION MAY BE DROPPED AND PURCHASES MAY BE CONSIDERED AS GENUINE. 3.1. THE ASSESSEE IN THE ALTERNATIVE CONTENTION ALSO ARGUED THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF MAYANK DIAMOND PRIVATE LIMITED VS., ITO DATED 7 TH NOVEMBER, 2014 CONSIDERED THE ISSUE OF BOGUS PURCHASES, WHEREIN THE DIRECTOR OF THE SAID COMPANY UNDER SECTION 131 8 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. OF THE INCOME TAX ACT HAS ADMITTED UNACCOUNTED PURCHASES. THE TRIBUNAL HAS PARTLY ALLOWED THE APPEAL BY APPLYING GROSS PROFIT RATE OF 12.5%. HOWEVER, THE HONBLE GUJARAT HIGH COURT DIRECTED TO APPLY GROSS PROFIT RATE OF 5% AGAINST TOTAL BOGUS PURCHASES. OTHER DECISIONS WERE ALSO RELIED UPON. 3.2. THE ASSESSING OFFICER CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL ON RECORD. THE ASSESSING OFFICER NOTED THAT IT IS AN ADMITTED FACT THAT DAMOR FAMILY RUNS THEIR BUSINESS FROM THEIR RESIDENTIAL ADDRESS, BUT, THE INSPECTOR HAS REPORTED THAT NO SUCH BUSINESS ACTIVITY IS CARRIED-OUT AT THE RESIDENTIAL PREMISES. THE SUMMONS WERE ISSUED TO ALL CONCERNS RUN BY DAMOR FAMILY TO APPEAR BEFORE ASSESSING OFFICER ALONG WITH COMPLETE BOOKS OF ACCOUNT. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF ASSESSEE THAT GOODS WERE DELIVERED AT THE DOORSTEP OF THE ASSESSEE. SUMMONS WERE ALSO ISSUED TO THE DAMOR FAMILY FOR APPEARANCE. HOWEVER, THEY TOOK ADJOURNMENT, BUT, NOBODY APPEARED THEREAFTER AND NO BOOKS OF ACCOUNT HAVE BEEN PRODUCED. THE ASSESSING OFFICER NOTED ALL THE DETAILS IN THE 9 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ASSESSMENT ORDER AND NOTED THAT EMAIL ADDRESS OF ONE OF THE DIRECTOR SHRI VIRAL VORA HAVE BEEN MENTIONED BY THE SELLER. THE MEMBERS OF DAMOR FAMILY HAVE FILED THEIR RETURN OF INCOME UNDER SECTION 44AD OF THE INCOME TAX ACT. THE ASSESSING OFFICER ALSO NOTED THAT IN SOME OTHER CASES EVEN 100% DISALLOWANCE OF PURCHASES HAVE BEEN MADE. THE STATEMENT OF DIRECTOR OF ASSESSEE-COMPANY WAS RECORDED ON OATH UNDER SECTION 131 OF INCOME TAX ACT, IN WHICH HE HAS STATED THAT THEY HAVE A PROCEDURE TO PUT STAMP ON ALL THE PURCHASE BILLS WHICH ARE PAID. BUT, IN THE CASE OF THESE PARTIES NO DETAILS HAVE BEEN MENTIONED. THE A.O, THEREFORE, NOTED THAT ALL THE PURCHASES ARE MADE FROM DAMOR FAMILY, BUT, NO BUSINESS HAVE BEEN CONDUCTED AT THEIR ADDRESS, NO DAY TODAY STOCK REGISTER HAVE BEEN MAINTAINED. THE DAMOR FAMILY HAS FILED RETURN OF INCOME ONLY UNDER SECTION 44AD OF THE INCOME TAX ACT. THEREFORE, A.O. TREATED THE ENTIRE PURCHASES OF RS.38.81 CRORES MADE FROM DAMOR FAMILY AS BOGUS CASH CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT. THE ADDITION OF THE SAME WAS ACCORDINGLY MADE. 10 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 4. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A). THE WRITTEN SUBMISSIONS OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER, IN WHICH THE ASSESSEE REITERATED THE SAME FACTS. BEFORE THE LD. CIT(A), IT WAS HIGHLIGHTED THAT ALL THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AND NO EVIDENCE HAS BEEN BROUGHT ON RECORD THAT AMOUNT PAID HAS COME BACK TO THE ASSESSEE. THE SELLERS ARE ASSESSED TO TAX. THE PURCHASES ARE EXPORTED WHICH IS NOT DISPUTED. NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY BECAUSE THESE WERE INVOICES AND BILLS OF PURCHASES ONLY WHICH ARE RECORDED IN THE BOOKS OF ACCOUNT. IN TEXTILE BUSINESS NO EDUCATIONAL QUALIFICATION OR TECHNICAL KNOWHOW IS REQUIRED AND NO FURTHER INFRASTRUCTURE LIKE GODOWN OR OFFICE IS REQUIRED AS IN THE CASE OF THE ASSESSEE, DELIVERY OF THE STOCK HAVE BEEN MADE AT THE DOOR STEP OF THE ASSESSEE. MERELY BECAUSE NO DETAILS OF PAYMENT ARE RECORDED IN THE PURCHASE BILLS IS NO GROUND TO REJECT THE EXPLANATION OF ASSESSEE. THE PARTIES ARE NOT RELATED TO ASSESSEE. 11 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 4.1. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF ASSESSEE AND MATERIAL ON RECORD DIRECTED THE ASSESSING OFFICER TO MAKE FURTHER ENQUIRY INTO THE MATTER AND ASKED TO FILE THE REMAND REPORT. THE REMAND REPORT OF THE ASSESSING OFFICER IS REPRODUCED IN THE APPELLATE ORDER. THE A.O. REPORTED THAT SECTION 44AD IS NOT APPLICABLE IN THE CASE OF DAMOR FAMILY BECAUSE THEIR TURNOVER IS MORE THAN RS.1 CRORE. SUMMONS UNDER SECTION 131 OF THE INCOME-TAX ACT WERE ISSUED TO THE DAMOR FAMILY AND THEY FILED VARIOUS DETAILS WHICH WERE EXAMINED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER RECORDED STATEMENT OF SHRI MUKESH R. PAREKH, CHARTERED ACCOUNTANT WHO IS AN AUDITOR OF DAMOR FAMILY. IN HIS STATEMENT, HE HAS STATED THAT HE HAS AUDITED DAMOR FAMILY CONCERNS FOR ASSESSMENT YEAR UNDER APPEAL ONLY. HIS AFFIDAVIT WAS ALSO FILED ON RECORD. THE ASSESSING OFFICER POINTED-OUT THAT KYC DOCUMENTS AND BANK STATEMENTS HAVE BEEN OBTAINED OF DAMOR FAMILY CONCERNS. HOWEVER, THE FLOW OF MONEY FROM THE BANK ACCOUNTS OF THE DAMOR FAMILY CONCERNS CANNOT BE ASCERTAINED AT THIS STAGE BECAUSE THE BANK HAS YET TO PROVIDE COMPLETE DETAILS IN THIS 12 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. REGARD. SUMMONS HAVE ALSO BEEN ISSUED TO THE BANK AND RELEVANT INFORMATION ARE BEING GATHERED. THE ASSESSING OFFICER FURTHER FILED THE SECOND REMAND REPORT AND EXPLAINED THAT AS PER DIRECTIONS OF THE LD. CIT(A), HE HAS ISSUED SUMMONS TO 07 MEMBERS OF DAMOR FAMILY AND THEIR STATEMENTS HAVE BEEN RECORDED. IT IS EXPLAINED BY THEM THAT SHRI RAKESH IS BROTHER OF SHRI SHAILESH DAMOR WHO IS AN EMPLOYEE OF THE ASSESSEE-COMPANY. HE WAS UNABLE TO EXPLAIN NAME OF THE PARTIES FROM WHOM FINISHED GOODS HAVE BEEN PURCHASED AND THE NAME OF THE BROKER THROUGH WHOM SAID PURCHASES HAVE BEEN MADE. SMT. JENIFER DAMOR STATED THAT SHE IS NOT HAVING ANY KNOWLEDGE OF THE BUSINESS AND ON HER BEHALF SHRI RAKESH DAMOR WAS ARRANGING THE BUSINESS AND SHE WAS ONLY PUTTING THE SIGNATURE. LIKEWISE STATEMENT OF A DAMOR FAMILY HAVE BEEN RECORDED. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT THESE PERSONS WERE DUMMY PERSONS ONLY AND BEING USED TO USE THEIR NAMES. THE ASSESSING OFFICER ALSO ISSUED SUMMONS UNDER SECTION 131 TO SEVERAL PERSONS FROM WHOM DAMOR FAMILY CLAIMED TO HAVE MADE PURCHASES. MOST OF THE SUMMONS RECEIVED BACK UN- 13 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. SERVED. NO SUCH PERSON ATTENDED THE PROCEEDINGS BEFORE ASSESSING OFFICER, BUT, IN SOME OF THE CASES, REPLIES HAVE BEEN RECEIVED THROUGH DAK. THE ASSESSING OFFICER DID NOT ACCEPT REPLY OF SUCH PARTIES SEND THROUGH DAK. THE ASSESSING OFFICER NOTED THAT NO NAMES OF PROPRIETOR, LETTER PAD, PHONE NUMBER AND COPY OF THE ITR HAVE BEEN PRODUCED BEFORE HIM. THE ASSESSING OFFICER AGAIN ISSUED NOTICES UNDER SECTION 133(6) OF THE INCOME TAX ACT THROUGH INSPECTOR OF HIS OFFICE. BUT, INSPECTOR HAS REPORTED THAT NO SUCH BUSINESS ENTITIES EXISTS BY THEIR NAMES AND THEY ARE NOT AT THE CONCERNED ADDRESS. SOME OF THE ADDRESSES COULD NOT BE LOCATED OR FOUND BY THE INSPECTOR. THE ASSESSING OFFICER, THEREFORE, REPORTED THAT ASSESSEE-COMPANY HAS TAKEN SHELTER OF DAMOR FAMILY ONLY FOR REFLECTING THE PURCHASES AS GENUINE IN HIS BOOKS OF ACCOUNT. THE DEPARTMENT HAS RECEIVED REPLIES FROM THE SELLER PARTIES THROUGH DAK AND FROM OTHERS, BUT, SAME WERE NOT ACCEPTED. 4.2. COPY OF THE REMAND REPORT WAS PROVIDED TO THE ASSESSEE WHO HAS REITERATED THE SUBMISSIONS THAT PURCHASES ARE GENUINE WHICH ARE ROUTED THROUGH THE 14 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. BANKING CHANNEL AND ALL THE PURCHASES ARE EXPORTED, WHICH HAVE NOT BEEN DOUBTED. THE STATEMENT OF PARTIES HAVE BEEN RECORDED IN WHICH THEY HAVE CONFIRMED TO HAVE MADE PURCHASES TO THE ASSESSEE. IT WAS, THEREFORE, EXPLAINED THAT ALL THE PARTIES ARE GENUINE. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION THAT GENUINE PURCHASES HAVE BEEN MADE. THE ASSESSEE IS NOT SUPPOSED TO EXPLAIN THE PURCHASES MADE BY DAMOR FAMILY. 4.3. THE LD. CIT(A) CONSIDERING EXPLANATION OF ASSESSEE, STATEMENTS RECORDED BY ASSESSING OFFICER IN THE REMAND PROCEEDINGS AND REMAND REPORT FILED BY THE ASSESSING OFFICER, CONCLUDED THAT THESE WERE BOGUS PURCHASES. THE LD. CIT(A) RELIED UPON JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF N K PROTEINS LIMITED [2016] 6 TMI 1139 (GUJARAT) IN WHICH 100% DISALLOWANCE OF BOGUS PURCHASES HAVE BEEN MADE AND THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT HAVE BEEN CONFIRMED BY THE HONBLE SUPREME COURT REPORTED IN 2017-TIOL-23-SC-IT. THE LD. CIT(A) ACCORDINGLY CONFIRMED THE ADDITION AND DISMISSED THE APPEAL OF ASSESSEE. 15 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 5. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS ALSO FILED WRITTEN SUBMISSIONS. HE HAS SUBMITTED THAT COMPLETE NAMES AND ADDRESSES OF THE PURCHASE PARTIES WERE PROVIDED ALONG WITH THEIR BILLS, CONFIRMATIONS, ITR ETC. SUMMONS ISSUED BY THE ASSESSING OFFICER TO THE PURCHASE PARTIES STAND SERVED AND COMPLIED WITH. THEY HAVE APPEARED IN PERSON BEFORE ASSESSING OFFICER AND CONFIRMED THE TRANSACTIONS. THUS, THEIR IDENTITY HAVE BEEN PROVED. THE PURCHASE PARTIES HAVE SUBMITTED THEIR AUDIT REPORT TO PROVE GENUINE TRANSACTION AS WELL AS FILED COPY OF THE ITR. THE STATEMENT OF SHRI MUKESH R. PAREKH, CHARTERED ACCOUNTANT WAS ALSO RECORDED BY ASSESSING OFFICER WHO HAS CONFIRMED THE GENUINENESS OF THE TRANSACTION. THE REVENUE DEPARTMENT ACCEPTED THE INCOME TAX RETURN FILED BY DAMOR FAMILY. THE ASSESSING OFFICER ALSO EXAMINED AS TO HOW THE PARTIES HAVE ENTERED INTO THE TRANSACTION OF MAKING PURCHASES. ALL THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL AND NO EVIDENCE HAVE BEEN BROUGHT ON RECORD THAT PURCHASE MONEY CAME BACK TO THE ASSESSEE. THE 16 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. DELIVERY OF THE GOODS HAVE BEEN MADE AT THE DOOR STEP OF THE ASSESSEE. THE PARTIES ARE NOT RELATED TO THE ASSESSEE. THE ASSESSEE ALSO FURNISHED QUANTITATIVE DETAILS OF FINISHED GOODS PURCHASED FROM THE SAID PARTIES AND EXPORTED WHICH HAVE NOT BEEN DOUBTED. THE ASSESSEE HAS MADE PURCHASES FROM OTHER PARTIES ALSO WHICH HAVE NOT BEEN DOUBTED BY THE ASSESSING OFFICER. THE QUANTITATIVE DETAILS SUBMITTED BY THE ASSESSEE HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER. MERELY BECAUSE EMAIL OF SHRI VIRAL VORA WHO IS ALSO A PROFESSIONAL CHARTERED ACCOUNTANT HAVE BEEN MENTIONED IN THE ITR OF DAMOR FAMILY, IS NO GROUND TO DISBELIEVE THE EXPLANATION OF ASSESSEE. NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY TO SUGGEST NON-GENUINE PURCHASES. DURING THE COURSE OF SURVEY, ONLY BILLS AND INVOICES WERE FOUND WHICH HAVE ALREADY BEEN ENTERED INTO THE BOOKS OF ACCOUNT OF ASSESSEE. NO FINDINGS HAVE BEEN GIVEN IN THE ASSESSMENT ORDER TO SUGGEST THAT INCRIMINATING DOCUMENT HAVE BEEN FOUND DURING THE COURSE OF SURVEY INDICATED TO BOGUS PURCHASES. MERELY BECAUSE DETAILS OF PAYMENT ARE NOT MENTIONED IN THE PURCHASE BILLS IS NO 17 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. GROUND TO REJECT THE EXPLANATION OF ASSESSEE. ALL THE DOCUMENTS AND THE TRANSACTIONS HAVE BEEN VERIFIED BY THE BANK ALSO. THE BOOKS OF ACCOUNT OF ASSESSEE HAVE NOT BEEN REJECTED BY THE AUTHORITIES BELOW. NO SPECIFIC DEFECTS HAVE BEEN POINTED-OUT IN MAINTENANCE OF THE BOOKS OF ACCOUNT. SINCE BOOKS OF ACCOUNT HAVE BEEN ACCEPTED AND AUDITED BY THE AUDITOR ALSO, THEREFORE, PURCHASES CANNOT BE DOUBTED. NO EVIDENCE HAVE BEEN BROUGHT EVEN DURING REMAND PROCEEDINGS TO SUGGEST THAT PURCHASES ARE BOGUS. THE INITIAL BURDEN UPON ASSESSEE TO PROVE GENUINE PURCHASES HAVE BEEN DISCHARGED. BUT, NO EVIDENCE HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO PROVE THAT PURCHASES WERE BOGUS. EVEN IF ASSESSING OFFICER HAS POINTED-OUT SOME DISCREPANCY THAT NEEDS EXPLANATION FROM DAMOR FAMILY, FOR WHICH, ASSESSEE CANNOT BE HELD RESPONSIBLE. LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON JUDGMENT OF GUJARAT HIGH COURT IN TAX APPEAL NO.689/2010 IN THE CASE OF CIT-1 VS M/S. NANGALIA FABRICS PRIVATE LIMITED DATED 22 ND APRIL, 2013, WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT PROVISIONS OF SECTION 68 IS NOT ATTRACTED TO AMOUNTS REPRESENTING 18 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. PURCHASES AND THUS, NO ADDITION COULD BE MADE AGAINST THE ASSESSEE. LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS., TEJUA ROHITKUMAR KAPADIA 94 TAXMANN.COM 324 (GUJ.) IN WHICH DEPARTMENTAL APPEAL ON IDENTICAL FACTS HAVE BEEN DISMISSED AND THE JUDGMENT OF HONBLE GUJARAT HIGH COURT HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS., TEJUA ROHITKUMAR KAPADIA REPORTED IN [2018] 94 TAXMANN.COM 325 (SC). LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS., M.K. BROTHERS [1987] 163 ITR 249 (GUJ.) HE HAS SUBMITTED THAT LD. CIT(A) RELIED UPON JUDGMENT IN THE CASE OF N.K. PROTEINS LIMITED (SUPRA) FOR UPHOLDING THE DISALLOWANCE OF ENTIRE PURCHASES IN WHICH INCRIMINATING DOCUMENTS WERE FOUND AGAINST THE ASSESSEE, ON WHICH, ADDITION WAS MADE. BUT IN THE CASE OF ASSESSEE NO INCRIMINATING DOCUMENTS HAVE BEEN FOUND, THEREFORE, THE SAID DECISION IS TOTALLY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN ASSESSMENT YEAR 2010- 19 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 11, THE ASSESSING OFFICER ACCEPTED THE SIMILAR PURCHASES IN THE SCRUTINY ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 AND THE LD. CIT INITIATED REVISION PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. COPY OF THE SHOW CAUSE NOTICE UNDER SECTION 263 OF THE INCOME TAX ACT IS FILED AT PAGE 15 WITH THE WRITTEN SUBMISSIONS, IN WHICH, LD. CIT WANTED TO EXAMINE THE SIMILAR ISSUE. THE ORDER OF THE LD. CIT-2, SURAT HAVE BEEN SET ASIDE BY THE ITAT IN ITA.NO.787/AHD./2015 VIDE ORDER DATED 19 TH FEBRUARY, 2016. LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT ISSUE IS COVERED BY ORDER OF ITAT, AHMEDABAD BENCH IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2010-2011 ON IDENTICAL FACTS. HE HAS ALSO RELIED UPON ORDER OF ITAT, DELHI BENCH IN THE CASE OF BHATIA DIAMONDS PRIVATE LIMITED VS., INCOME TAX OFFICER IN ITA NO.2822/DEL./2018 FOR THE ASSESSMENT YEAR 2013-2014 DATED 24 TH JUNE, 2019, IN WHICH, ON IDENTICAL FACTS, THE ADDITION HAVE BEEN DELETED. HE HAS, THEREFORE, SUBMITTED THAT THERE IS NO EVIDENCE ON RECORD TO PROVE THAT PURCHASES MADE BY ASSESSEE WERE BOGUS. HE HAS SUBMITTED THAT IN THE 20 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. CASE OF MAYANK DIAMONDS PRIVATE LIMITED (SUPRA), THE DIRECTOR OF THE ASSESSEE COMPANY WAS EXAMINED UNDER SECTION 131 OF THE INCOME TAX ACT, IN WHICH HE HAS EXPLAINED THAT THERE WERE NO BILL ISSUED BY THE PURCHASE PARTIES. IN SUCH CIRCUMSTANCES, THE HONBLE GUJARAT HIGH COURT DIRECTED TO APPLY GROSS PROFIT RATE OF 5% AGAINST THE UNACCOUNTED PURCHASES. HE HAS, HOWEVER, SUBMITTED THAT IN THE CASE OF ASSESSEE THERE IS NO SUCH EVIDENCE ON RECORD. HE HAS ALSO RELIED UPON SAMPLE COPY OF INVOICES OF OTHER INDEPENDENT ASSESSEES FILED ON RECORD TO SHOW THE PRACTICE OF DIRECT DELIVERY OF GOODS TO THE ASSESSEE CONSUMERS FROM THE SUPPLIERS BYE-PASSING THE TRADERS. IT IS, THEREFORE, A NORMAL PRACTICE IN TEXTILE INDUSTRY WHERE DELIVERY OF THE GOODS ARE MADE DIRECTLY TO THE CONSUMER ON THE INSTRUCTIONS OF THE CUSTOMERS. HE HAS, THEREFORE, SUBMITTED THAT ENTIRE ADDITION IS UNJUSTIFIED AND LIABLE TO BE DELETED. 