The DCIT, Circle-9, Ahmedabad V. Shri Mahendra D.Desai, Ahmedabad

ITA 3025/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62952 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D K SINGH
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 40A(3); 133A; 154; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 2835/ AHD/2008 I.T.A.NO. 2937/AHD/2009 (ASSESSMENT YEAR 2005-06 & 2006-07) MAHENDRA D DESAI, PROP. M/S. BHAGWATI ASSOCIATES, 2 ND FLOOR, OM COMPLEX, 32, SWASTIK SOCIETY, C.G.ROAD, AHMEDABAD VS. DCIT, CIRCLE 9, AHMEDABAD PAN/GIR NO. : AAJPD4857H I.T.A.NO. 2896/AHD/2008 I.T.A.NO. 3025/AHD/2009 (ASSESSMENT YEAR 2005-06 & 2006-07) DCIT, CIRCLE 9, VS. MAHENDRA D DESAI, AHMEDABAD PROP. M/S. BHAGWATI ASSOCIATES, 2 ND FLOOR, OM COMPLEX, 32, SWASTIK SOCIETY, C.G.ROAD, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S N SOPARKAR, AR RESPONDENT BY: SHRI D K SINGH, SR. DR DATE OF HEARING: 08.08.2012 DATE OF PRONOUNCEMENT: 21.09.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE CROSS APPEALS FIELD BY THE ASSESSEE AND THE REVENUE FOR THE ASSESSMENT YEARS 2005-06 & 2006-07 AND THESE AP PEALS ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A) XV, AHMED ABAD DATED I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 2 12.06.2008 FOR ASSESSMENT YEAR 2005-06 AND DATED 04 .09.2009 FOR ASSESSMENT YEAR 2006-07. 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE IN I.T.A.NO. 2835/AHD/2008 ASSESSMENT YEAR 2005-06. 2.1 GROUND NO.1 IS AS UNDER: 1. THE ORDER OF THE HON'BLE CIT(A) NOT ACCEP TING HE SUBMISSION OF YOUR APPELLANT AND UPHOLDING THE ACTI ON OF AO RELATING TO REJECTION OF THE BOOKS OF ACCOUNTS OF T HE APPELLANT IS BAD IN LAW AND ALSO ON FACTS. 2.1.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE DEALS IN TRADING OF COAL, COKE, LIGNITE AND COMMISSION AGENT. THERE WA S A SURVEY CONDUCTED U/S 133A OF THE INCOME TAX ACT, 1961 ON 26.09.2007 AND IN THE COURSE OF THIS SURVEY, IT WAS NOTED BY THE DEPARTMENT THAT FO R LIGNITE, THE ASSESSEE HAD PAID THE COSTS IN ADVANCE TO GMDC AND, THEREFOR E, THE LIABILITY SHOWN BY THE ASSESSEE IN THE BALANCE SHEET AS ON 31 .03.2003, 31.03.2004 AND 31.03.2005 ON ACCOUNT OF LIGNITE FREIGHT TO THE EXTENT OF RS.165.51 LACS RS.175.76 LACS AND RS.302.59 LACS RESPECTIVELY ARE FICTITIOUS AND / OR NOT CORRECTLY SHOWN. THE A.O. HAS ALSO NOTED ON PA GE 6 OF THE ASSESSMENT ORDER THAT IN REPLY TO QUESTION 9, IT WA S STATED BY THE ASSESSEE THAT HE IS ONLY A LINK BETWEEN THE PROSPECTIVE PURC HASERS AND SELLERS OF LIGNITE. HE ALSO SUBMITTED THAT HE USED TO RAISE D EBIT NOTES FOR LIGNITE PAYMENT, TRUCK FREIGHT, OCTROI AND SERVICE CHARGES. A COPY OF DEBIT NOTE WAS ALSO PRODUCED. HE ALSO SUBMITTED THAT METHOD O F ACCOUNTING OF THE DEBIT NOTE IS THAT THE CUSTOMER ACCOUNT IS DEBITED WITH THE AGGREGATE VALUE OF SERVICES PROVIDED AND CORRESPONDING CREDIT IS MA DE TO UNPAID FREIGHT ACCOUNT TOWARDS FREIGHT CHARGES AND OCTROI SHOWN IN THE DEBIT NOTE, SERVICE CHARGES ACCOUNT TOWARDS THE AMOUNT TO BE CH ARGED FOR SERVICES RENDERED AND GMDC ACCOUNT TOWARDS LIGNITE COST. HE FURTHER SUBMITTED I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 3 THAT SERVICE CHARGES IS THE INCOME OF THE ASSESSEE WHICH IS TRANSFERRED TO P & L ACCOUNT WHEREAS THE ACCOUNT OF GMDC AND UNPAID FREIGHT ACCOUNT IS SHOWN IN THE BALANCE SHEET ON LIABILITY SIDE AND TH E ACCOUNT OF CUSTOMERS IS SHOWN IN THE BALANCE AT SUNDRY DEBTORS ON ASSETS SIDE. IT WAS ALSO EXPLAINED THAT WHEN THE AMOUNT WAS RECEIVED FROM TH E CUSTOMERS, PARTIES ACCOUNT IS CREDITED AND THE AMOUNT IS DEPOSITED INT O BANK AND, THEREAFTER, THE PAYMENT IS MADE TO TRANSPORT COMPANY BY WITHDRA WING THE AMOUNT FROM THE BANK AND THE UNPAID FREIGHT ACCOUNT IS DEB ITED. IT WAS ALSO EXPLAINED THAT THIS METHOD OF ACCOUNTING IS BEING F OLLOWED CONSISTENTLY AND THERE IS NO CHANGE IN THIS METHOD OF ACCOUNTING FOLLOWED IN EARLIER YEARS. THE A.O. ALSO OBSERVED ON PAGE 7 OF THE ASS ESSMENT ORDER IN PARA 6 THAT AFTER GOING THROUGH THESE FACTS, HE IS OF TH E CONSIDERED OPINION THAT THE ASSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOU NTS AND THE A.O. REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROV ISIONS OF SECTION 145(2) FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 ALSO AND THE MODUS OPRANDI OF THE ASSESSEE IN THOSE YEARS AND IN THE C URRENT YEAR HAVE NOT BEEN CHANGED. HE ALSO OBSERVED THAT THE ASSESSEE I S PAYING HUGE AMOUNT OF CASH AND ACCEPTING CASH ALSO AND THE VOUCHERS AR E SELF MADE AND THEREFORE, CORRECT PROFIT CANNOT BE ARRIVED AT FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. BY MAKING THESE OBSERV ATIONS, HE REJECTED THE BOOKS OF ACCOUNTS IN THE PRESENT YEAR ALSO BY I NVOKING THE PROVISIONS OF SECTION 145(2) OF THE INCOME TAX ACT, 1961. THI S ACTION OF THE A.O. WAS UPHELD BY LD. CIT(A) AND NOW, THE ASSESSEE IS I N APPEAL BEFORE US. 2.2 GROUNDS NO.2 & 3 ARE AS UNDER: 2. LD. CIT(A) ERRED IN NOT ACCEPTING THE SUBMISSIO N OF YOUR APPELLANT AND UPHOLDING ADDITION ON ACCOUNT OF GP A MOUNTING TO RS. 12,27,096 ESTIMATED @ 17% BY THE AO. IT IS, THE REFORE, REQUESTED TO PLEASE DELETE THE ENTIRE ADDITION OF R S. 12,27,096/-. I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 4 3. LD. CIT(A) ERRED IN NOT HOLDING THAT FREIGHT LIA BILITY IS THE LIABILITY OF THE CUSTOMERS AND NOT THAT OF THE APPE LLANT, AND IT DOES NOT AFFECT TRADING RESULTS. LD. CIT(A) ALSO ERRED I N CONFIRMING ADDITION ON ACCOUNT OF FICTITIOUS FREIGHT LIABILITY AMOUNTING TO RS. 12,66,045/-. IT IS, THEREFORE, REQUESTED TO PLEASE DELETE THE ENTIRE ADDITION OF RS. 12,66,045/-. 2.2.1 THESE GROUNDS ARE ALSO INTERCONNECTED WITH G ROUND NO.1 BECAUSE GROUND NO.2 IS REGARDING MAKING ADDITION OF RS.12,2 7,096/- ON ACCOUNT OF G.P. ADDITION BY APPLYING THE G.P. RATE OF 17% AND HENCE, IF REJECTION OF BOOKS OF ACCOUNTS IS NOT FOUND TO BE CORRECT THA N GP ADDITION CANNOT SURVIVE. GROUND NO.3 IS ALSO CONNECTED BECAUSE THE MAIN BASIS OF REJECTION OF BOOKS OF ACCOUNT IS THIS THAT THE ASSE SSEE IS SHOWING VERY HIGH AMOUNT OF FREIGHT LIABILITY WHICH THE ASSESSEE COULD NOT SUBSTANTIATE AS PER THE A.O. AND THE ADDITION OF RS.24,.93,141/- WAS MADE BY THE A.O. ON THIS BASIS THAT 20% OF FREIGHT LIABILITY IS BOGU S. THE A.O. CAME TO THE CONCLUSION THAT G.P. ADDITION CONFIRMED BY HIM OFRS .12,27,096/- SHOULD BE REDUCED FROM THIS ADDITION OUT OF FREIGHT LIABIL ITY OF RS.24,93,141/- AND HENCE, HE CONFIRMED BALANCE ADDITION ON THIS ACCOUN T OF RS.12,66,045/-. NOW, THE ASSESSEE HAS RAISED THESE GROUNDS IN ITS A PPEAL. 2.2.2 IT WAS SUBMITTED BY THE LD. A.R. BEFORE US TH AT SEPARATE REGISTERS ARE MAINTAINED FOR PARTY WISE DETAILS IN RESPECT OF FREIGHT LIABILITY AND IN THE FACTS OF THE PRESENT CASE, NEITHER THE REJECTIO N OF BOOKS OF ACCOUNTS IS PROPER NOR THE ADDITION MADE BY THE A.O. ON ACCOUNT OF GP ADDITION OR ON ACCOUNT OF ANY BOGUS AMOUNT OUT OF FREIGHT LIABILIT Y. HE FURTHER SUBMITTED THAT REGARDING THE TRIBUNAL ORDER IN ASSE SSEES OWN CASE FOR ASSESSMENT YEAR 1998-99, THE TRIBUNAL ORDER IN REVE NUES APPEAL FOR THIS YEAR IN I.T.A.NO. 757/AHD/2002 DATED 20.10.2006 IS AVAILABLE ON PAGES 131-133 OF THE PAPER BOOK AND THE TRIBUNAL ORDER FO R THE SAME ASSESSMENT YEAR IN ASSESSEES APPEAL IN I.T.A.NO. 412/AHD/2002 DATED 10.03.2006 IS I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 5 AVAILABLE ON PAGES 134-135 OF THE PAPER BOOK. HE S UBMITTED THAT AS PER THESE TWO TRIBUNAL ORDERS, IN THOSE YEARS, ALTHOUGH G.P. ADDITION WAS CONFIRMED PARTLY BY ADOPTING G.P. RATE OF 15% BUT B ECAUSE OF THE SAME, THE ADDITION MADE IN THAT YEAR OF R.32.82 LACS U/S 40A(3) WAS DELETED. HE FURTHER POINTED OUT THAT G.P. ADDITION MADE BY THE A.O. IN THAT YEAR BY ADOPTING G.P. RATE OF 17% WAS ONLY OF RS.57,000/- A ND HENCE, THE TRIBUNAL ORDER IN THAT YEAR CANNOT BE THE BASIS TO CONFIRM T HE ADDITION IN THE PRESENT YEAR OF SUCH A HUGE AMOUNT BECAUSE DUE TO S MALLNESS OF G.P. ADDITION, THE SAME WAS NOT SERIOUSLY CONTESTED IN T HOSE YEARS PARTICULARLY WHEN HUGE ADDITION OF RS.38.92 LACS WAS NOT MAINTAI NABLE ONCE BOOKS ARE REJECTED. RELIANCE WAS PLACED ON THE TRIBUNAL DECI SION IN THE CASE OF DCIT VS ASSOCIATED PETROLEUM CORPORATION IN I.T.A.N O. 2308 AND 2333/AHD /2008 DATED 31.08.2010. HE SUBMITTED A CO PY OF THIS TRIBUNAL ORDER AND HE POINTED OUT THAT IN THAT CASE, IT WAS HELD BY THE TRIBUNAL THAT THE DEFECTS POINTED OUT BY THE A.O. IN THE BOOKS OF ACCOUNTS ARE NOT FIT TO REJECT THE BOOKS OF ACCOUNTS. HE SUBMITTED THAT IN THE PRESENT CASE ALSO, SOME DEFECTS ARE POINTED OUT BY THE A.O. IN THE BOO KS OF ACCOUNTS BUT EVEN IF THOSE DEFECTS ARE ACCEPTED AS CORRECT THEN ALSO THEY ARE NOT SUFFICIENT FOR REJECTION OF BOOKS OF ACCOUNTS. HE ALSO POINTED OUT THAT IT IS NOTED BY THE TRIBUNAL ON PAGE 10 OF THE TRIBUNAL OR DER THAT THE PROVISIONS OF SECTION 145(3) CAN BE INVOKED FOR REJECTION OF B OOKS OF ACCOUNTS IF THE A.O. GIVES A FINDING THAT (I) ASSESSEE IS NOT FOLLO WING REGULARLY ANY ACCOUNTING STANDARD NOTIFIED BY THE CENTRAL GOVERNM ENT IN ACCORDANCE WITH SECTION 145(2) AND (II) THE A.O. IS NOT SATISF IED ABOUT THE CORRECTNESS AND COMPLETENESS OF ACCOUNTS AND (III) WHERE THE AS SESSEE IS NOT FOLLOWING ANY METHOD OF ACCOUNTING REGULARLY. TH E TRIBUNAL HAS ALSO HELD THAT IF NO SUCH FINDING IS GIVEN THEN INCOME C HARGEABLE UNDER THE HEAD PROFITS & GAINS OF BUSINESS HAS TO BE COMPUTED IN ACCORDANCE WITH I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 6 THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY THE A SSESSEE AND METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. 2.2.3 AS AGAINST HIS, LD. D.R. SUBMITTED THAT THE R EJECTION OF BOOKS IS PROPER BECAUSE FREIGHT CHARGES IS NOT A BALANCE SHE ET ITEM AS HAS BEEN TAKEN BY THE ASSESSEE. HE DREW OUR ATTENTION TO PA RA 14 ON PAGE 10 OF THE ASSESSMENT ORDER WHERE IT IS NOTED BY THE A.O. THAT OUTSTANDING FREIGHT LIABILITY SHOWN BY THE ASSESSEE HAS INCREASED TO RS .302.59 LACS IN THE PRESENT YEAR AS AGAINST RS.177.76 LACS IN ASSESSMEN T YEAR 2004-05 AND RS.156.51 IN ASSESSMENT YEAR 2003-04. HE SUBMITTED THAT LIABILITY SHOWN IN ASSESSMENT YEAR 2005-06 IS ALMOST DOUBLE TO THE LIABILITY SHOWN IN THE ASSESSMENT YEAR 2003-04 AND, THEREFORE, THE A.O. WA S RIGHT IN COMING TO THE CONCLUSION THAT THE PART OF LIABILITY MUST HAVE BEEN BOGUS AND THE SAME IS INCOME FORM UNDISCLOSED SOURCES. HE ALSO P OINTED OUT THAT IN THAT CASE, THE SURVEY TOOK PLACE ON 31.08.2007 AND THE A SSESSEE MADE DISCLOSURE OF RS.66,11,451/- AND THE FREIGHT LIABIL ITY AS ON THAT DATE WAS RS.2,78,17,669/- AND ON THE BASIS OF THESE TWO FIGU RES, HE WORKED OUT THE PERCENTAGE OF DISCLOSED AMOUNT FOR OUTSTANDING FREI GHT LIABILITY AMOUNT WHICH WAS WORKED OUT AT 23.72% AND BY APPLYING THIS PERCENTAGE, HE WORKED OUT THE DISALLOWANCE OF THE PRESENT YEAR AT RS.43,05,770/- BY ADOPTING THE AVERAGE LIABILITY FOR ASSESSMENT YEAR 2003-04, 2004-05 AND 2005-06 AT RS.2,15,28,876/-. REGARDING THE G.P. AD DITION, HE SUBMITTED THAT WHEN THE BOOKS ARE PROPERLY REJECTED THEN THE GP ESTIMATION IS ALSO REASONABLE. 2.2.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. FIRST, WE DISCUSS ABOUT THE REJECTION OF BOOKS OF ACCOUNTS DO NE BY THE A.O. WE FIND THAT THE MAIN BASIS OF THE A.O. FOR REJECTION OF BOOKS OF ACCOUNTS IS I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 7 THIS THAT THE ASSESSEE DID NOT BROUGHT FULL AND COM PLETE DETAILS OF FREIGHT PAYABLE ALONG WITH NAMES OF PERSONS TO WHOM PAYMENT S WERE TO BE MADE. THE SECOND OBJECTION IS THAT THE ASSESSEE HA S ALSO ACCEPTED CASH DEPOSITS EXCEEDING RS.20,000/- AND THE 3 RD OBJECTION IS REGARDING HIGH AMOUNT OF FREIGHT LIABILITY. ON THIS BASIS, THE A. O. CAME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT MAINTAINING PROPER BOOKS OF ACCOUNTS BUT AS PER THE TRIBUNAL ORDER IN THE CASE OF DCIT VS ASSOCIATE D PETROLEUM CORPORATION (SUPRA), THE PROVISIONS OF SECTION 145( 3) CAN BE INVOKED FOR REJECTION OF BOOKS OF ACCOUNTS IF THE A.O. GIVES A FINDING (I) ASSESSEE IS NOT FOLLOWINGS REGULARLY ANY ACCOUNTING STANDARD NO TIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH SECTION 145(2), (II) THE A.O. IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF ACCOUNTS AND (III) WHEN THE ASSESSEE IS NOT FOLLOWING ANY METHOD OF AC COUNTING REGULARLY. WHEN WE EXAMINE THE OBJECTION OF THE A.O. IN THE PR ESENT CASE, WE FIND THAT THIS IS NOT THE CASE OF THE A.O. THAT THE ASSE SSEE IS NOT FOLLOWING REGULARLY ANY ACCOUNTING STANDARD NOTIFIED BY THE C ENTRAL GOVERNMENT IN ACCORDANCE WITH SECTION 145(2) OF THE ACT. THIS IS ALSO NOT THE OBJECTION OF THE A.O. THAT THE ASSESSEE IS NOT FOLLOWING ANY METHOD OF ACCOUNTING REGULARLY. REGARDING THE THIRD ASPECT ALSO THAT TH E A.O. IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF ACCOUNTS, WE FIND THAT THIS IS NOT THE OBJECTION OF THE A.O. IN THE PRESENT CASE A ND EVEN IF IT IS ACCEPTED THAT THIS IS AN OBJECTION OF THE A.O., WE ARE OF TH E CONSIDERED OPINION THAT IN THE FACTS OF THE PRESENT CASE, THIS OBJECTION IS NOT CORRECT. THE ASSESSEE HAS DULY SUBMITTED COPIES OF DEBIT NOTES TO THE SUR VEY TEAM AND ALSO EXPLAINED THE BASIS OF PASSING ENTRIES IN THE BOOKS OF ACCOUNTS. IT WAS SUBMITTED THAT THE DEBIT NOTE IS RAISED WHICH INCLU DES LIGNITE PAYMENT, TRUCK FREIGHT, OCTROI AND SERVICE CHARGES. IT WAS POINTED OUT THAT THE TOTAL AMOUNT IS DEBITED TO THE CUSTOMERS AND THE COST OF LIGNITE IS CREDITED TO I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 8 GMDC, TRUCK FREIGHT AND OCTROI IS CREDITED TO OUTST ANDING FREIGHT LIABILITY AND SERVICE CHARGES IS CONSIDERED AS INCOME WHICH I S TAKEN TO P & L ACCOUNT. NO DEFECT IS POINTED OUT BY THE A.O. IN A SSESSMENT ORDER IN THIS SUBMISSION OF THE ASSESSEE. IT IS NOT THE CASE OF THE A.O. THAT THE ENTRIES ARE NOT MADE IN THE BOOKS OF ACCOUNTS. IF ENTRIES ARE SHOWN IN THE BOOKS OF ACCOUNTS THEN IT CANNOT BE SAID THAT THE BOOKS O F ACCOUNTS ARE NOT CORRECT AND COMPLETE. THERE MAY BE SOME OTHER METH ODS OF ACCOUNTING ALSO BUT THIS METHOD OF ACCOUNTING CANNOT BE SAID T O BE DEFECTIVE IN OUR OPINION. GENERALLY, WHEN A PERSON IS ACTING AS ORG ANIZER AND TAKING CARE OF PAYMENTS TO SUPPLIERS, PAYMENT TO TRUCK OPERATOR S AND OCTROI PAYMENT ALSO AND CHARGES FOR ALL THESE SERVICES, THEN THE I NCOME OF THE ASSESSEE IS ONLY THE SERVICE CHARGES + ANY EXTRA RECOVERY BY TH E ASSESSEE FORM THE CUSTOMERS ON ACCOUNT OF FREIGHT ETC, IF ANY. THIS IS NOT THE CASE OF THE A.O. THAT THE ASSESSEE IS RECOVERING ANY EXTRA MOUN T ON ACCOUNT OF FREIGHT, OCTROI ETC. AND NOT DECLARING THE SAME AS INCOME. THE OBJECTION OF THE A.O. IS THIS THAT THE FREIGHT LIABILITY SHOW N BY THE ASSESSEE IS BOGUS. BUT THIS IS NOT COMING OUT FROM THE ASSESSMENT ORDE R AS TO WHAT IS THE BASIS OF THIS OBJECTION THAT THE FREIGHT LIABILITY IS BOGUS. ONLY BECAUSE THIS AMOUNT IS HIGH, ONE CANNOT COME TO THE CONCLUSION T HAT THE LIABILITY IS BOGUS UNLESS SUCH OBJECTION IS SUPPORTED BY SOME OT HER COGENT EVIDENCE. THE A.O.S OBJECTION IS THIS THAT AT THE TIME OF SU RVEY, CARRIED OUT ON 26.09.2007, THE ASSESSEE HAS MADE A DISCLOSURE OF R S.66,11,451/- ON THE BASIS OF THIS DISCLOSURE IN ASSESSMENT YEAR 2008-09 , THE A.O. IS DRAWING ANALOGY IN THE PRESENT YEAR ALSO THAT IN THE PRESEN T YEAR ALSO SIMILAR PERCENTAGE OF OUTSTANDING FREIGHT LIABILITY IS BOGU S. WE FAIL TO UNDERSTAND THIS LOGIC OF THE A.O. BECAUSE IN PARA 14 OF THE AS SESSMENT ORDER ON PAGE 10, THE A.O. HAS STATED THAT IT APPEARS THAT SINCE LONG BACK LIABILITY IS CARRIED FORWARD FROM YEAR TO YEAR. IF THIS BE SO, THEN THE LIABILITY FOR I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 9 ASSESSMENT YEAR 2005-06 IS ALSO CARRIED FORWARD IN ASSESSMENT YEAR 2008- 09 I.E. THE YEAR OF SURVEY AND IN THAT YEAR, ASSESS EE HAS DISCLOSED AN AMOUNT OF RS.66,11,451/- AND HENCE, NO FURTHER ADDI TION CAN BE MADE IN THE PRESENT YEAR ON THE BASIS OF THIS OBJECTION THA T PART OF FREIGHT LIABILITY IS BOGUS BECAUSE EVEN IF SOME BOGUS FREIGHT LIABILI TY IS THERE, THE SAME WAS TAKEN CARE OF IN THE DISCLOSURE IN ASSESSMENT Y EAR 2008-09 AS IS THE STAND OF THE A.O. THAT THE FREIGHT LIABILITY IS CAR RIED FORWARD FROM YEAR TO YEAR. SIMILARLY, WE DO NOT FIND ANY MERIT IN G.P. ADDITION ALSO BECAUSE AS PER THE YEAR WISE G.P. CHART SUBMITTED BY THE ASSES SEE, WE FIND THAT THE ASSESSEE HAS FURNISHED ITEM WISE G.P. PREPARING CHA RT FROM ASSESSMENT YEAR 1997-98 TO ASSESSMENT YEAR 2005-06. FOR STEAM COAL, G.P. OF THE PRESENT YEAR IS 32.46% WHICH IS HIGHEST IN ALL THES E YEARS. IN ASSESSMENT YEAR 2004-05, THE SAME WAS 16.16% AND IN ASSESSMENT YEAR 1997-98, IT WAS 13.21%. SIMILARLY, FOR WHITE COAL, G.P. DECLAR ED OF THE PRESENT YEAR IS 16.01% WHICH WAS 16.13% IN ASSESSMENT YEAR 2004- 05. FOR GNSP PAID, G.P. IN THE PRESENT YEAR IS 17.02% AND FOR CH ARCOAL IT IS 20.84% AND IN BOTH THESE ITEMS, G.P. IN THE PRESENT YEAR IS BE TTER THAN THE PRECEDING YEAR. THERE IS NO G.P. DECLARED IN LIGNITE BECAUSE THE ASSESSEE IS NOT DEALING IN LIGNITE BUT ACTING AS COMMISSION AGENT O NLY FOR LIGNITE. ON THE BASIS OF THE OBJECTION REGARDING SOME INCONSISTENCY IN ACCOUNTING OF FREIGHT LIABILITY, GP ADDITION CANNOT BE MADE FOR O THER ITEMS WITHOUT POINTING OUT ANY DEFECT IN RESPECT OF THOSE ITEMS P ARTICULARLY WHEN LIGNITE IS NOT AN ITEM IN WHICH ASSESSEE IS TRADING BECAUSE THE ASSESSEE IS ONLY COMMISSION AGENT FOR LIGNITE. 2.2.5 IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONS IDERED OPINION THAT IN THE FACTS OF THE PRESENT CASE, EVEN THE REJ ECTION OF BOOKS OF ACCOUNT IS NOT PROPER AND EVEN IF REJECTION OF THE BOOKS OF ACCOUNTS IS ACCEPTED, THE ADDITION MADE BY THE A.O. ON ACCOUNT OF G.P. AD DITION AND I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 10 DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF BOGUS F REIGHT LIABILITY CANNOT BE SUSTAINED. WE, THEREFORE ALLOW ALL THESE THREE GROUNDS OF THE ASSESSEE. 2.3 GROUNDS NO.4, 5, 6 & 7 ARE INTERCONNECTED WHICH READ AS UNDER: 4. LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 35000/- BY HOLDING THAT THE DEPOSIT GIVEN BY DEEPAL M. DESA I HUF OF THE SAID AMOUNT TO YOUR APPELLANT, IS BOGUS DEPOSIT U/S 68. IT IS, THEREFORE, REQUESTED TO PLEASE DELETE THE ADDITION OF RS. 35,000/-. 5. LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF R S. 35000/- BY HOLDING THAT THE DEPOSIT GIVEN BY TEJAL M. DESAI HUF OF THE SAID AMOUNT TO YOUR APPELLANT, IS BOGUS DEPOSIT U/S 68. IT IS, THEREFORE, REQUESTED TO PLEASE DELETE THE ADDITION OF RS. 35,000/-. 6. LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF R S. 33000/- BY HOLDING THAT THE DEPOSIT GIVEN BY JAYANTILAL ET CO. OF THE SAID AMOUNT TO YOUR APPELLANT, IS BOGUS DEPOSIT U/S 68. IT IS, THEREFORE, REQUESTED TO PLEASE DELETE THE ADDITION OF RS. 33,0 00/-. 7. LD, CST(A) ERRED IN UPHOLDING ADDITION OF RS. 4,798/- ON ACCOUNT OF INTEREST PAID TO DEEPAL M. DESAI HUF AND TEJAL M. DESAI HUF. IT IS, THEREFORE, REQUESTED TO PLEASE DE LETE THE ADDITION OF RS. 4,798/-. 2.3.1 BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. IN PARA 11 & 12 OF THE ASSESSMENT ORDER THAT VARIOUS DEPOSITS WE RE ACCEPTED BY THE ASSESSEE IN THE PRESENT YEAR AND THE ASSESSEE WAS A SKED TO FILE CONFIRMATION GIVING MODE OF PAYMENT AND CAPACITY OF DEPOSITORS TO LEND MONEY. THE A.O. HAS ALSO NOTED THAT TOTAL DEPOSITS OF RS.47,14,900/- WAS ACCEPTED BY THE ASSESSEE FROM 8 PERSONS IN THE PRES ENT YEAR. HE FURTHER NOTED THAT THE ASSESSES DID NOT FILE CONFIRMATION O F THE DEPOSITORS GIVING THEIR NAMES, AGE, OCCUPATION, CAPACITY TO LEND MONE Y AND WHETHER THEY ARE REGULARLY FILING INCOME TAX RETURNS. BY MAKING THESE OBSERVATIONS, A.O. MADE ADDITION OF THIS ENTIRE AMOUNT OF RS.47,1 4,900/- U/S 68 IN ADDITION TO THE ADDITION MADE OF RS.3,93,947/- ON A CCOUNT OF INTEREST PAID BY THE ASSESSEE ON THESE DEPOSITS. BEING AGGRIEVED , THE ASSESSEE CARRIED I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 11 THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS PART LY CONFIRMED THIS ADDITION OF RS.35,000/- EACH IN RESPECT OF DEPOSITS BY DEEPAL DESAI (HUF) AND TEJAL M DESAI AND ALSO CONFIRMED THE DEPO SITS OF RS.33,000/- BY J. LAL & CO. AND ALSO CONFIRMED DISALLOWANCE OF INTEREST OF RS.4,798/- ON ACCOUNT OF INTEREST PAID TO DEEPAL DESAI AND TEJ AL DESAI ETC. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 2.3.2 IT WAS SUBMITTED BY THE LD. A.R. THAT ALL THE CONFIRMATIONS ARE DULY SUBMITTED BEFORE LD. CIT(A) EXCEPT OF J. LAL & CO. FROM WHOM DEPOSIT OF RS.33,000/- WAS ACCEPTED IN THE PRESENT YEAR. H E ALSO SUBMITTED THAT LD. CIT(A) HAS DULY OBTAINED REMAND REPORT FORM THE A.O. AND THE POSITION AS PER REMAND REPORT IS NOTED BY LD. CIT( A) ON PAGES 12-15 OF HIS ORDER. HE FURTHER SUBMITTED THAT LD. CIT(A) HA S MADE DELETION ON THE BASIS OF REMAND REPORT BUT HE HAS CONFIRMED THE ADD ITION ON ACCOUNT OF DEEPAL DESAI (HUF) IN RESPECT OF RS.35,000/- ON THI S BASIS THAT CREDITWORTHINESS AND GENUINENESS HAS NOT BEEN PROVE D. SIMILARLY, FOR TEJAL DESAI ALSO, PART ADDITION OF RS.35,000/- WAS CONFIRMED ON SIMILAR BASIS THAT CREDITWORTHINESS COULD NOT BE ESTABLISHE D. REGARDING J. LAL & CO., IT IS NOTED BY LD. CIT(A) THAT RS.33,000/- WAS NOT CONFIRMED IN THE REMAND PROCEEDINGS ALSO AND A.O.S INFORMATION WAS THAT THE DETAILS REGARDING THIS PARTY WAS NOT FURNISHED IN REMAND PR OCEEDINGS ALSO. HE FAIRLY CONCEDED THAT THE ADDITION OF RS.33,000/- IN RESPECT OF J LAL & CO. MAY BE CONFIRMED BECAUSE THE ASSESSEE COULD NOT PRO DUCE THE CONFIRMATION OF THIS PARTY BUT ALL THE REMAINING AD DITIONS SHOULD BE DELETED BECAUSE CONFIRMATIONS ARE DULY FURNISHED FO RM DEEPAL DESAI (HUF) AND TEJAL DESAI (HUF) AND THESE TWO PERSONS M ADE WITHDRAWAL FROM BHAGWATI AVIATION BY CHEQUE ON 01.10.2004 AND HAVE GIVEN LOAN TO THE ASSESSEE ON 07.01.2004. THIS CHEQUE TRANSACTIO N WAS ACCEPTED BY LD. CIT(A) BUT SIMILAR TRANSACTION FOR WHICH CASH WAS R ECEIVED FROM LOAN I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 12 CREDITOR IN THE SAME PERIOD I.E. BHAGWATI AVIATION IS NOT ACCEPTED AND, THEREFORE, THE SAME SHOULD ALSO BE ACCEPTED. 2.3.3 LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.3.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. REGARDING DEEPAL DESAI (HUF), WE FIND THAT IT IS NOTED BY LD. CIT(A) ON PAGE 12 OF HIS ORDER THAT A CASH LOAN OF RS.17,000/-WAS GIVEN TO THE ASSESSEE ON 01.11.2004 WHILE THIS PERSON RECEIVED THIS AMOUNT I N CASH FORM BHAGWATI AVIATION ON 15.02.2005. REGARDING THE SECOND LOAN OF RS.18,000/- IN CASH GIVEN TO THE ASSESSEE ON 01.07.2004, IT WAS SU BMITTED THAT SOURCE OF THIS WAS AGRICULTURAL INCOME BUT THE SAME WAS NOT S UPPORTED BY CONVINCING EXPLANATION. IT WAS ALSO NOTED THAT AGR ICULTURAL INCOME HAS NOT BEEN REFLECTED IN ANY OF THE INCOME TAX RETURNS FILED IN INDIVIDUAL CAPACITY AND HUF IS NOT FILING ANY RETURN. IN OUR CONSIDERED OPINION, THE LOAN OF RS.17,000/- GIVEN ON 01.11.2004 CANNOT BE A CCEPTED AS EXPLAINED OUT OF RECEIPT OF CASH FROM BHAGWATI AVIATION ON 15 .02.2005 BUT THE SECOND LOAN OF RS.18,000/-RECEIVED ON 01.07.2004 FO R WHICH IT WAS EXPLAINED THAT AGRICULTURAL INCOME IS THE SOURCE, C ANNOT BE REJECTED MERELY ON THIS BASIS THAT HUF IS NOT FILING ANY IN COME TAX RETURN. HENCE, WE UPHOLD THIS ADDITION OF RS.17,000/- REGARDING LO AN TAKEN FORM DEEPAL DESAI (HUF) AND DELETE THE ADDITION OF RS.18,000/- REGARDING LOAN FROM THIS PERSON. SIMILARLY, REGARDING DEPOSITS TAKEN F ORM TEJAL DESAI (HUF), WE FIND THAT ONE LOAN IS TAKEN ON 01.11.2004 OF RS. 17,000/- IN CASH WHEREAS THE SOURCE IS EXPLAINED TO BE CASH FROM BHA GWATI AVIATION ON 15.02.2005. ADDITION ON THIS ACCOUNT IS UPHELD BEC AUSE FOR A LOAN ON 01.11.2004, WITHDRAWAL ON 15.02.2005 CANNOT BE ACCE PTED AS THE SOURCE. THE 2 ND LOAN OF RS.18,000/- IN CASH ON 01.07.2004 HAS BEEN EXPLAINED THAT THE SOURCE IS AGRICULTURAL INCOME. IT IS STATED BY LD. CIT(A) THAT AS PER I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 13 7/12 EXTRACT, THIS PARTY IS HAVING ONLY VERY SMALL PIECE OF LAND ON WHICH JAWAR IS GROWN AND NO SALE BILL OR OTHER EVIDENCE W AS FILED TO JUSTIFY THIS AGRICULTURAL INCOME. WE ARE OF THE CONSIDERED OPIN ION THAT WHEN THE ASSESSEE IS HOLDING A LAND IN WHICH SOME CROP IS AL SO GROWN, THEN FOR THIS SMALL AMOUNT OF RS.18,000/-, SOURCE SHOULD BE ACCEP TED AND HENCE, WE DELETE THIS ADDITION OF RS.18,000/- REGARDING DEPOS IT FROM TEJAL DESAI (HUF) ALSO. REGARDING ADDITION OF RS.33,000/- IN R ESPECT OF DEPOSIT BY J. LAL & CO., WE UPHOLD THE ENTIRE ADDITION BECAUSE NO EXPLANATION COULD BE FURNISHED WITH REGARD TO THIS DEPOSIT. REGARDING D ISALLOWANCE OF INTEREST, WE DIRECT THE A.O. TO ALLOW RELIEF WITH REGARD TO 2 ND LOAN OF RS.18,000/- EACH, WHICH IS FROM DEEPAL DESAI AND TEJAL DESAI (H UF) FOR WHICH ADDITIONS ARE DELETED BY US. ACCORDINGLY, GROUNDS NO.4, 5 & 7 ARE PARTLY ALLOWED WHEREAS GROUND NO.6 IS REJECTED. 2.4 GROUND NO.8 IS AS UNDER: 8. LD. CIT(A) INSTEAD OF DELETING ENTIRE ADDITION OF RS. 2,02 S 840 OUT OF MOOR AND JAKAT EXPENSES ERRED IN UPHOLDI NG ADDITION OF RS. 2,02,840/- CONSIDERING THAT 10% OUT OF THE SAID EXPENSES WOULD NOT BE GOT VERIFIED, IT IS, THEREFOR E, REQUESTED TO PLEASE DELETE THE ADDITION OF RS. 2,02,840/-. 2.4.1 BRIEF FACTS OF THIS ISSUE ARE THAT IT IS NOTE D BY THE A.O. ON PAGE 12 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIM ED NOOR JAKAT OF RS.20,28,473/-. HE FURTHER NOTED THAT IN THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH FULL AND COMPLETE DETAILS BECAUSE ASSESSEE DID NOT FILE COMPLETE DETAILS OF T HESE EXPENSES AND, THEREFORE, REASONABLE ESTIMATE OF 10% OF EACH EXPEN SES IS TO BE DISALLOWED. ON THIS BASIS, HE MADE DISALLOWANCE OF RS.2,02,840/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 14 2.4.2 IT IS SUBMITTED BY THE LD. A.R. THAT ALTHOUGH THE A.O. HAS DISCUSSED FOR THIS DISALLOWANCE ON PAGE 12 OF THE ASSESSMENT ORDER BUT WHILE COMPUTING THE INCOME ON PAGE 13 OF THE ASSESSMENT O RDER, NO ACTUAL ADDITION WAS MADE ON THIS ACCOUNT OF RS.2,02,840/-. IT WAS ALSO SUBMITTED BY THE LD. A.R. THAT NO DETAIL WAS CALLED FOR BY THE A.O. AND, THEREFORE, THIS DISALLOWANCE IS NOT JUSTIFIED. LD . D.R. SUPPORTED THE ASSESSMENT ORDER. 2.4.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT IS NOTED BY THE A.O. ON PAGE 12 OF THE ASSE SSMENT ORDER THAT THE ASSESSEE WAS ASKED TO FURNISH FULL AND COMPLETE DET AILS BUT IT IS NOT SPECIFIED AS TO WHAT WERE THOSE DETAILS WHICH WERE CALLED FOR. THIS IS NOT THE CASE OF THE A.O. THAT PAYMENT OF NOOR JAKAT EXP ENSES IS EXCESSIVE OR UNREASONABLE AS COMPARED TO EARLIER YEARS. IT IS A LSO NOT MENTIONED THAT WHAT TYPE OF DETAILS WERE CALLED FOR AND MOREOVER, NO ACTUAL ADDITION WAS MADE BY THE A.O. IN THE COMPUTATION OF INCOME IN PA GE 13 OF THE ASSESSMENT ORDER AND IT HAS NOT BROUGHT ON RECORD T O SHOW THAT THE MISTAKE WAS RECTIFIED U/S 154 WITHIN THE TIME ALLOW ED UNDER THAT SECTION. EVEN IF THIS HAS BEEN RECTIFIED THEN ALSO WE FEEL T HAT SUCH AD-HOC DISALLOWANCE WITHOUT POINTING OUT AS TO WHAT WAS TH E DETAILS CALLED FOR WHICH WERE NOT SUBMITTED, IS NOT JUSTIFIED. WE, TH EREFORE, DELETE THIS DISALLOWANCE. THIS GROUND IS ALLOWED. 2.5 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 3. NOW, WE TAKE UP THE REVENUES APPEAL FOR THE ASS ESSMENT YEAR 2005-06 I.E. I.T.A.NO. 2896/AHD/2008. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE ID. COMMISSIONER OF INCOME-TAX (A)-XV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION MADE BY THE I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 15 ASSESSING OFFICER U/S 68 TO THE TUNE OF RS.46,38,90 0/-. THE DEPOSITORS ARE FICTITIOUS AND THE AMOUNT OF DEPOSIT NEEDS TO BE TAXED U/S 68. 2. THE ID. COMMISSIONER OF INCOME-TAX (A)-XV, AHMEDABAD HAS ERRED IN LAW AND ON K FACTS IN DELETING THE ADD ITION OF INTEREST TO THE TUNE OF RS.3,89,149/- MADE BY THE ASSESSING OFF ICER. 3. THE ID. COMMISSIONER OF INCOME-TAX (A)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF FREIGHT 'LIABILITY TO THE TUNE OF RS.30,39,725/-MADE BY THE ASSESSING OFFICER. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE ID. COMMISSIONER OF | INCOME-TAX (A)-XV, AHMEDABAD OUGH T TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS THEREFORE PRAYED THAT THE ORDER OF T HE ID. COMMISSIONER OF INCOME-TAX (A)-XV, AHMEDABAD MAY BE SET-ASIDE AN D THAT OF THE ASSESSING OFFICER BE RESTORED. 3.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A) FOR ALL THE ISSUE S. 3.1.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. REGARDING THE 1STGROUND, WE FIND THAT THE A.O. HAS MADE ADDIT ION REGARDING TOTAL AMOUNT OF DEPOSIT RECEIVED DURING THE PRESENT YEAR OF RS.47,14,900/- AND REGARDING GROUND NO.2, WE FIND THAT THE A.O. MADE D ISALLOWANCE OF TOTAL AMOUNT OF INTEREST PART ON THESE DEPOSITS OF RS.3,9 3,947/-. THIS ADDITION WAS MADE BY THE A.O. ON THIS BASIS THAT THE ASSESSE E DID NOT FILE CONFIRMATIONS. IN APPELLATE PROCEEDINGS, ASSESSEE FILED CONFIRMATIONS AND OTHER REQUIREMENTS. LD. CIT(A) ALSO OBTAINED REMAN D REPORT FORM THE A.O. AND AFTER CONSIDERING THE REMAND REPORT OF THE A.O., HE DELETED THIS PART ADDITION OF RS.46,38,900/- OUT OF TOTAL ADDITI ON OF RS.47,14,900/- MADE BY THE A.O. U/S68 AND ALSO DELETED THE CONSEQU ENTIAL DISALLOWANCE OF INTEREST. LD. CIT(A) DELETED THIS ADDITION ON T HIS BASIS THAT THE ASSESSEE HAS DULY FURNISHED CONFIRMATIONS AND COULD ESTABLISH THE I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 16 IDENTITY, CREDITWORTHINESS OF THE CREDITOR AND GENU INENESS OF THE TRANSACTION. LD. D.R. COULD NOT CONTROVERT THIS FI NDING OF LD. CIT(A) AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN TH E ORDER OF LD. CIT(A) ON THIS ISSUE REGARDING DELETION OF PART ADDITION M ADE BY THE A.O. U/S 68. DELETION OF PART INTEREST IS CONSEQUENTIAL. THESE GROUNDS NO.1 & 2 ARE REJECTED. 3.2 GROUND NO.3 IS INTERCONNECTED WITH GROUND NO.3 OF THE ASSESSEES APPEAL AND WHILE DECIDING THE ASSESSEES APPEAL, WE HAVE ALREADY HELD THAT NO ADDITION IS CALLED FOR IN THE PRESENT CASE REGARDING THE FREIGHT LIABILITY AND, THEREFORE, THERE IS NO MERIT IN GROU ND NO.3 RAISED BY THE REVENUE. THE SAME IS ALSO REJECTED. 3.3 IN THE RESULT, THIS APPEAL OF THE REVENUE IS R EJECTED. 4. NOW, WE TAKE UP THE ASSESSEES APPEAL FOR ASSESS MENT YEAR 2006-07 I.E. I.T.A.NO. 2937/AHD/2009. THE GROUNDS RAISED B Y THE ASSESSEE ARE AS UNDER: THE LD. CIT APPEALS XV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN PASSING APPELLATE ORDER DATED 04/09/2009 F OR ASST. YEAR 2006-07 IN THE CASE OF APPELLANT BY CONFIRMING THE G. P. ADDITION OF RS. 48, 54. 881/- . 2 THE LD. CIT APPEALS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS 14,12,759/- U/S. 68 AS UNPROVED FREIGHT LIABILITY. (THOUGH THE ADDITION MADE IS RS. 62,67,640/- BUT IT GETS TELESCOPED WITH G.P. ADDITION OF RS. 48,54,881/- AND THE BALAN CE RS. 14,12.759/- IS ADDED HERE. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL ON OR BEFORE OF THE FINAL HEARING OF APPEAL. 4.1 REGARDING GROUND NO.2, IT WAS AGREED BY BOTH TH E SIDES THAT THIS ISSUE IS INTERCONNECTED WITH GROUND NO.3 OF THE ASS ESSEES APPEAL IN ASSESSMENT YEAR 2005-06. IN THAT YEAR, WE HAVE DEC IDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND IT WAS HELD THAT NO ADDI TION IS JUSTIFIED OUT OF I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 17 OUTSTANDING FREIGHT LIABILITY AND ON SIMILAR LINES, IN THIS YEAR ALSO, WE HOLD THAT NO ADDITION IS JUSTIFIED OUT OF OUTSTANDING FR EIGHT LIABILITY. GROUND NO.2 IS ALLOWED. 4.2 REGARDING GROUND NO.1 ALSO, IT WAS SUBMITTED TH AT HIS ISSUE IS SIMILAR TO GROUND NO.2 RAISED IN ASSESSMENT YEAR 20 05-06. IN THAT YEAR, WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSE E AND ACCORDINGLY IN THE PRESENT YEAR ALSO, THIS ISSUE IS DECIDED IN FAV OUR OF THE ASSESSEE. THIS GROUND IS ALSO ALLOWED. 4.3 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 5. NOW, WE TAKE UP THE REVENUES APPEAL FOR THE ASS ESSMENT YEAR 2006-07 IN I.T.A.NO. 3025/AHD/2009. THE GROUNDS RA ISED BY THE REVENUE ARE AS UNDER: 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN GRANTING RELIEF OF RS.52,54,781/- OUT OF ADDITION OF FICTITI OUS LIABILITIES. 2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING TELESCOPING OF THE ADDITION MADE OUT OF FICTITIOUS LIABILITY AGAINST THE ADDITION MADE BY REJECTING OF BOOKS AND ESTIMAT ION OF GROSS PROFIT. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 4) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 5.1 IT WAS AGREED BY BOTH THE SIDES THAT THIS ISSUE IS SIMILAR TO GROUND NO.3 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2005- 06. BOTH THE SIDES AGREED THAT THIS ISSUE CAN BE DECIDED ON SIMILAR LI NES AS IN ASSESSMENT YEAR 2005-06 WHEREIN WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AS PER PARA 2.2.5 ABOVE AND ACCORDINGLY, IN THE PRE SENT YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 5.2 IN THE RESULT, THIS APPEAL OF THE REVENUE IS DI SMISSED. I.T.A.NO. 2835,2896 /AHD/2008 I.T.A.NO. 2937, 3026/AHD/2009 18 6. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE F OR THE ASSESSMENT YEAR 2005-06 IS PARTLY ALLOWED AND FOR THE ASSESSME NT YEAR 2006-07 IS ALLOWED AND BOTH THE APPEALS OF THE REVENUE ARE DIS MISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 04/09/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12/09/2012 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/09/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/9/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/09/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .