The Dt.CIT., Circle-11, Ahmedabad V. Shri Gautam Sohanlal Chaudhary,(HUF), Ahmedabad

ITA 2789/AHD/2009

• Counselvise Citation: 278920514 RSA 2009
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-09-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 12-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Keywords: Gross profit estimation; Opportunity of cross examination
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 2789/ AHD/2009 (ASSESSMENT YEAR 2004-05) DCIT, CIRCLE 11, AHMEDABAD VS. GAUTAMCHAND SOHANLAL CHAUDHARY, (HUF), 13, MAHAVIR SOCIETY, PALDI, AHMEDABAD PAN/GIR NO. : AAGHS2108K (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S K GUPTA, CIT DR RESPONDENT BY: SHRI GAURAV NAHTA, AR DATE OF HEARING: 03.09.2012 DATE OF PRONOUNCEMENT: 05.10.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT(A) XVI, AHMEDABAD DATED 31.07.2009 FOR THE ASSESSMENT YEAR 2004-05. 2. GROUND NO.1 READS AS UNDER: 1. THE LD, C1T(A) ERRED IN FACTS AND ON LAW IN DELE TING THE ADDITION OF RS.11,77,455/- ON ACCOUNT OF SUPPRESSIO N OF SALES OF SMIL WHICH IS A SISTER CONCERN OF THE ASSESSEE. 2.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER. HE AL SO DRAWN OUR ATTENTION TO PAGES 13-14 OF THE ORDER OF LD. CIT(A) POINTING OUT THAT IT IS NOTED BY LD. CIT(A) ALSO IN PARA 6.1 OF HIS ORDER T HAT ON 31.03.2004, THE ASSESSEE HAS SHOWN LOSS OF RS.90,191/- BUT ON OTHER DATE, THERE IS I.T.A.NO.2789 /AHD/2009 2 UNACCOUNTED PROFIT SHOWN BY THE ASSESSEE. HE SUBMIT TED THAT IT IS ALSO OBSERVED BY LD. CIT(A) THAT AT THE SAME TIME, THE A .O. COULD HAVE DISALLOWED THE LOSS OF RS.90,191/- BUT IN SPITE OF MAKING THIS OBSERVATION, LD. CIT(A) HAS DELETED THE ENTIRE ADDITION OF /RS.1 1,77,455/- AND HENCE, THE ORDER OF LD. CIT(A) IS NOT CORRECT. 2.2 A AGAINST THIS, LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTED THAT WHILE DECIDING THIS ISSUE, LD. CIT(A) HAS NOTED THAT THESE DEFECTS IN THE BOOKS SHOULD BE CONSIDERED WHI LE REJECTING THE BOOK RESULTS OF THE ASSESSEE TO ESTIMATE GP AS DISCUSSED IN THE CONCLUSIVE PORTION OF HIS ORDER AND HE DRAWN OUR ATTENTION TO PAGES 24-25 OF THE ORDER OF LD. CIT(A) WHERE, IT IS NOTED BY LD. CIT(A ) THAT IN THE REMAND REPORT, IT IS SUBMITTED BY THE A.O. THAT THERE ARE SOME MULTIPLE ADDITIONS AND THE ADDITION MADE IS ON HIGHER SIDE AND, THEREF ORE, COMMENTS OF LD. CIT(A) IS ACCEPTABLE TO THE A.O. TO ESTIMATE THE GP AND REGARDING THE RATE OF G.P., HE HAS REPORTED IN THE REMAND REPOT T HAT IN THE LAST 5 YEARS, THE GP RATE VARIED FORM 1.07% TO 4.10% AND CONSIDER ING THIS FACT OF THE CASE, IN VIEW OF THE A.O., THE MOST APPROPRIATE RAT E OF G.P. WOULD BE 3% AS AGAINST 1.90% SHOWN BY THE ASSESSEE AND IT WILL COVER VARIOUS ADDITIONS MENTIONED IN PARA 2-18 OF THE ORDER OF LD . CIT(A). HE DRAWN OUR ATTENTION TO PARA 2 OF THE ORDER OF LD. CIT(A) AND POINTED OUT THAT THIS ADDITION OF RS.11,77,455/- IS ALSO INCLUDED AND HEN CE, AS PER THIS FINDING OF LD. CIT(A), G.P. ADDITION CONFIRMED BY HIM AS PE R THE REMAND REPORT OF THE A.O. COVERS THIS ADDITION ALSO. 2.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE ISSUE REGARDING GP ADDITION WAS DECIDED BY LD. CIT(A) AS PER REMAND REPORT OF THE A.O. AS PER WHICH IT WAS SUGGE STED THAT THE G.P. RATE I.T.A.NO.2789 /AHD/2009 3 MAY BE ESTIMATED @3% AS AGAINST 1.90% SHOWN BY THE ASSESSEE TO COVER VARIOUS ADDITIONS MENTIONED IN PARA 2-18. AS PER P ARA 10.8 OF THE ORDER OF LD. CIT(A), THE ISSUE REGARDING G.P. WAS FINALLY DECIDED BY HIM AND FOR THE SAKE OF READY REFERENCE, THE SAME IS REPROD UCED BELOW: 10.8 AS MENTIONED ABOVE, THERE ARE STILL CERTAIN LOOP HOLES IN THE ACCOUNTS OF THE APPELLANT PARTICULARLY AS RE GARDS GROUND NO.6 WHEREIN THE PURCHASE RATE IS SHOWN MORE THAN T HE SALE RATE AND THE APPELLANT HAS SHOWN LOSS OF RS. 90,191/- AP PROX ON THE SALE OF MAIZE TO SISTER CONCERN SMIL. THE ASSESSING OFFI CER WAS THEREFORE DIRECTED TO FIND OUT THE REASONABLE GP IN THIS LINE OF BUSINESS TO COVER UP SUCH DEFECTS IN THE BOOKS OF A CCOUNTS. THE ASSESSING OFFICER IN HIS REMAND REPORT STATED THAT THE GP VARIES FOR THE LAST 5 YEARS FROM 1.07 % TO 4.07% AND ACCORDING TO HIM THE GP AT THE RATE OF 3% AS AGAINST 1.90% SHOWN BY THE ASS ESSEE SHOULD BE SUFFICIENT TO COVER THE ADDITIONS MENTIONED IN PARA 2 TO PARA 18 OF THE REMAND REPORT. TO THIS THE APPELLANT VIDE ITS W RITTEN SUBMISSION DT 21-5-2009 STATED THAT THE AVERAGE GP FOR THE LAS T 5 YEARS COMES TO 2.40% ONLY AND THE GP PROPOSED @ 3% BY THE ASSES SING OFFICER HAS NO BASIS. IT WAS SUBMITTED THAT THE GP ADDITION SHOULD ALSO COVER THE IMPUGNED ADDITION OF RS. 2,22,000/- OF AGRICULTURAL INCOME SINCE THERE IS NO EVIDENCE TO ESTABLISH THAT SUCH CASH WAS ALREADY USED. IN MY OPINION GP RATE OF 3% IS REASON ABLE. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ADOPT THE SAME AS THE GP OF THIS YEAR. AS REGARDS THE CONTENTION OF THE A PPELLANT THAT THE GP ADDITION SHOULD TAKE CARE OF THE AGRICULTURAL IN COME OF RS. 2,22,000/-, IT IS TO BE STATED THAT THIS REQUEST OF THE APPELLANT CANNOT BE ACCEPTED BECAUSE THE GP ADDITION HAS NOTHING TO DO WITH THE AGRICULTURAL ACTIVITY OF THE APPELLANT AND AT NO PO INT OF TIME THE APPELLANT HAS ADMITTED THAT THE CASH GENERATED FROM THE BUSINESS HAS BEEN DEPOSITED IN THE BANK ACCOUNT OF THE APPEL LANT IN THE FORM OF AGRICULTURAL INCOME. 2.4 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), IT IS SEEN THAT LD. CIT(A) HAS DIRECTED THE A.O. TO ADOPT 3% G.P. RATE AS PROPOSED BY THE A.O. IN THE REMAND REPOT. REGARDING THE ALLEGATION OF THE LD. D.R. FOR THE ADDITION OF RS.90,191/- IN RESPECT OF LOSS SHOW N BY THE ASSESSEE ON THE SALE OF MAIZE TO SISTER CONCERN SMIL, WE FIND THAT THIS ASPECT WAS ALSO I.T.A.NO.2789 /AHD/2009 4 CONSIDERED BY LD. CIT(A) IN THIS PARA AND, THEREFOR E, G.P. ADDITION CONFIRMED BY HIM INCLUDES THIS AMOUNT OF RS.90,191/ - ALSO. REGARDING THE MERIT OF THE ADDITION OF RS.11,77,455/-, IT IS HELD BY LD. CIT(A) IN PARA 6.1, PAGE 43-44 OF HIS ORDER THAT THE A.O. HAS GENERALIZED THE RATE DIFFERENCE OF RS.75/- OF ALL THE PURCHASES MADE ON 30.03.2004 AND RS.24/- OF ALL THE PURCHASES MADE ON 31.3.2004 TO MAKE HUGE ADDITION OF RS.11,77,455/- WHICH IS NOT AT ALL JUSTIFIED. HE H AS ALSO GIVEN A FINDING THAT THE A.O. COULD HAVE CONSIDERED ONLY THOSE SALE S IN RESPECT OF WHICH, THE ASSESSEE IS SHOWING LOSS AND HE SHOULD HAVE EST IMATED REASONABLE G.P. ON SUCH SALES. LD. D.R. COULD NOT CONTROVERT THIS FINDING OF LD. CIT(A) REGARDING THOSE SALES IN WHICH THE ASSESSEE HAS SHOWN LOSS OF RS.90,191/- THAT LD. CIT(A) HAS CONSIDERED THIS ASP ECT ALSO WHILE CONFIRMING THE GP ADDITION @ 3% AND HENCE, WE DO NO T FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISS UE. GROUND NO.1 IS REJECTED. 3. GROUNDS NO.2 & 3 ARE INTERCONNECTED WHICH READ A S UNDER: 2. THE LD. CIT(A) ERRED IN FACTS AND ON LAW IN DEL ETING THE ADDITION OF RS. 48,26,535/- ON ACCOUNT OF TRADE CRE ATORS. THE LD. CST(A) FAILED TO APPRECIATE THE FACT THAT ASSESSEE HAS NOT EXPLAINED WHETHER THE PURCHASES SHOWN AS PER THE WE IGHMENT HAS BEEN MADE FROM A PARTICULAR PARTY OR NOT, 3. THE LD. CIT{A) ERRED IN FACTS AND ON LAW IN DELE TING THE ADDITION OF RS. 61,76,086 ON ACCOUNT OF CLOSED CRED ITORS. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THESE CRE DITORS THEMSELVES HAS STATED THAT NO AMOUNT WAS DUE FROM THE ASSESSEE . 3.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT BOTH THESE ISSUES WERE DECIDED BY LD. CIT(A) AS PER PARA 10.4 I.T.A.NO.2789 /AHD/2009 5 10.7 OF HIS ORDER, APPEARING ON PAGES 62-68, WHICH ARE BEING REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT, REMAND REPORT AND THE REPLY OF THE REMAND REPORT. THE A.O. HAS S TATED AT PAGE 30 OF THE ASSESSMENT ORDER THAT DURING THE ASSESSMENT PROCEEDING HE HAD RECORDED THE STATEMENT OF THE ABOVE MENTIONED C REDITORS. THE COPIES OF THE STATEMENTS WERE NOT MADE AVAILABLE TO THE APPELLANT FOR REBUTTING THE STATEMENT OF THE CREDITORS NOR TH E OPPORTUNITY TO CROSS EXAMINE THE CREDITORS WAS GIVEN TO THE APPELL ANT. IN ITS SUBMISSION THE APPELLANT STATED THAT IN FACT THE ST ATEMENTS GIVEN BY THE CREDITORS ARE NOT 1 CORRECT. ONE OF THE REASON AS TO WHY THE STATEMENTS OF THE CREDITORS IS NOT CORRECT, HAS BEE N GIVEN BY THE APPELLANT AS THE PAYMENTS MADE TO THESE CREDITORS M OSTLY IN THE MONTH OF APRIL, 2004 IS BEING REFLECTED IN THE BANK STATEMENTS PRODUCED BY THESE CREDITORS BEFORE THE ASSESSING OF FICER. IN THEIR BANK STATEMENT ALL THE CHEQUES ISSUED IN THEIR FAVO UR ARE REFLECTED. THE ASSESSING OFFICER CONVENIENTLY OVERLOOKED THIS IMPORTANT FACT WHILE ACCEPTING THE CONTENTION OF THE CREDITORS THA T AS ON 31-3- 2004 THEY HAVE NOTHING TO RECEIVE FROM THE APPELLAN T. FOR EXAMPLE, IN THE CASE OF L RADHAKRISHNAN, THE ASSESSING OFFIC ER ADDED THE DIFFERENCE OF RS.398503/- AFTER THE BALANCE OF RS. 176426/- WAS ADMITTED BY THAT PARTY AS ON 31-3-2004. THE APPELLA NT SUBMITTED THAT TO THIS PARTY CHEQUE NO 943231 FOR RS. 93643/ - AND CHEQUE NO. 94234 FOR RS. 106616/- WERE ISSUED ON 8-4-2004 FROM K V B MANGALAPURAM. THE CREDITOR HAS DEPOSITED THIS AMOUN T BY ONE SINGLE PAY-IN-SLIP OF RS. 200259 ON 8-4-2004, WHICH IS APPEARING IN THE BANK STATEMENT OF SHRI L RADHAKRISHNAN FURNI SHED BEFORE THE ASSESSING OFFICER AND APPEARING AT PAGE G-108 OF PA PER BOOK. SIMILARLY CHEQUE NO 943245 FOR RS. 92555/- AND CHEQ UE NO 400452 FOR RS. 105689/- WERE ISSUED ON 10-4-2004 IN FAVOUR OF SHRI L RADHAKRISHNAN. BOTH THESE CHEQUES ARE DEPOSI TED BY THE CREDITOR ON 10-4-2004 BY SINGLE PAY-IN-SLIP OF RS. 1 98244/- WHICH IS AGAIN APPEARING AT PAGE NO G-108 OF THE PAPER BO OK WHICH IS THE BANK STATEMENT GIVEN BY SHRI L RADHAKRSIHNAN TO THE ASSESSING OFFICER AT THE TIME OF RECORDING HIS STATEMENT. THE COMPLETE PAYMENT DETAILS AND THE ENTRY OF SUCH CHEQUES CREDI TED IN THE ACCOUNT OF VARIOUS CREDITORS IS ALREADY REPRODUCED ABOVE IN CHART FORM. THE ASSESSING OFFICER HAS NOT COMMENTED ANYTH ING ON THIS CHART WHICH WAS SUBMITTED BEFORE THE ASSESSING OFFI CER AT THE TIME OF REMAND [REPORT.. ON THE BASIS OF THE ENTRY OF TH E CHEQUES I.T.A.NO.2789 /AHD/2009 6 APPEARING IN THE ACCOUNTS OF THE CONCERNED TRADE CR EDITORS, I AM SATISFIED THAT EACH AND EVERY ENTRY OF CHEQUE 39850 3/-, SHRI SRI M. S MURUGESAN WHOSE BANK ACCOUNTS WERE FURNISHED TO T HE APPELLANT BY THE ASSESSING OFFICER ARE REFLECTED IN THEIR BA NK ACCOUNTS. THEREFORE IT WOULD BE INCORRECT TO RELY ON THE STAT EMENT OF THESE CREDITORS THAT THEY HAVE NOTHING TO RECEIVE FROM TH E APPELLANT AS ON 31-3-2004. THEIR STATEMENT IS CONTRARY TO THE FACTS OF THE CASE. IN RESPECT OF OTHER CREDITORS NAMELY AGARWAL TRADERS R S. 2495/-, M/S. MANJUSHREE ENTERPRISE RS. 801203/-, SRI MAHALAXMI T RADING CO RS. 227687/-, SRI SHAKTI TRADING AGENCIES RS. 1475/ - AND SRI S S MANI RS. 5214/- THE ASSESSING OFFICER HAS NOT MADE AVAILABLE THEIR BANK STATEMENTS TO THE APPELLANT THEREFORE THE APPE LLANT IS NOT IN A POSITION AS TO ON WHICH DATE AND WHICH ACCOUNT SUCH PARTIES HAVE CREDITED THE CHEQUES ISSUED BY THE APPELLANT TO THE M. MOST OF THESE PAYMENTS ARE MADE BY DEMAND DRAFT AS THESE PARTIES WERE OUTSIDERS AND INSISTED THE PAYMENT BY DEMAND DRAFT. AT THE TI ME OF REMAND REPORT ALSO THE OPPORTUNITY OF CROSS EXAMINATION WA S NOT GIVEN BY THE ASSESSING OFFICER TO THE APPELLANT. NOR THE ASS ESSING OFFICER HAS COMMENTED ANYTHING ON THE PAYMENTS MADE BY THE APPELLANT TO SUCH CREDITORS AS MENTIONED ABOVE. IN THE ABSENCE O F ANY FACTUAL EVIDENCES, THE VERBAL STATEMENTS OF THE CREDITORS C ANNOT BE RELIED UPON AND THEREFORE THE ASSESSING OFFICER WAS NOT JU STIFIED IN TREATING THE AMOUNT OF RS. 48,26,5357- AS TRADE CRE DITORS AS THE INCOME OF THE APPELLANT ON THE GROUND THAT THE CRED ITOR BALANCES ARE NOT GENUINE. 10.5 THE ASSESSING OFFICER HAS ALSO RELIED ON THE W EIGHMENT CHARGES ACCOUNTED FOR BY M/S. SMIL, A SISTER CONCER N OF THE APPELLANT. THE ASSESSING OFFICER OBSERVED THAT ALL THE SUPPLIERS OF MAIZE HAVE TO PAY RS. 40/- PER LOADED TRUCK AND RS. 10/- PER EMPTY TRUCK AS WEIGHMENT CHARGE FOR EACH LORRY PER TRIP T O M/S. SMIL. M/S. SMIL IS SHOWING SUCH INCOME IN ITS BOOKS OF AC COUNTS. THE ASSESSING OFFICER OBSERVED THAT ON THE DATE OF PURC HASE MADE BY THE APPELLANT, NO ENTRY WITH RESPECT TO THE WEIGHIN G BILL CHARGES IS REFLECTED IN THE BOOKS OF M/S. SMIL EXCEPT AS ON 31 -3-2004. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT NO PURCH ASES WERE MADE ON 30-3-2004, 29-3-2004, 28-3-2004, 27-3-2004, 21-3-2004, 26-2-2004, 25-2-2004, 24-2-2004, 23-2-22004, 20-2-2 004, 17-2- 2004, 12-2-2004, 10-2-2004 & 30-6-2003. FURTHER THE CREDITORS HAVE STATED THAT USUALLY THE SUPPLIES ARE NOT MADE AFTER 22 ND MARCH TO APRIL 1 ST OWING TO THE REASON THAT THE PAYMENTS WOULD GET DELAYED UPTO 2 ND OR 3 RD APRIL AND UNTIL SUCH TIME THEY COULD NOT I.T.A.NO.2789 /AHD/2009 7 MANAGE AS THE SUPPLIERS ARE LOW PROFILE. FURTHER TH E ASSESSING OFFICER MADE A REMARKS THAT THE APPELLANT HAS GIVEN A DOCUMENT TO THE CANARA BANK CC ACCOUNT ON 7-6-2003 THAT THE ASS ESSEE HAD HIMSELF ADMITTED THE STOCK OF MAIZE AS ON 1-5-2003 HAD 9615 BAGS WHEREAS FIRST PURCHASE IS MADE ON 30-6-2003. AT THE RATE OF RS. 640/- THE VALUE WORKS OUT AT RS. 61,53,600/-. THE A SSESSING OFFICER THEREFORE CONCLUDED THAT THE ASSESSEE COULD HAVE SUPPRESSED THE PURCHASES FROM THE CLOSED CREDITORS. THE APPELLANT ON THE OTHER HAND SUBMITTED THAT THE ACCOUNTING OF WEIGHING CHARGES IS MADE BY M/S. SMIL ON THE BASIS OF 7 -TO 10 DAYS ON RECEIPT O|~WEIA5MIDLIITIPSI THEREFORE IT IS NOT NEC ESSARY THAT THE WEIGHMENT SLIP OF A PARTICULAR DAY IS ACCOUNTED FOR ON THAT PARTICULAR DAY. IT COULD BE ACCOUNTED FOR WITHIN 7 TO 10 DAYS BECAUSE ALL THE SLIPS ARE TAKEN TOGETHER FOR 7 TO 1 0 DAYS AND THEN THE INCOME IS ACCOUNTED FOR BY M/S. SMIL. IF THE AP PELLANT HAS NOT PURCHASED THE MAIZE AS ALLEGED BY THE ASSESSING OFF ICER, THEN THERE CANNOT BE THE SALE OF THE SAME MAIZE TO SMIL. IN FA CT, THE APPELLANT IS NOT GETTING THE DELIVERY OF THE MAIZE BUT THE DELIVERY IS DIRECTLY MADE BY THE SUPPLIERS TO SMIL. IF THE PURC HASES ARE NOT GENUINE THEN THE SALES ALSO CANNOT BE ACCEPTED AS G ENUINE. BUT THIS IS NOT THE CASE OF THE ASSESSING OFFICER. HE HAS MA INLY RELIED UPON THE ORAL STATEMENTS OF THE CREDITORS, WHICH WAS GIV EN BY THEM ON THE BASIS OF THEIR MEMORY AND WHICH IS NOT IN MY OP INION SUPPORTED BY THE FACTS, AND MADE ADDITION OF ALMOST ALL THE TRADE CREDITORS. SINCE THE SALES ARE NOT DOUBTED BY THE A O, THERE HAS TO BE PURCHASES FOR AFFECTING SUCH SALES. THEREFORE EV EN IF THERE ARE CERTAIN INCONSISTENCIES, THEN ALSO ONLY THE PROFIT CAN BE TAXED AND NOT THE WHOLE AMOUNT OF PURCHASES OR SALES CAN BE A DDED AS THE INCOME OF THE APPELLANT. IN THE SUBSEQUENT PARA AS THE INCOME IS ESTIMATED ON THE BASIS OF THE GP ESTIMATION, SOME I NCONSISTENCY IF ANY WOULD BE TAKEN CARE THEREIN. I THEREFORE, DELET E THE ADDITION OF RS. 48,26,535/-. 10.6 SIMILAR IS THE CASE WITH THE CLOSED CREDITORS. AS MENTIONED ABOVE, THE ASSESSING OFFICER MADE ADDITION OF RS. 6 1,76,086/- ON THE GROUND OF BOGUS CLOSED CREDITORS IN THE NAME OF THE PERSONS MENTIONED AS ABOVE. THE ASSESSING OFFICER OBSERVED THAT AS ON 31- 3-2003 THE APPELLANT HAS SHOWN CREDITOR OF RS. 61,7 6,086/- WHICH WERE SQUARED UP DURING THE YEAR. THESE CREDITORS ST ATED BEFORE THE ASSESSING OFFICER THAT THEY DO NOT HAVE ANY BALANCE WITH THE APPELLANT AS ON 31-3-2003. THEREFORE THE PAYMENT MA DE AGAINST SUCH CREDITS DURING THE YEAR WAS CONSIDERED BY THE ASSESSING I.T.A.NO.2789 /AHD/2009 8 OFFICER TOWARDS THE PURCHASES MADE DURING THE YEAR AND NOT AGAINST THE PURCHASES MADE IN EARLIER YEARS. 10.7 I FAIL TO UNDERSTAND THE LOGIC GIVEN BY THE AS SESSING OFFICER WHILE MAKING ADDITION OF RS. 6176086/-. IF HE IS EX AMINING THE CREDITORS OUTSTANDING AS ON 31-3-2003 AND HE FINDS THAT SUCH CREDITS ARE NOT GENUINE THEN THE ADDITIONS, IF ANY, CAN BE MADE U/S. 68 OF THE I T ACT IN RESPECT OF A Y 2003-04 AND NOT IN A Y 2004- 05. FURTHER IF THOSE PARTIES ARE SAID THAT THE IMPU GNED PAYMENTS WERE RECEIVED BY THEM AGAINST THE CURRENT YEAR SALE THEN THEY SHOULD HAVE PRODUCED THE SALE BILLS BEFORE THE ASSE SSING OFFICER. THIS ADDITION IS MADE BY THE ASSESSING OFFICER TOTA LLY ON THE PRESUMPTION THAT THE PAYMENTS MADE TO SUCH PARTIES IS IN RESPECT OF PURCHASES MADE DURING THE YEAR. IN MY OPINION, NO A SSESSEE WOULD NOT LIKE TO ACCOUNT FOR SUCH PURCHASES, IF AT ALL, THEY ARE MADE. FURTHER THE ASSESSING OFFICER WHILE SUBMITTING THE REMAND REPORT HAS ONLY REPRODUCED THE LOGIC GIVEN BY THE ASSESSIN G OFFICER IN THE ASSESSMENT ORDER WITHOUT GIVING ANY IOTA OF PROOF T HAT THE PURCHASES WERE NOT MADE IN THE EARLIER YEAR BUT IN THE CURRENT YEAR. I THEREFORE HAVE NO HESITATION IN DELETING THE WHOL E ADDITION OF RS. 61,76,086/-. 3.3. FROM THESE PARAS OF THE ORDER OF LD. CIT(A), W E FIND THAT REGARDING THE DISALLOWANCE OF ADDITION MADE BY THE A.O. OF RS .48,26,535/-, A FINDING IS GIVEN BY LD. CIT(A) THAT EVEN IF THERE A RE CERTAIN INCONSISTENCY, THEN ALSO, ONLY THE PROFIT CAN BE TA XED AND NOT THE WHOLE AMOUNT OF PURCHASES AND SALE CAN BE ADDED AS THE IN COME OF THE ASSESSEE AND SINCE THE INCOME OF THE ASSESSEE IS BEING ESTIM ATED ON THE BASIS OF GP ESTIMATION, SOME INCONSISTENCY, IF ANY, CAN BE TAKE N CARE OF AND ON THIS BASIS, HE HAS DELETED THIS ADDITION. UNDER THESE F ACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON T HIS ISSUE AND HENCE, GROUND NO.2 IS REJECTED. 3.4 REGARDING THE GROUND NO.3 ALSO, WE FIND THAT TH IS FINDING IS GIVEN BY LD. CIT(A) THAT HE FAILED TO UNDERSTAND THE LOGI C GIVEN BY THE A.O. WHILE MAKING THE ADDITION OF RS.61,76,086/-. HE HA S OBSERVED THAT IF THE I.T.A.NO.2789 /AHD/2009 9 A.O. IS EXAMINING THE CREDITORS OUTSTANDING AS ON 3 1.03.2003 AND HE FINDS THAT SUCH CREDITS ARE NOT GENUINE THEN THE AD DITION, IF ANY, CAN BE MADE U/S 68 OF THE INCOME TAX ACT, 1961 IN ASSESSME NT YEAR 2003-04 AND NOT IN ASSESSMENT YEAR 2004-05 I.E. THE CURRENT YEA R. HE HAS ALSO GIVEN A FINDING THAT IF THOSE PARTIES HAVE SAID THAT SOME P AYMENTS WERE RECEIVED BY THEM AGAINST THE CURRENT YEAR SALE, THEN THEY SH OULD HAVE PRODUCED SALE BILLS BEFORE THE A.O. HE HAS FURTHER OBSERVED THAT THE ADDITION IS MADE BY THE A.O. TOTALLY ON THE PRESUMPTION THAT TH E PAYMENTS MADE TO SUCH PARTIES IS IN RESPECT OF PURCHASES MADE DURING THE PRESENT YEAR. HE HAS ALSO MADE OBSERVATION THAT IN HIS OPINION, NO A SSESSEE WOULD LIKE TO NOT TO ACCOUNT FOR SUCH PURCHASES, IF AT ALL, THEY ARE MADE. HE HAS ALSO OBSERVED THAT IN THE REMAND REPORT, THE A.O. HAS RE PRODUCED THE LOGIC GIVEN BY THE A.O. IN THE ASSESSMENT ORDER WITHOUT G IVING ANY IOTA OF ANY POSSIBILITY THAT THE PURCHASES WERE NOT MADE IN THE EARLIER YEAR BUT IN THE CURRENT YEAR AND ON THIS BASIS, HE HAS DELETED THIS ADDITION OF RS.61,76,086/-. THIS FINDING OF LD. CIT(A) COULD N OT BE CONTROVERTED BY LD. D.R. AND HENCE, WE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. ACCORDINGLY, THIS G ROUND NO.3 IS ALSO REJECTED. 4. GROUND NO.4 IS AS UNDER: 4. THE LD. CIT(A) ERRED IN FACTS AND ON LAW IN DEL ETING THE ADDITION OF RS. 39,32,300 ACCOUNT OF DIFFERENCE IN SMIL, THOUGH THE LD. CIT(A) HAS NOTED THAT CERTAIN ERRORS WERE C OMMITTED BY THE ASSESSEE IN CONSOLIDATING THE ACCOUNTS OF SMIL. 4.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 4.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND I.T.A.NO.2789 /AHD/2009 10 THAT THIS ISSUE WAS DECIDED BY LD . CIT(A) AS PER PARA 7.1 OF HIS ORDER WHICH IS REPRODUCED BELOW: 7.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. THE APPELLANT WAS MAINTAINING SEPARATE ACCOUNTS (4) OF SMIL & M/S. SMIL WAS MAINTAINING SINGLE ACCOUNT OF THE APPELLAN T. THE A.O. ASKED FOR THE ACCOUNTS FROM A Y 2003-04 ONWARDS. FO R THIS PURPOSE THE APPELLANT MERGED ALL THE ACCOUNTS OF SM IL IN COMPUTER. HOWEVER, WHILE MERGING THESE ACCOUNTS, CE RTAIN ERRORS KREPT IN AS MENTIONED BY THE APPELLANT ABOVE. HOWEV ER THE ASSESSING OFFICER DID NOT ACCEPT THE REVISED SET OF COPY OF ACCOUNT SUBMITTED TO HIM ON 29-11-2006. WHILE ARRIVING AT T HE DIFFERENCE OF RS. 39,32,300/-, HE COMMITTED MANY ERRORS SUCH A S DEBIT BALANCE OF RS. 12,87,491/-AS PER SMIL WAS TAKEN BY HIM AS C REDIT BALANCE & FURTHER HE ADOPTED WRONG FIGURE OF OPENING BALANC E IN THE FINAL RECONCILIATION STATEMENT. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY WRONG ENTRIES IN THE REMAND REPORT EXCEPT REITE RATING THE THINGS MENTIONED IN THE ASSESSMENT ORDER. IN MY OPINION, T HE ASSESSING OFFICER DID NOT APPLY HIS MIND TO THE RECONCILIATIO N STATEMENT. HAD HE DONE SO, HE WOULD HAVE SPECIFIED AS TO WHICH PAR TICULAR ENTRY IS NOT ACCOUNTED FOR BY SMIL BUT BY THE APPELLANT AND VICE VERSA. INSTEAD OF DOING THIS EXERCISE, HE SENT THE REMAND REPORT HIGHLIGHTING IRRELEVANT ISSUES. NO COMMENTS WERE MA DE BY HIM ON THE MISTAKES COMMITTED BY THE ASSESSING OFFICER BY TAKING THE DEBIT BALANCE AS CREDIT BALANCE ETC. THERE IS NOT A SINGLE SALE TO SMIL WHICH IS NOT ACCOUNTED FOR BY THE APPELLANT. A LL THE SALES ARE MADE TO SMIL ONLY. BESIDES THAT THE APPELLANT HAD O THER ACCOUNTS ON WHICH ALSO NO SPECIFIC ENTRY WAS FOUND TO BE UNA CCOUNTED BY THE ASSESSING OFFICER. I THEREFORE, HOLD THAT THE A SSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.39,3 2,300/- ON THIS ISSUE. THE ADDITION IS DIRECTED TO BE DELETED. 4.3 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT IT IS OBSERVED BY LD. CIT(A) THAT THE A.O. DID NOT ACCEPT THE REVISED SET OF COPY OF ACCOUNT SUBMITTED TO HIM ON 29.11.2006 AND WHILE ARRIVING AT THE DIFFERENCE OF RS.39,32,300/-, HE COMMITTED MANY ERR ORS SUCH AS DEBIT BALANCE OF RS.12,87,491/- AS PER SMIL WAS TAKEN BY HIM AS CREDIT BALANCE AND FURTHER HE ADOPTED WRONG FIGURES OF OPE NING BALANCE IN FINAL I.T.A.NO.2789 /AHD/2009 11 RECONCILIATION STATEMENT. HE HAS ALSO OBSERVED THA T THE A.O. HAS NOT POINTED OUT ANY WRONG ENTRY IN THE REMAND REPORT EX CEPT REITERATING THE THINGS MENTIONED IN THE ASSESSMENT ORDER AND HENCE, AS PER THE OPINION OF LD. CIT(A), THE A.O. DID NOT APPLY HIS MIND TO THE RECONCILIATION STATEMENT. LD. CIT(A) HAS EXAMINED ALL THE ASPECTS OF THE MATTER AND THEREAFTER, HE DELETED THIS ADDITION. LD. D.R. COU LD NOT CONTROVERT VARIOUS FINDINGS OF LD. CIT(A) IN THE ABOVE PARA AS REPRODU CED AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD . CIT(A) ON THIS ISSUE. GROUND NO.4 OF THE REVENUE IS ALSO REJECTED. 5. GROUND NO.5 IS AS UNDER: THE LD. CIT(A) ERRED IN FACTS AND ON LAW IN DELETI NG THE ADDITION OF RS.72,95,322/- ON ACCOUNT OF SUPPRESSION OF CLOS ING STOCK. THE LD. CIT(A) HAS FAILED TO ANALYZE AND APPRECIATE THA T THE ASSESSEE HAS NOT EXPLAINED WHAT WAS STOCK AS ON 22/03/2004 A S PER BOOKS OF ACCOUNT & HAS NOT RECONCILED THE STOCK STATEMENT IN RESPECT OF PURCHASES & SALES MADE BETWEEN 23/03/2004 TO 31/03/ 2004. 5.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER AND THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 5.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 9.1 OF HIS ORDER WHICH IS REPRODUCED BELOW: 9.1 I HAVE SEEN ANN R-L OF THE PAPER BOOK WHICH IS THE STOCK STATEMENT DATED 22-3-2004 'AND IS ACKNOWLEDGED BY T HE CANARA BANK ON 23-3-2004. UNFORTUNATELY NO COMMENTS ARE MA DE BY THE ASSESSING OFFICER IN THE REMAND REPORT ON THESE PAP ERS SHOWING THE STOCK POSITION AS ON 22-3-2004 ACKNOWLEDGED BY THE BANK ON 23-3-2004. WHEREFROM THE ASSESSING OFFICER HAS CONC LUDED THAT THE STOCK OF 12981 BAGS IS AS ON 31-3-2004 IS NOT C LEAR. IT IS BASED ON THE PRESUMPTION & ASSUMPTIONS. I CANNOT SUSTAIN SUCH ADDITIONS MADE ON THE ASSUMPTIONS WITHOUT NEGATING THE CLAIM OF THE APPELLANT THAT THE STOCK STATEMENT PERTAINS TO THE STOCK POSITION AS I.T.A.NO.2789 /AHD/2009 12 ON 22-3-2004. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.72,95,322/-. 5.3 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT STOCK STA TEMENT GIVEN BY THE ASSESSEE TO THE BANK IS DATED 22.03.2004 AND ITS AC KNOWLEDGEMENT BY CANARA BANK IS ON 23.03.2004 BUT THE A.O. HAS PROCE EDED ON THIS BASIS THAT THE SAME IS AS ON 31.03.2004, WHICH IS FOUND T O BE ON PRESUMPTION AND ASSUMPTION ONLY AND, THEREFORE, SUCH ADDITION M ADE BY THE A.O. CANNOT BE SUSTAINED. LD. D.R. COULD NOT CONTROVERT THIS FINDING OF LD. CIT(A) BY BRINGING ANY MATERIAL ON RECORD TO SHOW T HAT THE STOCK STATEMENT GIVEN BY THE ASSESSEE TO THE BANK WAS NOT OF 22.03.2004 BUT THE SAME WAS OF DATED 31.03.2004. HENCE, WE DO NOT FIN D ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. THIS GROUND IS ALSO REJECTED. 6. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT ON E MORE ARGUMENT WAS MADE BY LD. A.R. OF THE ASSESSEE WHICH APPLIES TO ALL THE GROUNDS RAISED BY THE REVENUE THAT ONCE BOOKS ARE REJECTED AND G.P. IS ESTIMATED, NO SEPARATE ADDITION CAN BE MADE ON THE BASIS OF TH OSE REJECTED BOOKS. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE ON T HE TRIBUNAL DECISION RENDERED IN THE CASE OF ACIT VS LAXMI INDUSTRIES, 4 8 DTR 54 (CHENNAI). IN REPLY TO THIS ARGUMENT, LD. D.R. OF THE REVENUE HAD NOTHING TO SAY. WE FIND THAT G.P. ADDITION IS CONFIRMED BY LD. CIT(A) FROM 1.9% TO 3% AS PROPOSED BY THE A.O. IN REMAND REPOT. IN THIS CASE CITED BY LD. A.R. THIS WAS HELD BY THE TRIBUNAL THAT ONCE, THE BOOKS ARE E JECTED AND INCOME IS ESTIMATED ON THE BASIS OF G.P. RATE, NO OTHER ADDIT ION ON THE BASIS OF BOOKS CAN BE MADE. HENCE, AS PER THIS TRIBUNAL DEC ISION, FOR THIS SIMPLE REASON THAT G.P. ADDITION IS MADE BY REJECTING BOOK S OF ACCOUNTS, NO OTHER I.T.A.NO.2789 /AHD/2009 13 ADDITION CAN BE MADE ON THE BASIS OF BOOKS OR BY DI SALLOWING ANY EXPENSES. HENCE, ALL THE GROUNDS RAISED BY THE REVE NUE ARE LIABLE TO BE REJECTED FOR THIS REASON ALSO. THEREFORE, WE ALSO REJECT ALL THESE GROUNDS OF THE REVENUE BY RESPECTFULLY FOLLOWING THIS TRIBU NAL DECISION. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 8. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 24/09/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25/09/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 05/10/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.9/10/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 09/10/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .