THE ACIT CIR 18(2), Mumbai V. M/S. ATLAS EXPORTERS, Mumbai

ITA 302/MUM/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2576 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2001-2002
• Appeal Filed On: 13-01-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DAYA SHANKAR
• Assessee Lawyers: M SUBRAMANIAM
• Keywords: Business income; Business expenditure; Opportunity of being heard; Source of fund; Retrospective amendment
• Section: 271(1)(c); 80HHC; 133(6); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VP & SHRI R.K. PANDA, AM I.T.A. NO. 302/MUM/2005 (ASSESSMENT YEAR 2001-02) I.T.A. NO. 977/MUM/2007 (ASSESSMENT YEAR 2001-02) ACIT, CIRCLE 18(2) ROOM NO. 115, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012 VS. M/S. ATLAS EXPORTERS 126, MATHURADAS MILL COMPOUND, N.M. JOSHI MARG, LOWER PAREL, MUMBAI-400 013 PAN: AAKFA 7289 D APPELLANT RESPONDENT APPELLANT BY: SHRI DAYA SHANKAR RESPONDENT BY: SHRI M. SUBRAMANIAM O R D E R DATE OF HEARING: 21.10.2009 DATE OF ORDER: 18.12.2009 PER R.K. PANDA, AM: THE ABOVE TWO APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 10.11.2004 AND 22.11.2006 OF THE CIT(A)-XVIII, MUMBAI RELATING TO ASSESSMENT YEAR 2001-02. IN I.T .A. NO. 302/MUM/05 THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) IN DELETING THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER AND GIVING RELIEF U/S. 80HHC OF THE INCOME-TAX ACT, 1961 (THE ACT) WHEREAS IN I.T.A. NO. 977/MUM/2007, THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) IN CANCELLING THE PENALTY OF RS.2,70,08,603 U/S.271(1) (C) OF THE ACT. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS WERE HEARD TOG ETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. I.T.A. NO. 302/MUM/2005 : 2. GROUNDS OF APPEAL NOS. 1 TO 6 READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN : I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 2 (I) DIRECTING TO TREAT AMOUNTING TO RS.34,96,087/- AS BUSINESS PROFIT ELIGIBLE FOR DEDUCTION U/S. 80HHC I GNORING THAT THE RECEIPT OF INTEREST IS NOT DERIVED FROM EX PORT OF GOODS; (II) HOLDING THAT THE INTEREST ON FDR IS TO BE NET TED OFF AGAINST THE INTEREST PAYMENT EXPENSES IGNORING THAT THERE IS NO NEXUS BETWEEN INTEREST EXPENDITURE AND INTEREST ON FDR; (III) HOLDING THAT THE INTEREST INCOME ON FDR IS E LIGIBLE FOR DEDUCTION U/S. 80HHC IGNORING THAT ANY RECEIPTS NOT FORMING PART OF SALE PROCEEDINGS RELATING TO EXPORT CANNOT BE CONSIDERED AS BUSINESS PROFITS ELIGIBLE FOR DEDUCTI ON U/S. 80HHC; (IV) DIRECTING TO TREAT INTEREST INCOME AS BUSINES S INCOME WITHOUT APPRECIATING THAT FINANCING IS NOT THE BUSI NESS OF THE APPELLANT AND THE SAME CANNOT BE NETTED OFF AGAINST THE INTEREST PAYMENTS ALLOWABLE AS BUSINESS EXPENDITURE U/S. 36 OF THE INCOME TAX ACT 1961; (V) DIRECTING TO TREAT INTEREST INCOME ON FDR AS B USINESS INCOME ELIGIBLE FOR DEDUCTION U/S. 80HHC IGNORING T HAT INTEREST INCOME DOES NOT FORM PART OF THE PROCEEDIN GS RELATING TO EXPORT FOR THE PURPOSE OF DEDUCTION U/S . 80HHC; (VI) IGNORING THE JURISDICTIONAL HIGH COURT DECISI ONS IN A.K. DOSHI IN 249 ITR 849, KANTILAL CHHOTALAL IN 246 ITR 439, RAVI RATNA EXPORTS IN 246 ITR 443 AND PRAVIN K. MEHTA IN 246 ITR 445 HOLDING THAT INTEREST ON FDR IS INCOME FROM OTH ER SOURCES AND NOT EXPORT INCOME ELIGIBLE FOR DEDUCTIO N U/S. 80HHC. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE RECEIVED INTEREST ON FDR AMOUNTING TO RS.34,96,087 AND CONSIDERED THE SA ME AS BUSINESS INCOME. SINCE THE ASSESSEE DID NOT ADDUCE ANY EVID ENCE TO SHOW THAT THE INTEREST ON FDR IS INEXTRICABLY CONNECTED WITH THE BUSINESS ACTIVITY OF THE ASSESSEE AND OBSERVING THAT THE ASSESSEE HAS PARKED ITS SURPLUS FUNDS IN BANK DEPOSITS, THEREFORE, THE ASSESSING OFFICER REL YING ON A NUMBER OF DECISIONS BROUGHT THE SAME TO TAX UNDER THE HEAD I NCOME FROM OTHER SOURCES. FURTHER HE ALSO DID NOT ALLOW DEDUCTION U/S. 80HHC OF THE ACT ON SUCH INTEREST INCOME. I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 3 3.1 IN APPEAL, THE CIT(A) FOLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESSEES OWN CASE AND IN THE CASE OF ANOTHER SIST ER CONCERN M/S. LOOMS INDIA DIRECTED THE ASSESSING OFFICER TO TREAT THE A MOUNT OF RS.34,96,087 AS BUSINESS PROFIT ELIGIBLE FOR DEDUCTION U/S. 80HHC O F THE ACT. FURTHER HE HELD THAT INTEREST ON FDR HAS TO BE NETTED OFF AGAI NST THE INTEREST EXPENDITURE. AGGRIEVED WITH SUCH ORDER OF THE CIT( A) THE REVENUE IS IN APPEAL BEFORE US. 3.2 THE LEARNED DR RELYING ON A NUMBER OF DECISIONS SUB MITTED THAT INTEREST ON SURPLUS FUNDS PARKED IN BANK HAS TO BE TREATED AS INCOME FROM OTHER SOURCES AND HENCE NOT ELIGIBLE FOR DEDU CTION U/S. 80HHC OF THE ACT. 3.3 THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT IN THE E ARLIER YEAR SIMILAR ISSUE HAS BEEN DECIDED BY THE CIT(A) IN ASSESSEES FAVOUR . 3.4 AFTER HEARING BOTH THE SIDES WE ARE OF THE OPINION THAT THE ISSUE NEEDS RE-CONSIDERATION AT THE LEVEL OF THE ASSESSIN G OFFICER IN THE LIGHT OF THE LATEST DECISION OF THE SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF KALPATARU COLOURS & CHEMICALS VS. ADDL. CIT AND TOP MAN EXPORTS VS. ITO REPORTED IN 318 ITR (AT) 87 AT PAGES 152 TO 155 AND THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218. SINCE THE ABOVE DECISIONS WERE NEITHER CITED BY EITHER OF THE PARTIES FOR WHICH THESE WERE NEITHER CONSIDERED NOR CONFRONTED TO THE PARTIES AT THE TIME OF HEARING, T HEREFORE, WE, IN THE INTEREST OF JUSTICE DEEM IT PROPER TO RESTORE THE M ATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION OF THE IS SUE IN THE LIGHT OF THE ABOVE DECISIONS. THE ASSESSING OFFICER SHALL DECID E THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. ACCORDI NGLY THESE GROUNDS BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 4. GROUNDS OF APPEAL NOS. 7 AND 8 BY THE REVENUE ARE A S UNDER: I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN : (VII) DIRECTING TO ALLOW DEDUCTION U/S. 80HHC WITHO UT APPRECIATING THAT THE ASSESSEE HAS NO POSITIVE INCO ME FROM EXPORT OF 90% OF INCENTIVES AND OTHER INCOME ARE RE DUCED FROM PROFIT OF THE BUSINESS; (VIII) HOLDING THAT THE APPELLANT IS ENTITLED FOR D EDUCTION U/S.80HHC IGNORING THAT THE INTEREST INCOME IS TO B E CONSIDERED PER EXPLANATION (BAA) TO SECTION 80HHC(3 )(A) OF THE INCOME-TAX ACT, 1961. 4.1 BOTH THE PARTIES FAIRLY CONCEDED THAT THE ABOVE TWO GROUNDS HAVE TO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN VIEW OF THE RETROSPECTIVE AMENDMENT TO THE PROVISIONS OF SECTION 80HHC W.E.F. 1.4.1992. ACCORDINGLY THE ABOVE TWO GROUNDS BY THE REVENUE ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR F RESH ADJUDICATION IN THE LIGHT OF THE RETROSPECTIVE AMENDMENT TO SECTION 80H HC OF THE ACT. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY ALLOW ED FOR STATISTICAL PURPOSES. 5. GROUNDS OF APPEAL NO. 9 BY THE REVENUE READS AS UND ER: (IX) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING TO ALLOW 10% OF EXPENDITURE ON EXPORT INCENTIVES OF RS.1,81,43,944/ - AS INDIRECT COST WITHOUT APPRECIATING THE FACTS THAT T HERE ARE NO PROVISIONS IN SECTION 80HHC TO ALLOW SUCH AD-HOC EXPENDITURES. 5.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFICER REDUCED GROSS EXPORT INCENTIVES OF RS.1.81 CRORES FROM NET PROFIT OF RS.1.63 CRORES RESULTING IN A NEGATIVE FIGURE. HE ACCORDINGLY CON CLUDED THAT THE ASSESSEE HAS INCURRED A LOSS. HOWEVER, ACCORDING TO THE CIT (A) WHAT CAN BE EXCLUDED IS ONLY 90% OF EXPORT INCENTIVES. HENCE 1 0% OF THE AMOUNT SHOULD BE EXPENDITURE INCURRED FOR THE PURPOSE OF E ARNING THE EXPORT INCENTIVES. FOR THIS PROPOSITION HE RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SURENDRA ENGIN EERING CORPORATION REPORTED IN 78 TTJ 347. CONCLUDING THAT THE EXPORT PROFITS U/S. 80HHC(3)(A) IS A POSITIVE FIGURE, THE CIT(A) CAME T O THE CONCLUSION THAT I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 5 DEDUCTION SHOULD BE AVAILABLE U/S. 80HHC TO THE ASS ESSEE. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO REDUCE 10% OF THE EXPORT INCENTIVES WHILE CALCULATING INDIRECT COST. AGGRIEVED WITH SU CH ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5.2 THE LEARNED DR SUBMITTED THAT THERE IS NO SUCH PROV ISION IN THE ACT. THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN DI RECTING THE ASSESSING OFFICER TO REDUCE 10% OF THE EXPORT INCENTIVES WHIL E CALCULATING IN DIRECT COST. 5.3 THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A). 5.4 AFTER HEARING BOTH THE SIDES, WE FIND THE CIT(A) HE LD THAT SINCE THE PROFIT DERIVED FROM EXPORT ACTIVITY IS A POSITIVE F IGURE THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80HHC AND HE ACCORDINGL Y DIRECTED THE ASSESSING OFFICER TO RECOMPUTE AND GRANT DEDUCTION U/S. 80HHC IN ACCORDANCE WITH LAW. HOWEVER, ACCORDING TO THE ASS ESSING OFFICER THERE IS A NEGATIVE FIGURE AFTER THE EXPORT INCENTIVES ARE E XCLUDED FROM THE NET PROFIT. IN OUR OPINION THIS ISSUE NEEDS RE-EXAMINA TION AT THE LEVEL OF THE ASSESSING OFFICER IN THE LIGHT OF THE RECENT DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WHICH WAS NOT CONFRONTED TO EITHER OF THE PARTIES AT THE TIME OF HEARING BEFORE US. WE, THEREFORE, DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH AND IN ACCORD ANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSES SEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUNDS OF APPEAL NOS. 10 AND 11 BY THE REVENUE REA D AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN : (X) DIRECTING TO DELETE THE ADDITION OF RS.5,25,65, 974/- HOLDING THAT THE PURCHASES ARE FULLY EXPLAINED PER BOOKS OF ACCOUNTS IGNORING THAT THE SUPPLIES ARE UNTRACEABLE , I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 6 TRANSACTIONS THROUGH BOOKS AND IN CASH, DETAILS FUR NISHED BY THE BROKERS NOT RELEVANT; (XI) DELETING THE ADDITION OF RS.5,25,65,974/- BEIN G UNPROVED PURCHASES IGNORING THE FACTS THAT M/S. K.G . DENIM LTD. DENIED ANY TRANSACTION WITH THE APPELLANT. 6.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ADDRESSES OF CERTAIN SUPPLIERS FURNISHED BY THE ASSESSEE WERE INCOMPLETE FOR WHICH THE LETTERS SENT AT THOSE ADDRESSES CAME BACK UNSERVED WITH THE REMARK ADDRESS INCOMPLETE. ENQUIRIES WERE ALSO GOT CONDUCTED THR OUGH THE ADI (INVESTIGATION), SALEM WHO ALSO REPORTED THAT THE A DDRESSES OF THESE PARTIES WERE INCOMPLETE. CERTAIN OTHER PARTIES WHO M THE ASSESSEE HAD SHOWN AS SUPPLIERS GAVE REPLIES TO THE ASSESSING OF FICER STATING THAT THEY HAVE NOT SOLD ANY GOODS TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE LEDGER ACCOUNTS OF THE PARTIES SUBMITTED BY THE ASSESSEE SHOWED THAT PAYMENTS HAVE BEEN MADE TO THE SE PARTIES IN CASH. ON BEING CONFRONTED BY THE ASSESSING OFFICER, IT WA S SUBMITTED BY THE ASSESSEE THAT PURCHASES WERE MADE THROUGH BROKERS A ND CASH WAS GIVEN BY THE ASSESSEE TO THE BROKERS WHO MADE THE DDS FRO M THE BANK AND THE DDS WERE THEREAFTER SENT TO THE SUPPLIERS. IT WAS SUBMITTED BY THE ASSESSEE THAT THESE DDS WERE PURCHASED FROM THE IND IAN OVERSEAS BANK, RADHASAOMI SATSANG HALL BRANCH. THE ASSESSING OFFI CER CONDUCTED ENQUIRIES THROUGH THE INDIAN OVERSEAS BANK AND FOUN D THAT THE DD NOS. GIVEN BY THE ASSESSEE WERE NOT PERTAINING TO THE AS SESSEE BUT PURCHASED BY SOME THIRD PARTIES AND THAT TOO NOT IN FAVOUR OF THE ALLEGED SUPPLIERS. THE ASSESSING OFFICER CONFRONTED ALL THE ABOVE FACT S TO THE ASSESSEE. THE ASSESSEE SUBMITTED THAT CASH WAS GIVEN TO THE BROKE RS AND THE DD NOS. WERE FURNISHED BY THE BROKERS TO THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS NOT DEBITED ANY BROKERA GE OR COMMISSION EXPENDITURE TO THE PROFIT AND LOSS A/C. ON BEING C ONFRONTED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT NO B ROKERAGE HAS BEEN PAID BY THE ASSESSEE BUT THE BROKERS MIGHT BE GETTING BR OKERAGE FROM THE SELLERS AND THAT PAYMENTS FOR ALL THE PURCHASES WER E ENTERED IN THE BOOKS I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 7 OF ACCOUNT AND CASH WAS GIVEN TO THE BROKERS TO MAK E OUT DDS ON THE BANK TO BE SENT TO THE SUPPLIERS. IT WAS SUBMITTED THAT PAYMENTS WERE FROM BALANCE AVAILABLE IN THE BOOKS OF ACCOUNT. HO WEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVE N BY THE ASSESSEE AND MADE AN ADDITION OF RS.3,79,15,446/- U/S. 69A OF TH E I.T. ACT. 6.2 SIMILARLY, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SHOWN PURCHASES OF RS.1,43,84,218 FROM M/S. K.G. DE NIM LTD. THE PAYMENT HAS BEEN SHOWN TO HAVE BEEN MADE BY CHEQUES . THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE ACT TO THE SAID PARTY WHO VIDE ITS LETTER DATED 22 ND MARCH, 2004 STATED THAT IT HAD NOT SOLD ANY GOODS TO THE ASSESSEE FIRM DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER OBSERVED THAT THE PEAK OF THE SAID LEDGER ACCOUNT S UBMITTED BY THE ASSESSEE COMES TO RS.1,46,50,501. SINCE THE SAID G OODS MUST HAVE BEEN PURCHASED IN CASH WHICH IS NOT REFLECTED IN THE BOO KS OF THE ASSESSEE THE ASSESSING OFFICER MADE AN ADDITION OF RS.1,46,50,50 1 U/S. 69A OF THE ACT. THUS IN EFFECT, THE ASSESSING OFFICER MADE AN ADDITION OF RS.5,25,65,947 (RS.3,79,15,446 + RS.1,46,50,501) U/ S. 69A OF THE ACT. 6.3 IN APPEAL, THE CIT(A) DELETED THE ABOVE ADDITION. WHILE DOING SO HE OBSERVED THAT FOR INVOKING THE PROVISIONS OF SEC TION 69A, IT IS ESSENTIAL THAT THE ASSESSEE MUST NOT BE IN A POSITION TO EXPL AIN THE ORIGIN AND SOURCE OF FUNDS USED FOR ACQUISITION OF VALUABLE AR TICLES (IN THIS CASE FABRIC). BUT IN THE INSTANT CASE BOTH THE PURCHASE S AND SALES ARE PROPERLY EXPLAINED IN THE BOOKS. HE OBSERVED THAT ACCORDING TO THE ASSESSING OFFICER IN CASH PURCHASES FULL CONSIDERATION HAS T O BE PAID BEFORE TAKING DELIVERY. HE OBSERVED THAT IN CASES OF GREY MARKE T PURCHASES PAYMENTS ARE MADE ON DEFERRED PAYMENT BASIS AFTER VERIFICATI ON OF THE QUANTITY AND QUALITY, THEREFORE, BROKERS ARE REQUIRED WHO ARE TR USTED BY BOTH THE SIDES. HE ACCORDINGLY CONCLUDED THAT THE GOODS HAVE BEEN P URCHASED AND PAYMENTS WERE MADE BY CASH AVAILABLE AS REFLECTED I N THE BOOKS AND NOTHING CONTRARY HAS BEEN BROUGHT OUT BY THE ASSESS ING OFFICER. HE I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 8 ACCORDINGLY DELETED THE ADDITION. AGGRIEVED WITH S UCH ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6.4 THE LEARNED DR WHILE ASSAILING THE ORDER OF THE CIT (A), SUBMITTED THAT IT IS CLEAR FROM THE MODUS OPERANDI OF THE ASS ESSEE THAT IT WAS INFLATING ITS PURCHASES. HE SUBMITTED THAT THE POW ERS OF THE CIT(A) ARE CO-TERMINUS WITH THAT OF THE ASSESSING OFFICER AND HE COULD HAVE DONE SOMETHING WHICH THE ASSESSING OFFICER HAS FAILED/OM ITTED TO DO. AS REGARDS THE OBSERVATION OF THE CIT(A) THAT WRONG PR OVISION HAS BEEN USED, HE SUBMITTED THAT THE CIT(A) COULD HAVE TAKEN RECOU RSE TO THE PROVISIONS OF SECTION 292B AND COULD HAVE CORRECTED THE USE OF THE WRONG SECTION, IF ANY. HOWEVER, HE HAS NOT DONE THE SAME. FURTHER S EVERAL PARTIES COULD NOT BE FOUND WHEREAS OTHER PARTIES HAVE GONE ON REC ORD AND STATED THAT THEY HAVE NOT MADE ANY SALES. THE ASSESSEE HAS ALS O NOT PAID ANY BROKERAGE TO ANY PARTIES. THEREFORE, IT IS CLEAR T HAT NEITHER THE BROKERS ARE INVOLVED NOR PURCHASES WERE MADE THROUGH THEM. THE PARTIES FROM WHOM PURCHASE HAVE BEEN MADE DENIED TO HAVE MADE AN Y SUCH SALES TO THE ASSESSEE. THEREFORE, IT IS A CLEAR CASE OF INF LATION OF PURCHASES AND THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 6.5 THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A). 6.6 AFTER HEARING BOTH THE SIDES, WE FIND THE PURCHASES MADE BY THE ASSESSEE EITHER DIRECTLY OR THROUGH BROKERS REMAINE D UNVERIFIED DUE TO NOTICES BEING RETURNED UNSERVED OR THE SUPPLIERS DE NYING SALES TO THE ASSESSEE. UNDER THESE CIRCUMSTANCES, THE CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . EVEN IF A WRONG SECTION WAS MENTIONED BY THE ASSESSING OFFICER, THE CIT(A), WHOSE POWERS ARE CO-TERMINUS WITH THAT OF THE ASSESSING O FFICER, COULD HAVE CORRECTED SUCH PROVISION. IT IS THE SETTLED PROPOS ITION OF LAW THAT FOR CLAIMING ANY EXPENDITURE AS GENUINE EXPENDITURE, TH E ONUS IS ALWAYS ON THE ASSESSEE. HOWEVER, IN THE INSTANT CASE THE ASS ESSEE HAS FAILED TO DISCHARGE THE ONUS CAST ON IT. THEREFORE, THE CIT( A), IN OUR OPINION, WAS I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 9 NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. HOWEVER, CONSIDERING THE TOTALITY OF THE FACTS OF T HE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE T HIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE O NE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS S ATISFACTION REGARDING THE GENUINENESS OF THE PURCHASES SHOWN BY THE ASSES SEE. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AND IN ACCORD ANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 977/MUM/2007 : 7. AFTER HEARING BOTH THE SIDES, WE FIND THE CIT(A) DE LETED THE PENALTY OF RS.27,08,603 LEVIED BY THE ASSESSING OFFICER U/S . 271(1)(C) OF THE ACT. WE FIND THE CIT(A) DELETED THE PENALTY ON THE GROUN D THAT THE VARIOUS ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFIC ER WERE DELETED BY HIS PREDECESSOR. HOWEVER, WE HAVE ALREADY RESTORED THE ISSUES IN THE QUANTUM APPEAL FILED BY THE REVENUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. WE, THEREFORE, DEEM IT PRO PER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJU DICATION IN ACCORDANCE WITH LAW AND AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENU E ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 18 TH DECEMBER, 2009. SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 18 TH DECEMBER , 2009 I.T.A. NO. 302/MUM/2005 I.T.A. NO. 977/MUM/07 M/S. ATLAS EXPORTERS, MUMBAI ==================== 10 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT(A)-XVIII, MUMBAI, (4) THE CIT, MC-XVIII, MUMBAI, (5) THE DR, A BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO