M/s. Arpan Aromatics, Ahmedabad V. The Addl.CIT.,Range-6, Ahmedabad

ITA 2839/AHD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76850 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: D K PARIKH
• Keywords: Non-deduction of tax; Corroborative evidences; Commercial expediency
• Section: 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.2839/AHD/2012 A.YS. 2009-10 M/S. ARPAN AROMATICS, C-1/B/173, PHASE II, GIDC, VATVA, AHMEDABAD. PAN: AALFA 3875K VS ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-6, AHMEDABAD. (APPELLANT) (RESPONDENT) ITA NO.176/AHD/2013 A.YS. 2009-10 ITO WARD-6(4), AHMEDABAD. VS M/S. ARPAN AROMATICS, C-1/B/173, PHASE II, GIDC, VATVA, AHMEDABAD. PAN: AALFA 3875K (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.C. MATHEWS, SR.D.R., ASSESSEE(S) BY : SHRI D.K. PARIKH, A.R. / DATE OF HEARING : 09/06/2014 / DATE OF PRONOUNCEMENT: 20/06/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THESE ARE CROSS APPEALS FOR A.Y. 2009-10 EMANATING FROM THE ORDER OF LEARNED CIT(A)-XI, AHMEDABAD DATED 01.11.2 012. THESE APPEALS ARE CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. A. REVENUES APPEAL (ITA NO.176/AHD/2013) 2. GROUND NO.1 AND 2 ARE REPRODUCED BELOW: ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 2 - (I) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED UNSECURED LOANS TO THE EXTENT OF RS.50,50,000/- . (II) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE DISALLOWANCE OUT OF INTEREST CLAIMED TO HAVE BEEN P AID ON UNEXPLAINED UNSECURED LOANS. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) DATED 30.12.2011 WERE THAT THE AS SESSEE FIRM IS IN THE BUSINESS OF MANUFACTURING OF AROMATIC CHEMICALS. IT WAS NOTED BY THE AO THAT IN TOTAL THERE WERE UNSECURED LOANS OF RS.3,78,91,165/- . BECAUSE OF THAT REASON, THE CASE WAS SELECTED FOR SCRUTINY. TH E ASSESSEE WAS ASKED TO GIVE THE DETAILS OF UNSECURED LOANS WITH NAMES, ADD RESSES, PAN AND CONFIRMATIONS FROM THE CONCERNED PERSONS. ONLY SOME OF THE CONFIRMATIONS WERE FURNISHED BY THE ASSESSEE. THE A SSESSEE HAS FURNISHED FORM NO.15G AND FORM NO.15H IN RESPECT OF THOSE PAR TIES, MEANT FOR NON DEDUCTION OF TDS. THE AOS OBSERVATION WAS THAT IN A SITUATION WHEN THOSE PERSONS HAVE FURNISHED FORM NO.15G AND F ORM NO.15H THEN IT COULD BE HELD THAT THOSE PARTIES HAD NO CAPACITY TO GIVE LOANS. HENCE, THE ASSESSEE WAS ASKED TO FURNISH THE GENUINENESS O F THE LOAN FROM THOSE PERSONS. THERE WERE IN ALL 25 PERSONS AS LISTED BY THE AO IN THE SHOW CAUSE NOTICE IN RESPECT OF UNSECURED LOAN RECEIVED, PERTAINING TO THE YEAR UNDER CONSIDERATION, OF RS.61,01,457/-. THE AO HAS ASKED TO FURNISH THE CREDITWORTHINESS AS WELL AS THE GENUINENESS OF THE TRANSACTION. THE ASSESSEES REPLY WAS THAT FORM NO.15G AND FORM NO.1 5H ALONG WITH PAN INFORMATION HAS ALREADY BEEN FURNISHED. THE AMO UNTS HAVE ALSO BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES. RATHER IN O NE OF THE REPLY THE ASSESSEE HAD PLEADED THAT THE BURDEN OF PROVING THE GENUINENESS LIES ON THE DEPARTMENT IN A SITUATION WHEN ALL OTHER INFORM ATION HAD ALREADY BEEN FURNISHED. ON THE OTHER HAND, THE OBJECTION OF THE AO WAS THAT THE ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 3 - PRIMARY ONUS WAS ON THE ASSESSEE TO ESTABLISH THE I DENTITY, THE CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TIONS IN RESPECT OF THOSE PARTIES. HE HAS CITED DECISIONS OF FEW HIGH C OURTS, NAMELY, CIT VS. K.M. MAHIM, 213 ITR 820 (KERALA), SHIV RICE, GE NERAL MILLS, 300 ITR 19 (P & H) & CIT V/S. UNIT COMMERCIAL AND UNIT CO., 187 ITR 596 (CAL.) AND JALARAM TIMBERS, 223 ITR 11 (GUAHATI). B Y PLACING RELIANCE ON THOSE DECISIONS AND CONSIDERING THE FACTS OF THE CASE, AO HAS INVOKED THE PROVISIONS OF SECTION 68 AND TAXED THE IMPUGNED AMOUNT OF RS.61,01,457/- ALONG WITH INTEREST OF RS.10,96,458/ -. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY. 4. BEFORE LEARNED CIT(A) WRITTEN SUBMISSIONS WERE F URNISHED AND AFTER CONSIDERING THE SAME IT WAS HELD AS UNDER: 2.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. I HAVE ALSO PERUSED THE CASE LAWS RELIED UPON BY THE A.O. AND BY THE AP PELLANT. I HAVE ALSO CAREFULLY GONE THROUGH THE EVIDENCES PLACED ON RECO RD DURING ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. TAKIN G ENTIRETY OF FACTS IN VIEW, I AM INCLINED TO AGREE WITH THE CONTENTIONS OF THE LD. A.R. FOR THE FOLLOWING REASONS :- (I) IT IS SEEN THAT THE A.O. MADE AN ADDITION OF R S.61,01,454/- U/S.68 OF THE I.T. ACT. THIS ADDITION INCLUDES UNSE CURED LOAN AMOUNT OF RS.50,05,000/- AND INTEREST ON THESE UNSECURED LOAN S OF RS. 10,96,454/-. IT IS A MATTER OF FACT THAT DURING ASS ESSMENT PROCEEDINGS THE APPELLANT HAS FURNISHED COPY OF LEDGER ACCOUNT OF THESE PERSONS ALONGWITH COPIES OF CONTRA ACCOUNT MENTIONING P.A. NUMBERS, COMPLETE ADDRESS AND THE PARTICULARS OF WARD/CIRCLE WHERE SUCH PERSONS ARE ASSESSED. PERUSAL OF THE LEDGER ACCOUNT S FURTHER REVEALS THAT THESE LOANS HAVE BEEN RECEIVED THROUGH THE BAN KING CHANNELS. IN MY CONSIDERED VIEW THE FACTS SUBMITTED BY THE APPEL LANT CLEARLY ESTABLISHES IDENTITY, GENUINENESS OF TRANSACTION AN D CREDITWORTHINESS OF THE CREDITOR. THIS WAY, THE APPELLANT HAD DISCHARGED ONUS CAST U PON HIM BY THE PROVISIONS OF SECTION 68 OF I.T. ACT, 19 61. ACCORDINGLY, I AM OF THE CONSIDERED VIEW THAT ADDITION AGAINST THESE CASH CREDITS U/S.68 IS NOT TENABLE. (II) DURING THE ASSESSMENT AS WELL AS APPELLATE PRO CEEDINGS THE APPELLANT HAS FURNISHED P.A. NUMBERS OF THE CREDITORS. THIS ITSEL F PROVES THE CREDITWORTHINESS OF THE CREDITOR. IN CASE, IF THE A.O. WAS ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 4 - NOT SATISFIED WITH THE CREDITWORTHINESS OF THE CRED ITORS, THE RIGHT COURSE OF ACTION WILL BE TO INITIATE PROCEEDINGS IN THE CA SE OF SUCH CREDITORS AND NOT MAKE AN ADDITION IN THE CASE OF THE APPELLA NT. IN THIS REGARD THE APPELLANT HAS RIGHTLY PLACED RELIANCE ON THE CA SE OF ROHINI BUILDERS, 256 ITR 360 (GUJ). (III) AS DISCUSSED ABOVE, THE APPELLANT HAS FILED SUFFICIENT EVIDENCES TO PROVE THE CREDITWORTHINESS OF THE CRED ITORS DURING THE ASSESSMENT PROCEEDINGS. THE A.O. HAD NOT MADE ANY E NQUIRIES TO DISPROVE THESE EVIDENCES AND THIS WAY THESE EVIDENC ES REMAINED UNCONTROVERTED AND THE SAME NEEDS TO BE ACCEPTED. O N THE OTHER HAND THE A.O. HAD MADE AN ASSUMPTION THAT THESE CREDITOR S HAD FILED FORM NOS. 15H & 15G FOR NON-DEDUCTION OF TAX AT SOURCE A ND ACCORDINGLY THE CREDITWORTHINESS OF THESE PERSONS IS DOUBTFUL. IN MY CONSIDERED VIEW, THE ISSUES IN INCOME-TAX PROCEEDINGS CANNOT B E DECIDED ON ASSUMPTIONS/PRE-ASSUMPTION. FOR MAKING ADDITIONS IN THE ASSESSMENT ORDER, THE A.O. HAS TO BRING, CLINCHING EVIDENCES O N RECORD TO DISPROVE THE CREDITWORTHINESS OF THE CREDITORS. IN THE ABSEN CE OF CONTROVERTING EVIDENCES, THE EVIDENCES PLACED ON RECORD BY THE AP PELLANT HAS TO BE ACCEPTED. THIS WAY THE IMPUGNED ADDITION IS NOT TEN ABLE. (IV) DURING THE ASSESSMENT PROCEEDINGS, THE A.O. HAD ISSUED ENQUIRY LETTERS U/S.133(6) OF I.T. ACT TO TWO CREDITORS. TH ESE CREDITORS HAD FILED REPLY IN RESPONSE TO THE ENQUIRY LETTERS. THE A.O. HAD NOT DISCUSSED THE OUTCOME OF THESE INVESTIGATIONS IN THE ASSESSMENT O RDER. 2.3 IN VIEW OF ABOVE FACTS, I HOLD THAT ADDITION O F RS.61,01,454/- MADE U/S.68 OF THE I.T. ACT IS UNTENABLE AND THE SAME IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., M R. K.C. MATHEWS HAS POINTED OUT THAT IT WAS WRONG ON THE PART OF LE ARNED CIT(A) TO GIVE A FINDING THAT GENUINENESS OF THE TRANSACTION AS WELL AS CREDITWORTHINESS OF THE CREDITOR WAS ESTABLISHED. SO, ACCORDING TO LEAR NED SR.D.R., AT THE MOST, ONLY IDENTITY WAS ESTABLISHED BUT NOT THE CRE DITWORTHINESS OF THE CREDITORS. HE HAS ALSO ARGUED THAT IT WAS WRONG ON THE PART OF LEARNED CIT(A) TO HOLD THAT BY FURNISHING PAN DETAILS, THE SAID INFORMATION ITSELF HAD PROVED THE CREDITWORTHINESS OF THE CREDITOR. TH E DECISION OF ROHINI BUILDERS, 256 ITR 306 (GUJ.) HAS ALSO BEEN WRONGLY RELIED UPON BY LEARNED CIT(A). IT WAS ALSO WRONG ON THE PART OF TH E LEARNED CIT(A) TO HOLD THAT THE AO HAD NOT MADE ANY INQUIRY TO DISPRO VE THOSE EVIDENCES. ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 5 - ACCORDING TO LEARNED DR IN A SITUATION WHEN THE PRE LIMINARY INFORMATION WAS NOT GIVEN BY THE ASSESSEE THEN THE AO WAS HANDI CAPPED TO INITIATE THE REQUISITE INQUIRY. THE ASSESSEE HAS MERELY FURN ISHED FORM NO.15H AND FORM NO.15G WHICH IS NOT THE COMPLETE INFORMATI ON; HENCE, THE ACTION OF THE AO DESERVES TO BE CONFIRMED. 6. FROM THE SIDE OF THE ASSESSEE, LEARNED AR, MR. D .K. PARIKH APPEARED AND INFORMED THAT FORM NO.15H GIVES THE CO MPLETE INFORMATION; THEREFORE, REST OF THE REQUIREMENT WAS DEEMED TO BE COMPLIED WITH BY FURNISHING OF FORM NO.15H AND FORM NO.15G IN RESPECT OF THE PARTIES. FURTHER, HE HAS DRAWN OUR A TTENTION ON A STATEMENT SHOWING THE DETAILS OF UNSECURED LOANS PLACED ON PA GE NO.28 OF THE PAPER BOOK. GIVING THE NAME OF THE PARTY, AMOUNT OF INTER EST, ADDITION OF AMOUNTS MADE IN THE ACCOUNT DURING THE YEAR, DETAIL S OF LEDGER ACCOUNT AND INFORMATION ABOUT PAN. HE HAS ALSO INFORMED THA T IN MOST OF THE CASES THE DEPOSITS WERE TAKEN IN THE PAST YEAR; THE REFORE, FOR THE YEAR UNDER CONSIDERATION ONLY THE OLD BALANCES HAVE BEEN CARRIED FORWARD OVER WHICH INTEREST WAS PAID. HE HAS ALSO PLEADED THAT I N THE PAST YEARS THE IMPUGNED DEPOSITS WERE TAKEN THROUGH BANK TRANSACTI ON. IN HIS OPINION, THE PRIMARY ONUS WAS DISCHARGED AND THE AO HAD NOT CHOSEN THE RECOURSE OF FURTHER INVESTIGATION; THEREFORE, IN SUCH SITUAT ION THE EXPLANATION AS OFFERED BY THE ASSESSEE SHOULD BE ACCEPTED. RELIANC E WAS PLACED ON CIT VS. RANCHHOD JIVABHAI NAKHANA, 21 TAXMANN. COM 159 (GUJARAT). 7. HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN THIS CASE, AN INTERESTING POSITION IS TH AT ON ONE HAND THE ASSESSEE IS CLAIMING THAT THE PRIMARY ONUS HAS BEEN DISCHARGED AS ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 6 - PRESCRIBED U/S. 68 OF THE IT ACT; HOWEVER, ON THE O THER HAND, THE REVENUE DEPARTMENT IS CHALLENGING THAT BY MERELY FURNISHING FEW FORMS, VIZ., 15H AND 15G THE ASSESSEE HAS NOT DISCHARGED THE PRIMARY ONUS AS PRESCRIBED U/S.68 OF IT ACT. AS FAR AS LANGUAGE OF SECTION 68 IS CONCERNED, THE TERMINOLOGY USED IS, THE ASSESSEE OFFERS NO EXPLA NATION ABOUT THE NATURE OF SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE AO SATISFACTORY, WHICH MEANS THE ASSESSEE HAS NOT OFFERED A PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARD THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSES SEE. AS FAR AS THE APPLICABILITY OF THE LAW IS CONCERNED IT IS WELL SE TTLED THAT THE PRIMARY ONUS IS ON THE ASSESSEE TO CONCLUSIVELY PROVE THE S OURCE OF THE SUM OF MONEY FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF TH E ASSESSEE. IN SOME OF THE CASES IT HAS ALSO BEEN HELD BY THE HONBLE H IGH COURTS THAT AS PER THE GENERAL PRINCIPLE LAID DOWN U/S.68 OF IT ACT TH E ASSESSEE IS REQUIRED TO GIVE THE COMPLETE INFORMATION ABOUT THE IDENTITY OF THE PERSON WHO HAD DEPOSITED THE AMOUNT, HIS CREDITWORTHINESS THAT WHE THER HE IS IN A CAPACITY TO ADVANCE THE LOAN AND THEN THE GENUINENE SS OF THE TRANSACTION SHOULD ALSO TO BE ESTABLISHED BY THE ASSESSEE. IN O THER WORDS THIS IS THE PRIMARY ONUS WHICH IS REQUIRED TO BE DECIDED BY THE ASSESSEE. IN THIS CASE, WE HAVE NOTED THAT THE AO HAD ASKED THE ASSES SEE TIME AND AGAIN TO FURNISH ALL THOSE DETAILS BUT THAT REQUIREMENT WAS PARTIALLY COMPLIED WITH BY THE ASSESSEE. ONLY IN SOME OF THE CASES, CONFIRM ATIONS WERE FURNISHED. LIKEWISE, CAPACITY OF THE DEPOSITORS HAVE NOT BEEN PROVED. THE ASSESSEE HAS ALSO NOT FURNISHED THE REQUISITE INFORMATION IN RESPECT OF ALL THE CREDITORS. WE ARE ALSO OF THE OPINION THAT ALTHOUGH THE AMOUNTS WERE CARRIED FORWARD FROM THE PAST YEARS BUT IN THE ABSE NCE OF ANY VERIFICATION IN THE PAST AS PRESCRIBED U/S.68, THEN THE AO IN AN Y OF THE SUBSEQUENT ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 7 - YEAR, WHEN AN AMOUNT IS FOUND CREDITED IN THEIR ACC OUNTS, THEN THE A.O. IS ENTITLED TO INVOKE THE INQUIRY AS PRESCRIBED U/S.68 OF IT ACT. EVEN, IT IS NOT SUFFICIENT THAT THE AMOUNT WAS RECEIVED BY CHEQ UE OR DD, AS HELD BY FEW HONBLE HIGH COURTS, THAT THE BANK TRANSACTION SHOULD ALSO BE VERIFIED SO AS TO ESTABLISH THE CORRECT SOURCE OF F UNDING OF LOAN TO THE ASSESSEE. DUE TO ALL THESE REASONS, WE ARE NOT IN A GREEMENT WITH THAT FINDING OF LEARNED CIT(A) THAT THE ASSESSEE HAD CLE ARLY ESTABLISHED THE CREDITWORTHINESS OF THE CREDITORS. WE ARE ALSO NOT IN AGREEMENT WITH THE FINDING OF LEARNED CIT(A) THAT BY FURNISHING OF PAN DETAILS, THE ASSESSEE HAD PROVED THE CREDITWORTHINESS OF THE CREDITORS. F URNISHING OF PAN CAN LEAD TO AN INQUIRY FROM THE CONCERNED OFFICER HAVIN G JURISDICTION OVER THE SAID CREDITOR, BUT THE CREDITWORTHINESS WAS REQUIRE D TO BE INDEPENDENTLY INVESTIGATED TO ACCEPT THE LOAN U/S.68 OF IT ACT. A S FAR AS THE GENUINENESS OF THE TRANSACTION IN THE PRESENT CASE IS CONCERNED , NO EFFORT, EITHER BY AO OR BY LEARNED CIT(A), WAS MADE. WE, THEREFORE, HOLD THAT IN A SITUATION WHEN ON ONE HAND THE ASSESSEE HAS FURNISHED THE DOC UMENTS WHICH WERE REQUIRED TO BE INVESTIGATED BY THE AO AND ON THE OT HER HAND THE AO HAS NOT THOROUGHLY INVESTIGATED THOSE PARTIES WHO HAVE ADVANCED THE LOANS, THEN IT SHALL BE JUSTIFIABLE TO RESTORE THIS GROUND BACK TO THE STAGE OF THE AO TO BE DECIDED DE NOVO AS PER LAW AFRESH, NEEDLES S TO SAY AFTER PROVIDING AN ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. SINCE, THE ISSUE IS RESTORED BACK FOR DE NOVO CONSIDERATION; H ENCE, THIS GROUND OF THE REVENUE MAY BE TREATED AS ALLOWED FOR STATISTICAL P URPOSE ONLY. 8. APROPOS TO OTHER GROUND, WHICH IS IN RESPECT OF THE DISALLOWANCE OF INTEREST ON UNSECURED LOANS SINCE AS PER ABOVE PARA GRAPHS THE MATTER HAS BEEN RESTORED BACK, IN CONSEQUENCE THEREOF, THIS GR OUND IS ALSO TO BE ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 8 - DECIDED ALONG WITH GROUND NO.1; HENCE, MAY BE TREAT ED AS ALLOWED FOR STATISTICAL PURPOSE ONLY. 9. GROUND NO.3 IS REPRODUCED BELOW: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS. 1,60,070/- MADE OUT OF INTEREST EXPENSES U/S.36(1)( III) OF THE INCOME TAX ACT. 9.1 IN RESPECT OF THIS GROUND, THE OBSERVATION OF T HE AO WAS THAT THE ASSESSEE HAD PAID INTEREST OF RS.48,54,228/- ON UNSECURED LOANS. THEREUPON, IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD PAID INTEREST TO THOSE PARTIES @ 15% . LIST OF THOSE 8 PERSONS ALONG WITH THE AMOUNT OF INTEREST PAID WAS INCORPORATED IN THE ASSESSMENT OR DER. AS PER AO, THE RATE OF INTEREST AT 15% WAS HIGHER THAN THE NORMAL RATE OF INTEREST. THE AO HAS INVOKED THE PROVISIONS OF SECTION 36(I)(III) OF IT ACT AND HELD THAT THE INTEREST WAS PAID HIGHER BY 3%; HENCE, THE BALANCE INTEREST, AS COMPUTED IN THE ASSESSMENT ORDER OF RS.1,60,070/- W AS DISALLOWED. 10. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , IT WAS HELD THAT THE INTEREST PAID BY THE ASSESSEE @ 15% WAS REASONABLE, BECAUSE THE BANKS WERE ALSO CHARGING THE INTEREST AT ALMOST THE SAME RATE. IT WAS ALSO NOTED BY LEARNED CIT(A) THAT IN ONE OF THE CASE, AS REFER RED IN THE APPELLATE ORDER, THE RESPECTED ITAT HAS ALLOWED THE INTEREST UPTO 18%. 11. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES AND CONSIDERING THE EXPLANATION OFFERED BY THE ASSESSEE, WE ARE ALSO OF THE VIEW THAT IN THE ABSENCE OF ANY COMPARABLE INSTANCES THE AO WAS NOT JUSTIFIED IN PRESUMING THAT THE RATE OF INTEREST WAS HIGHER THAN THE PREVAILING RATE. ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 9 - FURTHER, WE HAVE NOTED THAT FOR THE PURPOSE OF THE EXPANSION OF THE BUSINESS, THE ASSESSEE WAS IN NEED OF THE FUNDS; HE NCE, ARRANGED THE FUNDS FROM PRIVATE PARTIES INSTEAD FROM BANKS AND PAID TH E INTEREST @ 15%. SINCE, IT WAS A BUSINESS REQUIREMENT; HENCE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF LEARNED CIT(A). RESU LTANTLY, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 12. GROUND NO.4 IS REPRODUCED BELOW: (IV) THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN HOLDING THAT THE ASSESSING OFFICER (A.O.) HAS ERRED IN REJECTING THE BOOK RESULTS EVEN WHEN THE ASSESSEE HAD NOT MAINTAINED QUANTITATIVE DETAILS OF RAW MATE RIAL, FINISHED GODS AND YIELD AND HAD NOT MAINTAINED STOCK REGISTER. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE A O ON ACCOUNT OF SUPPRESSION OF PRODUCTION. 12.1 ON ACCOUNT OF AN OBSERVATION OF THE AUDITOR IN THE AUDIT REPORT THE AO HAD RAISED A QUERY ASKING THE ASSESSEE TO EXPLAI N THE YIELD OF THE FINISH GOODS. THE ASSESSEE HAS SUBMITTED THE WORKIN G OF THE YIELD OF THREE MAJOR PRODUCTS, NAMELY, AMYL SALICYLATE, BENZYL AND CLOVE RETIFIED. THE YIELD OF THE SAID THREE PRODUCTS WAS STATED TO BE 1.15 1.25, 1.15 1.25 AND 0.70 0.80. ACCORDING TO AO, THE YIELD I N RESPECT OF SOME OF THE PRODUCTS WAS TOWARDS LOWER SIDE. IN HIS OPINION , IN THE CHEMICAL MANUFACTURING SUCH A LOW YIELD WAS NOT POSSIBLE. IN COMPLIANCE OF AN ANOTHER SHOW CAUSE NOTICE, THE ASSESSEE HAS GIVEN T HE REASONING, RELEVANT PORTION IS AS FOLLOWS: POINT NO :-4 : YIELD BASE WE ARE MANUFACTURER OF AROMATICS INGREDIENTS AS PER OUR PREVIOUS SUBMISSION ON 27/08/2011, WE HAVE EXPLAINED THE FAC TS YIELD OF ANY PRODUCTS DEPENDS PURELY ON FINISHED GOODS AS PER CUSTOMER OR DER RECEIVED. REASONS FOR LOWER YIELD OF 3RD PRODUCTS: ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 10 - IN ADDITION WE HAVE TO STATE THAT WE HAVE SHOWN YIE LD OF CLOVE RECTIFIED FOR THIS PRODUCTS WE HAVE TO USE CRUDE CLOVE OIL WHICH WAS MENTIONED IN THIS MATERIALS AND FROM THIS CRUDE OIL WE HAVE TO RESOLV E IMPURITIES AND UNWANTED MATERIALS BY VARIOUS METHOD OF RECTIFICATION TO BRI NG THE DESIRED PURITY OF FINISHED PRODUCTS CLOVE RECTIFIED. IN THIS PROCESS RESULTS IN TO YIELD LOWER THAN 01.00 (ONE). THERE IS ALSO LOSS BY ALMOST MERE. REASONS, MOISTURE ETC. WE HAVE TO PRODUCE PRODUCTS AS PER CUSTOMER'S REQUI REMENT AND HENCE THERE IS NO FINISHED PRODUCT. SO, IN OUR CASE, FINISHED P RODUCTION IS CONSIDERED AS SALES QUANTITY AND OTHER STOCKS ARE CONSIDERED AS S EMIFINISHED GOODS AND WE HAVE SHOWN STOCK OF SEMI FINISHED GOODS IN OUR RECO RDS. THE ABOVE JUSTIFIES THE WORKING OF YIELD WHICH WE S UBMITTED PREVIOUSLY AND PLEASE TAKE NOTE. 12.2 THE AO HAS AGAIN ASKED TO FURNISH THE PRODUCT- WISE YIELD AND IN COMPLIANCE THE ASSESSEE HAS PLACED ON RECORD THE YI ELD OF THE MAJOR PRODUCTS WHICH WAS 73.45 AVERAGE. AFTER PERUSING TH E CHART FURNISHED BY THE ASSESSEE; AO HAS NOTED THAT THE WASTAGE CLAIMED BY THE ASSESSEE WAS TOWARDS HIGHER SIDE. THE AO HAS ALSO NOTED THAT THE ASSESSEE HAS NOT PRODUCED THE STOCK REGISTER. BY PLACING THE RELIANC E ON THE RATIO OF BRIJ MOHAN BANSAL, 213 CTR 171 (P & H), RATTAN LAL OM PR AKASH, 132 ITR 640 (ORRISA) AND MOHD. HARON & CO., 274 ITR 490 (AL LD.) THE AO HAS HELD THAT THERE WAS SUPPRESSION OF PRODUCTION AND THE SAME WAS CALCULATED AS UNDER: THE ASSESSEE HAS NOT PROVIDED THE QUANTITATIVE DETA ILS, THEREFORE, EXACT WORKING OF SUPPRESSION OF PRODUCTION IS DIFFICULT T O ARRIVE AT. UNDER THESE CIRCUMSTANCES, THE VALUE OF SUPPRESSION OF PRODUCTI ON IS DETERMINED BY TAKING THE FIGURES OF PRODUCTION GIVEN VIDE LETTER DATED 2 8/12/2011. AS PER THE DETAILS, TOTAL CONSUMPTION OF RAW MATERIAL IS 43,35 4.60 KG. AND PRODUCTION IS 31,837.75 KG. THE SUPPRESSION OF PRODUCTION ON CONS UMPTION OF RAW MATERIAL OF 43,354.60 KG. IS WORKED OUT @ 11.15% AT 4,834 KG . THE AVERAGE SALE_PRICE IS RS. 1,55,51,087/- 33,936 KG. = RS. 458.21/KG. THE VALUE OF 4,834 KG. OF FINISHED GOODS @ RS. 458.21/ COMES TO RS. 22,14,987/-. THE ADDITION OF RS. 22,14,987/- IS MADE ON ACCOUNT SUPP RESSION OF PRODUCTION. ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 11 - THE ASSESSEE HAS CONCEALED THE INCOME OF RS.22,14,9 87/- BY SUPPRESSING THE PRODUCTION. PENALTY PROCEEDINGS U/S .271(L)(C) OF THE ACT ARE INITIATED. [ADDITION OF SUPPRESSION OF PRODUCTION RS.22,14,9 87/-] 13. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY. LEARNED CIT(A) HAS GRANTED RELIEF IN THE LIGHT OF T HE FOLLOWING OBSERVATIONS: 5.2 (III THE BOOKS OF ACCOUNTS WERE AUDITED BY EXC ISE AUTHORITIES AND THE AUDIT REPORT WAS SUBMITTED ON 19.12.2011. THE A UDIT PERIOD WAS FROM NOVEMBER 2006 TO SEPTEMBER, 2011. IT MEANS THAT THE CURRENT FINANCIAL YEAR WAS COVERED WITH THE EXCISE AUDIT. THE EXCISE AUDIT ORS HAS NOT FOUND OUT ANY DEFECTS IN CONSUMPTION OF RAW MATERIALS AND PRODUCT ION. THIS FACT ALSO INDICATE THAT THE BOOKS OF ACCOUNTS WERE TRUTHFULLY MAINTAINED BY THE APPELLANT. (IV) BOOKS OF ACCOUNTS WERE AUDITED BY THE STATUTOR Y AUDITORS AND THE AUDITORS HAS VERIFIED THE FINANCIAL RESULTS AND THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. THE AUDITORS HAS NOT G IVEN ANY ADVERSE COMMENT ON THE BOOKS OF ACCOUNTS OF THE APPELLANT. 5.3 IN VIEW OF ABOVE FACTS AND KEEPING IN VIEW OF T HE FACTS THAT THE AO HAS NOT FOUND SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS , I AM INCLINED TO AGREE WITH THE CONTENTIONS OF LD. AR. ACCORDINGLY, I HOLD THAT ADDITION OF RS.22,14,987/- MADE BY THE AO AGAINST SUPPRESSION OF PRODUCTION IS UNTENABLE AND THE SAME IS ORDERED TO BE DELETED. THE APPELLANT WILL GET RE LIEF TO THIS EXTENT. THIS GROUNDS OF APPEAL IS ALLOWED. 14. AFTER HEARING BOTH THE SIDES, AS ALSO AFTER PER USING THE ORDER OF LEARNED CIT(A), WE ARE OF THE VIEW THAT WITHOUT PLA CING ON RECORD ANY SUBSTANTIVE DEFECT IN THE BOOKS OF ACCOUNT IT WAS N OT JUSTIFIABLE ON THE PART OF THE AO TO PRESUME THAT THERE WAS SUPPRESSIO N OF PRODUCTION. FACTS OF THE CASE HAVE FURTHER REVEALED THAT THE PRODUCTI ON WAS ALSO SUBJECT TO SCRUTINY BY EXCISE DEPARTMENT. THE PRODUCTION ACCOU NTS WERE THEREFORE ALSO SUBJECT TO AUDIT BY THE SAID DEPARTMENT. THE A SSESSEE HAS ALSO FURNISHED THE COMPARATIVE FIGURES OF THE TURN OVER, ALSO THE CORRESPONDING PROFITS EARNED FROM THE PAST YEARS. ON THE BASIS OF ALL THAT DETAILS INFORMED THE AO THAT THE TURNOVER HAD GONE UP DURIN G THE YEAR UNDER CONSIDERATION AND OVER ALL RESULTS WERE BETTER THAN THE PAST YEAR. WE THEREFORE APPROVE THE FINDING OF LEARNED CIT(A) THA T IN THE ABSENCE OF ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 12 - ANY PARTICULAR DEFECT IN THE BOOKS OF ACCOUNTS AND IN THE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD AGAINST THE ASSESSEE, TH E AO WAS UNJUSTIFIED IN ESTIMATING THE PERCENTAGE OF THE SUPPRESSION OF PRODUCTION. WE, THEREFORE, AFFIRM THE FINDINGS OF LEARNED CIT(A) AN D FIND NO FORCE IN THIS GROUND OF THE REVENUE; HENCE DISMISSED. 16. GROUND NO.5 IS REPRODUCED BELOW: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION MADE ON ACCOUNT OF INCLUSION OF EXCISE DUTY IN VALUATION OF CLOSING ST OCK MADE IN VIEW OF THE CLEAR PROVISIONS OF SECTION 145A OF THE INCOME TAX ACT. 16.1 THE AO HAS NOTED THAT IN THE TRADING ACCOUNT THE AS SESSEE HAD SHOWN TRANSFER OF GOODS WORTH RS.83,37,613/- FROM TRADING DIVISION TO MANUFACTURING DIVISION. IN THE MANUF ACTURING DIVISION, THE GOOD RECEIVED ON TRANSFER WERE ALLEGE D TO BE SHOWN AT RS.70,24,204/-. IT WAS EXPLAINED BY THE ASSESSEE TH AT THE EXCISE DUTY PAID ON THE GOODS TRANSFERRED HAD BEEN EXCLUDE D ON TRANSFER TO MANUFACTURE DIVISION. FURTHER, IT WAS NOTED BY T HE AO THAT AT THE END OF THE YEAR THE CLOSING STOCK OF THE MANUFACTUR ING DIVISION WAS SHOWN AT RS.20,39,181/-. SO THE AO HAS COMMENTED TH AT THE CLOSING STOCK INCLUDES THE GOODS TRANSFERRED FROM TRADING DIVISION TO MANUFACTURING DIVISION. ACCORDING TO AO, THE VA LUE OF THE CLOSING STOCK DID NOT INCLUDE THE EXCISE DUTY. AS P ER THE AMENDED PROVISIONS OF SECTION 154A, ACCORDING TO AO, THE EX CISE DUTY WAS TO BE INCLUDED IN THE VALUATION OF CLOSING STOCK. T HE AO HAD WORKED OUT THE EXCISE DUTY COMPONENT @ 19% AT THE C LOSING STOCK OF RS.20,39,181/- AND INCLUDED THE EXCISE DUT Y COMPONENT OF RS.3,87,444/- IN THE ASSESSEE INCOME OF THE ASSESSE E. ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 13 - 17. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, THE MAIN CONTENTION OF THE ASSESSEE WAS AS UNDER: 5. THE NEXT GROUND OF APPEAL (GROUND NO.14 & 15) I S REGARD TO AN ADDITION OF RS.3,87,444/- ON ACCOUNT OF EXCISE DUTY INCLUDED IN THE CLOSING STOCK. YOUR APPELLANT SUBMITTED THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS THE METHOD OF ACCOUNTING FOLLOWED IN THE TRADING AND MA NUFACTURING DIVISION WAS EXPLAINED WITH THE TREATMENT OF EXCISE DUTY CHARGED ON THE MANUFACTURING OF FINISHED GOODS. THE LD. AO NOT APPRECIATING THE FAC TS OF THE CASE THAT SINCE THE APPELLANT GOODS, WHICH HAS NOT LEFT THE FACTORY PRE MISES OF THE APPELLANT, ADDITION THEREOF CANNOT BE MADE AS THE ELEMENT OF C OST. YOUR APPELLANT SUBMITS THAT SINCE THE APPELLANT HAS DEBITED PURCHASES ALSO EXCLUSIVE OF EXCISE DUTY AS ALSO OPENING STOCK IS A LSO CONSTANTLY VALUED AS SUCH, THERE WILL BE NO EFFECT ON CURRENT YEARS PROF IT WHICH IS REVENUE NEUTRAL IF EQUAL AMOUNT IS ALSO GIVEN CREDIT IN DEBIT OF PURCH ASE AND OPENING STOCK VALUATION. 17.1 LEARNED CIT(A) WAS OF THE VIEW THAT THE ASSESS EE HAD FOLLOWED EXCLUSION METHOD OF ACCOUNTING. ACCORDING TO HIM, T HE EXCISE DUTY WAS NEITHER DEBITED NOR CREDITED IN THE P&L A/C AND IT WAS AN ITEM OF THE BALANCE SHEET. ACCORDING TO HIM, THE EXCISE DUTY PA ID ON TRANSFER OF GOODS WAS REVENUE NEUTRAL. HE HAS ALSO COMMENTED TH AT THE AO HAD NOT FOUND DEFECT IN THE ACCOUNTING POLICIES FOLLOWED BY THE APPELLANT. AFTER DISCUSSING FEW CASE LAWS, HE HAS DELETED THE IMPUGN ED ADDITION. 18. WE HAVE HEARD BOTH THE SIDES. WE ARE NOT IN AGR EEMENT WITH THE FINDINGS OF LEARNED CIT(A) PRIMARILY BECAUSE OF THE REASON THAT NO CONVINCING REPLY WAS GIVEN BY THE ASSESSEE THAT WHY ON TRANSFER OF GOOD FROM TRADING DIVISION TO MANUFACTURING DIVISION THE VALUE OF THE GOODS WAS NOT THE SAME AND WHY IT WAS REDUCED FROM RS.83, 37,613/- TO RS.70,24,204/-? IF THE EXCISE DUTY WAS PAID AT THE TIME OF PURCHASE THEN WHEY IT WAS EXCLUDED ON TRANSFER TO MANUFACTURING D IVISION? FURTHER WE ARE ALSO NOT CONVINCED WITH THE SAID FINDING OF LEA RNED CIT(A) THAT DUE TO EXCLUSION METHOD OF ACCOUNTING ADOPTED BY THE ASSES SEE THE COMPONENT ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 14 - OF EXCISE DUTY WAS NOT THE PART AND PARCEL OF THE P &L A/C BUT IT WAS DIRECTLY REFLECTED IN THE BALANCE-SHEET AT THE CLOS E OF THE ACCOUNTING PERIOD. ACCORDING TO US, AFTER THE INTRODUCTION OF SECTION 145A THE METHOD OF ACCOUNTING HAS BEEN STREAMLINED. ACCORDIN G TO THIS PROVISION INSPITE OF ANYTHING CONTAINED IN SECTION 145 OF IT ACT THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PU RPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION SHALL BE FURTHER ADJUSTED TO INCLUDE TH E AMOUNT OF ANY TAX, DUTY, CESS (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE AS ON THE DATE OF VALUATION. THEREFORE, LE ARNED CIT(A) IS EXPECTED TO ANALYZE THE PROVISION OF THE ACT IN THE LIGHT OF THE FACT OF THE CASE; ESPECIALLY THE AMOUNT OF THE EXCISE DUTY ACCO UNTED FOR IN THE BOOKS OF ACCOUNTS AT THE TIME OF PURCHASE OF RAW MATERIAL , AS ALSO AT THE TIME OF VALUATION OF CLOSING STOCK. WE ARE ALSO NOT CONVINC ED WITH THE FINDING OF LEARNED CIT(A) THAT HOW THE COMPONENT OF EXCISE DUT Y WAS REVENUE NEUTRAL IN THE PRESENT CASE. TO APPRECIATE THE COR RECT FIGURES OF EXCISE DUTY ACCOUNTED FOR IN THE P & L A/C AND AS TO WHETH ER IT WAS TRANSFERRED TO THE BALANCE-SHEET BY THE ASSESSEE, ARE NOT EMERG ING FROM THE FACTS OF THE CASE. THEREFORE, WE DEEM IT PROPER TO RESTORE T HIS GROUND BACK TO THE STAGE OF THE AO TO BE DECIDED DENOVO AFTER ASKING T HE ASSESSEE TO PRODUCE BEFORE HIM THE ACCOUNTS OF THE TRADING DIV ISION AS WELL AS THE ACCOUNTS OF THE MANUFACTURING DIVISION. SINCE, TH E MATTER HAS BEEN RESTORED BACK FOR DENOVO CONSIDERATION; HENCE, THIS GROUND OF THE REVENUE IS HEREBY ALLOWED ONLY FOR STATISTICAL PURP OSE. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWED. B. ASSESSEES APPEAL (ITA NO.2839/AHD/2012) ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 15 - 19. THE ASSESSEE HAS RAISED GROUND NO.1 AND 2 AS FO LLOWS: 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF COMMISSION EXPENSE OF RS.7,78,582/ - THOUGH THE APPELLANT HAD SUBMITTED THE DETAILS OF NATURE OF EX PENDITURE, WORK PERFORMED AND SALES MADE THROUGH COMMISSION AGENTS. THE COMMI SSION EXPENSE HAVING BEEN INCURRED FOR THE PURPOSE OF BUSINESS AS IN THE PAST, THE SAME BE ALLOWED. 2. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT THE COMMISSION AGENTS HAD ACTUALLY RENDERED SERVICES FROM YEAR TO YEAR AND COMPLETE DETAILS INCLUDING CONFIRMATION, P.A.N. AS WELL AS TDS WERE FURNISHED. THE COMMISSION EXPENSE BEING REASONABLE AND INCURRED OU T OF COMMERCIAL EXPEDIENCY OUGHT TO HAVE BEEN ALLOWED, THE SAME BE ALLOWED NOW. 19.1 IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD P AID COMMISSION OF RS.7,78,582/- TO VARIOUS PERSONS. THE ASSESSEE HAS FURNISHING DETAILS OF THE PERSONS TO WHOM THE COMMISSION WAS PAID. THE AS SESSEE HAD COMPETED TO GET THE ORDER FROM THE PARTIES. TO HELP IN THE EXECUTION OF THE ORDER AND TO HELP IN GETTING THE PAYMENT IN TIM E, AS ALSO TO RESOLVE THE PROBLEM IN TRANSACTION IF INCURRED; THE SAID COMMIS SION WAS PAID. IT WAS ALSO INFORMED THAT THE TDS WAS DEDUCTED. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD FAILED TO JUSTIFY TH E PAYMENT OF COMMISSION WITH SUPPORTING EVIDENCES. HE HAS CITED THESE DECISIONS, VIZ., ASSAM PESTICIDES & AGRO CHEMICALS, 251 CTR 213 (GUJ .), CHANDRAVILAS HOTEL, 164 ITR 102 (GUJ.), LACHMINARAY AN MADAN LAL, 86 ITR 439 (SC) AND DISALLOWED THE CLAIM. 20. ALTHOUGH, IT WAS NOTED BY LEARNED CIT(A) THAT D URING THE ASSESSMENT PROCEEDINGS, AS WELL AS DURING THE APPEL LATE PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THE DETAILS OF THE COMMISSIO N EXPENSES, NAMES AND ADDRESSES OF THE COMMISSION AGENT, THEIR PAN, C ONFIRMATION ETC. BUT ACCORDING TO HIM THE ASSESSEE HAD FAILED TO PRODUCE HARD EVIDENCE TO PROVE THE FACT OF THE SERVICES RENDERED BY THE COMM ISSION AGENTS. ACCORDING TO HIM, THE ASSESSEE HAS NOT ESTABLISHED THAT THE COMMISSION ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 16 - WAS PAID BUT DUE TO THE COMMERCIAL EXPEDIENCY OF TH E ASSESSEE. THE ACTION OF THE AO WAS CONFIRMED BY FOLLOWING FORTUNE INTERNATIONAL , 177 TAXATION 50 (DELHI). 21. WITH THIS BRIEF BACKGROUND, WE HAVE HEARD THE R IVAL SUBMISSIONS. AT THE OUTSET, IT IS WORTH TO MENTION THAT AS PER T HE COMPARISON OF THE COMMISSION PAID IN THE PRECEDING YEAR, IT IS EVIDEN T THAT THERE WAS NO ABRUPT INCREASE IN THE PAYMENT OF THE COMMISSION AS PER THE FOLLOWING CHART. PARTICULARS A.Y.2008-09 A.Y. 2009-10 SALES (RS.) 48575770.00 56529754.00 COMMISSION (RS.) 694702.00 778582.00 PERCENTAGE (%) 1.43 1.37 21.1 WE HAVE BEEN INFORMED THAT NO SUCH DISALLOWANC E WAS MADE EARLIER. AS PER THE DETAILS FURNISHED BEFORE THE LO WER AUTHORITIES, IT WAS EXPLAINED THAT THE COMMISSION WAS PAID TO THE AGENT S FOR PROCURING ORDERS FROM OUTSIDE AND ALSO GETTING PAYMENT ON THE SALES WHICH WERE EXECUTED THROUGH THOSE AGENTS. ONE OF THE ADMITTED FACTUAL POSITION WAS THAT THE TDS ON COMMISSION WAS ALSO DEDUCTED. IT HAS ALSO BEEN PLEADED THAT IT WAS NOT THE CASE OF THE REVENUE DEP ARTMENT THAT THE IMPUGNED COMMISSION WAS PAID TO THE RELATED PARTIES . THE ASSESSEE HAS FURNISHED FEW CASE LAWS OF THE RESPECTED CO-ORDINAT E BENCHES OF THE TRIBUNAL IN SUPPORT OF THE CLAIM THAT THE SERVICES RENDERED BY THOSE COMMISSION AGENTS HAVE ALSO BEEN ESTABLISHED; HENCE , THE DISALLOWANCE WAS LEGALLY INCORRECT. WE, THEREFORE, HOLD THAT THI S IS NOT THE CASE WHERE PAYMENT OF COMMISSION WAS MADE MERELY THROUGH ACCOU NT PAYEE CHEQUES BUT THIS IS THE CASE WHERE THE FACTS HAVE R EVEALED THAT THE ORDER ITA NO.2839/AHD/2012 & ITA NO.176/AHD/2013 M/S. ARPAN AROMATICS VS. ACIT RANGE-6, AHMEDABAD. ITO WARD-6(4), AHMEDABAD VS. M/S. ARPAN AROMATICS A.YS.2003-04 & 2004-05 - 17 - HAVE BEEN PROCURED AND THE SALES WERE EXCLUDED THRO UGH THOSE COMMISSION AGENTS, THEREFORE, ON PAYMENT OF COMMISS ION THE TDS WAS DEDUCTED BY THE ASSESSEE. RESULTANTLY, AFTER CONSID ERING FEW CASE LAWS IN SUPPORT OF THE ASSESSEE, WE HEREBY REVERSE THE FIND INGS OF REVENUE AUTHORITIES AND ALLOW THIS GROUND. 22. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLO WED AND ASSESSEES APPEAL IS ALLOWED. SD/- SD/- (N.S. SAINI) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 20/06/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD