The ACIT, 1 (1), V. M/s Nathuream Shri Narayan,

ITA 302/IND/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47793 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-02-2011
• Assessment Year: misc
• Appeal Filed On: 07-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DARSHAN SINGH
• Assessee Lawyers: ANIL KHAA
• Keywords: Gross profit estimation; Unexplained investment; Depreciation; Search and seizure; Opportunity of being heard; Reason to believe; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 142(1); 80HHC; 80IB; 147; 69; 148; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS.129/IND/2007, 156 AND 157/IND/2010 AND 80/I ND/2010 A.YS.2003-04, 2001-02, 2002-03 AND 2006-07 ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL APPELLANT VS M/S SANWARIA AGRO OILS LIMITED BHOPAL PAN AACCS-1449-N RESPONDENT C.O. NO. 3/IND/2010 (ARISING OUT OF ITA NO. 80/IND/2010) M/S SANWARIA AGRO OILS LIMITED BHOPAL OBJECTOR VS ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL RESPONDENT ITA NOS. 302/IND/2008 AND 152/IND/2010 A.YS. 2005-06 AND 2006-07 ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL APPELLANT VS M/S NATHURAM SHRINARAYAN ITARSI PAN AACFN-6525F RESPONDENT 2 DEPARTMENT BY : SHRI DARSHAN SINGH, CIT DR ASSESSEES BY : SHRI ANIL KHABYA, CA O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE AS WELL AS THE ASSESSEES ARE IN APPEAL AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) AND THE ASSESSEE HAS ALSO PREFERRED CROSS OBJECTION AGAINST IN ITA NO. 80/IND/2010. 2. DURING HEARING WE HAVE HEARD SHRI DARSHAN SINGH , LEARNED CIT DR AND SHRI ANIL KHABYA, LD. COUNSEL FO R THE ASSESSEE. FIRSTLY, WE SHALL TAKE UP THE APPEALS OF THE REVENUE IN ITA NO. 128/IND/2007 (ASSESSMENT YEAR 2003-04) W HEREIN THE FIRST GROUND PERTAINS TO ALLOWING RELIEF U/S 80 HHC(1A) OF THE ACT ON THE BASIS OF THE RATIO LAID DOWN BY THE HON BLE APEX COURT IN THE CASE OF IPCA LAB VS. CIT. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS IN SUPPORT TO THE ASSES SMENT ORDER WHEREAS THE LD. COUNSEL FOR THE ASSESSEE DEFENDED T HE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL 3 AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSE SSEE CLAIMED DEDUCTION U/S 80HHC OF THE ACT TO THE TUNE OF RS.25 ,28,610/-. AS PER THE ASSESSING OFFICER AND ALSO OF THE LEARNE D CIT DR FOR THE PURPOSE OF QUANTIFICATION OF ALLOWABILITY OF DE DUCTION 90% OPF THE RECEIPT OF MISCELLANEOUS INCOME OF RS. 91,3 1,040/- WAS NOT REDUCED FOR WORKING OUT PROFIT OF BUSINESS AND THE METHOD OF CALCULATING INDIRECT COST ATTRIBUTABLE TO TRADIN G EXPORT WAS ALSO NOT APPLIED CORRECTLY, CONSEQUENTLY, THE DENIA L OF DEDUCTION WAS ARGUED TO BE CORRECTLY MADE BY THE REVENUE. IT IS SEEN THAT WHILE ALLOWING THE CLAIM OF DEDUCTION BY THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) HE HIMSELF HAS OBSERVED THAT THE ASSESSING OFFICER WAS JUSTIFIED I N COMPUTING INDIRECT COST AT RS. 87,76,666/- AND FURTHER HELD T HAT THE ASSESSING OFFICER WRONGLY COMPUTED ADJUSTED PROFIT OF BUSINESS. THERE IS NO FINDING IN THE IMPUGNED ORDE R WHETHER THE MAIN EXPORTER HAS FORGONE HIS CLAIM. NO SUCH P ROOF WAS FILED BY THE ASSESSEE BEFORE US. IN VIEW OF THESE FACTS, THIS ISSU IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFIC ER TO EXAMINE WHETHER FORM NO. 10CCAB WAS FILED BY THE AS SESSEE. 4 THE ASSESSING OFFICER WILL FURTHER EXAMINE WHETHER IDENTICAL CLAIM WAS FOREGONE BY THE MAIN EXPORTER. IF SUCH C LAIM IS FOUND TO BE CORRECT, THEN THE CLAIM OF THE ASSESSEE MAY B E ALLOWED AND IF NOT, IT MAY BE EXAMINED AS PER THE PROVISION S OF THE ACT, THEREFORE, THIS GROUND OF THE REVENUE IS ALLOWED FO R STATISTICAL PURPOSES. NEEDLESS TO MENTION HERE THAT DUE OPPORT UNITY OF BEING HEARD BE PROVIDED TO THE ASSESSEE WITH FURTHE R LIBERTY TO FILE EVIDENCE, IF ANY, BEFORE THE ASSESSING OFFICER IN SUPPORT OF ITS CLAIM. 4. THE NEXT GROUND PERTAINS TO DELETING THE ADDITIO N OF RS.8,50,147/- MADE IN RESPECT OF INCOME SHOWN IN T HE RETURN OF INCOME OF M/S SURYA TRADING COMPANY, A BENAMI CONCE RN OF THE ASSESSEE. THE LEARNED CIT DR DEFENDED THE ASSE SSMENT ORDER WHEREAS THE LD. COUNSEL FOR THE ASSESSEE DEFE NDED THE IMPUGNED ORDER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IF THE CONCLUSION DRAWN IN TH E IMPUGNED ORDER IS ANALYSED, IT HAS BEEN MENTIONED THAT THE A SSESSING 5 OFFICER HAS NOT ESTABLISHED THAT M/S SURYA TRADING CORPORATION WAS THE BENAMI COMPANY OF THE ASSESSEE. HOWEVER, I T IS SEEN THAT THERE IS NO INDEPENDENT FINDING IN THE IMPUGNE D ORDER THAT M/S SURYA TRADING CORPORATION WAS IN FACT NOT A BEN AMI CONCERN OF THE ASSESSEE. THEREFORE, WITHOUT COMMEN TING UPON THE MERITS OF THE ISSUE, WE REMAND THIS ISSUE TO TH E FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE FIRSTLY WHETHER M/S SURYA TRADING CORPORATION IS THE BENAMI CONCERN OF THE AS SESSEE AND SECONDLY WHETHER M/S SURYA TRADING CORPORATION HAS FILED ANY RETURN AND WITH WHAT RESULT AND THEN DECIDE ON THE BASIS OF OUTCOME OF SUCH INQUIRY/EXAMINATION. THE ASSESSEE I S AT LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUBSTANTIATE ITS CL AIM, THEREFORE, THIS GROUND OF THE REVENUE IS ALSO ALLOWED FOR STAT ISTICAL PURPOSES. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. 6. IN ITA NO. 156 AND 157/IND/2010 ANNULLING THE REASSESSMENT ORDER DATED 22.12.2008 FRAMED U/S 143( 3) READ WITH SECTION 148 OF THE ACT HOLDING THE SAME AS AB- INITIO VOID 6 HAS BEEN CHALLENGED BY THE REVENUE. ON THE OTHER H AND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THERE WAS NO FAILURE ON TH E PART OF THE ASSESSEE TO DISCLOSE THE RELEVANT MATERIAL FULLY AN D TRULY. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SOYABEAN EXTRACTION, PRODUCTION OF SOYAMEAL/DOC AND SOYA OIL, ETC. THE ASSESSEE DECLA RED TOTAL INCOME OF RS.2,50,74,640/- IN ITS RETURN FILED U/S 139 FOR THE ASSESSMENT YEAR 2002-03 ON 24.3.2003 BY CLAIMING DE DUCTION U/S 80IB OF THE ACT AND U/S 80HHC OF THE ACT. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 15.3.2004. EVEN THE FI RST APPELLATE ORDER WAS PASSED ON 11.6.2004 ALLOWING PA RTIAL RELIEF TO THE ASSESSEE. SUBSEQUENTLY, FOR THE ASSESSMENT Y EAR 2001- 02 NOTICE U/S 148 WAS ISSUED ON 27.3.2008 AND THE REASSESSMENT PROCEEDINGS WERE COMPLETED VIDE ORDER DATED 22.12.2008. LIKEWISE, FOR THE ASSESSMENT YEAR 2002 -03 THE ORIGINAL RETURN WAS FILED ON 24.3.2003 WHEREIN THE ASSESSEE 7 CLAIMED DEDUCTION U/S 80IB AND 80HHC. SUBSEQUENTLY , NOTICE U/S 148 WAS ISSUED ON 27.3.2008 FOR INITIATING PROC EEDINGS U/S 147 AND THE REASSESSMENT U/S 147 READ WITH SECTION 143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATED 22.12.2008. IN SUCH A SITUATION, THE CLAIM OF THE ASSESSEE IS THAT THE PR OCEEDINGS U/S 148 WERE INITIATED BEYOND THE PRESCRIBED PERIOD OF FOUR YEARS. IN SUCH A SITUATION , WE ARE REPRODUCING HEREUNDER SECTION 147 OF THE ACT ALONG WITH PROVISO :- [ INCOME ESCAPING ASSESSMENT. 22 147. IF THE 23 [ASSESSING] OFFICER 24 [HAS REASON TO BELIEVE 25 ] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT 25 FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS 25 SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING S UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT Y EAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSE SSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE 26 ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1 ) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS 26 NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR IF THE AFORESAID IS ANALYSED SPEAKS ABOUT FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR SUBJECT TO THE CONDITION THAT THERE SHOULD BE NO ESCAPEMENT OF INCOME BY REA SON OF 8 FAILURE ON THE PART OF THE ASSESSEE IN MAKING A RET URN U/S 139 OF THE ACT. IN THE PRESENT APPEAL, SINCE THE ASSESSME NT YEARS INVOLVED ARE 2001-02 AND 2002-03 AND NOTICE U/S 148 WAS ISSUED ON 27.3.2008, THEREFORE, INITIATION OF PROCE EDINGS ARE BEYOND THE PRESCRIBED LIMIT OF FOUR YEARS AS PROVID ED UNDER PROVISO TO SECTION 147 OF THE ACT, THEREFORE, NO AC TION IS REQUIRED TO BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM END OF THE RELEVANT ASSESSMENT YEAR ESPECIALLY WHEN THE AS SESSEE DISCLOSED THE CLAIMED IN ITS RETURN FULLY AND TRULY , CONSEQUENTLY, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER, THEREFO RE, BOTH THESE APPEALS OF THE REVENUE ARE DISMISS. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISM ISSED. 8. NOW WE SHALL DEAL WITH ITA NO. 80/IND/2010 WHERE THE FIRST GROUND PERTAINS TO DELETING THE ADDITION OF RS. 10 LACS OUT OF THE TOTAL ADDITION OF RS. 15 LACS MADE ON ACCOUNT OF WA REHOUSING CHARGES IN VIEW OF PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE LD. CIT DR DEFENDED THE ASSESSMENT ORDER WHEREA S THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORD ER. 9 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRA DING IN COMMODITIES. THE ASSESSEE DECLARED INCOME OF RS. 2,00,91,510/- IN THE RETURN FILED ON 26.11.2006. T HE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED PAYMENT OF RS.31,12,825/- TOWARDS WAREHOUSE TO AN ASSOCIATE CO NCERN M/S SHREENATH WAREHOUSING CORPORATION WHICH IS A UN IT OF M/S NATTHURAM SHRINARAYAN AGRAWAL. THE STAND OF THE RE VENUE IS THAT THE CLAIM OF SUCH EXPENSES IS EXCESSIVE, THERE FORE, THE ASSESSING OFFICER DISALLOWED RS. 15 LACS U/S 40A(2) TREATING THE SAME AS EXCESSIVE AND UNREASONABLE. ON APPEAL, CON SIDERING THE DIFFERENCE BETWEEN THE PREVAILING MARKET RATE A ND THE CLAIM OF THE ASSESSEE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED RS. 5 LACS AS EXCESSIVE AND TH E DISALLOWANCE WAS MADE ACCORDINGLY AND DELETED THE DISALLOWANCE OF RS.10 LACS WHICH IS UNDER CHALLENGE BEFORE US. THE PREVAILING RATE AT THE RELEVANT TIME FOR WHEAT AND PADDY 10 WAS RS. 3/- PER BAG, PER MONTH AND IN THE CASE OF T UWAR AND SOYABEAN IT WAS RS. 50/- PER BAG PER MONTH, THEREFO RE, SINCE THE WAREHOUSING RATES ARE FIXED AND DECIDED BY THE GOVERNMENT, THEREFORE, THE EXCESSIVE PAYMENT WAS EV EN DENIED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS), THEREFORE, WE FIND NO INFIRMITY IN THE SAME, CONSEQ UENTLY, THIS GROUND OF THE REVENUE IS DISMISSED. 10. THE NEXT GROUND PERTAINS TO DELETING THE ADDITI ON OF RS.91,27,782/- MADE ON ACCOUNT OF DEFERRED REVENUE EXPENSES FOR MANDIDEEP UNIT. THE STAND OF THE LEARNED CIT D R IS THAT THE TRIAL RUN EXPENSES WERE WRONGLY CLAIMED AS THERE WA S NO ELECTRICITY CONNECTION WHEREAS THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE TRIAL AND RUN WAS MADE ON THE BA SIS OF DIESEL/GENERATOR AND NECESSARY EVIDENCE WAS CLAIMED TO HAVE BEEN FILED BEFORE THE DEPARTMENT. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSE SSEE COMPANY ACQUIRED AN OLD SICK UNIT M/S UNITED SOYA PRODUCT, MANDIDEEP, 11 PURCHASED VIDE A TRIPARTITE AGREEMENT WITH THE SELL ER AND FINANCIAL INSTITUTION. AS PER THE ASSESSEE, THE AC QUIRED UNIT WAS MADE OPERATIONAL AND THE TRIAL RUN PRODUCTION START ED IN THE MONTH OF APRIL, 2005. IT WAS FURTHER CLAIMED THAT D URING INITIAL PERIOD LOSS WAS SUFFERED DUE TO VARIOUS REASONS ESP ECIALLY WHEN THE PLANT AND MACHINERY WAS NOT STABILIZED. THE ASSESSEE CLAIMED LOSS OF RS.1,18,02,476/- BY CL AIMING THE SAME AS DEFERRED REVENUE EXPENDITURE IN ITS BOOKS A ND CLAIMED IT AS A BUSINESS LOSS WHEREAS THE STAND OF THE REVE NUE IS THAT THE EXPENDITURE WAS INCURRED FOR TRIAL RUN, THEREFO RE, THE SAME IS NOT ALLOWABLE. HOWEVER, WE ARE OF THE VIEW THAT SIN CE IT WAS NOT DISPUTED THAT THE TRIAL RUN PRODUCTION STARTED FROM 1.4.2005 TO 30.11.2005, IT HAS TO BE ALLOWED. THE MANDIDEEP UNI T WAS CLAIMED TO BE FULLY FUNCTIONAL FROM 1.4.2005, CONSE QUENTLY, THE EXPENSES ARE REVENUE EXPENDITURE. THE COMMENCEMENT OF BUSINESS IS NOT THE PRE-CONDITION AND IT IS ENOUGH IF THE ASSESSEE ESTABLISHES THAT THE UNIT WAS SET UP AND T HE TRIAL RUN PRODUCTION IS STARTED FROM A PARTICULAR DATE. THE COMMERCIAL PRODUCTION AT FULL SWING IS NORMALLY AT A LATER DAT E. SIMPLY 12 BECAUSE THE ASSESSEE INCURRED HUGE LOSSES AT THE IN ITIAL STAGE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT SET UP ITS BUSINESS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ALREADY CONSIDERED THE DETAILS OF EXPENSES LIKE PUR CHASE OF RAW MATERIAL, MANUFACTURING EXPENSES, FUEL EXPENSES/OTH ER EXPENSES. IT IS ALSO NOTED THAT THE GENERAL MANAGER FROM GOVT. INDUSTRIES CENTRE ISSUED PRODUCTION CERTIFICATE DAT ED 27.5.2005 WITH SPECIFIC MENTIONING THAT THE PRODUCTION STARTE D FROM 21.4.2005 EVEN MENTIONING THE ANNUAL CAPACITY AND N ATURE OF PRODUCT. NO CONTRARY EVIDENCE WAS FURNISHED BY THE DEPARTMENT, THEREFORE, IN VIEW OF THE DECISIONS REL IED UPON IN THE IMPUGNED ORDER, WE FIND NO INFIRMITY IN THE IMP UGNED ORDER, THEREFORE, THE SAME IS CONFIRMED. ACCORDINGLY, THIS GROUND OF THE REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. 12. THE ASSESSEE HAS ALSO PREFERRED CROSS OBJECTIO N WHEREIN THE FIRST OBJECTION PERTAINS TO DISALLOWANCE OF WAR EHOUSE EXPENSES OF RS. 15 LACS MADE BY THE ASSESSING OFFIC ER. SINCE THIS ISSUE HAS BEEN DELIBERATED UPON SUPRA AND THE STAND TAKEN 13 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AFFIRMED, WE FIND NO INFIRMITY IN THE SAME, THEREFO RE, THIS GROUND OF CROSS OBJECTION IS DISMISSED. 13. THE NEXT GROUND OF CROSS OBJECTION PERTAINS TO MAINTAINING DISALLOWANCE OF RS. 3,26,500/- OUT OF LEGAL EXPENSE S WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE, HENCE, THE SAME IS DISMISSED. 14. THE NEXT GROUND PERTAINS TO DIRECTION TO THE A SSESSING OFFICER IN THE IMPUGNED ORDER TO RECOMPUTED BUSINES S PROFIT OF FINANCIAL YEAR 2005-06 BY INCREASING VALUE OF OPENI NG STOCK AS ON 1.4.2005 BY RS. 5,46,030/- THEREBY NOT ALLOWING DEDUCTION OF RS. 5,476,51,030/- WHILE COMPUTING THE TOTAL INCOME OF THE FINANCIAL YEAR 2006-07. THE LD. COUNSEL FOR THE ASS ESSEE CLAIMED THE SAME AS CONSEQUENTIAL IN NATURE . THE LEARNED CIT DR DEFENDED THE IMPUGNED ORDER. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSIO N, THE FINDING IN THE IMPUGNED ORDER IS REPRODUCED HEREUND ER :- 14 9.2 IT MAY BE NOTED THAT THE ASSESSING OFFICER HAD MADE ADDITION OF RS. 5,46,51,030/- IN A.Y. 2005-06 ON ACCOUNT OF SUPPRESSION IN VALUATION OF CLOSING STOCK AS ON 31.3.2005 BUT THIS ADDITION HAS BEEN DELETED BY THE CIT(A). THEREFORE, THE GROUND TAKEN BY THE APPELLANT DOES NOT SURVIVE AND, HENCE, DISMISSED . HOWEVER, FROM THE FACTS NARRATED ABOVE, NO CLEAR FI NDING IS OOZING OUT AS NECESSARY DETAILS, IF ANY, ARE NOT AV AILABLE ON RECORD, THEREFORE, THE ASSESSING OFFICER IS DIRECTE D TO EXAMINE THE CLAIM OF THE ASSESSEE AND DECIDE ACCORDINGLY AS PER THE PROVISIONS OF THE ACT. THEREFORE, THIS GROUND OF TH E REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. NEEDLESS TO MENT ION THAT DUE OPPORTUNITY OF BEING HEARD BE PROVIDED TO THE ASSES SEE WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUB STANTIATE ITS CLAIM. 16. THE CROSS OBJECTION OF THE ASSESSEE IS, THEREFO RE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 17. IN ITA NO. 152/IND/2010 THE REVENUE HAS RAISED THE GROUND THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN 15 ALLOWING RELIEF OF RS. 14,30,566/- OUT OF THE TOTAL ADDITION OF RS.23,80,566/- MADE ON ACCOUNT OF DISALLOWANCE OF G ODOWN EXPENSES OF ASHOK DAL AND OIL MILLS. 18. THE LEARNED CIT DR CONTENDED THAT IDENTICALLY I N THE CASE OF THE ASSESSEE VIDE ORDER DATED 5 TH FEBRUARY, 2010 (ITA NOS. 485 AND 486/IND/2007 AND CO NO. 116/IND/2007 - ARIS ING OUT OF ITA NO. 485/IND/2007) REMANDED THE ISSUE TO THE FIL E OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. ON THE O THER HAND, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VIDE ORDER DAT ED 3.12.2009 DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE, THEREFORE, THE SAME CAN BE AFFIRMED. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. WITHOUT GOING INTO THE MERITS OF THE CASE, IT IS SEEN THAT THE IMPUGNED ORDER IS DATED 3.12.2009 AND THE ORDER OF THE TRIBUNAL IS DATED 5 TH FEBRUARY, 2010 I.E OF A LATER DATE WHEREIN IN THE CASE OF THE ASSESSEE THE IMPUGN ED ISSUE WAS REMANDED BACK TO THE FILE OF THE ASSESSING OFFI CER FOR FRESH 16 ADJUDICATION WITH THE DIRECTION TO PROVIDE OPPORTUN ITY TO THE ASSESSEE. THE RELEVANT PORTION OF THE SAME IS REPR ODUCED HEREUNDER :- BOTH THESE APPEALS ARE BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 9.7.2007 AND CROSS OBJECTION BY THE ASSESSEE ARISING OUT OF ITA NO. 485/IND/07. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.77,24,331/- OUT OF THE TOTAL ADDITION OF RS. 80,04,831/- MADE ON ACCOUNT OF UNACCOUNTED STOCK OF FOOD-GRAINS IN BENAMI NAMES OF 55 FARMERS 2. THAT THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCES OF RS.22,94,837/- AND RS. 43,48,437/- RESPECTIVELY MADE ON ACCOUNT OF DEDUCTION U/S 80IB OF THE ACT. 3. THAT THE LEARNED CIT(A) FURTHER ERRED IN DELETING T HE DISALLOWANCE OF INTER-UNIT TRANSACTION FOR RS. 16,15,089/- IN ITS CROSS OBJECTION THE ASSESSEE HAS RAISED THE GROUND THAT THE LEARNED CIT(A) ERRED IN MAINTAININ G THE ADDITION OF RS. 2,80,500/- AS ALLEGED UNEXPLAIN ED INVESTMENT U/S 69 OF THE ACT. 2. DURING HEARING OF THESE APPEALS WE HAVE HEARD LEARNED REPRESENTATIVES FROM BOTH THE SIDES, CONSIDERED THE ARGUMENTS ADVANCED BY THEM AND ALSO PERUSED THE MATERIAL AVAILABLE ON THE FILE. 17 THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT PROPER/REQUIRED INQUIRY WAS NOT MADE BY THE AO. HOWEVER, THE ASSESSMENT ORDER WAS SUPPORTED. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE ASSESSEE IS HAVING TWO BRANCHES I.E. ASHOK DAL MILLS AND SHRINATHJI WAREHOUSING CORPORATION. IT WAS POINTED OUT THAT FROM 1.4.2001 THE ASSESSEE STARTED THE NEW BUSINESS OF WAREHOUSING AND IN THE PREMISES OF ASHOK DAL MILL NEW BUILDING WAS CONSTRUCTED FOR THE NEW BUSINESS. A PLEA WAS ALSO RAISED THAT WHEN THE ASSESSEE STARTED NEW ELIGIBLE BUSINESS ALSO MAINTAINED SEPARATE ACCOUNT AND OLD BUSINESS PREMISES WAS NOT SPLIT UP. A STRONG PLEA WAS RAISED THAT IN PAST ALSO NO WAREHOUSING ACTIVIT Y WAS DONE BY THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE DECLARED INCOME OF RS.8,53,920/- IN IT S RETURN FILED ON 28.11.2003. SINCE THE CASE WAS TAK EN UP FOR SCRUTINY, NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 14.10.2004. ANOTHER NOTICE U/S 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED ON 7.5.2005. T HE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS AND FURNISHED THE DETAILS FROM TIME TO TIME WHICH WERE EXAMINED BY THE AO. THE ASSESSEE IS TRADING IN FOO D GRAINS, WAREHOUSING AND ALSO HAVING INTEREST INCOME . A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 23 RD AND 24 TH OCTOBER, 2002 AND IST NOVEMBER, 2002 AT THE GODOWN PREMISES OF THE ASSESSEE AT KHEDA, ITARSI. DURING SEARCH AN INQUIRY WAS CONDUCTED FROM SHRI RAMSWAROOP REGARDING STORAGE OF GRAM AT SSWC. AS PER THE REVENUE, IN THE RECORD OF SSWC, 63 AND 91.8 BAGS OF GRAM WERE KEPT BY SHRI RAMSWAROOP MALVIYA. HOWEVER, SHRI MALVIYA IN HIS STATEMENT DATED 24.10.2002 DENIED HAVING KEPT ANY GRAM OR ANY OTHER 18 FOOD GRAIN AT SSWC. THE ASSESSEE VIDE REPLY DATED 25.11.2004 GAVE A LIST OF FARMERS/TRADERS WHOSE MATERIAL WAS SEIZED (TOTAL 75 PERSONS). AS PER THE REVENUE, OUT OF 75 PERSONS, 54 FARMERS SUBMITTED TH EIR AFFIDAVIT TO CLAIM THEIR GOODS. FURTHER, THE ASSESS EE ALSO SUBMITTED LIST OF FARMERS WHO HAD TAKEN DELIVE RY OF GOODS BEFORE SEARCH (14 PERSONS) AND LIST OF TRA DERS WHOSE GOODS WERE SEIZED (7 TRADERS) VIDE LETTER DAT ED 1.2.2006 AND 14.3.2006. TWO FARMERS SHRI RAJENDRA PATEL AND SHRI VISHNUPRASAD APPEARED IN PERSON IN RESPONSE TO SUMMONS. SHRI RAJENDRA PATEL CLAIMED THAT IN FINANCIAL YEAR 2002-03 HE KEPT 232 BAGS OF WHEAT WHICH WERE TAKEN BACK IN JANUARY, 2003. SHRI VISHNUPRASAD OF VILLAGE BHATTI ALSO CLAIMED THAT HE KEPT 250 BAGS OF WHEAT. STATEMENTS OF THESE TWO FARMERS WERE RECORDED. THE LEARNED AO CONSIDERED THE STOCK OF 55 FARMERS AS UNACCOUNTED STOCK OF THE FIRM KEPT IN BENAMI NAMES, THEREFORE, HE ADDED THE AMOUNT OF RS.80,04,831/- AS UNEXPLAINED INVESTMENT IN SUCH STOCK. ON APPEAL, THE LEARNED CIT(A) DID NO T APPRECIATE THE THEORY OF BENAMI THAT TOO IN THE ABS ENCE OF ANY MATERIAL/EVIDENCE IN SUPPORT OF SUCH CLAIM, THEREFORE, HE DELETED THE ADDITION. HOWEVER, SINCE SHRI PRAMOD SINGH SOKANI AND RAMSWAROOP MALVIYA DID NOT ADMIT THE OWNERSHIP OF GOODS, CONSEQUENTLY, THE ADDITIONS OF RS. 1,86,000/- AND RS. 94,500/- IN RESPECT OF THESE TWO PERSONS WERE FOUND TO BE SUSTAINABLE, THEREFORE, THE BALANCE ADDITION OF RS.77,24,331/- WAS DELETED WHICH IS UNDER CHALLENGE , ON BEHALF OF THE REVENUE, BEFORE US. 5. ON CONSIDERATION OF TOTALITY OF FACTS WE HAVE FOUND THAT THE ADDITION OF RS.80,04,831/- WAS MADE BY THE LEARNED AO AS UNACCOUNTED STOCK OF FOOD GRAINS IN BENAMI NAMES IN THE WAREHOUSE. AS PER THE ASSESSEE , THE IMPUGNED ADDITION WAS MADE ON THE BASIS OF SOME PROCEDURAL MISTAKES. THE ASSESSEE STARTED THE 19 WAREHOUSING ACTIVITY ONLY FROM F.Y. 2001-02 AND IN THE INITIAL YEAR OF BUSINESS OPERATION, PROCEDURAL MISTAKES WERE COMMITTED WHICH WAS FOUND IN 75 CASES BUT THE ADDITION WAS MADE ONLY IN 55 CASES WHICH SUGGESTS THAT SUCH PROCEDURAL MISTAKE WAS NOT TAKEN AS THE BASIS FOR MAKING THE ADDITION RATHER T HE THEORY OF BENAMI WAS APPLIED BY THE AO. WE ARE IN AGREEMENT WITH THE OPINION OF THE LEARNED CIT(A) THAT FOR PROVING THAT A PARTICULAR TRANSACTION IS B ENAMI IS ON THE PERSON WHO IS CLAIMING SO AND THE BURDEN HAS TO BE STRICTLY DISCHARGED WITH THE HELP OF CORROBOR ATING MATERIAL. ON THE BASIS OF MERE SUSPICION, NO ADDIT ION CAN BE SUSTAINED. THERE IS A FACTUAL FINDING THAT NO OATH WAS ADMINISTERED ON 24.10.2002 AND THE STATEMENT WAS RECORDED ON 23 RD AND 24 TH OCTOBER, 2002. IT IS A SETTLED PRINCIPLE THAT NO ADDITION C AN BE MADE MERELY ON SUSPICION BECAUSE SUSPICION CANNOT TAKE THE SHAPE OF EVIDENCE HOWSOEVER STRONG IT MAY BE. WE HAVE ALSO FOUND THAT THE LEARNED CIT(A) HAS NOT BLINDLY DELETED THE ADDITION, RATHER THE DENIAL OF OWNERSHIP OF GOODS BY TWO PERSONS HAS BEEN DULY CONSIDERED AND THE ADDITIONS OF RS. 1,86,000/- AND RS.94,500/-, RESPECTIVELY, WERE DULY SUSTAINED. WE HAVE NOT FOUND ANY INFIRMITY IN THE SAME, THEREFORE , THIS GROUND OF THE REVENUE IS HAVING NO MERIT, CONSEQUENTLY DISMISSED. 6. THE NEXT GROUND RAISED PERTAINS TO DELETING THE DISALLOWANCE OF RS.22,94,837/- AND RS. 43,48,437/- RESPECTIVELY MADE ON ACCOUNT OF DEDUCTION U/S 80IB OF THE ACT. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT FULL FACTS HAVE NOT BEEN RECORDED B Y THE AO AS IT HAS BEEN CLAIMED THAT INITIALLY THERE WAS DAL MILL AND THE STORAGE HOUSE WAS CONSTRUCTED NEXT YEA R. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. KEEPING IN VIEW THE TOTALITY OF FACTS, WE ARE IN AGREEMENT WITH THE STA ND OF 20 THE REVENUE THAT DESIRED INQUIRY WAS NOT MADE BY TH E AO, CONSEQUENTLY, THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE ON THREE ASPECTS LIKE HANDLIN G, STORAGE AND TRANSPORTATION OF FOOD GRAINS AND ALSO WHETHER IT WAS INTEGRATED BUSINESS, THEREFORE, THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND REMANDED BACK TO THE FILE OF THE AO FO R EXAMINATION IN THE LIGHT OF ABOVE OBSERVATIONS. NEEDLESS TO MENTION HERE THAT DUE OPPORTUNITY BE PROVIDED TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. THE ASSESSEE IS ALSO AT LIBERTY TO FURNISH EVIDENCE, IF ANY, BEFORE THE AO. THIS GROUND OF THE REVENUE IS, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES ONLY. T HE REVENUE HAS ALSO RAISED THE GROUND FOR INTER-UNIT TRANSACTION (ITA NO. 486/IND/07), SINCE THE CLAIM O F DEDUCTION U/S 80IB HAS BEEN REMANDED BACK TO THE FI LE OF THE LEARNED AO, THIS GROUND IS ALSO REMANDED BAC K TO HIM FOR DECIDING THE SAME AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ORDER PRONOUNCED IN OPEN COURT ON_5 TH FEBRUARY,2010. SINCE IN THE IDENTICAL SITUATION, THAT TOO IN THE C ASE OF THE ASSESSEE FOR EARLIER ASSESSMENT YEAR, THE ISSUE WAS REMANDED BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER O N THE SAME TERMS AND CONDITIONS, THIS APPEAL OF THE REVENUE IS REMANDED BACK TO THE ASSESSING OFFICER, THEREFORE, THIS APPE AL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 21 IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. 20. NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE IN ITA NO..02/IND/2010 WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS E RRED IN 1. DELETING THE ADDITION ON ACCOUNT OF LOW G.P. OF RS. 67,03,204/- WITHOUT APPRECIATING THE REASONING GIVE N BY THE A.O. FOR NOT ACCEPTING BOOK RESULT. 2. DELETING THE ADDITION ON ACCOUNT OF LOW G.P. OF RS. 67,03,204/- WITHOUT STATING THE REASONS FOR ARRIVIN G AT THE PREVAILING MARKET PRICE AS ON 31.3.2005. 3. ALLOWING RELIEF AND HAS NEITHER HIMSELF VERIFIED PREVAILING MARKET PRICE NOR GIVEN AN OPPORTUNITY TO THE A.O. TO VERIFY AS ANY EVIDENCE WAS FILED BY THE ASSESSEE IN SUPPORT OF PREVAILING MARKET PRICE. 4. DELETING THE ADDITION ON ACCOUNT OF LOW G.P. OF RS. 67,03,204/- WITHOUT COMMENTING UPON THE ACCOUNTING MANIPULATIONS BETWEEN THE GROUP CONCERNS AND ABOUT THE SHARP REDUCTION IN THE GROSS PROFIT. 5. DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF WAREHOUSE EXPENSES OF ASHOK DAL MILLS OF RS.16,04,158/- BY MERELY STATING THAT THE ISSUE IS COVERED IN EARLIER ORDER IN THE A.Y. 2004-05 AND NO DISCUSSION IS MADE IN THAT A.Y. EITHER AND COMPLETE LY IGNORED THE PROVISION OF SECTION 40A(2)(B) AND SECT ION 80IB(8) AND 80IB(10). 6. DELETINGH THE ADDITION ON ACCOUNT OF DISALLOWANC E OF WAREHOUSE EXPENSES OF ASHOK DAL MILLS OF RS. 22 16,04,158/- WITHOUT GOING THROUGH THE ENTIRE ASSESSMENT ORDER ON THIS ISSUE THOUGH DIFFERENT FAC TS AND REASONING ASWELL AS ANALYSIS OF LAW WAS PROVIDE D IN THE ASSESSMENT ORDER FOR THE A.Y. AND HE HAS NOT ADDRESSED ALL THESE AND DECIDED TO FOLLOW HIS OWN O RDER FOR THE PRECEDING YEAR. 21. AS FAR AS GROUND NOS. 1 TO 4 ARE CONCERNED, THE SAME PERTAINS TO LOW GROSS PROFIT OF RS.67,03,204/-. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT THE REAS ONING GIVEN IN THE ASSESSMENT ORDER FOR NOT ACCEPTING THE BOOK RESULTS WAS NOT PROPERLY APPRECIATED AS NEITHER THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) HAS HIMSELF VERIFIED THE PR EVAILING MARKET PRICE NOR ANY OPPORTUNITY WAS GIVEN TO THE A SSESSING OFFICER TO EXAMINE AND VERIFY THE CLAIM OF THE ASSE SSEE. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORDER BUT FAIRLY AGREED TO THE SUGGESTION OF THE LEARNED CIT THAT THE SAME HAS TO BE GOT EXAMINED BY THE ASSESSING OFFICER AGAIN. IN VIEW OF THE FACTS NARR ATED IN THE ASSESSMENT ORDER/IMPUGNED ORDER AND THE ASSERTION M ADE BY THE LEARNED RESPECTIVE COUNSEL ESPECIALLY WHEN THER E IS NO INDEPENDENT FINDING IN THE IMPUGNED ORDER REGARDING PREVAILING 23 MARKET PRICE, GROUND NOS. 1 TO 4 ARE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF TH E REVENUE AND ALSO OF THE AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THEREFORE, THESE GROUNDS OF THE REVEN UE ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. 22. GROUND NOS. 5 AND 6 PERTAIN TO DELETING THE ADD ITION ON ACCOUNT OF WAREHOUSE EXPENSES OF ASHOK DAL MILLS TO THE TUNE OF RS.16,04,158/-. WITHOUT GOING INTO MUCH DELIBER ATION, WE HAVE ALREADY DELIBERATED THE ISSUE (SUPRA), THEREFO RE, BOTH THESE GROUNDS OF THE REVENUE ARE HAVING NO MERIT, CONSEQUENTLY DISMISSED. 23. IN THE RESULT, THIS APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. FINALLY, ITA NO. 129/IND/2007 IS PARTLY ALLOWED FO R STATISTICAL PURPOSES, ITA NOS. 156 AND 157/IND/2010 ARE DISMISSED. ITA NO. 80/IND/2010 IS ALLOWED FOR STATISTICAL PUR POSES. C.O. OF THE ASSESSEE IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 24 ITA NO. 152/IND/2010 IS ALLOWED FOR STATISTICAL PU RPOSES AND ITA NO. 302/IND/2008 IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT 29 TH APRIL, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH APRIL, 2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE DN/-