I TA NO.3209/AHD/2008 A SSESSMENT YEAR 1989-90 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, A HMEDABAD (BEFORE SHRI G.C. GUPTA,VICE PRESIDENT AND SHRI B. R. BASKARAN,AM) I.T.A. NO.320 9/AHD/2008 (ASSESSMENT YEAR: 1989-90) SUMAN SILK MILLS PVT. LTD., 2409, G.I.D.C., INDUSTRIAL ESTATE, SACHIN, SURAT. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME- TAX, SPECIAL RANGE-2, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AADCS 3058C APPELLANT BY : MR.SAPNESH SHETH RESPONDENT BY : MR. P. K.SRIVASTAVA, SR. D.R. ( )/ ORDER DATE OF HEARING : 18-1-2012 DATE OF PRONOUNCEMENT : 25-1-2012 PER: SHRI B.R. BASKARAN, ACCOUNTANT MEMBER. THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 9-7-2008 PASSED BY THE LD. CIT (A)-I, SURAT AND IT RELATES T O THE ASSESSMENT YEAR 1989-90. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE RELATED T O THE FOLLOWING THREE ADDITIONS: (A) ESTIMATION OF GROSS PROFIT ON UNACCOUNTED PROD UCTION (B) UNACCOUNTED INVESTMENT IN STOCK & PROCESSING (C) EXCISE DUTY EVASION. I TA NO.3209/AHD/2008 A SSESSMENT YEAR 1989-90 2 3. THE FACTS RELATING TO THESE ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS DYEING AND PRINTING OF FABRICS MAIN LY ON JOB WORK BASIS, BESIDES ITS OWN PRODUCTION. THE CENTRAL EXCISE AUTHORITIES COND UCTED INSPECTION IN THE PREMISES OF THE ASSESSEE AND DURING THE COURSE OF S AID INSPECTION; THEY NOTICED THAT THE ASSESSEE HAS CARRIED OUT ILLICIT PROCESSING OF CLOTH. THE EXCISE AUTHORITIES DETERMINED THE QUANTITY OF CLOTH SO PROCESSED AT 15 ,18,034 MTS. BASED ON THIS INFORMATION, THE AO ESTIMATED THE VALUE OF UNACCOUN TED JOB CHARGES AT RS.43.26 LACS AND ADDED THE PROFIT EARNED THEREON BY TAKING THE RATE OF GROSS PROFIT 19%. THE EXCISE AUTHORITIES ALSO DETERMINED THE AMOUNT O F EXCISE DUTY EVADED BY THE ASSESSEE AT RS.24,80,675/-. THE AO CONSIDERED THE S AID AMOUNT ALSO AS THE INCOME OF THE ASSESSEE. THE AO ALSO ESTIMATED THE INVESTM ENT THAT WOULD HAVE BEEN MADE BY THE ASSESSEE IN THE ILLICIT PROCESSING OF CLOTH AND JOB WORK AT RS.13,74,000/- AND ADDED THE SAME. ALL THESE ADDITIONS WERE CONTESTED BY THE ASSESSEE UP TO THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 31-3 -2003 IN ITA NO.1397/AHD./99 SET ASIDE THE MATTER TO THE FILE OF THE LD. CIT (A) TO RECONSIDER THE ISSUE ON THE BASIS OF APPELLATE ORDERS OF THE CENTRAL EXCISE AUT HORITIES. ACCORDINGLY THE LD. CIT (A) DIRECTED THE AO, IN THE SECOND OF ROUND APP EAL, TO SUBMIT THE REMAND REPORT ON THE BASIS OF ORDERS OF THE CENTRAL EXCISE AUTHORITIES. IN THE APPELLATE ORDER, THE CENTRAL EXCISE AUTHORITIES HAD REDUCED T HE QUANTITY OF CLOTH ILLICITLY PROCESSED. ACCORDINGLY, THE LD. CIT (A) GRANTED A C ORRESPONDENT RELIEF OF RS.9,822/- IN THE GROSS PROFIT ADDITION UNDER RS.41 ,881/- OUT OF EXCISE DUTY ADDITION. AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING THE LD. AR DID NOT PRESS THE GROUND RELATING TO GROSS PROFIT ADDITION AND HENCE THE SAME IS DISMISS ED AS WITHDRAWN. I TA NO.3209/AHD/2008 A SSESSMENT YEAR 1989-90 3 5. WITH REGARD TO THE OTHER TWO ADDITIONS, THE LD. AR SUBMITTED THAT THEY HAVE BEEN MADE BY THE AO ON SURMISES AND CONJECTURES, WI THOUT BRINGING ANY MATERIAL ON RECORD. BY PLACING RELIANCE ON THE FOLLOWING CAS E-LAW, THE LD. AR SUBMITTED THAT SUCH KINDS OF ADDITIONS ON PRESUMPTIONS ARE NO T SUSTAINABLE. (A) CIT VS. S.M. OMER 201 ITR 608 (CAL) (B) CIT VS. PRESIDENT INDUSTRIES. 258 ITR 654 (GUJ .) (C) ASHOKKUMAR RASTOGI VS. CIT (1991) 100 CT R (ALL) 204. (D) ITAT C-BENCH, AHMEDABAD IN ITA NO.897 WITH CO 72/2009 DATED 21-11-2011 6. ON THE OTHER HANDS, THE LD. DR STRONGLY SUPPORTE D THE ORDER OF THE LD. CIT (A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORDS. THE AO HAS MADE ADDITION OF RS.13,74,000/- TOWARDS UNEX PLAINED INVESTMENT WITH THE FOLLOWING OBSERVATIONS:- AS PER PAGE 18 OF ORDER OF THE CENTRAL EXCISE, CO LLECTOR, THE ASSESSEE HAD PROCESSED 467195 L. MTRS OF CLOTH FOR COMPANY I TSELF AND REST FOR OTHER PARTIES. THE VALUE OF CLOTH PROCESSED BY THE ASSESS EE COMPANY WAS DETERMINED AT RS.64,25,245/-.THIS IS FOR 8 MONTHS A ND ONE MONTH INVESTMENT IS TAKEN AS PEAK INVESTMENT OF THE ASSESSEE IN ILLI CIT BUSINESS. ON THE BASIS OF THIS RS.8,04,000/- IS TAKEN AS INVESTMENT OF THE AS SESSEE FROM UNDISCLOSED SOURCES IN ILLICIT BUSINESS. SIMILARLY ONE MONTH JO B CHARGES IS ALSO TAKEN AS INVESTMENT OF THE ASSESSEE IN JOB WORK FROM UNDISCL OSED SOURCES AND THIS WORKS OUT TO RS.5.40 LAKHS APPROXIMATELY. THIS IS A LSO ADDED IN THE TOTAL INCOME OF THE ASSESSEE. I TA NO.3209/AHD/2008 A SSESSMENT YEAR 1989-90 4 8. ON A CAREFUL PERUSAL OF THE OBSERVATIONS OF THE AO EXTRACTED ABOVE, WE NOTICE THAT THE AO HAS MADE IMPUGNED ADDITION OF RS .13.74 LACS ONLY ON THE BASIS OF PRESUMPTIONS WITHOUT BRINGING ANY MATERIAL IN SU PPORT OF THE SAID CONCLUSION I.E., THERE IS NO MATERIAL ON RECORD TO PROVE THAT THE ASSESSEE HAS MADE ANY INVESTMENT WHICH ARE NOT RECORDED IN THE BOOKS OF A CCOUNT, WHICH IS A MANDATORY CONDITION FOR INVOKING SECTION 69 OF THE ACT. WE AL SO NOTICE THAT THE LD. CIT (A) HAS SIMPLY CONFIRMED THE ADDITION WITHOUT MAKING AN Y DISCUSSION ON THIS ISSUE. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT FIND A NY MERIT IN THE IMPUGNED ADDITION. ACCORDINGLY, WE SET ASIDE THE ORDER OF T HE LD. CIT (A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 9. THE NEXT ISSUE RELATES TO THE ADDITION OF EXCISE DUTY. THE SAID ADDITION WAS MADE BY THE AO WITH FOLLOWING OBSERVATION:- 6. TOTAL AMOUNT OF EXCISE DUTY IN RELATION TO UNAU THORIZED PROCESSING WAS DETERMINED BY EXCISE AUTHORITIES AT RS. 24,80,6 75/-. SINCE THIS IS CLEAR EVASION, THEREFORE, THIS MUST BE TAKEN TO BE THE EA RNING OF THE ASSESSEE OVER AND ABOVE THE NORMAL G.P. IT SHOULD BE NOTED THAT T HIS AMOUNT WAS NOT PAID DURING THE YEAR AND THEREFORE, THIS IS NOT ALLOWABL E. PART OF THE AMOUNT WAS PAID IN SUBSEQUENT YEAR. THEREFORE, THIS SUM IS ADD ED. WITH REGARD TO THIS ADDITION ALSO, WE FIND MERIT IN THE CONTENTION OF LD A.R THAT THERE IS NO BASIS WITH THE AO FOR DRAWING ADVE RSE CONCLUSIONS. THOUGH THE EXCISE AUTHORITIES HAVE QUANTIFIED THE AMOUNT OF DU TY EVASION, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE ASSESSEE DID COLLECT THE SAID AMOUNT FROM ITS CUSTOMERS. THE LD A.R ALSO SUBMITTED THAT IT DID N OT CLAIM THE SAID AMOUNT AS EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT. IN THE SE CIRCUMSTANCES, IN OUR VIEW, THE AO COULD NOT MAKE ANY ADDITION OF THE AMOUNT OF EXC ISE DUTY EVASION QUANTIFIED BY THE EXCISE AUTHORITIES. WE NOTICE THAT THE LD C IT (A) ALSO DID MAKE DETAILED I TA NO.3209/AHD/2008 A SSESSMENT YEAR 1989-90 5 DISCUSSION ON THE MERIT OF THIS ADDITION. ACCORDIN GLY, WE SET ASIDE THE ORDER OF LD CIT (A) ON THIS ISSUE AND DIRECT THE AO TO DELETE T HE SAID ADDITION. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 25-01-2012 SD/- SD/- (G. C. GUPTA) (B.R. BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-I, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. I TA NO.3209/AHD/2008 A SSESSMENT YEAR 1989-90 6 1.DATE OF DICTATION 18 - 01 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 18 /01 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 19 -01 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 - 01 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25 - 1 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 5 - 1 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..