DCIT, Faridabad V. M/s Arya Bandhu, Faridabad

ITA 3040/DEL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52837 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWANI TANEJA; DR RAKESH GUPTA
• Assessee Lawyers: MRS ANUSHA KHURANA
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NOS. 1968 & 3040/DEL/2009 ASSTT. YRS: 2005-06 & 2006-07 DCIT CIR. 1, VS. M/S ARYA BANDHU, FARIDABAD. PLOT NO. 37-E, SECTOR-6, FARIDABAD. PAN/GIR NO. AABFA8074D (APPELLANT ) ( RESPONDENT ) APPELLANT BY : DR. RAKESH GUPTA ADV. & SH. ASHWANI TANEJA ADV. RESPONDENT BY : MRS. ANUSHA KHURANA, SR. DR O R D E R PER R.P.TOLANI, J.M : THESE ARE TWO REVENUES APPEALS FOR A.Y. 2005-06 & 2006-07. RESPECTIVE GROUNDS TAKEN ARE AS UNDER: ITA NO. 1968/DEL/09 (A.Y. 2005-06) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 77,91,940/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF BOGUS PURCHASES EVEN THOUGH THE ASSESSEE HAD FAILED TO ESTABLISH THAT THE PURCHASES WERE GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 46,42,246/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF SUPPRESSION OF PRODUCTION OF SOAPS DISREGARDING THE FACT THAT THE ASSESSEE HAD NOT SHOWN THE QUANTITY OF SOAP MANUFAC TURED DURING THE YEAR CORRECTLY IN ITS BOOKS OF ACCOUNTS TO THE EXTENT OF RS. 46,42,246/-. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 17,56,969/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF FREIGHT, OCTROI AND CARTAGE EXPENSES DISREGARDING T HE FACT THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE GENUINENES S OF THE EXPENDITURE CLAIMED FOR DEDUCTION U/S 37(1) OF THE INCOME TAX ACT, 1961. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 2,98,282/- ON ACCOUNT OF SALES PROMOTION AND RS . 27,973/- ON ACCOUNT OF REBATE AND DISCOUNT EXPENSES, DISREGA RDING THE FACT THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE GENUINENESS OF THESE EXPENDITURE WHOLLY & EXCLUSIVELY FOR BUSINESS PURPOSES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 20,000/- MADE BY THE ASSESSING OFFICER ON ACCOU NT OF UTILIZATION OF INTEREST BEARING FUNDS FOR NON-BUSIN ESS PURPOSES IN CONTRACTION OF THE JUDGMENT OF THE JURISDICTIONA L HIGH COURT IN THE CASE OF CIAT VS. M/S ABHISHEK INDUSTRIES LTD . (2006) 268 ITR 1 (P&H) 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 67,404/- MADE BY THE ASSESSING OFFICER ON ACCOU NT OF WORKERS AND STAFF WELFARE EXPENSES DISREGARDING THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THESE EXPENSES AND WHETHER EXPENSES WERE WHOLLY AND EXCLU SIVELY FOR BUSINESS PURPOSES. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 14,792/- MADE BY THE ASSESSING OFFICER U/S 41(1 ) OF THE INCOME TAX ACT, 1961 DISREGARDING THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE THAT LIABILITY SUBSISTS. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 3 8. THAT THE APPELLANT CRAVES FOR THE PERMISSION T O ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HARING OF APPEAL. ITA NO. 3040/DEL/09 (A.Y. 2006-07) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 50,85,983/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF SUPPRESSION OF PRODUCTION OF SOAP DISREGARDING THE FACT THAT THE ASSESSEE HAD NOT SHOWN THE QUANTITY OF SOAP MANUFAC TURED DURING THE YEAR CORRECTLY IN ITS BOOKS OF ACCOUNTS TO THE EXTENT OF RS. 50,85,983/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 12,22,587/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF FREIGHT, OCTROI AND CARTAGE EXPENSES DISREGARDING T HE FACT THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE GENUINENES S OF THE EXPENDITURE CLAIMED FOR DEDUCTION U/S 37(1) OF THE INCOME TAX ACT, 1961. 3. THAT THE APPELLANT CRAVES FOR THE PERMISSION T O ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HARING OF APPEAL. A.Y. 2005-06 : 2. BRIEF FACTS REGARDING ADDITION ON ACCOUNT OF BOG US PURCHASES ARE AS UNDER: (1) ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF WASHING SOAP FOR WHICH CAUSTIC LYE, OIL & FATS, SODIUM SILICATE ETC. ARE USED AS RAW- MATERIAL. THE ASSESSEES BOOKS OF ACCOUNT ARE DULY AUDITED. RESPECTIVE RETURNS WERE FILED WHICH WERE SELECTED F OR SCRUTINY U/S 143(2). DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO WANTED TO VERIFY THE GENUINENESS OF THE PURCHASES. ACCORDINGL Y, NOTICES U/S ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 4 133(6) WERE ISSUED ON SAMPLE BASIS TO SOME OF THE P ARTIES. ACCORDING TO AO, SOME OF THE PARTIES REPLIED THAT THERE WAS N O BUSINESS DEALING WITH THE ASSESSEE. INQUIRIES WERE ALSO CARRIED OUT BY ADIT, INDORE. AO ISSUED A SHOW CAUSE NOTICE VIDE HIS LETTER DATED 17-12-07 IN RESPECT OF EIGHT PARTIES. ASSESSEE IMMEDIATELY THER EAFTER VIDE LETTER DATED 20-12-2007 SUBMITTED THAT ALL THE TRANSACTIO NS WERE GENUINE AND WERE SUPPORTED BY: (I) COPIES OF ACCOUNTS OF THOSE PARTIES (II) COPIES OF BANK STATEMENT OF THE ASSESSEE (III) COPIES OF PURCHASE BILLS (IV) COPIES OF COUNTERFOILS OF SALES TAX FORMS (V) COPIES OF TRANSPORTERS BILLS ETC. AND COPIES OF BIL LS OF BROKERS THROUGH WHOM THE ALLEGED PURCHASES WERE MADE. (2) ASSESSEE FURTHER EXPLAINED ITS DEALINGS WITH EIGHT PARTIES MENTIONED BY AO AS UNDER: (I) M/S MANOJ KUMAR SANJAY KUMAR, HISAR: THE INVESTIGAT ION BY THE DEPARTMENT WERE APPARENTLY MADE AT THE OFFIC E/ GODOWN ADDRESS OF THE PARTY. THE SAME BEING AT A DI STANCE FROM THE CITY COULD NOT BE DELIVERED TO THEM AND HE NCE NO RESPONSE WAS APPARENTLY RECEIVED FROM THEM. ENCLOSE D IS A LETTER RECEIVED FROM THE CONCERNED PARTY EXPLAINING THE NON RECEIPT OF LETTER BY THEM SENT BY THE INCOME TAX DEPARTMENT. DUE TO THE INSUFFICIENT TIME AFFORDED T O US, WE ARE SUBMITTED THE FAXED COPY OF LETTER OF THE PARTY . FURTHER WE ARE NOW SUBMITTED AGAIN THE CONFIRMED COPY OF AC COUNT OF M/S MANOJ KUMAR SANJAY KUMAR ALONG WITH THE ADDR ESS SUPPLIED TO US BY THE PARTY FOR FURTHER COMMUNICATI ON. YOU ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 5 ARE WELCOME TO MAKE FURTHER ENQUIRY AT THE ADDRESS MENTIONED IN THE LETTER. IT IS EVIDENT FROM THE ABO VE THAT ALL TRANSACTIONS ARE GENUINE. (II) M/S BALAJI TRADING CO.: TRANSACTION AMOUNTING TO RS . 5,60,872/- HAVE TAKEN PLACE WITH THE AFORESAID PART Y DURING THE IMPUGNED ASSESSMENT YEAR AND NOT RS. 10,79,942/ - AS STATED IN THE SHOW CAUSE NOTICE. COPY OF ACCOUNT IN OUR BOOKS OF ACCOUNTS IS ENCLOSED OTHER EVIDENCE AS STA TED ABOVE PROVING THE GENUINENESS OF OUR TRANSACTIONS WITH TH E SAID PARTY ARE ALSO ENCLOSED. (III) M/S LAHIA INDUSTRIES: TRANSACTION AMOUNTING TO RS. 1,07,045/- HAVE TAKEN PLACE WITH THE FORESAID PARTY DURING THE IMPUGNED ASSESSMENT YEAR AS STATED IN THE SHOW CAUSE NOTICE. COPY OF ACCOUNT IN OUR BOOKS OF ACCOUNTS IS ENCLOSED OTHER EVIDENCE AS STATED ABOVE PROVING THE GENUINEN ESS OF OUR TRANSACTIONS WITH THE AID PARTY ARE ALSO ENCLOS ED. THE AFORESAID PARTY BESIDE HAVING SALES TAX REGISTRATIO N NUMBERS ALSO HAS AN EXCISE REGISTRATION NUMBER WHICH IS MEN TIONED ON HIS BILLS. THE EXISTENCE OF THE PARTY MAY BE VER IFIED BY YOUR GOODSELF FROM THIS DEPARTMENT ALSO. (IV) M/S K.K. TRADERS: TRANSACTION AMOUNTING TO RS. 12,2 6,771/- HAVE TAKEN PLACE WITH THE AFORESAID PARTY DURING TH E IMPUGNED ASSESSMENT YEAR AS STATED IN THE SHOW CAUS E NOTICE. COPY OF ACCOUNT IN OUR BOOKS OF ACCOUNTS IS ENCLOSED OTHER EVIDENCE AS STATED ABOVE PROVING THE GENUINEN ESS OF OUR TRANSACTIONS WITH THE AID PARTY ARE ALSO ENCLOS ED. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 6 (V) M/S SWARG TRADING CO: TRANSACTION AMOUNTING TO RS. 2,432,000/- HAVE TAKEN PLACE WITH THE AFORESAID PAR TY DURING THE IMPUGNED ASSESSMENT YEAR AS STATED IN THE SHOW CAUSE NOTICED . COPY OF ACCOUNT IN OUR BOOKS OF ACCOUNTS IS ENCLOSED OTHER EVIDENCE AS STATED ABOVE PROVING THE GENUINENESS OF OUR TRANSACTIONS WITH THE AID PARTY ARE ALSO ENCLOSED. (VI) M/S MOGA TRADING CO: AS STATED VIDE OUR LETTER DATE D 18.12.2007 M/S MOGA TRADING CO. IS OUR DEBTOR TO WH OM SOAP IS SOLD BY US. NO PURCHASE ARE MADE FROM IT AN D IT IS INCOMPREHENSIBLE AS TO WHAT TRANSACTION IS BEING ST ATED AS NON-GENUINE. (VII) M/S A.R. TRADERS: M/S A.R. TRADERS AS SUBMITTED BY OUR LETTER DATED 18.12.2007 THERE WAS NO TRANSACTION WI TH THE AFORESAID PARTY DURING THE IMPUGNED ASSESSMENT YEAR NOR WAS THERE ANY OPENING BALANCE OUTSTANDING FOR PAYME NT. (VIII) M/S MAHESHWARI TRADING CO: TRANSACTION AMOUNTING TO RS. 6,97,922/- HAVE TAKEN PLACE WITH THE AFORESAID PART Y DURING THE IMPUGNED ASSESSMENT YEAR AS STATED IN THE SHOW CAUSE NOTICE. COPY OF ACCOUNT IN OUR BOOKS OF ACCOUNT IS ENCLOSED OTHER EVIDENCE AS STATED ABOVE PROVING THE GENUINEN ESS OF OUR TRANSACTIONS WITH THE SAID PARTY ARE ALSO ENCLO SED. (3) ACCORDING TO AO, ONE MORE LETTER WAS ISSUED TO ASSE SSEE ON 20-12- 2007 IN RESPECT OF FOLLOWING FIVE PARTIES, MENTIONE D ON PAGE 6 OF THE ASSESSMENT ORDER: (I) M/S SRIVASTAVA HI-TECH PRO OIL CO. (II) M/S SHRI CHAMUNDESHWARI AGRO TECH. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 7 (III) M/S SUBHAM INTERNATIONAL (IV) M/S SHREE BALAJI SALES CORP. (V) M/S MANOJ KUMAR SANJAY KUMAR (4) WITH AN OBSERVATION THAT THE ASSESSEES REPLY HAS N OT BEEN FOUND TO BE SATISFACTORY. ASSESSEES CONTENTION IS TO THE EFFEC T THAT THIS LETTER WAS NOT RECEIVED BY THE ASSESSEE AND THE ASSESSMENT HAS BEEN COMPLETED ON 31-12-2007. AO HELD THESE PURCHASES TO BE BOGUS AND ADDED THE ENTIRE AMOUNT OF RS. 77,91,940/- TO THE INCOME OF T HE ASSESSEE. BESIDES, THE BOOKS OF ACCOUNT WERE REJECTED. (5) ON THE ISSUE OF SUPPRESSION OF PRODUCTION, THE AO O BSERVED THAT THE ISSUE OF PRODUCTION AND SALE WAS EXAMINED IN THE CA SE OF M/S PUNEET UDYOG, ONE OF THE GROUP CONCERN, DURING A.Y. 2003-0 4 AND IT WAS HELD THAT THIS GROUP CONCERN WAS SUPPRESSING THE FI GURES OF PRODUCTION AND SALES. THESE ADDITIONS WERE MADE IN THE CASE O F THIS ASSESSEE FOLLOWING ASSESSMENT ORDERS IN THE CASE OF M/S PUNE ET UDYOG FOR A.Y. 2004-05 & 2005-06 ON THE PLEA THAT THE APPEAL OF M/S PUNEET UDYOG FOR A.Y. 2003-04 WAS PENDING BEFORE THE ITAT. (6) BESIDES, THE AO FURTHER OBSERVED AS UNDER: (I) ASSESSEE WAS NOT MAINTAINING BATCH-WISE SALE DETAIL S. (II) THERE WAS DISCREPANCY IN OVERALL YIELD. (III) THERE WERE DISCREPANCIES IN THE STOCK OF PACKAGING MATERIAL. (7) SHOW CAUSE NOTICES WERE ISSUED TO THE ASSESSEE, WHI CH WERE REPLIED IN DETAILS BY THE ASSESSEE, SAME ARE REPRODUCED IN THE ASSESSMENT ORDER. AO, HOWEVER, HELD THAT VALUE OF STOCK HAS BE EN UNDER DECLARED AND THE DIFFERENCE IS DEEMED TO HAVE BEEN SOLD BY T HE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT AND AN ADDITION OF RS. 46,42,246/- WAS MADE. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 8 (8) SIMILARLY, ADDITIONS ON ACCOUNT OF AD HOC DISALLOWA NCE OF FREIGHT, OCTROI AND CARTAGE EXPENSES; SALES PROMOTION EXPENS ES; WORKERS AND STAFF WELFARE EXPENSES WERE MADE. AO FURTHER MADE A D HOC ADDITION OF RS. 20,000/- ON ACCOUNT OF UTILIZATION OF INTERE ST BEARING FUNDS FOR NON-BUSINESS PURPOSES; AND AN AMOUNT OF RS. 14,792/ - WAS ADDED U/S 41(1). A.Y. 2006-07 : 3. IN THIS YEAR, NO ADDITIONS WERE MADE ON ACCOUNT OF BOGUS PURCHASES. AO, HOWEVER, MADE AN ADDITION OF RS. 50,85,983/- ON ACCOUNT OF SUPPRESSION OF PRODUCTION OF SOAP, FOLLOWING HIS OR DER FOR A.Y. 2005-06. FURTHER, AN AMOUNT OF RS. 12,22,587/- WAS ADDED BY AD HOC DISALLOWANCE FREIGHT, OCTROI AND CARTAGE EXPENSES, HOLDING THAT ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE EXPENSES. 4. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEALS BEFO RE THE CIT(A), WHERE DETAILED SUBMISSIONS WERE FILED, ASSAILING THE FIND INGS OF AO. IT WAS CONTENDED THAT THE BOOKS OF ACCOUNT WERE REGULARLY MAINTAINED; ALL THE PURCHASES AND SALES WERE DULY VOUCHED; THE PURCHASE S WERE FULLY SUPPORTED BY RELEVANT EVIDENCE; THERE WAS NO DISCREPANCY IN T HE YIELD AND PACKAGING MATERIAL; ALL THE SALES WERE PROPERLY ENTERED IN BO OKS; ALL THE EXPENSES ON ACCOUNT OF FREIGHT, TRANSPORTATION, OCTROI WERE DUL Y VOUCHED; AND THAT THE ADDITIONS WERE MADE ON SURMISES AND CONJECTURES. 4.1. THE SUBMISSIONS OF THE ASSESSEE WERE FORWARDED BY THE CIT(A) TO THE AO FOR EXAMINATION AND TO CONDUCT CROSS-EXAMINATION OF THE PARTIES WHO HAD DENIED HAVING MADE PURCHASES OF GOODS FROM ASSE SSEE. FINDINGS OF ASSESSMENT ORDER WERE RELIED. 4.2. AO IN HIS REMAND REPORT DATED 23-1-2009, IN WH ICH IT WAS FURTHER COMMENTED THAT THE NOTICES WERE RECEIVED BACK FROM POSTAL AUTHORITIES, ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 9 THEREFORE, THE CROSS-EXAMINATION WAS NOT POSSIBLE. THE ASSESSEE IN ITS REJOINDER TO THE AOS REPORT DATED 23-1-2009, SUBM ITTED AS UNDER: THE LD. AO HAS MENTIONED IS THE SAID LETTER DATED 23-01-2009 THAT NOTICE U/S 133(6) WAS ISSUED IN ORIGINAL ASSES SMENT PROCEEDINGS TO CALL FOR INFORMATION FROM M/S BALAJI TRADING COMPANY, NANDED AND M/S LOHIA INDUSTRIAL, ANDHRA PR ADESH BUT THE SAME WERE RECEIVED BACK UN-SERVED WITH THE REMARK NO SUCH FIRM AT THE GIVEN ADDRESS AND HENCE CROSS-EXA MINATION OF THESE PARTIES IS NOT POSSIBLE UNDER THE CIRCUMSTANC ES AT THIS STAGE. RESPECTFULLY SUBMITTED THAT IT WAS SUBMITTED IN OUR WRITTEN SUBMISSION FILED BEFORE YOUR GOOD SELF THAT THIS IN FORMATION ABOUT THE NON-EXISTENCE OF PARTIES WAS NOT CORRECT AND THE EXISTENCE WAS PROVED BY FILING EVIDENCES IN THE FOR M OF:- 1. BILLS SHOWING PURCHASES FROM THESE PARTIES AND REFLECTING THEIR TIN NO. ISSUED BY SALES TAX AUTHORITY 2. COPY OF ST-38 3. COPY OF TRANSPORTERS BILL 4. COPY OF BROKERS BILL 5. COPY OF ACCOUNT SHOWING PAYMENT MADE BY ACCOUNT PAYEE CHEQUE. SINCE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQ UES, THE PARTIES CANNOT DISAPPEAR AND HENCE THE ASSESSEE HAD REQUESTED FOR THE CROSS-EXAMINATION OF THE CONCERNED PERSONS. ALL THE PARTIES MENTIONED ABOVE ARE THE WITNESS OF THE LD. AO AND THEREFORE, IT IS THE DUTY OF THE ASSESSING OFFICER TO MAKE THEM AVAILABLE FOR OUR CROSS-EXAMINATION. THEREFORE, COU NTER COMMENTS OF THE LD. AO ARE MISPLACED. MOREOVER THIS INFORMATION ABOUT THE NON-EXISTENCE O F THE FIRM HAD BEEN REPORTED BY THE ADDL. DIT(INVESTIGATION), INDORE WHEN THE PARTY CONCERNED IS SITUATED IN NANDED, MAHARASH TRA AND ANDHRA PRADESH. THIS FACT HAD BEEN POINTED OUT BY T HE ASSESSEE IN THE ASSESSMENT PROCEEDINGS. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 10 IT IS THEREFORE SUBMITTED THAT THE EVIDENCES AND PL EADING MADE EARLIER MAY PLEASE BE CONSIDERED AND APPEAL MAY KIN DLY BE DECIDED. 4.3. CIT(A) AFTER PERUSING THE MATERIAL AVAILABLE O N RECORD, DELETED THE VARIOUS ADDITIONS BY FOLLOWING OBSERVATIONS: BOGUS PURCHASES : I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE REPORT OF THE AO ON THEM AS WELL AS THE REPLY TO THE REPORT OF THE AO BY THE LD. AR. IT IS FOUND THAT IT WAS THE DUTY OF THE AO TO ALLOW THE CROSS EXAMINATION TO THE ASS ESSEE IN RESPECT OF THE ABOVE PURCHASE WHEREIN THE AO HAS DR AWN ADVERSE INFERENCES REGARDING THE GENUINENESS OF THE PURCHASE TRANSACTION WITH THEM. HOWEVER, AS PER THE REPORT O F THE AO AND THE DISCUSSIONS WITH THE LD. AR, IT IS FOUND TH AT THE AOS REPORT IS TOTALLY MISPLACED. IN THE ABSENCE OF THE CROSS EXAMINATION OF THE ABOVE PARTIES, THE EVIDENCE GATH ERED BY THE AO CANNOT BE TREATED AS A PROPER EVIDENCE UNDER THE EVIDENCE ACT, AS HELD BY A CATENA OF JUDICIAL PRONOUNCEMENTS . THEREFORE, IT CANNOT BE USED AGAINST THE ASSESSEE. AS FAR AS O THER PARTIES FROM SR. NO. (3) TO (7) ARE CONCERNED, THERE IS ENO UGH VOLUMINOUS DOCUMENTS & THIRD PARTIESS EVIDENCES PL ACED ON RECORD THAT PROVES THE AUTHENTICITY OF PURCHASE FR OM THEM. THEREFORE, THE THIRD PARTYS EVIDENCES RELIED UPON BY THE AO WITHOUT BEING CONFRONTED BY THE AO WITH THE ASSESSE E AS PER THE EVIDENCE ACT CANNOT BE THE BASIS OF REJECTION O F THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961. THEREFORE, IN THE ABSENCE OF ANY MATERIAL EVIDENCE GATHERED BY THE AO WHICH CAN BE USED ADVERSELY AGAINST THE ASSESSEE AN D IN VIEW OF THE VARIOUS JUDGMENTS RELIED UPON BY THE LD. AR AS ABOVE, THE AOS ACTION IS UNJUSTIFIED IN THE REJECTION OF BOOK S OF ACCOUNTS U/S 145(3) AND CONSEQUENTLY THE ADDITION OF RS. 77, 91,940/- IS NOT SUSTAINABLE. HENCE IT STANDS DELETED. SUPPRESSION OF PRODUCTION OF SOAPS : 13. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER OF ASSESSMENT. IT IS FOUND TH AT HE AO HAS ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 11 MERELY PROCEEDED ON THE SO CALLED ENQUIRIES INTO TH E PRODUCTION PROCESS OF THE ASSESSEE AS WAS MADE BY HIS PREDECES SORS WITHOUT HIS LITTLE CONTRIBUTION WHICH IS NOT VERY M ATERIAL TO THE OVERALL ACTION OF HIS PREDECESSORS IN REJECTING THE BOOKS OF ACCOUNTS UNDER THE PROVISIONS OF SECTION 145(3) AND CALCULATING THE SUPPRESSED QUANTITY OF SOAP MANUFACTURED THIS Y EAR AT RS. 46,42,246/-. ON IDENTICAL FACTS AND CIRCUMSTANCES, I HAD DELETED SUCH ADDITIONS MADE BY THE AO IN THE ASSESSMENT YEA R 2001-02, AND ASSESSMENT YEAR 2003-04 IN APPEAL NO. 217/05-06 DATED 14- 03-2007 IN THE CASE OF M/S PUNEET UDYOG, THE SISTER CONCERN DEALING IN THE SAME LINE OF BUSINESS, WHICH DECISIO N HAS BEEN UPHELD BY THE JURISDICTIONAL TRIBUNAL IN ITS ORDER DATED 08-08- 2008 IN ITA NOS. 3410/D/2006 AND ITA NO. 2419/D/200 7, ASSESSMENT YEAR 2001-02 AND ASSESSMENT YEAR 2003-04 . SIMILAR ADDITION DELETED BY THE CIT(A) AND CIT(A)S DECISIO N UPHELD WAS IN THE CASE OF SISTER CONCERN M/S PUNEET UDYOG BY THE LD. TRIBUNAL IN THEIR ORDER DATED 22-09-2006 IN ITA NO. 5474/DEL/2003, A.Y. 2000-01. SINCE THE ISSUE HAS BE EN FINALLY CLINCHED BY THE LD. JURISDICTIONAL TRIBUNAL, IT BEI NG A COVERED ISSUE, THE ADDITION MADE IN THE BOOK RESULTS OF THE ASSESSEE AT RS. 46,42,246/- U/S 145(3) IS DELETED. FREIGHT, OCTROI & CARTAGE EXPENSES : 19. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER OF ASSESSMENT. ON IDENTICAL F ACTS AND CIRCUMSTANCES, SUCH ADDITION WAS MADE IN THE ASSESS MENT YEAR 2001-02 AND 2003-04 IN THE CASE OF THE SISTER CONCE RN, M/S PUNEET UDYOG IN THE SAME LINE OF BUSINESS WHICH WAS DELETED BY THE UNDERSIGNED AND MY ACTION HAS BEEN UPHELD BY THE LD. JURISDICTIONAL TRIBUNAL IN THEIR ORDER DATED 08-08- 2008 IN ITA NO. 3410/D/2006 AND ITA NO. 2419/D/2007, ASSESSMENT YEAR 2001-02 AND ASSESSMENT YEAR 2003-04. SINCE THE MATT ER HAS BEEN FINALLY CLINCHED BY THE LAST FACT FINDING AUTH ORITY, THE DISALLOWANCE WORKED OUT BY THE AO AT RS. 17,56,969/ - BEING UNWARRANTED AND STANDS DELETED. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 12 SALES PROMOTION & REBATE EXPENSES : 22. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER OF ASSESSMENT. THIS IS ALSO A COVERED MATTER AND AN SIMILAR FACTS AND CIRCUMSTANCES THE A DDITION WAS DELETED BY ME IN ASSESSMENT YEAR 2003-04 & 2005-06 IN THE CASE OF M/S PUNEET UDYOG, THE SISTER CONCERN,, AND MY ACTION HAS BEEN UPHELD BY THE LD. JURISDICTIONAL TRIBUNAL IN THEIR ORDER DATED 08-08-2008 IN ITA NO. 2419/D/2007, ASSESSMENT YEAR 2003-04. SINCE THE LAST FACT FINDING AUTHORITY, THE LD. JURISDICTIONAL TRIBUNAL HAS CLINCHED THE ISSUE, THE ADDITIONS OF RS. 2,98,282/- & 27,973/- RESPECTIVELY BEING UNCALL ED FOR ARE DELETED. INTEREST ON BORROWED CAPITAL : 25. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER OF ASSESSMENT. I TEND TO CONC UR WITH THE CONTENTIONS OF THE LD. AR AND FIND THAT THE AO HA S NOT GIVEN ANY FINDING ON THE ISSUE AND HIS RELIANCE IN THE CA SE OF M/S ABHISHEKH INDUSTRIES IS ROUTINE AND MISPLACED. THER EFORE, THE DISALLOWANCE OF RS. 20,000/- HAVING NO LEGS IS DELE TED. WORKERS & STAFF WELFARE EXPENSES : 30. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER OF ASSESSMENT. I FIND THAT TH E AO HA JUST MADE A BALD AND CASUAL ESTIMATED DISALLOWANCE, WHIC H IS ARBITRARY AS HE AHS NOT BROUGHT OUT ANY SPECIFIC IN STANCES OF VOUCHERS/ EVIDENCES WHICH MAY SHOW NON-BUSINESS NAT URE OF SUCH EXPENDITURE. MOREOVER, I HAVE VERIFIED ALL THE DETAILS OF SUCH EXPENDITURE AS PROVIDED IN THE PAPER BOOK AND FIND THAT NONE OF THEM IS FOR ANY PERSONAL OR NON-BUSINESS NA TURE AND THEY ARE WHOLLY INCURRED IN RESPECT OF THE EMPLOYEE S OF THE FIRM. THEREFORE, THE DISALLOWANCE BEING UNCALLED FO R IS DELETED. ADDITION U/S 41(1) : 37. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ORDER OF ASSESSMENT. I TEND TO CONC UR WITH THE ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 13 CONTENTION OF THE LD. AR. THE AO CANNOT PUSH HIMSEL F INTO THE FOOT-STEPS OF A BUSINESSMAN TO DETERMINE THAT CREDI TORS HAVE CEASED TO EXIST. MOREOVER, AS PER THE BALANCE SHEET , THE LIABILITY WAS STILL OUTSTANDING AND HENCE IT CANNOT BE SAID TO HAVE CEASED. THEREFORE, IN VIEW OF THE DECISION OF THE H ONBLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME TAX VS. TAMILNADU WAREHOUSING CORPORATION AND AMBICA MI LLS VS. COMMISSIONER OF INCOME TAX (SUPRA) AND VARIOUS OTHE R JUDGMENTS RELIED UPON BY THE LD. AR, THE ACTION OF THE AO U/S 41 OF THE INCOME TAX ACT, CANNOT BE CONDONED AND TH EREFORE, THE ADDITION OF RS. 14,792/- IS DELETED. AGGRIEVED, THE REVENUE IS BEFORE US. 5. THE LEARNED DR RELIED ON THE ORDER OF AO. 6. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, MADE DETAILED ARGUMENTS ON ALL THE ISSUES, WHICH ARE DEA LT HEREUNDER: BOGUS PURCHASES : 7. IT IS PLEADED THAT THE ASSESSEE HAD APPEARED BEF ORE THE AO AND FURNISHED ALL THE DETAILS REGARDING THE PURCHASES O F RAW-MATERIAL. ALL THE PURCHASES ARE ON CREDIT BASIS AND NO PURCHASE IS EF FECTED BY WAY OF CASH. THE SAME ARE SUPPORTED BY PROPER PURCHASE VOUCHERS, TRANSPORT RECEIPTS AND WHICH BEAR SEAL AND SIGNATURES OF SALES-TAX CHECK P OSTS OF STATES. LEARNED COUNSEL REFERRED TO PURCHASE BILLS ISSUED BY VARIO US PARTIES, AVAILABLE AT PAGES 274 ONWARDS OF THE PAPER BOOK, BEARING TANKE R NO.; TRANSPORT RECEIPT NO.; NAME OF BROKER; TIN NO. WHEREVER APPLICABLE; A ND STAMPING OF THE SALES-TAX CHECK POST. 7.1. LEARNED COUNSEL THEN REFERRED TO ASSESSEES LE TTER, ADDRESSED TO AO, DATED 20-12-2007, WHICH CLEARLY MENTIONED FOLLOWING FACTS: ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 14 PLEASE REFER TO YOUR LETTER DATED 17-12-2007 RECEI VED ON 18-12- 2007 FIXING THE HEARING FOR 20-12-2007. IT IS WITH GREAT RESPECT SUBMITTED THAT THE TIME GIVEN IS NOT SUFFICIENT AT ALL AND IT IS REQUESTED THAT SUFFICIENT TIME MAY PLEASE BE GIVEN SO THAT DETAILED SUBMISSIONS MAY BE MADE ALONG WITH THE EVI DENCE. HOWEVER, IT IS SUBMITTED THAT THE MATERIAL COLLECTE D BY YOUR GOODSELF ON THE BASIS OF WHICH ADVERSE INFERENCE IS SOUGHT TO BE DRAWN AGAINST THE ASSESSEE HAS NOT BEEN SUPPLIED TO THE ASSESSEE DUE TO WHICH COMPLETE REPLY CANNOT BE FURN ISHED AND IT IS REQUESTED THAT THE SAME MAY PLEASE BE MADE AVAIL ABLE VERBATIM SO THAT THE REPLY MAY BE FILED EXHAUSTIVEL Y. WITHOUT PREJUDICED TO ABOVE, IT IS HOWEVER, SUBMITTED THAT ALL THE TRANSACTIONS WHEREVER AND WHENEVER ENTERED INTO WIT H THE PARTIES MENTIONED IN YOUR SHOW CAUSE DATED 17.12.20 07 ARE PERFECTLY GENUINE TRANSACTIONS. 7.2. THIS LETTER WAS SUPPORTED WITH COPIES OF ACCOU NT OF THESE PARTIES; BANK STATEMENT OF ASSESSEE, SHOWING CHEQUES ISSUED CLEAR ED BY THE RESPECTIVE PURCHASERS; COPIES OF BILLS WITH ALL THE DETAILS; C OUNTER FOIL OF SALES-TAX FORMS ISSUED BY THE PURCHASERS; COPIES OF TRANSPORT BILLS ; AND BANK SLIPS. AO, HOWEVER, WITHOUT SUPPLYING THE ADVERSE MATERIAL FRA MED THE ASSESSMENT ON 31-12-2007, ALTHOUGH THE ASSESSEE HAD REQUESTED TO SUPPLY THE ADVERSE MATERIAL ON 20-12-2007. 7.3. LEARNED COUNSEL THEN DREW OUR ATTENTION TO P APER BOOK PAGE NO. 363, WHICH CONTAINS YEAR-WISE PURCHASE CHART OF THE RAW- MATERIAL, WHICH REFLECTS THAT ASSESSEE HAD DEALING IN SUBSEQUENT YEAR ALSO W ITH ALL THESE PARTIES EXCEPT M/S AMRITA TRADING CO.; M/S LOHIA INDUSTRIES ; AND M/S BALAJI TRADING CO. PURCHASES FROM ALL THESE PARTIES HAVE B EEN ACCEPTED BY AO IN SUBSEQUENT ASSESSMENT YEARS BY ASSESSMENTS FRAMED U /S 143(3). A COPY OF ORDER FOR A.Y. 2006-07 U/S 143(3) IS PLACED ON PAPE R BOOK PAGES 564 TO 580. 7.4. LEARNED COUNSEL FURTHER CONTENDS THAT MUCH ADV ERSE INFERENCE HAS BEEN TRIED TO BE DRAWN BY AO FROM THE CASE OF M/S PUNEET UDYOG FOR A.Y. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 15 2003-04 IN RESPECT OF THESE PURCHASES AND ADDITION ON ACCOUNT OF ALLEGED OUT OF BOOKS STOCK SALES. 7.5. LEARNED COUNSEL CONTENDS THAT ALL THE ADDITION S HAVE BEEN DELETED BY THE ITAT IN THE CASE OF M/S PUNEET UDYOG. DEPARTMEN T CHALLENGED THE ORDER OF ITAT IN VARIOUS ASSESSMENT YEARS, WHICH HAVE BEE N DISMISSED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN RESPECTIVE Y EARS. COPIES OF THESE ORDERS ARE PLACED ON PAGES 588 TO 602 OF THE PAPER BOOK. THEREFORE, NOTHING REMAINS ON RECORD TO DRAW ANY ADVERSE INFERENCE ON THE BASIS OF M/S PUNEET UDYOGS CASE. 7.6. LEARNED CIT(A) WHILE DELETING THE ADDITIONS HA S REFERRED TO THE ITAT ORDER IN THE CASE OF M/S PUNEET UDYOG. IT IS FURTHE R PLEADED THAT SINCE THE DEPARTMENT ITSELF HAS ACCEPTED THE PURCHASES FROM T HESE PARTIES, THE ORDER OF CIT(A), DELETING THE ADDITIONS ON ACCOUNT OF SUCH P URCHASES, HOLDING THEM TO BE GENUINE IS PERFECTLY JUSTIFIED. 7.7. CIT(A) WHILE DELETING THE ADDITIONS, HAD FORWA RDED ALL THE SUBMISSIONS FILED BY THE ASSESSEE TO AO FOR REMAND REPORT. AO HAS NOT RAISED ANY ISSUE ON MERITS IN EFFECT AND HAS NOT C ONTROVERTED THE ASSESSEES SUBMISSIONS. THE CIT(A)S FINDINGS ARE JUSTIFIED IN THE CIRCUMSTANCES THAT THE TIME ALLOWED TO ASSESSEE WAS LESS, NO ADVERSE M ATERIAL WAS SUPPLIED TO ASSESSEE; ALL THE PURCHASES WERE DULY SUPPORTED WIT H DOCUMENTS AND REMAND REPORTS DO NOT CONTAIN ANY MATERIAL TO COMPUTE A DE LETED ADDITION, FOLLOWING THE DUE COURSE OF LAW. 7.8. COMING TO THREE PARTIES I.E. M/S AMRITA TRADIN G CO.; M/S LOHIA INDUSTRIES; AND M/S BALAJI TRADING CO., IT IS PLEAD ED THAT ALL THE NECESSARY DOCUMENTS IN RESPECT OF THESE PURCHASES HAVE BEEN D ULY FILED, WHICH ARE ON ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 16 THE PAPER BOOK, CONSIDERED BY CIT(A). THE PARTIES A RE VERY MUCH IN EXISTENCE. THEY HAVE TIN NUMBERS WHEREVER APPLICABL E. THE PURCHASES ARE BY CREDIT. PAYMENT HAVE BEEN MADE BY A/C PAYEE BANK ING CHANNELS WHICH HAVE BEEN CLEARED BY THESE PARTIES. THERE IS NO MEN TION IN THE AOS ORDER THAT THE BANK ACCOUNTS OF THESE PARTIES WERE CROSS CHECKED TO VERIFY WHETHER THEY HAD REALIZED THE CHEQUES/ DDS FOR SUCH PAYMENT S OR NOT, DUE TO WHICH SUCH INFERENCES ARE NOT CORRECT. 7.8. LEARNED COUNSEL CONTENDS THAT AO HAS TAKEN TH E NON-SERVICE OF NOTICE AS A BASIS FOR HOLDING THE PURCHASES TO BE NON-GENU INE, OVERLOOKING THE ENTIRE EVIDENCE TO SUPPORT THE PURCHASES MADE BY T HE ASSESSEE. AO HAS TO FRAME AN ASSESSMENT BASED ON EVIDENCE & RECORD AS THE ASSESSEE HAS SUPPLIED ALL THE NECESSARY DOCUMENTS MERELY BECAUSE THE ENVELOPES CAME BACK OR SOME PARTIES OUT OF SCARE ABOUT THE INCOME- TAX DEPARTMENT GAVE CERTAIN VAGUE REPLIES, CANNOT BE HELD AGAINST THE A SSESSEE, WITHOUT PROVIDING THE MATERIAL AND WITHOUT CONTROVERTING THE SUBMISSI ONS IN THE REMAND REPORT. ADDITION ON ACCOUNT OF SUPPRESSION OF PRODUCTION OF SOAPS : 8. AO WHILE MAKING THIS ADDITION HAS RELIED ON THE CASE OF SISTER CONCERN M/S PUNEET UDYOG FOR A.Y. 2003-04 AND 2005-06. THER E IS NO OTHER BASIS EXCEPT THIS ADVERSE INFERENCE. ALL THE SALES ARE VO UCHED. ASSESSEE MAINTAINS REGULAR STOCK REGISTER; THE RAW-MATERIALS AND THE F INISHED GOODS ARE VALUED ON THE BASIS OF COST OR MARKET VALUE. VIDE LETTER DATE D 20-12-2007, DETAILS OF WRAPPER EXPENSES WERE FILED WITH THE AO, WHICH EVER IS LOW. LEARNED COUNSEL THEN ADVERTED TO PAGE 42 OF THE PAPER BOOK, GIVING DETAILS OF: (I) RATIO OF CONSUMPTION OF RAW MATERIAL TO FINISHED GO ODS PRODUCED IN THE YEAR ALONG WITH TWO PRECEDING YEARS. ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 17 (II) DETAILS OF INVENTORIES OF CLOSING STOCK AND OPENING STOCK OF RAW MATERIAL, FINISHED AND SEMI-FINISHED GOODS AND BASI S OF VALUATION. (III) COMPARATIVE CHART OF SALES, GROSS PROFIT AND G.P. R ATE FOR THREE YEARS. (IV) MONTH-WISE DETAILS OF PACKING AND LOADING EXPENSES. 8.1. IT IS PLEADED THAT WHEN NO DEFECT IN THE BOOKS OF ACCOUNTS HAVE BEEN POINTED OUT BY THE AO, THE SAME CANNOT BE REJECTED MERELY ON GENERALIZE ASSUMPTION OF YIELD OR OVERALL CONSUMPTION OF PACKA GING MATERIAL. NOTHING HAS BEEN FOUND TO SUGGEST THAT ASSESSEE INDULGED IN ANY UNACCOUNTED SALES OR PRODUCTION. 8.2. LEARNED COUNSEL RAISED THE POINT THAT NEITHER THERE IS ANY MATERIAL TO UPHOLD THE FINDING OF REJECTION OF BOOKS OF ACCOUNT NOR IS THERE ANY MATERIAL OR EVIDENCE TO SUGGEST THAT ASSESSEE PRODUCED ANY QUANTITY OF SOAP OUTSIDE THE BOOKS OF ACCOUNT. THE AO HAS MADE ADDITIONS ONL Y ON SURMISES AND CONJECTURES. 8.3. LEARNED COUNSEL THEN REFERRED TO PAPER BOOK P AGE NOS. 485 TO 495, WHICH ARE THE YIELD COMPARISON OF FIVE YEARS AS PER SOLID WEIGHT METHOD; PAGE NO. 500 G.P. CHART AND YIELD CHART FOR LAST TEN YEARS; PAGE NOS. 501 TO 517 COPIES OF ASSESSMENT ORDER FOR LAST SEVEN YEA RS; PAGE NO. 518 COMPARATIVE CHART OF YIELD FOR LAST TEN ASSESSMENT YEARS WITH SISTER CONCERNS WHICH ARE ASSESSEE; VIKAS NIGAM; AKASH UDYOG; RAC HNA SABUN UDYOG; AND PUNEET UDYOG. 8.4. IT IS CONTENDED THAT THE ASSESSEES YIELD IS F AIRLY COMPARABLE TO SISTER CONCERN PUNEET UDYOG, THE RESULTS WHEREOF HAVE BEEN UPHELD NOT ONLY BY THE ITAT BUT ALSO BY THE HONBLE HIGH COURT, BY DISMISS ING THE DEPARTMENTAL APPEALS. THE ASSESSEES YIELD BEING COMPARABLE TO A LL SISTER CONCERNS AND WITH THE CASE OF PUNEET UDYOG, IN WHICH THE YIELD RESULTS HAVE CONCLUSIVELY ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 18 BECOME FINAL BY THE JUDGMENT OF ITAT AND HONBLE HI GH COURT JUDGMENT, NO ADDITION IS CALLED FOR. AO EVEN IN THE REMAND RE PORT HAS NOT GIVEN ANY WORTHWHILE COMMENTS. 8.5. PAGES 519 TO 520 OF THE PAPER BOOK IS ASSESSME NT ORDER U/S 15(3) OF THE HARYANA VALUE ADDED TAX ACT IN ASSESSEES CASE FOR ACCOUNTING PERIOD 2004-05. ITAT ORDERS IN ASSESSEES CASE FOR A.Y. 20 00-01, 2001-02, 2003- 04 AND 2004-05 ARE AVAILABLE AT PAGES 541 TO 562 OF THE PAPER BOOK. LEARNED COUNSEL ARGUES THAT THERE IS NEITHER ANY CASE FOR R EJECTION OF BOOKS NOR ANY MATERIAL ON RECORD TO SUGGEST PRODUCTION OUT OF BO OKS. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS PURCHASES ARE CONCERNED, IN OU R VIEW THE ASSESSEE HAS DISCHARGED ITS BURDEN BY PRODUCING ALL THE PURCHASE VOUCHERS, CONTAINING ALL THE DETAILS OF THE PARTIES. ALL THE PURCHASES ARE O N CREDIT AND THE PAYMENTS HAVE BEEN SUBSEQUENTLY MADE BY WAY OF A/C PAYEE BAN KING CHANNELS WHICH HAS NOT BEEN DISPUTED BY THE AO. THE SALE BILLS BEA R TRANSPORT DETAILS, LORRY/TANKER NO., STAMPS OF SALES-TAX AUTHORITIES O F THE RESPECTIVE STATES ESTABLISHING THE MOVEMENT OF GOODS. THE ASSESSEE FI LED ITS BANK STATEMENT DEMONSTRATING THAT THE PAYMENTS OF THE PURCHASE PRI CE WERE CLEARED BY THE RESPECTIVE PARTIES. PURCHASE DETAILS AND RAW-MATERI AL REGISTERS ARE MAINTAINED BY THE ASSESSEE WHICH IS NOT DISPUTED. IN OUR VIEW THERE IS SUBSTANTIAL MATERIAL ON RECORD TO SUGGEST THAT THE PURCHASES WE RE GENUINELY MADE. IT IS FURTHER EVIDENT FROM RECORD THAT OUT OF ELEVEN PART IES, PURCHASES FROM EIGHT PARTIES HAVE BEEN ACCEPTED BY THE AO HIMSELF IN SUB SEQUENT ASSESSMENTS FRAMED U/S 143(3). 9.1. FROM THE ASSESSEES LETTER DATED 17-12-2007 AN D 28-12-2007 IT EMERGES THAT THE ADVERSE MATERIAL WAS NOT PROVIDED TO ASSESSEE AND THE ASSESSMENT WAS MADE WITHIN TEN DAYS AFTER THE ASSES SEE MADE A REQUEST TO ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 19 PROVIDE SUCH MATERIAL. ASSESSMENTS AS MADE MAKING THIS ADDITION WITHIN TEN DAYS. CIT(A) IN FIRST APPEAL ADOPTED A RIGHT COURSE BY FORWARDING ALL THE SUBMISSIONS OF THE ASSESSEE TO AO FOR REMAND REPORT . IN OUR VIEW AO HAS NOT PUT UP ANY WORTHWHILE ADVERSE COMMENT TO CONTRO VERT THE SUBMISSIONS OF THE ASSESSEE. CIT(A), AFTER CONSIDERING THE ENTI RE MATERIAL, EVIDENCE, EXPLANATION AND AOS REMAND REPORT HAS DELETED THE ADDITION. IN OUR VIEW, NO INTERFERENCE IS CALLED FOR IN CIT(A)S ORDER. IN RESPECT OF REMAINING THREE PARTIES, ASSESSEE HAS PROVIDED SUFFICIENT MATERIAL AND EVIDENCE ON RECORD TO COME TO A CONCLUSION THAT THE PURCHASES WERE GENUIN E. TAKING INTO CONSIDERATION OF ALL THE MATERIAL AND FACTS, WE HAV E NO HESITATION IN UPHOLDING THE ORDER OF CIT(A) ON THE ISSUE, DELETIN G THE ADDITION ON ACCOUNT OF BOGUS PURCHASES. 10. COMING TO THE ISSUE OF ADDITION ON ACCOUNT OF S UPPRESSION OF PRODUCTION OF SOAPS, IN OUR VIE THE AO HAS PUT HIS MAIN RELIANCE ON THE SISTER CONCERNS CASE I.E. PUNEET UDYOG FOR A.Y. 2003-04. AO WHILE COMING TO THIS CONCLUSION HAS OBSERVED THAT SINCE THE SISTER CONCERN PRODUCED SOAP OUT OF BOOKS, THE ASSESSEE MAY HAVE ALSO MADE UNACCOUNT ED PRODUCTION OF SOAP ON AVERAGE YIELD BASIS. THIS CONTROVERSY ABOUT PROD UCTION IN THE CASE OF PUNEET UDYOG CAME UP BEFORE THE ITAT WHICH DELETED SUCH ADDITIONS AND THE ORDER OF THE ITAT HAS BEEN UPHELD BY THE HONBL E PUNJAB & HARYANA HIGH COURT. IN OUR VIEW, THEREFORE, NO ADVERSE INFE RENCE IS CALLED FOR IN ASSESSEES CASE IN VIEW OF THE FINDING OF FACT BY T HE ITAT IN PUNEET UDYOGS CASE WHICH HAVE BEEN CONFIRMED BY THE HONBLE HIGH COURT. 10.1. COMING TO THE REJECTION OF BOOKS ON ACCOUNT O F SOME ALLEGED DISCREPANCY IN PACKAGING MATERIAL ETC., WE SEE NO S UBSTANCE. ASSESSEES BOOKS ARE PROPERLY MAINTAINED. NO DEFECT WHAT-SO-EV ER HAS BEEN FOUND OUT. ASSESSEE HAS SUPPLIED COMPARATIVE CHART OF YIELD FO R TEN YEARS WITH SISTER ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 20 CONCERN ALONG WITH COMPARISON OF G.P. AND OTHER STO CK DETAILS. NO DEFECT IS FOUND IN STOCK BOOKS. IN OUR VIEW THE INFERENCE DER IVED FROM THESE FACTS BY REJECTING THE BOOKS IS BASED ON SURMISES. AO HAS NO T PUT UP ANY MATERIAL TO SUPPORT HIS ADVERSE INFERENCE AGAINST ASSESSEE IN R EMAND REPORT. IN VIEW OF THESE FACTS, WE UPHOLD THE ORDER OF CIT(A) DELETING THIS ADDITION ON ACCOUNT OF PRODUCTION/ SALE OUT SIDE BOOKS. IN VIEW OF THES E FACTS, CIT(A)SACTION IN DELETION OF ADDITION ON ACCOUNT OF UNACCOUNTED PRO DUCTION AND SALES IS ALSO UPHELD. ADDITION ON ACCOUNT OF FREIGHT, OCTROI & CARTAGE EX PENSES : 11. LEARNED COUNSEL CONTENDS THAT ALL THE EXPENDITU RE INCURRED BY THE ASSESSEE TOWARDS FREIGHT, OCTROI & CARTAGE ARE DULY VOUCHED ON DAY TO DAY BASIS ALONG WITH THE PURCHASES. IT HAS BEEN HELD BY AO THAT SINCE PART OF THE PURCHASES ARE HELD TO BE BOGUS, PART OF SUCH EXPENS ES IS TO BE DISALLOWED. LEARNED AO HAS NOT POINTED OUT ANY PARTICULAR ITEM OF THESE EXPENSES AS NOT INCURRED. THE EXPENDITURE INCURRED WAS SUPPORTED B Y GOODS RECEIVED ON GR. HIS SOLE OBJECTION WAS TO THE EFFECT THAT THE EXPEN DITURE WAS ON THE BASIS OF GOODS RECEIVED NOTE ON WHICH THERE WAS NO MENTION O F AMOUNT IN MOST OF THE CASES AND IN MANY CASES PAYMENTS WERE MADE ON C ASH AND SELF MADE VOUCHERS. IN SOME CASES THERE WERE CASH AND RECEIPT FROM TRANSPORTERS WERE NOT AVAILABLE, THEREFORE, AD HOC 50% OF THE EXPENDI TURE UNDER THESE HEADS WAS DISALLOWED. 11.1. CIT(A) HAS DELETED THE ADDITION FOLLOWING ITA T JUDGMENT IN THE CASE OF PUNEET UDYOG, WHICH HAS NOW BEEN CONFIRMED BY TH E HONBLE HIGH COURT. 12. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MA TERIAL AVAILABLE ON RECORD. AO IN PARA 4(III) OF HIS ORDER HAS HELD THA T SINCE THE PART OF THE ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 21 PURCHASES HAVE BEEN HELD TO BE BOGUS, THEREFORE, A PART OF FREIGHT CHARGES IS REQUIRED TO BE DISALLOWED. 12.1. WE HAVE ALREADY UPHELD THE ORDER OF CIT(A) DE LETING THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. BESIDES, AO HAS NOT POINTED OUT ANY SPECIFIC INSTANCE OF DISALLOWANCE OF FREIGHT, OCTRO I & CARTAGE AND BY GENERAL OBSERVATIONS HAS MADE AD HOC 50% DISALLOWANCE. IT I S UNDISPUTED THAT ALL THE EXPENDITURE ARE DULY INCORPORATED IN THE BOOKS OF A CCOUNT. THE OBSERVATION OF AO AS TO HOW SUCH VOUCHERS SHOULD BE MAINTAINED, WILL NOT JUSTIFY THE DISALLOWANCE. IN VIEW, THEREOF, WE UPHOLD THE ORDER OF CIT(A), DELETING THE ADDITION ON THIS COUNT. 13. THAT LEAVES US TO SMALL ADDITIONS OF RS. 2,98,2 82/- ON ACCOUNT OF SALE PROMOTION; RS. 27,973/- ON ACCOUNT OF REBATE AND DI SCOUNT; RS. 67,404/- ON ACCOUNT OF WORKERS AND STAFF WELFARE EXPENSES; RS. 14,792/- U/S 41(1). 13.1. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT SALE PROMOTION EXPENSES ARE PAID TO ALL THE AGENTS, CUSTOMERS AND DEALERS AS PER SALE PROMOTION SCHEME FROM TIME TO TIME. THE EXPENDITURE TO ALL OTHER AGENTS HAVE BEEN ALLOWED AND THE ONE IN RESPECT OF M/S SHA KTI NIGAM HAS BEEN DISALLOWED ONLY ON THE REASON THAT THIS IS RELATED CONCERN AND THERE WAS NO BUSINESS EXIGENCIES. LEARNED COUNSEL CONTENDS THAT 20% THEREOF HAS BEEN DISALLOWED WITHOUT INVOKING SEC. 4A(2) OR ESTABLISH ING THAT THE PAYMENTS WERE IN ANY WAY UNREASONABLE. THE DISALLOWANCE HAS BEEN RIGHTLY DELETED. 14. SIMILARLY, REBATE AND DISCOUNT GIVEN TO THIS C ONCERN AS PER REGULAR POLICY, HAS BEEN DISALLOWED BY 20% ON AD HOC BASIS, WHICH IS UNJUSTIFIED. 15. IN RESPECT OF STAFF WELFARE EXPENSES ALSO 1/3 RD HAS BEEN DISALLOWED ON AD HOC BASIS FOR NON-BUSINESS PURPOSES. IT IS CONTE NDED THAT THE ASSESSEE HAS TO PROVIDE MINERAL WATER TO WORKERS TO INCREASE THE IR EFFICIENCY. THIS CANNOT ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 22 BE HELD TO BE DISALLOWABLE U/S 37(1) WITHOUT GIVING ANY SPECIFIC REASON. 1/3 RD HAS BEEN DISALLOWED, WHICH HAS BEEN PROPERLY DELETE D BY THE CIT(A). 16. IN RESPECT OF 41(1), LEARNED COUNSEL CONTENDS T HAT THE OLD LIABILITIES OF RS. 14,792/- STILL CONTINUED IN THE BOOKS OF THE AS SESSEE. AO HAS UNILATERALLY HELD THAT THEY ARE OLD AND ADDED U/S 41(1). THE SAM E HAVE BEEN RIGHTLY DELETED BY CIT(A). 17. ABOUT AD HOC ADDITION OF RS. 20,000/- OUT OF I NTEREST, THE LEANED COUNSEL CONTENDS THAT WITHOUT ESTABLISHING THE ACTU AL DIVERSION OF THE INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES, THE AD HO C DISALLOWANCE OF RS. 20,000/- HAS BEEN RIGHTLY DELETED BY THE CIT(A). 18. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H THE ENTIRE MATERIAL AVAILABLE ON RECORD. WE FIND NO INFIRMITY IN THE OR DER OF CIT(A) DELETING THE AD HOC SALES PROMOTION AND REBATE EXPENSES. ONLY BE CAUSE THE ASSESSEE PAID THESE EXPENSES TO ASSOCIATE CONCERN, CANNOT BE DISA LLOWED AS THE SALES ARE HELD TO BE CORRECT AND AO CANNOT STEP INTO THE SH OES OF A BUSINESSMAN AS TO WHICH GOODS SHOULD BE SOLD THROUGH AGENT AND AT WHI CH COMMISSION. THERE IS NO FINDING THAT THE COMMISSION IS UNREASONABLE. THE SAME CANNOT BE DISALLOWED IN AD HOC MANNER, WHICH HAS BEEN RIGHTLY DELETED BY CIT(A). NO REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THE I SSUE IN QUESTION AND THE SAME IS UPHELD. 19. COMING TO THE STAFF WELFARE EXPENSES ALSO WE SE E NO JUSTIFICATION FOR 1/3 RD ADDITION AS PROVIDING MINERAL WATER TO WORKERS CAN NOT BE HELD TO BE FOR NON-BUSINESS PURPOSES. DELETION OF ADDITION ON ACCO UNT OF SEC. 41(1) IS ALSO UPHELD. 20. COMING TO THE ISSUE OF AD HOC ADDITION OF RS. 2 0,000/- OUT OF INTEREST, WE SEE NO REASON TO INTERFERE IN THE ORDER OF CIT(A ). AD HOC DISALLOWANCE ON ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 23 ACCOUNT OF NON-BUSINESS DIVERSION OF BORROWED FUNDS WITHOUT INDICATING THE PARTICULAR INSTANCE CANNOT BE UPHELD. 21. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE DISMISS THE REVENUES GROUND NOS. 1 TO 7 AND REVENUES APPEAL IS DISMISSE D. A.Y. 2006-07 : 22. REVENUE HAS APPEALED AGAINST THE DISALLOWANCE O F ADDITION ON ACCOUNT OF SUPPRESSION OF PRODUCTION OF SOAP OUT OF BOOKS; AND ADDITION ON ACCOUNT OF FREIGHT, OCTROI AND CARTAGE EXPENSES. 23. FACTS AND CIRCUMSTANCES FOR THIS YEAR BEING SAM E FOR A.Y. 2005-06, FOR THE SAME REASONS, WE UPHOLD THE ORDER OF CIT(A) , DELETING THESE TWO ADDITIONS. CONSEQUENTLY, REVENUES APPEAL FOR A.Y. 2006-07 IS ALSO DISMISSED. 24. IN THE RESULT, REVENUES APPEALS FOR BOTH THE A SSESSMENT YEARS IN QUESTION ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14-10-2011. SD/- SD/- (SHAMIM YAHYA ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14-10-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 1968 & 3040/DEL/09 DCIT VS. ARYA BANDHU 24