6. ON THE OTHER HAND, LD. D.R. RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SPECIFIC MATERIAL WAS FOUND DURING THE COURSE OF SURVEY THAT ASSESSEE MADE BOGUS PURCHASES. THE DAMOR FAMILY COULD NOT EXPLAIN 21 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. TRANSACTIONS OF PURCHASES AND SALES TO THE SATISFACTION OF THE AUTHORITIES BELOW. THEIR STATEMENTS DID NOT INSPIRE ANY CONFIDENCE TO PROVE THE GENUINE PURCHASES. THE SUPPLIER TO THE DAMOR FAMILY WERE ALSO NOT TRACEABLE. THEREFORE, THE PURCHASES COULD NOT BE CORROBORATED BY THE ACTUAL FACTS. THE INVESTIGATION CONDUCTED BY THE ASSESSING OFFICER WAS SUFFICIENT TO HOLD THAT PURCHASES WERE BOGUS. THE LD. D.R. IN THE ALTERNATE CONTENTION RELIED UPON JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MAYANK DIAMONDS PRIVATE LIMITED (SUPRA) TO CONTEND THAT GROSS PROFIT RATE OF 5% MAY BE APPLIED AGAINST THE BOGUS PURCHASES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS., TEJUA ROHITKUMAR KAPADIA [2018] 91 TAXMANN.COM 324 (GUJARAT) HELD AS UNDER : WHERE PURCHASES MADE BY ASSESSEE-TRADER WERE DULY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUNT 22 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. PAYEE CHEQUE, SELLER ALSO CONFIRMED TRANSACTION AND THERE WAS NO EVIDENCE TO SHOW THAT AMOUNT WAS RECYCLED BACK TO ASSESSEE, ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING SAID PURCHASES AS BOGUS UNDER SECTION 69C. 7.1. THE AFORESAID JUDGMENT HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT REPORTED [2018] IN 94 TAXMANN.COM 325 (SC). THE ITAT, DELHI BENCH, IN THE CASE OF BHATIA DIAMONDS PVT., LTD., VS., ITO, WARD-4(4), NEW DELHI, VIDE ORDER DATED 24.06.2019 IN PARA-8 FOLLOWING ITS EARLIER ORDER IN THE CASE OF SAME ASSESSEE, IN WHICH IT WAS HELD IN PARA-8 AS UNDER : 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT AN IDENTICAL ISSUE HAVE BEEN CONSIDERED BY ITAT, DELHI SMC-BENCH IN THE CASE OF THE SAME ASSESSEE IN PRECEDING A.Y. 2011-2012 AND SIMILAR ADDITION HAVE BEEN DELETED ON MERITS AND THIS FACT IS ALSO STATED BY THE LD. D.R. THAT FACTS ARE IDENTICAL IN 23 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ASSESSMENT YEAR UNDER APPEAL AS HAVE BEEN CONSIDERED IN A.Y. 2011-2012. IN THE PRESENT CASE ALSO, TWO OF THE PARTIES HAVE DENIED MAKING ANY SALES TO THE ASSESSEE. NO ENTRIES OF SUCH SALES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT. TWO PARTIES HAVE ADMITTED TO HAVE MADE SALES TO THE ASSESSEE AND FILED REPLY UNDER SECTION 133(6) OF THE I.T. ACT, 1961, SUPPORTED BY BILL AND AFFIDAVIT, ON WHICH, NO ADVERSE INFERENCE HAVE BEEN DRAWN BY THE A.O. ALL THE PAYMENTS OF PURCHASES HAVE BEEN MADE THROUGH BANKING CHANNEL WHICH HAVE NOT BEEN DOUBTED BY THE AUTHORITIES BELOW. THE ASSESSEE ALSO FILED THE QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASE GOODS, MANUFACTURE, SALES MADE AND CLOSING STOCK AT PAGE-25 OF THE PB WHICH ALSO SUPPORTS THE EXPLANATION OF ASSESSEE THAT HE HAS MADE GENUINE PURCHASES WHICH HAVE BEEN SOLD LATER ON. THESE FACTS CLEARLY SHOW THAT THERE WAS NO BASIS FOR THE AUTHORITIES BELOW TO CONSIDER IT TO BE A CASE OF BOGUS PURCHASES. IT IS ALSO AN ADMITTED FACT THAT STATEMENT OF SHRI RAJENDRA JAIN WAS NOT PROVIDED TO ASSESSEE NOR STATEMENT WAS 24 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. SUBJECTED TO CROSS-EXAMINATION ON BEHALF OF THE ASSESSEE. HE HAS ALSO RETRACTED FROM HIS EARLIER STATEMENT. THEREFORE, THERE WAS NO BASIS TO MAKE ANY ADDITION AGAINST THE ASSESSEE. THE ISSUE IS, THEREFORE, COVERED BY THE ORDER OF ITAT, DELHI SMC-BENCH IN THE CASE OF SAME ASSESSEE FOR THE A.Y. 2011-2012 DATED 05.04.2019 (SUPRA). IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. GROUND NOS. 3 TO 7 OF THE APPEAL OF THE ASSESSEE ARE ACCORDINGLY ALLOWED. 7.2. IN THE CASE OF M/S. NANGALIA FABRICS PVT. LTD., (SUPRA), THE HONBLE GUJARAT HIGH COURT CONFIRMED THE FINDINGS OF THE TRIBUNAL IN WHICH THE TRIBUNAL ACCEPTED THE SUBMISSIONS OF THE ASSESSEE THAT PURCHASES ARE SUPPORTED BY BILLS, ENTRIES IN THE BOOKS OF ACCOUNT AND PAYMENTS ARE MADE BY CHEQUE AND QUANTITATIVE DETAILS PROVIDED. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M.K. BROTHERS (SUPRA), HELD THAT AMOUNTS REPRESENTING PURCHASES COULD NOT BE ADDED AS INCOME AS THERE WAS NO EVIDENCE TO CONCLUDE THAT THE TRANSACTIONS WERE BOGUS. CONSIDERING THE FACTS OF 25 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. THE CASE IN THE LIGHT OF ABOVE DECISIONS, IT IS CLEAR THAT ASSESSEE MADE PURCHASES FROM DAMOR FAMILY CONCERNS WHICH ARE DULY SUPPORTED BY BILLS AND VOUCHERS. ALL THE PAYMENTS ARE MADE TO DAMOR FAMILY CONCERNS THROUGH ACCOUNT PAYEE CHEQUES. THE DAMOR FAMILY CONCERNS HAVE CONFIRMED ALL THE TRANSACTIONS WITH THE ASSESSEE BEFORE THE AUTHORITIES BELOW. THE DAMOR FAMILY CONCERNS HAVE FILED THEIR INCOME TAX RETURNS REFLECTING THE TRANSACTION WITH THE ASSESSEE, AND ALSO HAVE GOT THEIR BOOKS OF ACCOUNT AUDITED BY AN INDEPENDENT AUDITOR. THE ASSESSEE UNDISPUTEDLY MADE THE EXPORTS OF ALL THE FINISHED PURCHASE GOODS WHICH INCLUDES IMPUGNED PURCHASES WHICH HAVE NOT BEEN DOUBTED BY ASSESSING OFFICER. WITHOUT PURCHASES, ASSESSEE COULD NOT HAVE MADE THE EXPORTS. THE EXPLANATION OF ASSESSEE AS REGARDS EXPORTS SUPPORTED BY ALL THE DOCUMENTARY EVIDENCES WHICH HAVE NOT BEEN DISPUTED. THE ASSESSEE FILED CONFIRMATION STATEMENT OF ALL THE PURCHASE PARTIES. THE ASSESSING OFFICER IN THE REMAND PROCEEDING ALSO EXAMINED THE PURCHASE PARTIES AND THEIR AUDITOR, WHO HAVE CONFIRMED THE GENUINENESS OF THE TRANSACTION. THERE IS NO EVIDENCE ON 26 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. RECORD TO PROVE THAT AMOUNT OF PURCHASES GIVEN TO DAMOR FAMILY HAVE COME BACK TO THE ASSESSEE. IN SURVEY, NO INCREMENTING MATERIAL WAS FOUND TO PROVE THAT ASSESSEE MADE BOGUS PURCHASES. WHATEVER EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY I.E., BILLS AND INVOICES OF PURCHASES HAVE ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE SELLERS ARE ALSO ASSESSED TO TAX AND HAVE DECLARED THE TRANSACTION IN THEIR RETURNS WHICH HAVE BEEN ACCEPTED BY THE REVENUE DEPARTMENT. THE SELLER PARTY HAVE ALSO REPLIED TO THE NOTICE UNDER SECTION 133(6) OF THE INCOME TAX ACT. THE ASSESSING OFFICER DID NOT REJECT BOOKS OF ACCOUNT OF ASSESSEE UNDER SECTION 145 OF THE INCOME-TAX ACT. IF THE AFORESAID ADDITION IS CONFIRMED, ACCORDING TO EXPLANATION OF ASSESSEE, IT WOULD GIVE GROSS PROFIT RATE OF 41.4 % WHICH IS IMPOSSIBLE TO EARN IN THIS LINE OF TRADE. THE ASSESSING OFFICER ACCEPTED IN THE REMAND REPORT THAT ASSESSEE MAINTAINED STOCK QUANTITATIVE DETAILS, IN WHICH, NO DEFICIENCY HAVE BEEN POINTED-OUT. THE ASSESSING OFFICER ANALYSED THE KYC DOCUMENTS OF BANK STATEMENTS OF DAMOR FAMILY AND THEIR BANK STATEMENTS AND NOTHING ADVERSE WAS 27 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. FOUND AGAINST THEM OR AGAINST THE ASSESSEE. THE ASSESSEE PRODUCED COMPLETE DETAILS BEFORE THE AUTHORITIES BELOW IN WHICH NO DEFICIENCY HAVE BEEN POINTED-OUT. THE ASSESSEE NEED NOT TO PROVE SOURCE OF THE SOURCE I.E., PURCHASE MADE BY THE PURCHASER PARTIES I.E., DAMOR CONCERNS. THE ASSESSEE ALSO ESTABLISHED COMMON PRACTICE IN TEXTILE SECTOR IN SURAT FOR SUPPLY OF GOODS AT DOOR STEP OF CONSUMER. THUS, THE INITIAL BURDEN UPON ASSESSEE TO PROVE THE GENUINE PURCHASES HAVE BEEN DISCHARGED BY ASSESSEE. THE ASSESSEE HAS FULLY DISCHARGED ITS ONUS OF PROVING THE PURCHASES BY GIVING NAMES, ADDRESSES, CONFIRMATION, PAN, BILLS AND INVOICES, DETAILS OF PAYMENT BY ACCOUNT PAYEE CHEQUES, ITRS AND AUDIT REPORTS OF ITS SUPPLIERS. MERELY BECAUSE FURTHER SUPPLIERS TO DAMOR FAMILY DID NOT RESPOND TO THE NOTICE OF THE ASSESSING OFFICER IS NO GROUND TO REJECT THE EXPLANATION OF ASSESSEE. SINCE IN THE CASE OF ASSESSEE NO INCRIMINATING MATERIAL WAS FOUND TO PROVE BOGUS PURCHASES, THEREFORE, THE DECISION IN THE CASE OF M/S. M.K. PROTEINS LIMITED (SUPRA), WOULD NOT APPLY. IT MAY ALSO BE NOTED HERE THAT IN A.Y. 2010-11 THE ASSESSING OFFICER ACCEPTED SIMILAR PURCHASES IN 28 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. THE SCRUTINY ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT ON THE IDENTICAL FACTS. SIMILARLY, SEIZED MATERIAL WAS ALSO CONSIDERED IN THAT YEAR. THE LD. CIT, SURAT, HOWEVER, DID NOT AGREE WITH THE ASSESSMENT ORDER OF THE A.O. AND INITIATED REVISION PROCEEDINGS UNDER SECTION 263 OF THE I.T. ACT. HOWEVER, THE ORDER OF THE LD. CIT UNDER SECTION 263 OF THE I.T. ACT FOR THE A.Y. 2010-2011 HAVE BEEN SET ASIDE AND QUASHED BY THE ITAT, AHMEDABAD BENCH IN THE CASE OF SAME ASSESSEE VIDE ORDER DATED 19.02.2016. THEREFORE, ISSUE IS COVERED ON IDENTICAL FACTS IN FAVOUR OF ASSESSEE BY THE AFORESAID DECISION OF THE TRIBUNAL. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ABOVE DISCUSSION, WE DO NOT FIND IT TO BE A FIT CASE WHERE EVEN GROSS PROFIT RATE OF 5% BE APPLIED AGAINST THE ASSESSEE AS PER JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF MAYANK DIAMONDS PVT. LTD., (SUPRA). IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. GROUND NO.1 OF THE APPEAL OF ASSESSEE IS ACCORDINGLY ALLOWED. 29 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 8. ON GROUND NO.2, ASSESSEE CHALLENGED THE DISALLOWANCE OF RS.2,24,741/- UNDER SECTION 14A OF THE I.T. ACT. 9. THE A.O. FOUND DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD SHOWN INVESTMENT IN EQUITY SHARES OF RS. 1,41,72,500/- AS ON 31.03.2012 UNDER THE HEAD NON-CURRENT INVESTMENTS AND ALSO SHOWN INTEREST EXPENSES OF RS. 88,96,241/- . THE A.O. ISSUED SHOW CAUSE NOTICE REGARDING THE DISALLOWANCE OF INTEREST EXPENSES UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER DISALLOWED PROPORTIONATE INTEREST EXPENSES UNDER RULE 8D OF THE RULES OF RS.2,24,741/-. THE ASSESSEE SUBMITTED BEFORE ASSESSING OFFICER THAT THERE IS NO EXEMPTED INCOME EARNED DURING THE YEAR AND, THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS WHOLLY ERRONEOUS. THE LD. CIT(A) ALSO DID NOT ACCEPT THE CONTENTION OF ASSESSEE AND CONFIRMED THE ADDITION. 10. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE ASSESSEE HAD NOT EARNED ANY EXEMPTED INCOME DURING 30 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ASSESSMENT YEAR UNDER APPEAL, THEREFORE, SECTION 14A OF THE I.T. ACT IS NOT APPLICABLE TO ASSESSMENT YEAR UNDER APPEAL SO AS TO MAKE PROPORTIONATE DISALLOWANCE. HE HAS RELIED UPON JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT, (CENTRAL-1) VS. CHETTINAD LOGISTICS PVT. LTD., [2018] 95 TAXMANN.COM 250 (SC) IN WHICH THE HONBLE SUPREME COURT HELD THAT SECTION 14A CANNOT BE INVOKED WHERE NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR. SIMILAR VIEW IS ALSO TAKEN BY THE HONBLE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF CIT-1 VS. CORRTECH ENERGY PVT. LTD., [2014] 45 TAXMANN.COM 116 (GUJ.) WHEREIN ALSO IT HAS BEEN HELD THAT WHERE ASSESSEE HAS NOT SOUGHT ANY INCOME EXEMPT, THERE CANNOT BE ANY EXPENSE THERE AGAINST TO BE DISALLOWED. LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, PRAYED THAT ADDITION MAY BE DELETED. 11. THE LD. D.R. HOWEVER, DID NOT DISPUTE THE ABOVE JUDGMENTS. 31 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 12. IN VIEW OF THE ABOVE, IT IS CLEAR THAT SINCE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING ASSESSMENT YEAR UNDER APPEAL, THEREFORE, THERE IS NO QUESTION OF APPLICABILITY OF PROVISIONS OF SECTION 14A OF THE I.T. ACT IN THE MATTER. SIMILARLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., 378 ITR 33 (DEL.) HELD THAT WHEN NO EXEMPT INCOME RECEIVED OR RECEIVABLE IN ASSESSMENT YEAR UNDER APPEAL, NO DISALLOWANCE UNDER SECTION 14A IS REQUIRED. IN VIEW OF THE ABOVE LEGAL PROPOSITION, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. IN THE RESULT, GROUND NO.2 OF THE APPEAL OF ASSESSEE IS ALLOWED. 13. ON GROUND NO.3 ASSESSEE CHALLENGED THE DISALLOWANCE OF RS.1,21,25,273/- BEING BAD DEBTS. THE REVENUE ON GROUND NOS.1 AND 4 SIMILARLY CHALLENGED THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS.1,36,05,629/- ON ACCOUNT OF CLAIMS OF BAD DEBTS. 14. THE ASSESSEE RAISED GROUND OF APPEAL BEFORE THE LD. CIT(A) PERTAINING TO NOT ALLOWING THE BAD DEBTS CLAIMED 32 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. AMOUNTING TO RS.2,57,30,902/-. THE ASSESSEE PRAYED THAT ASSESSEE HAS SATISFIED ALL THE CONDITIONS FOR CLAIMING BAD DEBTS AND, THEREFORE, ASSESSING OFFICER SHOULD HAVE ALLOWED THE CLAIM OF ASSESSEE. THE ASSESSING OFFICER FOUND THAT ASSESSEE HAD CLAIMED BAD DEBTS AMOUNTING TO RS.2,57,30,902/-. THE MAJOR DEBTS WERE IN REFERENCE TO GOVERNMENT LIABILITIES. THE ASSESSING OFFICER HELD THAT LIABILITY WILL NOT AUTOMATICALLY CONVERT TO BAD DEBTS AND THE ASSESSEE FOLLOWED EXCLUSIVE METHOD OF ACCOUNTING WHICH MEANT THAT EXCISE DUTY WILL NEVER BE OFFERED AS INCOME OF THE ASSESSEE. THE ASSESSEE DID NOT FURNISH COPY OF THE LEDGER ACCOUNT OF THE PARTIES AND EXPLANATION THAT WHAT STEPS HAD BEEN TAKEN BY THE ASSESSEE TO RECOVER THE DEBTS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREFORE, DISALLOWED BAD DEBTS OF RS.2,57,30,902/-. 15. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT ASSESSING OFFICER HAS GIVEN FINDING IN REFERENCE TO GOVERNMENT LIABILITIES ONLY. THE ASSESSING OFFICER IN REFERENCE TO PK TEXTILES OF RS.41,51,476/- WHICH HAVE BEEN RECOVERED AND SHOWN AS 33 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. INCOME, HAS STILL MADE THE ADDITION. THE ASSESSEE IN REGARD TO THE CLAIM OF TOTAL BAD DEBTS SUBMITTED THAT IMPORT DUTY AMOUNTING TO RS.12,67,980/- WAS ON ACCOUNT OF YARN IMPORTED EARLIER FOR THE AMOUNT OF RS.3,16,99,500/- AND, THEREFORE, THIS WAS AN ADDITIONAL IMPORT BENEFIT AND NOT A REGULAR DUTY. THIS TYPE OF ADDITIONAL IMPORT DUTY CAN BE SET OFF AGAINST THE YARN SOLD IN LOCAL MARKET ONLY AND IN THE CASE OF ASSESSEE THIS YARN WAS USED OF RS.3,16,99,500/- AS CAPTIVE CONSUMPTION FOR SALE OF EXPORTS OF GRAY CLOTH. SINCE, THEY HAD NOT TRADED IN LOCAL SALES, THEREFORE, THEY WERE NOT ENTITLED TO ADDITIONAL BENEFITS IMPORT DUTY AND, THEREFORE, THIS AMOUNT WAS OFFERED FOR TAXATION UNDER THE HEAD EXPORT INCENTIVES RECEIVABLE IN F.Y. 2008-2009. THE ASSESSEE FILED COPY OF THE P & L A/C FOR F.Y. 2007-2008 WHEREIN THE AMOUNT OF RS.12,00,742/- HAS BEEN SHOWN AS INCOME UNDER THE HEAD ADDITIONAL IMPORT DUTY. THEREFORE, ONLY DIFFERENCE AMOUNT OF RS.67,238/- WILL BE THE AMOUNT WHICH CAN BE ADDED. THE LD. CIT(A) EXAMINED THE EXPLANATION OF ASSESSEE AND FOUND TO BE CORRECT AND, THEREFORE, AMOUNT OF RS.12,00,742/- WAS EXCLUDED FROM THE TOTAL ADDITION OF BAD 34 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. DEBTS. THE LD. CIT(A), FURTHER NOTED THAT IN REFERENCE TO THE BAD DEBTS OF NEW INDIA ASSURANCE COMPANY OF RS.1,24,04,887/-, THE ASSESSEE SUBMITTED THAT THIS AMOUNT HAS BEEN CARRIED FORWARD SINCE 31.03.2007. IT WAS CONTENDED THAT M/S. SATYA INTERNATIONAL, A PARTNERSHIP FIRM HAD THIS CLAIM OUTSTANDING SINCE A.Y. 2003-2004 AND THIS FIRM MERGED WITH THE ASSESSEE-COMPANY W.E.F. 01.01.2007 AND THIS AMOUNT AND OTHER AMOUNTS AS PER THE MOU HAS BEEN TRANSFERRED AFTER THE MERGER. THE NEW INDIA ASSURANCE COMPANY VIDE LETTER DATED 18.08.2011 HAD REJECTED THE CLAIM. THE CONTENTION OF ASSESSEE WAS EXAMINED BY THE LD. CIT(A) AND FOUND CORRECT. THEREFORE, THIS AMOUNT WAS ALSO EXCLUDED FROM THE ADDITION. THE LD. CIT(A), HOWEVER, ON PERUSAL OF THE DETAILS OBSERVED THAT ASSESSEE HAS NOT FURNISHED THE DETAILS BEFORE ASSESSING OFFICER REGARDING STEPS TAKEN TO RECOVER THE DEBTS IN RESPECT OF OTHER OUTSTANDING DEBTS. DURING APPELLATE PROCEEDINGS ALSO ASSESSEE FAILED TO FURNISH ANY DETAILS REGARDING EFFORTS MADE BY THE ASSESSEE TO RECOVER THE DEBTS. THE ASSESSEE RELIED UPON JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED 323 35 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ITR 397 (SC), BUT, IT WAS NOT APPLIED IN THE CASE OF ASSESSEE. THE LD. CIT(A), ACCORDINGLY, ALLOWED THE CLAIM OF ASSESSEE TO THE EXTENT OF RS.1,36,05,629/- AND DISALLOWED THE BALANCE AMOUNT OF RS.1,21,25,273/-. 16. BOTH THE PARTIES IN RESPECTIVE GROUNDS OF APPEALS CHALLENGING THE ORDER OF LD. CIT(A). 17. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSEE HAS WRITTEN-OFF THE AMOUNT IN QUESTION AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT OF ASSESSEE. HE HAS SUBMITTED THAT THE CLAIM OF BAD DEBT CAN BE CATEGORIZED IN THREE CATEGORIES I.E., LOSS ON ACCOUNT OF BAD DEBTS IN RESPECT OF SALES MADE, LOSS ON ACCOUNT OF NON- REALIZATION OF EXCISE EXPORT INCENTIVE INCOME OFFERED IN EARLIER YEARS IN THE NATURE OF DEPB LICENSE INCOME, EXCISE DUTY REFUND RECEIVABLE AND ADDITIONAL IMPORT DUTY REFUND RECEIVABLE AND LOSS ON ACCOUNT OF LESSER CLAIM BEING RECOVERED FROM NEW INDIA ASSURANCE COMPANY. THE DETAILS OF THE SAME ARE NOTED IN THE ORDER OF THE AUTHORITIES BELOW. 36 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF GOVERNMENT LIABILITIES ON THE PROPOSITION THAT SUCH LIABILITIES CANNOT BE CONVERTED INTO BAD DEBTS. HE HAS SUBMITTED THAT BAD DEBTS HAVE NOT BEEN CLAIMED IN RESPECT OF GOVERNMENT LIABILITIES, BUT, IT HAS IN FACT BEEN CLAIMED IN RESPECT OF AMOUNTS RECEIVABLE FROM THE GOVERNMENT TOWARDS EXPORT INCENTIVE INCOME. IT WAS POINTED-OUT THAT THIS EXPORT INCENTIVE INCOME WERE OFFERED IN P & L A/C IN EARLIER YEARS, HOWEVER, IN THE CURRENT YEAR ON ACCOUNT OF REJECTION THEREOF BY THE GOVERNMENT, THE SAME HAS BEEN WRITTEN-OFF. HE HAS SUBMITTED THAT ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT ASSESSEE HAD OFFERED EXCISE DUTY REFUND AS INCOME SEPARATELY ON THE FACE OF ITS P & L A/C OF THE EARLIER YEARS AS EXPORT INCENTIVE INCOME AND THE SAME BEING REJECTED IN THE YEAR UNDER CONSIDERATION. THEREFORE, CLAIM HAS BEEN MADE FOR BAD DEBTS/BUSINESS LOSS. HE HAS SUBMITTED THAT SINCE ASSESSEE HAS ALREADY SHOWN THE AMOUNTS AS IRRECOVERABLE IN ITS ACCOUNTS, THEREFORE, THERE IS NO NEED TO TAKE ANY STEPS FOR RECOVERY OF THE AMOUNTS IN QUESTION. THE ISSUE IS COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE 37 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. CASE OF TRF LIMITED (SUPRA). LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BAD DEBT TO THE EXTENT OF RS.41,51,476/- HAS BEEN ERRONEOUSLY SUSTAINED BY THE LD. CIT(A) NEEDS TO BE DELETED BECAUSE THE SAME HAVE BEEN OFFERED AS INCOME IN SUBSEQUENT YEAR I.E., A.Y. 2014-2015 AT THE TIME OF RECOVERY, THEREFORE, ENTIRE ADDITION IS LIABLE TO BE DELETED. 18. ON THE OTHER HAND LD. D.R. MERELY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO SUSTAIN EVEN THE PART ADDITION. THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED VS. CIT [2010] 323 ITR 397 (SC) HELD AS UNDER : AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD 38 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 19.1. IN THE AFORESAID CASE, IT IS NOT IN DISPUTE THAT THE AMOUNT IN QUESTION CLAIMED AS BAD DEBT IS WRITTEN-OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THEREFORE, ISSUE IS COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED (SUPRA). IN VIEW OF THE FACTS EXPLAINED BY LEARNED COUNSEL FOR THE ASSESSEE WHICH ARE NOT CONTROVERTED BY LD. D.R. IN THE LIGHT OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED (SUPRA), WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. 20. IN THE RESULT, GROUND NOS.1 AND 4 OF THE APPEAL OF THE DEPARTMENT ARE DISMISSED AND GROUND NO.3 OF THE APPEAL OF ASSESSEE IS ALLOWED. 21. IN THE RESULT, ITA.NO.273/SRT/2018 OF THE ASSESSEE ALLOWED. 39 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ITA.NO.436/SRT/2018 (REVENUES APPEAL) 22. THE REVENUE ON GROUND NOS.1 AND 4 CHALLENGED THE DELETION OF PART ADDITION OF BAD DEBTS WHICH HAS ALREADY CONSIDERED WHILE DECIDING THE APPEAL OF ASSESSEE. 23. ON GROUND NOS.1, 2 AND 3 REVENUE CHALLENGED THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.29,17,91,322/- ON ACCOUNT OF ADVANCES RECEIVED FROM THE CUSTOMERS. 24. DURING ASSESSMENT PROCEEDINGS, ASSESSING OFFICER FOUND THAT ASSESSEE HAS SHOWN ADVANCES FROM THE CUSTOMERS/DEBTORS OF RS.29,17,91,322/- FROM VARIOUS PARTIES INCLUDING M/S. NAJEEB AIMAL LTD. OF RS.19.41 CRORES. THE ASSESSING OFFICER FOUND THAT ASSESSEE WAS SHOWN LOOSE PAPER FILE AT PAGES 175 TO 187 WITH ID REMARK SEL XIV WHERE M/S. NAJEEB AIMAL LTD., OF KABUL, AFGHANISTAN HAS MADE ADVANCE OF RS.36.49 CRORES SINCE 27.10.2010 TILL THE DATE OF SURVEY. NO FINISHED GOODS SINCE THEN HAVE BEEN SUPPLIED BY THE ASSESSEE. THE ASSESSEE WAS REQUESTED TO EXPLAIN SUCH A HUGE ADVANCE IN THE BOOKS OF ACCOUNT. THE 40 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ASSESSING OFFICER DID NOT ACCEPT EXPLANATION OF ASSESSEE AND MADE THE AFORESAID ADDITION. 24.1. THE ASSESSEE FILED VARIOUS DETAILS BEFORE THE LD. CIT(A) ALONG WITH DOCUMENTARY EVIDENCES TO SHOW THAT ADVANCES HAVE BEEN RECEIVED FROM CUSTOMERS AND TIME TO TIME EXPORTS HAVE BEEN MADE. THE DETAILS OF EXPORTS ALONG WITH INVOICES WERE FILED TO SHOW THAT ADVANCES WERE GENUINE. THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER, WHICH THE ASSESSING OFFICER HAS FURNISHED BEFORE LD. CIT(A). AFTER EXAMINING CLAIM OF ASSESSEE, THE LD. CIT(A) FOUND THE CLAIM OF ASSESSEE TO BE VERIFIED. THE REMAND REPORT IS REPRODUCED IN THE APPELLATE ORDER WHICH READS AS UNDER : THE DIRECTIONS VIDE PARA (VII) WAS REGARDING THE DISALLOWANCE MADE OF RS.29,17,91,322/- AGAINST ADVANCES FROM CUSTOMERS/DEBTORS BY AO. IT WAS DIRECTED TO EXAMINE THE RECORD TO ASCERTAIN. WHETHER GOODS WERE SUPPLIED TO THE VARIOUS CUSTOMERS DURING AND SUBSEQUENT YEAR AGAINST THE 41 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ABOVE SAID ADVANCES MADE. IT IS SUBMITTED THAT DURING THE REMAND PROCEEDINGS THE DIRECTOR OF THE COMPANY PRODUCED TWO CHARTS WHICH ARE ENCLOSED FOR YOUR KIND REFERENCE AS ANNEX AD-1 & AD-2. BESIDE THIS THE ASSESSEE COMPANY VIDE LETTER DATED 07/07/2016 HAS ALSO FILED DETAILS (DURING REMAND REPORT BEFORE MY PREDECESSOR) REGARDING GOODS SUPPLIED TO SUCH CUSTOMERS AGAINST THE ADVANCES OF RS.29,17,91,322/-. THIS GIVES IMPRESSION THAT THE AMOUNT RECEIVED FROM NAJIB AIMAL LTD DURING FY 2010-11 OF RS 15,64,55,395/- AND AGAINST IT DURING FY 2011-12 I.E. YEAR UNDER CONSIDERATION (AY 2012-13) THE ASSESSEE COMPANY HAS INVOICED RS.17,28,83,257/- AND ALSO CLAIMED EXCHANGE LOSS OF RS.1,64,27,862/-. IN THE SAME YEAR, FURTHER ADVANCE OF RS.19.41 CRORE WAS RECEIVED BY THE ASSESSEE COMPANY AGAINST WHICH GOODS WERE CLAIMED TO BE DISPATCHED IN SUBSEQUENT FY 2012-13 AND IN THE YEAR AGAIN AN ADVANCE OF RS.17.24 CRORE RECEIVED AND GOODS 42 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. WERE DISPATCHED IN FY 2013-14. SO FAR ADVANCES / DEBTS FROM OTHER CUSTOMERS IS CONCERNED IT WAS SUBMITTED BY THE ASSESSEE COMPANY DULY VERIFIED FROM THE DIRECTOR THAT AGAINST ADVANCES RECEIVED OF RS.9,76,42,264/- IN FY 2011-12 I.E. DURING THE YEAR UNDER CONSIDERATION THE FINISHED GOODS AMOUNTING TO RS.9,78,75,059/- WERE DISPATCHED AND EXCHANGE LOSS OF RS.2,32,795/- WAS BOOKED IN AY 2013-14. 24.2. THE ASSESSEE FILED REJOINDER TO SHOW THAT ALL THE FACTS GOT VERIFIED. THE LD. CIT(A) FOUND THE CLAIM OF ASSESSEE IS EXPLAINED AND VERIFIED BY THE ASSESSING OFFICER. THEREFORE, ENTIRE ADDITION WAS DELETED. HIS FINDINGS IN PARA-6.4.5 IS REPRODUCED AS UNDER : 6.4.5. ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE AO HAS VERIFIED THE TWO CHARTS I.E. AD-1 AND AD-2 WHICH WAS SUBMITTED ALONG WITH THE REMAND REPORT. THE CHART AD-1 GIVES THE DETAILS OF THE DATE WISE FINISHED STOCKS FROM 43 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 01.04.2011 TO 31.03.2012, DETAILS OF THE OPENING STOCKS, PURCHASES, EXPORT SALES, LOCAL SALES ETC. THE CHART AD-2 GIVES THE DETAILS OF THE CONSIGNEE WISE ADVANCE PAYMENTS, STATEMENT FROM 01.04.2011 TO 31.3.2013 GIVING DETAILS OF THE ADVANCES RECEIVED DURING THE YEAR CLOSING ADVANCE, INVOICE AMOUNT, EXCHANGE GAIN/LOSS ETC. THE AO HAS SUBMITTED THAT AFTER DUE VERIFICATION IT WAS FOUND THAT THE AMOUNT RECEIVED FROM NAJIB AJMAL LTD. DURING THE FY 2010-11 OF RS.15,64,55,395/- AND AGAINST IT DURING FY 2011- 12, THE APPELLANT HAS RECEIVED INVOICE OF RS.17,28,83,257/- AND ALSO CLAIMED EXCHANGE LOSS OF RS.1,64,27,862/- AND FURTHER STATED THAT IN THE SAME YEAR, FURTHER ADVANCE OF RS.19.41 CRORE WAS RECEIVED BY THE APPELLANT COMPANY AGAINST WHICH GOODS WERE CLAIMED TO BE DISPATCHED IN SUBSEQUENT FINANCIAL YEAR AND IN THAT YEAR AGAIN ADVANCE OF RS.17.24 CRORES RECEIVED AND GOODS DISPATCHED IN FY 2013- 14. SO FAR THE 44 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. ADVANCES/DEBTS OF THE OTHER CUSTOMERS IS CONCERNED THE AO REPORTED THAT THE VERIFICATION HAS BEEN MADE AS CLAIMED BY THE APPELLANT THAT AGAINST THE ADVANCES RECEIVED OF RS.9,76,42,264/- IN FY 2011-12, THE FINISHED GOODS AMOUNTING TO RS.9,78,75,059/- WERE DISPATCHED AND EXCHANGE LOSS OF RS.2,32,795/- WAS BOOKED IN AY 2013-14. 6.4.6. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS EVIDENT THAT THE CLAIM OF THE APPELLANT REGARDING THE ADVANCES RECEIVED FROM THE CUSTOMERS WAS FOUND TO BE CORRECT DURING THE REMAND REPORT PROCEEDINGS. HENCE, THE AO HAD MADE THE ADDITION ON ACCOUNT OF ADVANCES RECEIVED BY THE APPELLANT ON INCORRECT UNDERSTANDING OF THE FACTS AND THEREFORE THE ADDITION MADE BY THE AO OF RS.29,17,91,322/- IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 25. THE LD. D.R. MERELY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND DID NOT POINT-OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). 45 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 26. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT ALL THE FACTS WERE EXPLAINED AND IT WAS EXPLAINED THAT AGAINST ADVANCES, ASSESSEE HAS MADE EXPORTS WHICH HAVE NOT BEEN DOUBTED BY THE AUTHORITIES BELOW. THE CLAIM OF ASSESSEE HAS BEEN VERIFIED BY THE A.O, THEREFORE, ADDITION HAVE BEEN RIGHTLY DELETED. 27. ON CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES, WE DO NOT FIND ANY JUSTIFICATION FOR REVENUE TO FILE APPEAL ON THIS GROUND OF APPEAL SINCE THE CLAIM OF ASSESSEE HAS BEEN VERIFIED BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS AT APPELLATE STAGE. THEREFORE, THERE IS NO ERROR IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ENTIRE ADDITION. THESE GROUND NOS.1, 2 AND 3 OF APPEAL OF REVENUE ARE DISMISSED. 28. IN THE DEPARTMENTAL APPEAL THE REMAINING GROUND NO.5 IS GENERAL IN NATURE. THEREFORE, NO FURTHER ADJUDICATION IS REQUIRED. 46 ITA.NOS.273 & 436/SRT/2018 M/S. SHANTAI EXIM LIMITED, SURAT. 29. IN THE RESULT, ITA.NO.436/SRT/2018 OF THE DEPARTMENT IS DISMISSED. 30. TO SUM-UP, APPEAL OF THE DEPARTMENT DISMISSED AND APPEAL OF ASSESSEE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (O.P. MEENA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 27 TH AUGUST, 2019 VBP/- COPY TO 1. THE APP ELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SURAT BENCH, SURAT. 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.