ITO, New Delhi V. M/s Opera Global Pvt. Ltd., New Delhi

ITA 2926/DEL/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6458 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 01-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Keywords: Rejection of books of accounts; Assessment record
• Section: 194C

Judgement Text

1 ITA NO. 2926 /DEL/2011 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBL E, JUDICIAL MEMBER I.T.A . NO.-2926/DEL/2011 (ASSESSME NT YEAR-2005-06) ITO WARD-13(4), ROOM NO. 219, C. R. BUILDING NEW DELHI (APPELLANT) VS OPERA GLOBAL PVT. LTD. D-12/2, OKHLA INDUSTRIAL AREA, PHASE-II NEW DELHI AAAC07607G (RESPONDENT) APPELLANT BY SH. AMRIT LAL, SR. DR RESPONDENT BY SH. VED JAIN, CA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 15/02/2011 PASSED BY LD. CIT (A)S XVIII, NEW DELHI FOR THE AS SESSMENT YEAR 2005-06. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE TRADING ADDITIO N OF RS.1,45,01,481/- TO RS.10,68,331/- THEREBY GIVING A RELIEF OF RS. 1,34,33,150/- WITHOUT APPRECIATING THE FACTS DISCUS SED IN THE ASSESSMENT ORDER AND REMAND REPORT. DATE OF HEARING 01.02.2016 DATE OF PRONOUNCEMENT 15.02.2016 2 ITA NO. 2926 /DEL/2011 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE G.O OF THIS YEAR IS DULY SUPPORTED BY THE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS ETC., DESPITE THE FACT THAT COMPLETE B OOKS OF ACCOUNTS AND BILLS FOR PURCHASES IN PARTICULAR AND BILLS/VOU CHERS FOR EXPENSES WERE NOT PRODUCED EVEN DURING REMAND PROCEEDINGS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ABOVE ADDITIO N MADE BY THE A.O BY MECHANICALLY APPLYING LAST YEARS FIGURES CANNOT BE SUSTAINED WITHOUT APPRECIATING THE FACTS RELATING TO VARIOUS DISCREPANCIES DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER AND THE REMAND REPORT THAT THE TRADING ADDITION WAS NOT BASED ON ACCOUNT OF SUPPRESSION OF SALES BUT ON ACCOUNT OF HUGE INFLATION IN PURCHA SES FROM THREE PARTIES AND VARIOUS OTHER DISCREPANCIES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT AS PER LEDGER ACCOUNT OF THE APPELLANT THE PURCHASE FR OM M/S CITY CREATIONS IS SHOWN AT RS.20,11,158/- WHEREAS AS PER THE CONFIRMATION OF THE PARTY AS MENTIONED IN THE A.OS ORDER THE NET SALES FIGURE IS RS.20,71,603/- THEREBY RESULTING IN A DIFFERENCE OF RS.60445/- WITHOUT APPRECIATING THE FACTS DISCUSSE D IN THE ASSESSMENT ORDER AND REMAND REPORT THAT THE TOTAL P URCHASES FROM THIS PARTY HAVE BEEN BOOKED BY THE ASSESSEE AT A SU BSTANTIAL INFLATED FIGURE OF RS.2,22,06,527/-. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT AS PER LEDGER ACCOUNT OF THE APPELLANT THE PURCHASE FR OM M/S RAINBOW ENTERPRISES IS SHOWN AT RS.51,86,209/- WHEREAS AS P ER THE CONFIRMATION OF THE PARTY IT IS RS.51,78,342/- THER EBY RESULTING IN A 3 ITA NO. 2926 /DEL/2011 DIFFERENCE OF RS.7866/- WITHOUT APPRECIATING THE F ACTS DISCUSSED IN THE ASSESSMENT ORDER AND REMAND REPORT THAT THE TOT AL PURCHASES FROM THIS PARTY HAVE BEEN BOOKED BY THE ASSESSEE AT A SUBSTANTIAL INFLATED FIGURE OF RS.1,54,87,182/-. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT FROM M/S RAJA FASHION, THE PURCHASE FIGURE AS PER THE APPELLANTS BOOK IS RS.72,71,311/- WHEREAS PER THE PARTY CONFIR MATION THE FIGURE IS RS.92,02,231/- THEREBY SHOWING HIGHER SAL ES BY THE PARTY OF RS.19,30,920/- WITHOUT APPRECIATING THE FACTS D ISCUSSED IN THE ASSESSMENT ORDER AND REMAND REPORT THAT THE TOTAL P URCHASES FROM THIS PARTY HAVE BEEN BOOKED BYTE AT A SUBSTANTIAL I NFLATED FIGURE OF RS.1,38,89,773/-. THUS, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN RESTRICTING THE TRADING ADDITION TO THE EXTENT OF DIFFERENCE IN PURCHASES OF RS.60445+10,00,000=10,68 ,331/- WITHOUT APPRECIATING THE EXCESSIVE AMOUNT OF PURCHA SES BOOKED IN THE NAMES OF ABOVE THREE PARTIES BY RS.2,01,95,369 +1,03,00,973+66,18,462=3,71,14,799 . 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF RS. 3,07,29,707/- MADE U/S 40(A)(IA) TO RS.53,000/- ONLY THEREBY GIVI NG A RELIEF OF RS.3,01,99,707/- WITHOUT APPRECIATING THE FACTS DIS CUSSED IN THE ASSESSMENT ORDER AND REMAND REPORT. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE ACTIVITIES OF FABRICATION, EMBROIDERY AND FINISHING & WASHING WERE 4 ITA NO. 2926 /DEL/2011 DONE IN-HOUSE BY THE ASSESSEE AND THAT PART OF THE EMBROIDERY CHARGES WHICH RELATED TO PAYMENT TO OUTSIDERS WERE LESS THAN RS.50,000/- EACH THEREBY DELETING RS.2,00,71,365/- . EMBROIDERY CHARGES OF RS.37,36,298/- AND FINISHING AND WASHING CHARGES TO THE EXTENT OF RS.16,04,529/- WITHOUT APPRECIATING T HE FACTS DISCUSSED IN DETAIL IN THE REMAND REPORT AND ALSO W ITHOUT VERIFYING THE FACT FROM THE ASSESSMENT RECORD THAT (I) FABRIC ATION CHARGES OF RS.42,86,882/- WERE PAID TO 15 PARTIES ABOVE RS. 1 LACS EACH AND THE BALANCE AMOUNT OF RS.1.58 CRORE WAS PAID TO THE WORKERS OF SOME OUTSIDE CONTRACTORS: (II) EMBROIDERY CHARGES O F RS.19,60,540/- WERE SHOWN PAID TO TEN PARTIES ABOVE RS. 1 LACS EAC H; AND (III) FINISHING & WASHING CHARGES OF RS. 11,60,170/- HAVE BEEN SHOWN PAID TO FOUR PARTIES ABOVE RS. 1 LACS EACH, NAMELY JAI KARAN PRESSING RS. 3,765,785/- SANTOSH WASHING & FINISHIN G RS. 5,03,244/-: RAJ KUMAR PRESSING RS. 1,16,725/-; AND AHUJA BROTHERS RS. 1,63,416/-. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT DYEING & PRINTING CHARGES WAS ON ACCOUNT OF PURCHASE OF DYED/PRINTED FABRICS FROM VA RIOUS PARTIES WHICH AS PER THE A.O DO NOT REQUIRE DEDUCTION OF TD S THEREBY DELETING THE ENTIRE DISALLOWANCE MADE U/S 40(A)(IA) OF RS.31,88,401/- WITHOUT APPRECIATING THE FACT DISCUS SED IN REMAND REPORT AND ALSO WITHOUT VERIFYING THE FACTS FROM TH E ASSESSMENT RECORDS THAT AS PER DETAILS OF CLOSING STOCK FURNIS HED VIDE LETTER DATED 16/1/2007, THE VALUE OF FABRICS WITH DYERS HA S BEEN SHOWN AT RS.14,25,648/-. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE LAB TESTING C HARGES ARE ALSO FULLY IN HOUSE AND HENCE THERE IS NO LIABILITY OF T DS THEREBY DELETING 5 ITA NO. 2926 /DEL/2011 THE ENTIRE DISALLOWANCE MADE U/S 40(A)IA) OF RS .5, 03,516/- WITHOUT APPRECIATING THE FACTS OF REMAND REPORT AND WITHOUT VERIFYING FROM THE RECORD THAT OUT OF TOTAL AMOUNT OF RS.5,03,516/ -, RS.2,66,239/- WAS PAID TO M/S S.G.S INDIA AND RS.2,34,917/- WAS P AID TO M/S INTERTEK TESTING SERVICES. 11. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT NO PAYMENT EXCEE DING RS.50000/- TO ANY AGENT WAS MADE AND THAT THERE WAS NOT LIABI LITY FOR TDS U/S 194C THEREBY DELETING THE ENTIRE DISALLOWANCE MADE US/ 40(A)(IA) OF RS.6,39,195/- DESPITE THE FACT THAT NO DETAILS WERE FURNISHED EVEN DURING REMAND PROCEEDINGS. 12. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT COMMISSION WAS DIRECTLY DEDUCTED BY THE FOREIGN CO MMISSION AGENT ON SALES MADE THROUGH HIM AND ONLY THE BALANCE AMOU NT, NET OF COMMISSION, WAS RECEIVED BY THE APPELLANT AND SINCE NO PAYMENT HAS BEEN MADE BY THE APPELLANT, THERE IS NO LIABILI TY OF TDS THEREBY DELETING THE ENTIRE DISALLOWANCE MADE OF RS.6,61,61 3/- DESPITE THE FACT THAT NO EVIDENCE IN THIS REGARD WAS FURNISHED EVEN DURING THE REMAND PROCEEDINGS. 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ENTIRE DISALLOWANC E OF RS.10,00,000/- MADE OUT OF SALARY EXPENSES WITHOUT APPRECIATING THE FACTS DISCUSSED IN DETAIL IN THE ASSESSMENT ORD ER AND THE REMAND REPORT AND THE FACT THAT IN RESPECT OF SEVEN ALLEGED EMPLOYEES MENTIONED IN THE ASSESSMENT ORDER TO WHOM SALARY OF RS.4,18,000/-, RS.3,97,650/-, RS.3,48,000/-, RS. 3, 00,000/- RS.1,890,000/- AND RS.5,28,000/- SHOWN TO HAVE BEEN PAID, NO EVIDENCE, AS ASKED FOR, WAS FILED EVEN DURING THE R EMAND 6 ITA NO. 2926 /DEL/2011 PROCEEDINGS AND THREE OF THEM WERE SHAREHOLDERS IN THE ASSESSEE COMPANY DURING THE YEAR. 3. GROUND NO. 1 TO 7 DEALS WITH THE GROSS PROFIT RA TE ADOPTED BY THE ASSESSING OFFICER IN MAKING TREATING ADDITION OF R S.1,45,01,481/- BY ADOPTING THE GROSS PROFIT RATE OF THE PRECEDING YEAR. GROUN D NO. 8 TO 12 ARE RELATED TO THE DISALLOWANCE OF RS.3, 07,29,707/- U/S 40(A)(IA) OF THE INCOME-TAX ACT BY THE ASSESSING OFFICER AS RELATES TO NON DEDUCTION OF T DS BY MAKING THE PAYMENT FOR THE VARIOUS EXPENSES. GROUND NO. 13 IS RELATED TO THE SALARY EXPENSES OF RS.10 LACS DISALLOWED BY THE ASSESSING OFFICER. 4. THE ASSESSEE IS A PRIVATE LIMITED COMPANY FILED ITS RETURN ON 31/10/2005 DECLARING AN INCOME OF RS.10,85,211/- AL ONG WITH THE SAID RETURN, THE ASSESSEE COMPANY HAS FILED AUDITED BALANCE-SHEE T, PROFIT AND LOSS ACCOUNT, SCHEDULE OF EXPENSES, AUDIT REPORT AND DOCUMENTS IN SUPPORT OF DEDUCTIONS CLAIMED. THE BUSINESS OF THE ASSESSEE COMPANY IS A MANUFACTURER AND EXPORT OF GARMENTS. THE ASSESSING OFFICER WHILE DECIDING THE GROSS PROFIT RATE HAS GIVEN A FINDING THAT THE GROSS PROFIT RATE DECLARED IN THE A. Y 2005-06 IS TOO LOW I.E. 16.72% COMPARE TO THE IMMEDIATE PRECEDING ASSE SSMENT YEAR WHERE THE ASSESSEE COMPANY HAS SHOWN GROSS RATE OR 25.79%. T HEREFORE, THE ASSESSING OFFICER ADOPTED G.P RATE FOR THE YEAR UNDER CONSIDE RATION TOO THAT OF THE IMMEDIATE PRECEDING ASSESSMENT YEAR AS RELATES TO D ISALLOWANCE U/S 40(IA). THE ASSESSING OFFICER HAS DISALLOWED CHARITY AND DONATI ONS TO THE EXTENT OF RS.17,556/-, DISALLOWANCE OUT OF ESI & PF TOWARDS R S.2,08,542/- DISALLOWANCE OF PAYMENTS MADE TO FALSE AMOUNTING TO RS.9,615/- D ISALLOWANCE OF PAYMENTS MADE TO POSTMAN TO RS.3,420/- DISALLOWANCE OF PAYME NTS AS TO TRAFFIC CHALLAN TO RS.1,300/- DISALLOWANCE OF EXPENSES INCURRED ON BEHALF OF ONS CREATION PVT. LTD. TO THE EXTENT OF RS.8,225/- DISALLOWANCE OF PA YMENT SPENT ON MOBILE TO RS.19,509/- DISALLOWANCE OF PAYMENTS MADE RELATED T O VIOLATION OF PUBLIC POLICY TO RS.6,150/- DISALLOWANCE OF PAYMENTS FOR COMPANY REGISTRATION TO RS.2,200/- 7 ITA NO. 2926 /DEL/2011 DISALLOWANCE OF CASH FOR DEPOSITING IN BANK ACCOUNT TO RS.5,300/- DISALLOWANCE OF INCOME TAX DEBITED TO PROFIT AND LOSS ACCOUNT TO RS.2,42,163/- DISALLOWANCE OF PROFESSIONAL CHARGES OF RS. 2,200/- DISALLOWANCE OF PAYMENT MADE TO M/S SELECTIVE PLACEMENT CONSULTANT TO RS.10,868/- DISAL LOWANCE OF PAYMENT RELATING TO SHRI B. K. CHABRA TO RS.53,000/- DISALL OWANCE OF PAYMENTS MADE TO SHRI SUNIL BHATTACHARYA TO RS.2 LAC DISALLOWANCE O UT OF PROFESSIONAL CHARGES TO RS.3,50,000/- DISALLOWANCE TO SALARY EXPENSES TO RS.10 LACS. AS RELATES TO DISALLOWANCE U/S 40(IA) THE ASSESSING OFFICER SUBM ITTED THAT THERE WAS NO DETAILS FILED BY THE ASSESSEE AND IF AT ANY STAGE THE DETAILS IF FILED THEN THERE WILL BE ALLOW ABILITY IN VIEW OF THE PROVISIONS OF SECTION 40(IA). 4. THE CIT(A) AS RELATES TO GROUND NO. 1 TO 7 CATEG ORICALLY OBSERVED THAT SINCE THE DUTY DRAWBACK IS INCLUDED IN THE SENSE T HE DRASTIC DEDUCTION OF 12% HAS RESULTED IN THE LOWERING G.P RATIO IN THIS ASSE SSMENT YEAR WHICH WAS POINTED OUT BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. THE CIT(A) ALSO ACCEPTED THE CONTENTION OF THE ASSESSEE THAT ALL PA YMENTS WERE MADE THROUGH BANKING CHANNELS AND ADMITTED THAT THERE IS A POSSI BILITY OF DISCREPANCY IN PARTY ACCOUNTS DUE TO LACK OF PROPER RE-CONCILIATIO N AND NON MAINTENANCE OF STOCK REGISTER BY THE ASSESSEE. THE CIT(A) HAS MADE AN ADDITION OF RS. 10,68,331/- AND DELETED THE REMAINING DISALLOWANCE OF RS.1,34,33,150/- AS RELATES TO GROUND NO. 8 TO 12, THE LD. CIT(A) OBSER VED THAT SINCE THERE IS NO PAYMENT TO OUTSIDERS IN SALARY AND WAGES THERE IS N O QUESTION TO DEDUCTION OF TDS ON THE ABOVE PAYMENTS AS RELATED TO FABRICATION CHARGES, EMBROIDER CHARGES AND FINISHING AND WASHING CHARGES. AS REL ATES TO CLEARING AND FORWARDING CHARGES THE ASSESSEES CONTENTION WAS TH AT NO PAYMENTS WAS DONE OVER AND ABOVE RS. 50,000/- TO ANY AGENT AND HENCE THERE WAS NO LIABILITY FOR TDS U/S 194C OF THE INCOME-TAX ACT. THE SAID CONTE NTION WAS ACCEPTED AND THE REMAND REPORT WAS TAKEN ON RECORD. THE CIT(A) DELETED THE RS.3,07,29,707/- U/S 40(A)(IA) AS RELATES TO GROUND NO. 13, THE CIT(A) DELETED THE ESTIMATED DISALLOWANCE UNDER THE HEAD OF SALARY EXPENSES. 8 ITA NO. 2926 /DEL/2011 5. THE LD. AR SUBMITTED THAT GROUND NO. 1 TO 7 DEAL S WITH ACTION OF THE A.O IN MAKING TRADING ADDITION OF RS.1,45,01,481/- BY A DOPTING THE GP RATE OF THE PRECEDING YEAR. THE A.O HAS MADE THE IMPUGNED ADDIT ION HOLDING THAT THE ASSESSEE DID NOT FURNISH THE VARIOUS DETAILS ASKED FOR DURING THE ASSESSMENT PROCEEDINGS. THE A.O HAS FURTHER ALLEGED THAT THER E WERE VARIOUS DISCREPANCIES IN THE SUBMISSIONS OF THE ASSESSEE COMPANY. THE A. O HAS ALSO HELD THAT THE ASSESSEE HAS DELIBERATELY NOT PRODUCED THE BOOKS OF ACCOUNTS. THE A.O, THUS, ADOPTED THE GP RATE OF THE LAST YEAR, I.E. 25.79% A ND MADE THE ADDITION OF RS.1,45,01,481/-[15,98,84,034 X(25.79-16.72]. THE A.O HAS DISCUSSED THIS ISSUE IN PARA 3.5-3.10 OF THE ORDER. HOWEVER, THE S AID ADDITION WAS RESTRICTED BY THE LD. CIT (A) TO AN AMOUNT OF RS.10,68,331/- H OLDING THAT THE GP OF THE ASSESSEE FOR THE YEAR WAS DULY SUPPORTED BY THE BOO KS OF ACCOUNTS, BILLS AND VOUCHERS, FURTHER ACCEPTING THE CONTENTION OF THE A SSESSEE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF SALARIES AND WAGES HAS ALSO GONE UP DURING THE YEAR. THE FINDINGS OF THE CIT (A) IN TH IS REGARD ARE AT PAGE 14-15 IN PARA 5.1 OF THE ORDER. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE A.O HAS REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMP ANY U/S 145(3) OF THE ACT MERELY ON THE BASIS OF SURMISES AND CONJECTURES. T HE ASSESSEE FILED VARIOUS DOCUMENTARY EVIDENCES DURING THE COURSE OF ASSESSME NT PROCEEDINGS. HOWEVER, THE A.O, NOT BEING SATISFIED BY THE DOCUME NTS OF THE ASSESSEE COMPANY, HAS ARBITRARILY ADOPTED THE G.P RATE OF LA ST YEAR AND HAS MADE THE IMPUGNED ADDITION. THE A.O HAS REJECTED THE BOOKS O F ACCOUNTS OF THE ASSESSEE COMPANY ONLY ON THE BASIS THAT THE GP RATE OF THE A SSESSEE FOR THE CURRENT YEAR IS LOWER THAN THE GP RATE OF THE PREVIOUS YEAR. IT HAS BEEN SUBMITTED BY THE ASSESSEE AND ALSO ACCEPTED BY THE CIT(A) THAT THE FALL IN GP RATE DURING THE YEAR WAS MAINLY BECAUSE OF THE FACT THAT THE ASSESS EE USED TO RECORD THE DUTY DRAWBACK AS PART OF ITS TOTAL TURNOVER AND USED TO BOOK THE SAME IN THE SALES. THE RATE OF DUTY DRAWBACK, HOWEVER, GOT REDUCED TO 2.5% FROM 14.5% DURING THE YEAR, THEREBY LEADING TO A HUGE REDUCTION IN TH E SALES, WHICH FURTHER AFFECTED THE GP RATE. HOWEVER, THE A.O HAS COMPLET ELY DISREGARDED THE ABOVE SUBMISSIONS OF THE ASSESSEE. THE LD. AR FURTHER SUB MITTED THAT IT IS A SETTLED 9 ITA NO. 2926 /DEL/2011 LAW THAT MERE NON SATISFACTION OF THE A.O ON A PART ICULAR ASPECT DOES NOT MEAN THAT THE SAME CAN BE REJECTED ON THE GROUND THAT TH E BOOKS OF ACCOUNTS OF THE ASSESSEE ARE INCOMPLETE OR INCORRECT. MERE REJECTI ON OF THE GP RATE ADOPTED BY THE ASSESSEE, CANNOT BE A GROUND TO REJECT THE BOOK S OF ACCOUNT OF THE ASSESSEE. 6. THE LD. AR SUBMITTED THE FOLLOWING CASE LAWS DCIT VS. GAJANAN TRADERS[2007] 12 SOT 36 (BANGALORE ) (URO) GANESH FOUNDRY VS. ACIT [2003] 130 TAXMAN 172 (JODH PUR) (MAG.) MANOHAR LAL VS. ITO [2000] (JODHPUR) 7. THE LD. AR WHILE DEALING WITH THE ASSESSMENT ORD ER STATED THAT THE AO POINTED OUT THE DISCREPANCIES IN THE AMOUNT OF PUR CHASES MADE BY THE ASSESSEE FROM THREE PARTIES, NAMELY CITY CREATIONS PVT. LTD., RAINBOW ENTERPRISES AND RAJA FASHIONS. IN THIS REGARD, THE SUBMISSIONS ARE AS FOLLOWS:- (I) CITY CREATIONS PVT. LTD.- THE A.O HAS ALLEGED THAT AS PER THE DETAILS SUBMITTED BY THE ASSESSEE, THE PURCHASES MA DE FROM THE SAID PARTY ARE RS.2,22,06,527/- HOWEVER, AS PER THE REPLY OF THE PARTY, THE AMOUNT IS RS.20,11,158/- ONLY. THE A.O HAS FURTHER ALLEGED THAT THE FIGURE APPEARING IN THE LEDGER ACC OUNT OF THE PARTY IN THE BOOKS OF THE ASSESSEE IS ALSO RS.20,11,158/- . IN THIS REGARD, IT IS SUBMITTED THAT THE DETAILS OF PARTY-WISE PURCHASES WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT (A). THE LEDGER ACCOUNT OF THE PARTY WAS ALSO SUBMITTED (PB 36). AS PER THE SAID LEDGER ACCOUNT, THE PURCHASES MADE FROM THE SA ID PARTY ARE RS.20,11,158/-. THE A.O HAS STATED THAT AS PER THE CONFIRMATION OF THE PARTY, THE NET SALES MADE BY THE PARTY WERE RS.20,71,603/-. THEREFORE, THE ONLY DIFFERENCE WHICH REMAINS IS RS. 60,445/- [20,71,603(-)20,11,158]. THUS, THE CIT (A) HAS SUS TAINED THE ADDITION FOR AN AMOUNT OF RS. 60,445/-. 10 ITA NO. 29 26/DEL/2011 (II) RAINBOW ENTERPRISES:- THE A.O HAS ALLEGED THAT THE TOTAL PURCHASES SHOWN FROM THE PARTY ARE FOR RS. 1,54,87, 182/-, WHEREAS AS PER THE REPLY OF THE PARTY, THE TOTAL S ALES MADE BY THE PARTY ARE RS.51,86,209/-. IN THIS REGARD, IT IS SU BMITTED THAT THE LEDGER ACCOUNT OF THE PARTY IN THE BOOKS OF THE ASS ESSEE COMPANY IS ENCLOSED AT PB 32-35, WHICH WAS SUBMITTED BEFORE THE CIT(A) AND THE A.O IN THE REMAND PROCEEDINGS. IT IS SUBMITTED THAT THE A.O HAS WRONGLY TAKEN THE FIGURE OF RS. 81,61,121/- FRO M THE LEDGER ACCOUNT, WHICH IS THE TOTAL OF THE CREDIT SIDE, WHI CH ALSO INCLUDES THE OPENING BALANCE. THEREFORE, THE A.O HAS GROSSL Y ERRED IN RECONCILING THE BALANCE OF THE PARTY. AS PER THE B OOKS OF THE ASSESSEE, ASSESSEE HAS PURCHASED MATERIAL OF RS.51, 86,209/-, FROM THE PARTY. HOWEVER, AS PER THE REPLY OF THE PARTY, THE SALES MADE ARE FOR RS.51, 78,343/- [55,86,209(-)4,07,867], LEA VING A DIFFERENCE OF RS.7,866/-, WHICH HAS BEEN SUSTAINED BY THE CIT( A). (III) RAJA FASHIONS- THE A.O HAS ALLEGED THAT THE TOTAL PURCHASES SHOWN BY THE ASSESSEE FROM THE SAID PARTY ARE RS.1, 38,89,773/-, WHEREAS AS PER THE REPLY OF THE PARTY, THE AMOUNT I S RS.72,71,311/-. IN THIS REGARD, THE LEDGER ACCOUNT OF THE PARTY IN THE BOOKS OF THE ASSESSEE COMPANY IS ENCLOSED AT PB 25-31, WHICH WAS SUBMITTED BEFORE THE CIT (A) AS WELL AS THE A.O DURING THE REMAND PROCEEDINGS. A PERUSAL OF THE ACCOUNT WOULD REVEAL THAT THE PURCHASES MADE BY THE ASSESSEE DURING THE YEAR ARE RS.72, 71,311/-. HOWEVER, AS PER THE REPLY RECEIVEDS FROM THE PARTY, THE FIGURE WAS RS.92, 02,231/- LEAVING THEREBY A DIFFER ENCE OF RS.19, 30,920/-. IT WAS SUBMITTED BY THE ASSESSEE THAT TH E PURCHASES MADE BY THE ASSESSEE HAVE BEEN FULLY CONFIRMED BY T HE PARTY, HOWEVER, CERTAIN ADDITIONAL SALES HAVE BEEN SHOWN, FOR WHICH THE ASSESSEE SHOULD NOT BE HELD RESPONSIBLE. IT WAS AL SO SUBMITTED THAT THE PAYMENTS HAVE BEEN RECEIVED BY THE ASSESSE E THROUGH 11 ITA NO. 29 26/DEL/2011 BANKING CHANNELS. THEREFORE, CONSIDERING THE ABOVE FACTS, AN AD- HOC ADDITION OF RS.10, 00,000/- WAS SUSTAINED BY TH E CIT (A), AND THE BALANCE ADDITION WAS DELETED. 4.9. THEREFORE, IT IS CLEAR THAT THE LD. CIT(A), CO NSIDERING THE FACTS OF THE CASE AND THE DOCUMENTARY EVIDENCES IN THIS REGARD, HAS RIGHTLY RESTRICTED THE ADDITION MADE BY THE A.O TO AN AMOUN T OF RS.10,68,331/- [60,445 (+) 7,866(+) 10,00,000], AND THUS, THE ORDER OF THE CIT(A) BE UPHELD. 8. AS RELATES TO GROUND NO. 8 TO 12, THE LD. AR SUB MITTED THAT THE CIT(A) HAS TAKEN ALL THE CONTENTIONS OF THE ASSESSEE ON RE CORD AND HAS PROPERLY DISBURSE AND PROPERLY ALLOWED THE SAID CONTENTIONS TO THE EXTENT STATED IN THE CIT(A)S ORDER. THE ASSESSEE ALSO RELIED UPON, REL IANCE IS ALSO PLACED ON THE FOLLOWING JUDGMENTS:- ITO VS. DR. WILLMAR SCHWABE INDIA (P.) LTD. [2005] 3 SOT 71 (DELHI) JINDAL PHOTO FILMS LTD. VS. ITO [2006] 5 SOT 272 (D ELHI) WHIRLPOOL OF INDIA LTD. VS. JCIT [2007] 16 SOT 435 (DELHI) ALSO, ASSESSEE HAS DEDUCTED TDS ON THE COMMISSION C HARGES OF THE AGENT, IS AN UNDISPUTED FACT. THEREFORE, THE ADDITION MADE BY T HE A.O HAS BEEN RIGHTLY RESTRICTED BY THE CIT(A) TO AN AMOUNT OF RS.53,000/ -. 9. THE LD. AR FURTHER SUBMITTED THAT AS RELATES TO THE ACTION OF THE A.O IN MAKING THE DISALLOWANCE OF RS.10,00,000/- ON ACCOUN T OF THE SALARY EXPENSES CLAIMED BY THE ASSESSEE, THE SAID ADDITION HAS BEEN MADE BY THE A.O ARBITRARILY, WITHOUT GIVING ANY PROPER REASON FOR T HE SAME, AND WITHOUT BRINGING ON RECORD ANY ADVERSE FINDING. THE ADDITI ON MADE BEEN MADE BY THE ON AD-HOC BASIS. THE LD. AR FURTHER SUBMITTED THAT THE CIT (A), HOWEVER, HAS RIGHTLY DELETED THE IMPUGNED ADDITION MADE BY THE A .O HOLDING THAT THE A.O HAS MADE THE ADDITION ON ESTIMATE BASIS AND WITHOUT ANY FINDING. FURTHER, THE 12 ITA NO. 29 26/DEL/2011 CIT (A) HAS HELD THAT THE A.O COULD NOT CONTROVERT THE VOLUMINOUS DETAILS FILED BY THE ASSESSEE IN THIS REGARD DURING THE REMAND PR OCEEDINGS. THE FINDINGS OF THE CIT (A) ARE AT PAGE 26-27 IN PARA 7.1 OF THE ORDER. 10. THE ASSESSEE ALSO SUBMITTED FOLLOWING CASE LAWS :- DCIT VS. M/S FCB ULKA ADVERTISING PVT. LTD (ITA NO. 5404/MUM/2007 & ITA NO. 6022/MUM/2008 & C.O NO. 293/MUM/2007 DATE D 21TH MAY 2014) HONBLE MUMBAI ITAT. ACIT VS. AMTEK AUTO LTD. [112 TTJ 455 (DEL)] DCIT VS. YASH B. JOHAR, (ITA NO. 2612/MUM/2008, A.Y 2004-05 DATED 5/1/2010) DEVJI NENSHI PALANI VS. ITO, (ITA NO. 6519/MUM/2009 , A.Y 2006-07 DATED 29/10/2010) 11. THE ASSESSEE FURTHER SUBMITTED THAT THE ITAT I N ASSESSEES GROUP OF COMPANIES CASE HELD THAT SINCE NO AMOUNT WAS PAID T O ANY OF THE EMPLOYEE EXCEEDING MINIMUM RELATED TO ATTRACT THE TDS PROVIS ION, THEREFORE, NO TDS WAS DEDUCTED THE SAME FACTUAL ASPECT HAS BEEN APPLIED H ERE IN THE PRESENT CASE AS WELL. 12. THE DR RELIED UPON THE ASSESSMENT ORDER. 13. WE HAVE PERUSED ALL THE RECORDS AND TAKEN INTO ACCOUNT, CONTENTIONS OF BOTH THE PARTIES FROM THE RECORD IT CAN BE SEEN THA T AS RELATES TO GROUND NO. 1 TO 7, THE CIT (A) HAS ADMITTED THAT THERE IS A POSS IBILITY OF DISCREPANCIES IN PARTY ACCOUNTS AND THE SAME CANNOT BE RULED OUT DUE TO LACK OF PROPER RE- CONCILIATION AS WELL AS THE STOCK REGISTER WAS NOT MAINTAINED BY THE ASSESSEE BUT THE CIT(A) ALSO HAS GIVEN A FINDING THAT ALL TH E PAYMENTS WERE MADE THROUGH BANKING CHANNELS AND ASSESSEE HAS GIVEN LED GER ACCOUNT AND COPIES OF LETTERS OF CREDIT BEFORE THE ASSESSING OFFICER. THE ASSESSEE COMPANY ALSO SUBMITTED CONFIRMATION OF THE PARTIES AS PER THE AS SESSING OFFICER S ENQUIRY. THE CIT(A) HAS RIGHTLY ADDED RS. 10 LACS AND DELETE D THE REMAINING 13 ITA NO. 29 26/DEL/2011 DISALLOWANCE. HENCE, GROUND NO. 1 TO 7 WILL NOT SU STAIN. AS RELATES TO GROUND NO. 8 TO 12, THE CIT(A) HAS GIVEN A FINDING THAT IN ALL RESPECTIVE SALARY AND WAGES THERE WAS NO PAYMENT WHICH WAS MADE ABOVE 50, 000/- AND, THEREFORE, THE SAME IS NOT COMING UNDER THE PURVIEW OF SECTION 194C FOR TDS DEDUCTION. THE RECORD ALSO SPEAKS THE SAME. THE REMAND REPORT ALSO HAS NOT STATED THAT THERE WAS A PAYMENT MORE THAN RS.50,000/- TO ANY OF THE ADMINISTRATIVE STAFF OR OUTSIDERS RELATED TO THE EXPENSES. HENCE, THESE GROUNDS ARE ALSO NOT SUSTAINABLE. AS RELATES TO EXPENDITURE UNDER THE H EAD SALARY THE ASSESSEE FILED THE DETAILS BEFORE THE ASSESSING OFFICER AND THE SA ME WAS NOT CONTROVERTED BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS. T HUS, THIS GROUND ALSO DOES NOT SUSTAIN. 14. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15TH OF FEBRUARY 2016. SD/- SD/- ( J. S. REDDY) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15/02/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 01/02/2016 PS 14 ITA NO. 29 26/DEL/2011 2. DRAFT PLACED BEFORE AUTHOR 02/02/2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 16.02.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 16.02 .2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.