DALAL MCKENNA P. LTD, MUMBAI V. DCIT 5(1), MUMBAI

ITA 2737/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48648 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL KUMAR
• Keywords: Unexplained expenditure; Business income; Depreciation; Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 2737/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. DALAL MCKENNA PVT. LTD. DCIT - 5(1) 11-21, MANI MAHAL, MATHEW ROAD MUMBAI OPERA HOUSE, MUMBAI 400004 VS. PAN - AAACD 1407 B APPELLANT RESPONDENT APPELLANT BY: SMT. ARATI VISSANJI RESPONDENT BY: DR. B. SENTHIL KUMAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-IX, MUMBAI DATED 23.03.2010. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LEARNED CIT (APPEALS) GROSSLY ERRED IN DIRE CTING THE ASSESSING OFFICER FOR ENHANCEMENT OF INCOME OF ` 2,44,28,822/-, BEING PROFIT OF M/S. SANGHI AIR PRODUCTS, PROPRIETA RY CONCERN OF SHRI NITIN SANGHI. 3. THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIATE THAT THERE WAS NO DIVERSION OF PROFIT FROM THE ASSESSEE COMPAN Y TO M/S. SANGHI AIR PRODUCTS AND HAS FAILED TO PROVE THAT SA E FROM THE ASSESSEE TO M/S. SANGHI AIR PRODUCTS WAS AT A PRICE LOWER THAN THAT CHARGED BY THE ASSESSEE FROM OTHERS. 4. THE LEARNED CIT (APPEALS) HAS GROSSLY ERRED IN CONF IRMING THE ADDITION OF RS.8,64,151/- ALTHOUGH THE NECESSARY EV IDENCE WAS FILED BEFORE HIM AND IF REQUIRED HE OUGHT TO HAVE R EMANDED THE ISSUE TO THE ASSESSING OFFICER FOR VERIFICATION. 5. BRIEFLY STATED, ASSESSEE COMPANY IS IN THE MANUFACT URING AND TRADING OF OXYGEN/NITROGEN/ACETYLENE PLANTS AND GASES USED FOR INDUSTRIAL PURPOSES. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS SH OWN TOTAL TURNOVER OF ` 5.7 CRORES AND THE NET PROFIT AS PER THE P & L ACCO UNT HAS BEEN ARRIVED AT ` 26,93,210/-. ASSESSEE DECLARED A TOTAL INCOME OF ` 25,61,510/-. IN THE ITA NO. 2737/MUM/2010 M/S. DALAL MCKENNA PVT. LTD. 2 COURSE OF ASSESSMENT PROCEEDINGS THE A.O. HAS NOTIC ED THAT THE COMPANY HAS SHOWN SALE OF OXYGEN PLANT TO VARIOUS PARTIES I NCLUDING SANGHI AIR PRODUCT CO., A PROPRIETARY CONCERN OF THE NITIN KUM AR SANGHI, BROTHER OF ONE OF THE DIRECTORS OF THE COMPANY. AFTER ENQUIRY HE WAS OF THE OPINION THAT THE SAID SALES STATED TO BE MADE TO SANGHI AIR PROD UCTS CO. WERE IN FACT SALES MADE BY THE ASSESSEE AND HOLDING THAT ASSESSE E COMPANY HAS TRANSFERRED EXCESS SALE PROCEEDS EITHER BY WAY OF T RANSFERRING THE PLANT AT LOWER PRICE OR BY MAKING/DIVERTING EXCESS SALE PROC EEDS TO GROUP CONCERNS, HE MADE ADDITION OF ` 1,59,17,509/- AS SURPLUS SALES OF THE ASSESSEE COMPANY AND ADDED BACK TO THE TOTAL INCOME OF THE A SSESSEE. IN ADDITION TO THE ABOVE THE A.O. ALSO MADE ADDITION OF ` 65,50,156/- TOWARDS THE VALUE OF 6 NUMBERS OF PLANT SUPPOSED TO BE IN THE CLOSING ST OCK. IN ADDITION TO THE ABOVE THE A.O. ALSO MADE AN ADDITION OF ` 8,64,151/- STATED TO HAVE BEEN ADJUSTMENT OF SECURITY DEPOSITS NOT RECONCILED HOLD ING THAT THIS IS UNEXPLAINED EXPENDITURE. 6. THE MATTERS WERE CARRIED TO THE CIT(A) AND ASSESSEE HAS RAISED VARIOUS GROUNDS. THE CIT(A), HOWEVER, WAS OF THE OP INION THAT SHRI NITIN SANGHI IS THE MANAGING DIRECTOR OF THE ASSESSEE COM PANY AND IS ALSO PROPRIETOR OF SANGHI AIR PRODUCT CO. (AS AGAINST TH E FINDINGS OF THE A.O. THAT SHIR NITIN SANGHI IS BROTHER OF ONE OF THE DIRECTOR S OF THE COMPANY). HE WAS OF THE OPINION THAT THE COMPANY IS ENTERED INTO COM POSITE CONTRACT AND WAS PASSING ON PROFITS TO THE PROPRIETARY CONCERN OF TH E DIRECTOR BY JOURNAL ENTRIES AND EXAMINED THE ISSUE IN DETAIL AND AT THE END, BROUGHT THE ENTIRE AMOUNT TO TAX WHAT WAS DISCLOSED BY THE INDIVIDUAL IN HIS INDIVIDUAL RETURNS THEREBY DELEING ADDITION OF ` 1,59,17,509 MADE BY THE A.O. AND MAKING ADDITION OF PROFIT OF ` 2,44,28,822/- OFFERED BY THE INDIVIDUAL AS INCOME OF THE ASSESSEE COMPANY. HE FURTHER DELETED THE CLOSIN G STOCK ADDITION OF ` 65,50,156/- AFTER RECONCILIATION OF THE PLANTS MADE AND SOLD IN EACH YEAR AND WITH REFERENCE TO THE ADDITION OF ` 8,64,151/- AS UNEXPLAINED PAYMENT HE CONFIRMED THE SAME REJECTING THE ASSESSEES CONT ENTIONS. ACCORDINGLY THE ASSESSEE HAS RAISED THE ABOVE GROUNDS. ITA NO. 2737/MUM/2010 M/S. DALAL MCKENNA PVT. LTD. 3 7. THE LEARNED COUNSEL REFERRED TO THE ISSUES AS MADE OUT BY THE A.O. AS MODIFIED BY THE CIT(A). REFERRING TO THE PAPER BOOK FILED IN THIS REGARD LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE ENTERED INTO A CONTRACTS FOR MANUFACTURE OR BUILDING GAS PRODUCING PLANTS AND TH E ASSESSEE DOES ONLY 30% OF THE OPERATIONAL BACKGROUND WORK WHICH INVOLV ES MANUFACTURE AND INSTALLATION WHEREAS THE BALANCE 70% OF THE WORK PE RTAINS TO ITS SISTER CONCERN, SANGHI AIR PRODUCT CO., WHICH PURCHASES IT EMS AND PROVIDES TO THE COMPANY SO THAT ASSESSEE AVOIDS LABOUR PROBLEMS. RE FERRING TO THE LETTER DATED 18 TH MARCH 2010 IT WAS SUBMITTED THAT ASSESSEE COMPANY SUPPLIES 30% OF ONLY MANUFACTURED ITEMS AND SANGHI AIR PRODU CTS CO. SUPPLIES 70% OF THE ITEMS (ONLY BROUGHT OUT ITEMS) AND THERE IS NO COST INCREASE DUE TO TIME GAP BETWEEN ORDER AND SUPPLY. ASSESSEE AS WELL ITS SISTER CONCERN WORKS IN DIFFERENT FIELDS AND IT IS NOT CORRECT TO STATE THAT ASSESSEE COMPANY PASSED ON PROFITS TO THE PROPRIETARY CONCERN OF THE DIRECTOR AS WAS CONSIDERED BY THE CIT(A). IT WAS HER SUBMISSION THA T THE A.O. CONSIDERED DIVERTING OF SALES WHICH ARE MADE TO THE PROPRIETAR Y CONCERN WHEREAS THE CIT(A), WHILE NOT AGREEING WITH ASSESSING OFFICERS OPINION, TOOK THE ENTIRE PROFIT OFFERED BY THE DIRECTOR AS THAT OF THE COMPA NY. SHE SUBMITTED THAT THE ORDER OF THE CIT(A) IS NOT CORRECT AS THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF GAS PRODUCTS AND THERE IS NO DIVERSI ON OF PROFIT TO THE SISTER CONCERN. WHILE ADMITTING THAT ASSESSEE AND ITS SIST ER CONCERN HAS SAME ADDRESS IT WAS HER CONTENTION THAT THEY OPERATE IN DIFFERENT FIELDS AND THERE IS NO DIVERSION OF PROFIT AT ALL. IT WAS FURTHER SU BMITTED THAT EVERY PERSON HAS A RIGHT TO ARRANGE THE AFFAIRS AND MAKE PROFITS AND ASSESSEE WAS OFFERING THE PROFIT OF ITS MANUFACTURING ACTIVITY REGULARLY WHER EAS THE INDIVIDUAL IS OFFERING THE PROFITS ON ITS TRADING OF PURCHASE AND SALE AND SUPPLY OF GOODS FOR INSTALLATION OF THE PROJECT. SINCE THESE TWO OP ERATES SEPARATELY AND HAS PAID TAXES INDEPENDENTLY AT THE MAXIMUM LEVEL, THER E IS NO QUESTION OF TAX EVASION AND ADDITION ON THE REASONS CONSIDERED BY T HE CIT(A) ARE NOT CORRECT. 8. THE LEARNED D.R., HOWEVER SUBMITTED THAT THE ASSESS EE HAS NOT PLACED ANY WORK ORDERS FOR EXAMINATION OF THE CONTRACT ENT ERED BY THE ASSESSEE COMPANY AND IN THE ABSENCE OF BIFURCATION UNDERTAKE N BY THE ASSESSEE THE ITA NO. 2737/MUM/2010 M/S. DALAL MCKENNA PVT. LTD. 4 FINDINGS OF THE CIT(A) ARE CORRECT. IT WAS FURTHER SUBMITTED THAT THE ENTIRE PURCHASES WERE MADE BY THE ASSESSEE AND ONLY JOURNA L ENTRIES WERE PASSED PASSING ON THE PROFIT TO THE SISTER CONCERN, THE RE ASON FOR WHICH THE ENTIRE SALES WERE TAKEN BY THE A.O. AS THAT OF ASSESSEE CO MPANY. IT WAS SUBMITTED THAT ASSESSEE HAS NOT FURNISHED ANY DETAILS BEFORE THE A.O. AND THE ASSESSEE COMPANY WAS UTILISING THE ENTIRE FUNDS AND ONLY MAK ING BOOK ENTRIES FOR THE SO CALLED WORK DONE BY THE SISTER CONCERN, WHICH IS A PROPRIETARY CONCERN OF THE DIRECTOR. REFERRING TO THE SAMPLE QUOTATIONS PL ACED ON RECORD IT WAS THE SUBMISSION THAT THIS DOES NOT INDICATE THAT THE CON TRACT WAS ENTERED BY THE SAID SANGHI AIR PRODUCTS CO. INDEPENDENTLY WHEREAS THE ACCOUNTS INDICATES THAT THE ENTIRE CONTRACT WAS UNDERTAKEN BY THE ASSE SSEE COMPANY AND ONLY JOURNAL ENTRIES WERE PASSED AND THERE IS SUBSTANTIA L TRANSFER OF PROFIT FROM THE ASSESSEE COMPANY TO THE SISTER CONCERN OF DIREC TOR. SHE SUPPORTED THE ORDER OF THE CIT(A). 9. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT M/S. SA NGHI AIR PRODUCTS CO. HAVING SEPARATE SALES TAX REGISTRATION AND AGAI NST C FORM ISSUED ONLY THE MATERIAL WAS SUPPLIED. SO IT CANNOT BE STATED T HAT THE SAID CONCERN WAS NOT INVOLVED IN IMPLEMENTING THE OPERATION OF CONTR ACT. 10. ON AN ENQUIRY WHETHER THE SAID SANGHI AIR PRODUCTS CO. HAS MAN POWER AND HOW THEY ARE TRANSACTING INDEPENDENT OF T HE ASSESSEE, IT WAS SUBMITTED THAT COMMON STAFF MEMBERS MAY BE INVOLVED AS THE NUMBER OF EMPLOYEES IN THE OTHER CONCERN WAS LESS. HOWEVER, I T WAS THE SUBMISSION THAT THESE TWO ARE INDEPENDENT CONCERNS AND THERE I S NO QUESTION OF DIVERSION OF PROFIT. 11. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE PAPER BOOK FILED. AT OUR INSTANCE THE ANNUAL REPORTS OF THE ASSESSEE COM PANY AND THAT OF SANGHI AIR PRODUCTS CO., THE PROPRIETARY CONCERN OF THE DI RECTOR WAS PLACED ON RECORD. AS SEEN FROM THE RECORD THE A.O. ORIGINALLY HAS TAKEN A STAND THAT THE ASSESSEE HAS DIVERTED SALES TO THE SISTER CONCE RN. THE FINDINGS OF THE A.O. WITH REFERENCE TO THE UNDISCLOSED SALES ARE AS UNDER: - ITA NO. 2737/MUM/2010 M/S. DALAL MCKENNA PVT. LTD. 5 SR.NO. NAME OF THE PARTY DATE AMOUNT 1 PAWAN OXYGEN & GASES 14.3.2006 1512160 2 HANS ISPAT LTD. 10.3.2006 970226 3 SYNERGY STEELS LTD. 10.12.2005 1000000 4 NEEPAZ METALLIES LTD. 2.2.2005 1800964 8.10.2005 2000000 28.10.2005 1500000 25.3.2006 2634147 5 MONA GASES P. LTD. 11.8.2005 2150652 6 S.M. PROCESS 17.6.2006 837200 7 RIDDHI SIDDHI GASES P. LTD. 20.1.2006 1512160 TOTAL 15917509 12. SINCE HE HAS EXAMINED THE ACCOUNTS COPIES AND LEDGE R ACCOUNTS OF THE ASSESSEE, HE WAS OF THE OPINION THAT ASSESSEE COMPA NY HAS TRANSFERRED THE SALE PROCEEDS EITHER BY WAY OF TRANSFERRING THE PLA NT AT LOWER PRICE OR BY TRANSFERRING THE EXCESS SALE PROCEEDS TO GROUP CONC ERN. SINCE THE AMOUNTS WERE TRANSFERRED BY BOOK ENTRIES AND AN AMOUNT OF ` 84,84,740/- IS TO BE RECEIVED BY THE ASSESSEE COMPANY AT THE END OF THE YEAR, THE A.O. TOOK THE STAND THAT ASSESSEE HAS SUPPRESSED SALES OF ` 1,59,17,509/-. BEFORE THE CIT(A) ASSESSEE SUBMITTED THAT THERE IS NO TRANSFER OF SALES TO THE SISTER CONCERN. THE CIT(A) ASKED FOR MANY DETAILS AND AFTE R ANALYSING THE NATURE OF MANUFACTURING OF GAS PLANT HE, VIDE PARA 2.3 ON WAR DS IN HIS ORDER, ELABORATELY CONSIDERED AND CAME TO THE CONCLUSION T HAT ASSESSEE COMPANY HAS DIVERTED PROFITS TO THE MANAGING DIRECTOR TO HI S INDIVIDUAL ACCOUNTS/ CONCERNS. THE REASONS GIVEN IN PARA 2.3.6 ARE AS UN DER: - A) IN ALL CASES, THE APPELLANT COMPANY IS ISSUING QUOTATIONS FOR THE COMPLETE PLANTS. THE APPELLANT COMPANY HA NOT PRODU CED THESE QUOTATIONS BEFORE THE ASSESSING OFFICER ON THE GROU ND THAT THESE ARE NOT AVAILABLE. IT WAS OBLIGATORY ON THE PART OF THE APPELLANT COMPANY TO KEEP, MAINTAIN AND PRODUCE ALL BUSINESS RELATED DOCUMENTS BEFORE THE ASSESSING OFFICER. HAD THE APP ELLANT PRODUCED THIS VITAL BUSINESS DOCUMENTS IN THE ASSES SMENT PROCEEDINGS OR IN THE APPELLATE PROCEEDINGS, IT WOU LD HAVE SHOWN THAT APPELLANT COMPANY IS SECURING CONTRACT FOR THE COMPLETE PLANT AND NOT ONLY FOR SUPPLYING MANUFACTURED COMPONENTS. ITA NO. 2737/MUM/2010 M/S. DALAL MCKENNA PVT. LTD. 6 B) THE APPELLANT COMPANY IS SUPPLYING MANUFACTURED COMPONENTS. THE APPELLANT HAS NOT EXPLAINED WHY IT CHOSE NOT TO SUPPLY COMPONENTS WHICH ARE TO BE JUST PURCHASED FROM THE MARKET. THERE IS NO LOGIC TO CARRY OUT ACTIVITY ON WHICH TH E APPELLANT IS EARNING NET PROFIT OF LESS THAN 10% AND NOT CARRYIN G LUCRATIVE PART OF THE CONTRACT ON WHICH PROFIT MARGINS ARE 35 %. C) M/S SAP DO NOT HAVE THE NECESSARY INFRASTRUCTURE TO CARRY OUT EVEN THE BUSINESS IT CLAIMS TO HAVE CARRIED OUT. IT HAS NO OFFICE AND OWNS NO FIXED ASSETS. INFACT BALANCE SHEET OF M /S. SAP SHOWS THAT IT HAS NOT PURCHASED ANY FIXED ASSETS TO CARRY ON THE BUSINESS. IT IS EVIDENT FROM THE FACT THAT IT HAS N OT CLAIMED ANY DEPRECIATION. NO ELECTRICITY EXPENSES ARE DEBITED I N THE BOOKS OF M/S SAP. FURTHER, SALARY EXPENSES OF M/S SAP ARE ON LY RS.3,55,389. D) MS SAP HAVE NOT EMPLOYED ANY QUALIFIED PERSONNEL TO CARRY OUT THE JOB. 13. THEREAFTER HE ANALYSED THE ISSUE AND BROUGHT THE EN TIRE BUSINESS INCOME OF M/S. SANGHI AIR PRODUCTS CO. AT ` 2,44,28,822/- AS INCOME OF THE ASSESSEE COMPANY. WHILE DOING SO HE DELETED THE ADD ITION MADE BY THE AO AT ` 1,59,17,509/-. 14. AFTER EXAMINING THE ABOVE TWO ISSUES, WE ARE OF THE OPINION THAT BOTH THE REVENUE AUTHORITIES HAVE NOT CONSIDERED THE ISS UE IN ITS CORRECT PERSPECTIVE. IT IS THE SUBMISSION OF THE ASSESSEE T HAT THE ASSESSEE MANUFACTURED AND INSTALLED PLANT WHEREAS THE SISTER CONCERN, M/S. SANGHI AIR PRODUCTS CO. SUPPLIED THE GOODS NECESSARY FOR I MPLEMENTING THE CONTRACT. IT IS TRUE THAT ASSESSEE HAS NOT PLACED COMPLETE CO NTRACTS AND HOW EACH PARTY UNDERTAKES CONTRACT. AS PER THE A.O. ASSESSEE IS EX ECUTING THE ENTIRE CONTRACT AND ONLY TRANSFERRING THE PROFITS. HOWEVER, AS SEEN FROM THE BILLS RAISED BY M/S. SANGHI AIR PRODUCTS CO. PLACED IN THE PAPER BO OK, SANGHI AIR PRODUCTS CO IS INDEPENDENTLY SUPPLYING GOODS TO THE CONTRACT ED PARTIES DIRECTLY ON THE BASIS OF THE C-FORM. AN INTERESTING ASPECT NOTED HE RE IS THAT THE ASSESSEE PLACED A STATEMENT OF SALES AND PURCHASES COSTS IN THE BOOKS OF SANGHI AIR PRODUCTS LTD. AT PAGE 109 TO 111. ASSESSEE HAS PURC HASED GOODS WORTH ` 1,77,63,106/- AND SOLD THEM AT A PRICE OF ` 2,87,35,474/- TO THIRD PARTIES, MAY BE AS PART OF THE CONTRACT. IN ADDITION AS PER THE 3CD REPORT SANGHI AIR PRODUCTS CO. PURCHASED GOODS FROM THE ASSESSEE COMP ANY AT ` 1,28,17,740/- WHICH WAS REPORTED AS PAYMENTS MADE TO PERSONS SPEC IFIED UNDER 40A(2)(B) IN ITA NO. 2737/MUM/2010 M/S. DALAL MCKENNA PVT. LTD. 7 THE 3CD REPORT AGAINST CLAUSE 18 OF THE REPORT. HOW MUCH OF THESE PURCHASES WERE SUPPLIED TO THIRD PARTIES AND WHAT IS THE AMOU NT RECEIVED AGAINST THESE PURCHASES HAS NOT BEEN SPECIFIED OR MADE AVAILABLE. HOWEVER, AS SEEN FROM THE SANGHI AIR PRODUCTS CO. P & L ACCOUNT, THE TOTA L SALES ARE TO THE TUNE OF ` 6.96 CRORES WHEREAS THE SAID CONCERN PURCHASED FROM THE ASSESSEE COMPANY AS REPORTED IN THE AUDIT REPORT WAS ONLY ` 1,28 CRORES. THEREFORE, IT CANNOT BE STATED THAT THE ENTIRE PROFITS DISCLOSED BY THE PRO PRIETOR SHRI NITIN SANGHI IN THE BUSINESS OF M/S. SANGHI AIR PRODUCTS CO. CAN BE OUT OF THE CONTRACT EXECUTED WITH THE ASSESSEE COMPANY. IT IS ALSO SEEN THAT THERE ARE OTHER INCOMES LIKE INTEREST RECEIVED, EXPORT LICENCES REC EIVED, SALES TAX SET OFF WHICH WERE INCLUDED IN THE PROFIT. IN VIEW OF THIS, WE AR E OF THE OPINION THAT IT IS NOT CORRECT TO BROUGHT TO TAX THE ENTIRE PROFIT DISCLOS ED BY THE PROPRIETOR/DIRECTOR UNLESS IT IS ESTABLISHED THAT ASSESSEE HAS DIVERTED PROFIT TO THE SISTER CONCERN. 15. WE ALSO KEPT IN MIND THE FINDINGS OF THE A.O. AS FA R AS ADDITION OF ` 1.59 LAKHS UNDERTAKEN ORIGINALLY BY THE A.O. SOME O F THE FINDINGS OF THE A.O. THAT THE TRANSACTIONS ARE DONE BY ONLY LEDGER ENTRIES CANNOT BE BRUSHED ASIDE AND SINCE THE ORDER OF THE A.O. AND THE CIT(A ) ARE DIMENSIONALLY DIFFERENT, WE ARE OF THE OPINION THAT THE ISSUE REQ UIRE RE-EXAMINATION BY THE A.O. THE A.O. IS DIRECTED TO KEEP IN MIND THE CONTR ACTS ENTERED BY THE ASSESSEE WITH THIRD PARTIES FOR MANUFACTURING GAS P RODUCTS AND THE EXTENT OF SALES MADE TO THE PROPRIETARY CONCERN AND BY THE SA ID CONCERN AS PART OF CONTRACT AND WHETHER ANY EXORBITANT PROFITS WERE DI VERTED TO THE SISTER CONCERN BY EXECUTING THE CONTRACT IN THE NAME OF TH E SISTER CONCERN OR ALLOWING SUPPLY OF GOODS AT UNREASONABLE PRICES. AO IS ALSO DIRECTED TO KEEP IN MIND THE MAN POWER AVAILABLE WITH THE SISTER CON CERN AND WHETHER ANY MAN POWER OF THE ASSESSEE WERE UTILISED FOR THE BUS INESS OF THE PROPRIETARY CONCERN AND TO EXAMINE WHETHER EXCISE AUTHORITIES H AVE TAKEN ANY COGNIZANCE OF DIVERSION OF BUSINESS, AS A.O. PLACED ON RECORD THE ENQUIRY CONDUCTED BY THE EXCISE AUTHORITIES IN PAGE 2 OF TH E ORDER. AS THESE ISSUES ALONGWITH INVOKING THE PROVISIONS OF SECTION 40A(2) ALSO REQUIRE EXAMINATION, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSMENT CAN BE SET ASIDE TO THE FILE OF THE A.O. FOR EXAMINING THE ISSUE AFRESH AFTER OBTAINING NECESSARY DETAILS. THEREFORE, WITHOUT GOING INTO TH E MERITS OF THE ACTION OF ITA NO. 2737/MUM/2010 M/S. DALAL MCKENNA PVT. LTD. 8 THE CIT(A)/ AO WE RESTORE GROUNDS 1 & 2 TO THE FILE OF THE A.O. FOR FRESH CONSIDERATION. ASSESSEE IS DIRECTED TO FURNISH NECE SSARY DETAILS IN SUPPORT OF ITS CONTENTIONS THAT NO INCOME HAS BEEN DIVERTED TO THE PROPRIETARY CONCERN. 16. GROUND NO. 3 PERTAINS TO THE ISSUE OF TREATMENT BY THE A.O. OF ` 8,64,151/- AS UNEXPLAINED PAYMENT AND CONFIRMATION BY THE CIT(A). 17. AS SEEN FROM THE ORDER OF THE CIT(A), ASSESSEE FURN ISHED NECESSARY EVIDENCE AS ADDITIONAL EVIDENCE BEFORE THE CIT(A), WHICH WAS NOT ADMITTED UNDER RULE 46A. WE ARE UNABLE TO UNDERSTAND WHY THE CIT(A) REFUSED TO ADMIT THE ADDITIONAL EVIDENCE WHEN THE FACTS ARE TO BE EXAMINED. SINCE THE MAIN ISSUE IS RESTORED TO THE FILE OF THE A.O. IN G ROUND NOS. 1 & 2, WE ARE OF THE OPINION THAT THE ISSUE OF ADDITION OF ` 8,64,151/- MADE BY THE A.O. AS UNEXPLAINED PAYMENT CAN ALSO BE RESTORED TO THE FIL E OF THE A.O. FOR FRESH EXAMINATION. ASSESSEE IS DIRECTED TO PLACE NECESSAR Y DETAILS BEFORE THE A.O. WITH THESE DIRECTIONS THE GROUNDS ARE CONSIDERED AL LOWED FOR STATISTICAL PURPOSES. 18. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27 TH APRIL 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IX, MUMBAI 4. THE CIT V, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.