Orient Craft Ltd., New Delhi V. DCIT Central circle -II, Gurgaon

ITA 3312/DEL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5023 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Appeal Filed On: 16-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Bogus purchase; Business income; Document seized; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Onus to prove; Documents seized; Bogus
• Section: 153A; 234B; 14A; 201; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. NO.3312/DEL/2019 ASSESSMENT YEAR: 20 1 5 - 20 1 6 ORIENT CRAFT LTD., C/O RRA TAX INDIA D-28, SOUTH EXTN. PART-I, NEW DELHI. V S . DCIT, CENTRAL CIRCLE - II , GURGAON. TAN/PAN : AAACO0068M (APP ELL ANT) (RESPONDENT) I.T.A. NO.5039/DEL/2019 ASSESSMENT YEAR: 2015-2016 DCIT, CENTRAL CIRCLE - II, GURGAON. VS. ORIENT CRAFT LTD., C/O RRA TAX INDIA D-28, SOUTH EXTN. PART-I, NEW DELHI. TAN/PAN: AAACO0068M (APPELLANT) (RESPONDENT) APPELLANT BY: DR. RAKESH GUPTA, ADV. RESPONDENT BY: MS. PRAMITA M. BISWAS, CIT - D.R. DATE OF HEARING: 14 07 2021 DATE OF PRONOUNCEMENT: 24 09 2021 O R D E R I.T.AS. NO.3312 & 5039/DEL/2019 2 PER AMIT SHUKLA, JM THE ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (AP PEALS)- III, GURGAON, DATED 30.03.2019. THE GROUNDS OF APPE AL RAISED BY THE REVENUE AND BY THE ASSESSEE, RESPECTIVELY AR E AS UNDER:- THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN ASSUMING JURISDICTION U/S 153A AND FURTHER ERRED IN PASSING THE IMPUGNED ASSESSMENT ORDER. 1. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACT ION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN AS SUMING JURISDICTION AND FRAMING THE IMPUGNED ASSESSMENT OR DER U/S 153A, IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SAME IS NOT SUSTA INABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWA NCE OF RS.19,46,05,259/- ALLEGEDLY ON ACCOUNT OF BOGUS EXP ENSES CLAIMED WITH RESPECT TO M/S SHRI RAM EXPORTS, MORE SO WHEN NO INCRIMINATING MATERIAL HAS BEEN FOUND AS A RESULT OF SEARCH AND IMPUGNED ADDITION HAS BEEN MADE BY RECORDING INCORRECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE AND WITHOUT APPRECIATING/CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE. I.T.AS. NO.3312 & 5039/DEL/2019 3 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWANCE OF RS.19,46,05,259/- ALLEGEDLY ON ACCO UNT OF BOGUS EXPENSES CLAIMED WITH RESPECT TO M/S SHRI RAM EXPORTS, IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.27,19,08,768/- ALLEGEDLY ON ACCOUNT OF BOGUS PUR CHASES FROM M/S AKANSHA FASHION AND M/S JINDAL FASHION, MO RE SO WHEN NO INCRIMINATING MATERIAL HAS BEEN FOUND AS A RESULT OF SEARCH AND IMPUGNED ADDITION HAS BEEN MAD E BY RECORDING INCORRECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE AND WITHOUT APPRECIATING/CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE. 5. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER , ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.27,19,08,768/- ALLEGEDLY ON ACCOUNT OF BOGUS PURCHASES FROM M/S AKANSHA FASHION AND M/S JINDAL FASHION, IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.1,04,00,175/- ALLEGEDLY AS UNEXPLAINED TRANSACTI ONS I.T.AS. NO.3312 & 5039/DEL/2019 4 RECORDED IN SEIZED DOCUMENT ON ACCOUNT OF BOGUS PUR CHASES FROM M/S SUPER CONNECTION, MORE SO WHEN NO INCRIMIN ATING MATERIAL HAS BEEN FOUND AS A RESULT OF SEARCH AND IMPUGNED ADDITION HAS BEEN MADE BY RECORDING INCORR ECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCI PLES OF NATURAL JUSTICE AND WITHOUT APPRECIATING/CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE. 7. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACT ION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MA KING ADDITION OF RS.1,04,00,175/- ALLEGEDLY AS UNEXPLAIN ED TRANSACTIONS RECORDED IN SEIZED DOCUMENT ON ACCOUNT OF BOGUS PURCHASES FROM M/S SUPER CONNECTION, IS BAD I N LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 8. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.6,63,79,551/- ALLEGEDLY AS UNEXPLAINED TRANSACTI ONS RECORDED IN SEIZED DOCUMENT ON ACCOUNT OF BOGUS PUR CHASES FROM M/S 5 EMPLOYEES CO., MORE SO WHEN NO INCRIMINA TING MATERIAL HAS BEEN FOUND AS A RESULT OF SEARCH AND IMPUGNED ADDITION HAS BEEN MADE BY RECORDING INCORR ECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCI PLES OF NATURAL JUSTICE AND WITHOUT APPRECIATING/CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE. 9. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACT ION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MA KING I.T.AS. NO.3312 & 5039/DEL/2019 5 ADDITION OF RS.6,63,79,551/- ALLEGEDLY AS UNEXPLAIN ED TRANSACTIONS RECORDED IN SEIZED DOCUMENT ON ACCOUNT OF BOGUS PURCHASES FROM M/S 5 EMPLOYEES CO, IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 10. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE DISALLOWANCE OF RS.72,740/- MADE BY LD. AO U/S 14A, MORE SO WHEN NO INCRIMINATING MATERIAL HAS BEEN FOUND AS A RESULT OF SEARCH 11. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ADDITION MADE IN THE IMPUGNED ASSESSMENT ORDER ARE BEYOND JURISDICTION AND ILLEGAL ALSO FOR THE REASON THAT THESE COULD NOT HAVE BEEN MADE SINCE NO INCRIMINATING MAT ERIAL HAS BEEN FOUND AS A RESULT OF SEARCH. 12. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN PASSING THE IMPU GNED ASSESSMENT ORDER WITHOUT THERE BEING REQUISITE APPR OVAL IN TERMS OF SECTION 153D AND IN ANY CASE APPROVAL IF A NY IS MECHANICAL WITHOUT APPLICATION OF MIND AND IS NO AP PROVAL IN THE EYES OF LAW. 13. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSING THE ACTION OF LD. AO IN CHARGING INTEREST U/S 234B OF INCOME TAX ACT, 1961. I.T.AS. NO.3312 & 5039/DEL/2019 6 DEPARTMENTAL GROUNDS OF APPEAL I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE DIS ALLOWANCE OF PRODUCT DEVELOPMENT / SAMPLING EXPENSES RS 16,06,31,683/- MADE BY THE AO BY IGNORING THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF MADRAS IND USTRIAL INVESTMENT CORPORATION LTD. VS. CIT 225 ITR 802. II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADD ITION OF RS. 9,20,23,623/- ON ACCOUNT OF UNEXPLAINED CASH SALES WHICH THE DIRECTOR OF ASSESSEE COMPANY HAD ADMITTED IN HI S STATEMENT RECORDED UNDER OATH DURING THE SEARCH PROCEEDINGS. III) WHETHER SECTION 14A(1) OF THE INCOME TAX ACT, 1961 WOULD STAND ATTRACTED EVEN IF THE TAX-EXEMPT INCOME IS NOT ACTUALLY EARNED DURING A PARTICULAR YEAR SUBJECT TO EXPENDITURE RELATABLE TO SUCH INCOME HAVING BEEN IN CURRED DURING THE YEAR. IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELE TING THE ADDITION ON ACCOUNT OF SECTION 14A WITHOUT APPRECIA TING THAT WHILE NOTICING THE OBJECTS AND REASONS BEHIND INTRO DUCTION OF SECTION 14A OF THE INCOME TAX ACT 1961, THE HON' BLE SUPREME COURT HELD IN CIT V. WALFORT SHARE & STOCK BROKERS (P) LTD [2010] 326 ITR 1 (SC) THAT EXPENSES ALLOWED CAN ONLY BE IN RESPECT OF EARNING OF TAXABLE INCOME. I.T.AS. NO.3312 & 5039/DEL/2019 7 V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF SECTION 14A OF THE ACT WITHOUT APPRECIATING THE JUDGMENT OF HON'BLE SUPREME COURT IN CIT V. RAJENDRA PRASAD MOODY [1978]115 ITR 519(SC) WHIC H HELD THAT THE ALLOWABILITY (OR OTHERWISE) OF AN EXP ENDITURE WOULD NOT DEPEND UPON WHETHER IT HAS IN FACT RESULT ED IN INCOME, AND THAT THE MERE FACT THAT EXPENDITURE STA NDS INCURRED FOR THE PURPOSE IS SUFFICIENT FOR ITS ADMI SSIBILITY, AND WHETHER THE RATIO OF THIS JUDGMENT CAN BE APPLI ED TO SAY, BY THE SAME ANALOGY, THAT THE EXPENDITURE INCU RRED TO EARN AN EXEMPT INCOME IS SUBJECT TO ITS ADMISSIBILI TY UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 INCLUDIN G THOSE OF SECTION 14A IRRESPECTIVE OF WHETHER THERE IS A R ECEIPT OF EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. VI) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD CIT(A) IS JUSTIFIED IN DELET ING THE ADDITION MADE ON ACCOUNT OF SECTION 14A OF THE ACT WITHOUT APPRECIATING THE OBSERVATIONS OF THE HON'BLE SUPREM E COURT IN MAXOPP INVESTMENT LTD. REPORTED IN (2018) 91 TAXMANN.COM 154 (SC), THAT AS PER SECTION 14A(1) OF THE ACT, DEDUCTION OF THAT EXPENDITURE IS NOT TO BE ALL OWED WHICH HAS BEEN INCURRED BY THE ASSESSEE 'IN RELATIO N TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT'. I.T.AS. NO.3312 & 5039/DEL/2019 8 VII) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD CIT(A) IS JUSTIFIED IN DELE TING THE ADDITION MADE ON ACCOUNT OF SECTION 14A OF THE ACT WITHOUT ADJUDICATING ON THE PROPOSITION OF LAW U/S 14A OF T HE INCOME TAX ACT, 1961 AS PROPOUNDED BY THE CBDT CIRC ULAR NO. 5 OF 2014 DATED 11.02.2014 I.E. SECTION 14A IS TRIGGERED FOR DISALLOWANCE OF EXPENDITURE INCURRED WHICH IS R ELATABLE TO TAX-EXEMPT INCOME EVEN THOUGH NO TAX-EXEMPT INCO ME UNDER THE ACT HAS BEEN EARNED DURING A PARTICULAR Y EAR. VIII) WHETHER THE CBDT CIRCULAR NO 5 OF 2014 IS ILLEGAL AND NOT IN CONSONANCE WITH LEGISLATIVE INTENT BEHIN D SECTION 14A AND THE CHARGING SECTIONS 4 AND 5 OF THE INCOME TAX ACT 1961 WHICH LAY DOWN THAT TOTAL INCOME UNDER THE ACT WOULD INCLUDE INCOME FROM ALL SOURCES WHETHER 'RECE IVED', 'DEEMED TO BE RECEIVED', 'ACCRUED' OR 'DEEMED TO AC CRUE'. IX) THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR MODIFY GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. ASSESSEE HAS FILED PAPER BOOK IN 7 VOLUMES HAVING PAGES 1 TO 1891, WHICH WERE REFERRED BY LD. AR EXTE NSIVELY DURING THE COURSE OF HEARING OF THE ABOVE APPEALS. BRIEF SYNOPSIS HAS ALSO BEEN FILED BY LD. COUNSEL FOR THE ASSESSEE IN BOTH THE APPEALS RUNNING INTO 13 PAGES, WHICH IS ALSO HELD ON RECORD AND HAS ALSO BEEN CONSIDERED BY US. 3. THE CASE OF THE ASSESSEE REPRESENTED BY DR. RAKESH GUPTA AND THAT OF REVENUE REPRESENTED BY MS. PARMIT A BISWAS. ARGUMENTS WERE EXTENSIVELY HEARD ON ALL THE GROUNDS INVOLVED. SINCE BOTH APPEALS ARE THE CROSS APPEALS AND I.T.AS. NO.3312 & 5039/DEL/2019 9 THEREFORE, WE TAKE BOTH THE APPEALS FOR DISPOSAL BY TAKING THE ASSESSEES APPEAL FIRST. 4. GROUND OF APPEAL NO. 1 AND 2. THESE GROUNDS WERE RELATING TO ASSUMPTION OF JURISDICTION UNDER SECTION 153A BUT THESE GROUNDS OF APPEAL WERE NOT PRESSED BY LD. COU NSEL AS PER THE BRIEF SYNOPSIS FILED AND HENCE THESE ARE DI SMISSED. 5. GROUND NO. 3 AND 4 OF THE ASSESSEES APPEAL ARE IN RESPECT OF DISALLOWANCE OF RS. 19,46,05259/- MADE B Y THE A.O. AND CONFIRMED BY CIT(A) AND ARE IN RESPECT OF THE EXPENSES CLAIMED TO BE INCURRED BY THE ASSESSEE COM PANY ON ACCOUNT OF JOB WORK DONE BY M/S SHRI RAM EXPORTS. ASSESSING OFFICER AT PAGE 28-36 OF HIS ORDER HELD S UCH EXPENSE AS BOGUS WHICH WAS UPHELD BY CIT(A) VIDE DI SCUSSION MADE AT PAGE 68-73. 6. IT WAS SUBMITTED BY THE LD. COUNSEL WITH THE HELP OF VARIOUS EVIDENCES REFERRED AT PAGE 1879-1884 OF THE PAPER BOOK& IT WAS ARGUED THAT M/S SHRI RAM EXPORTS WAS O NE OF THE JOB WORKERS ENGAGED BY THE ASSESSEE FOR DOING V ARIOUS JOB WORK SUCH AS BUNDLING, CUTTING, STITCHING, THREAD C UTTING, FINISHING ETC., WHICH ARE INTEGRAL PART OF THE GARM ENTS MANUFACTURING AND FURTHER SUBMITTED THAT THESE JOB W ORK ACTIVITIES ARE SUCH WITHOUT WHICH IT WAS NOT POSSIB LE TO MANUFACTURE THE GARMENTS AND THEREFORE EXPORT SALES COULD NOT BE POSSIBLE. ON THE OTHER HAND, LD. CIT (DR) RE LIED UPON THE FINDINGS RECORDED IN THE ASSESSMENT AND FIRST A PPEAL ORDER. I.T.AS. NO.3312 & 5039/DEL/2019 10 7. WE HAVE CONSIDERED THE ENTIRE MATERIAL BEFOR E US INCLUDING THE PAPER BOOKS, ORDERS OF THE LOWER AUTH ORITIES, SYNOPSIS FILED BEFORE US, WRITTEN SUBMISSIONS FILED BEFORE CIT(A) WHICH IS PART OF THE PAPER BOOK. IT IS SEEN BY US THAT PAGE 28-36 OF THE ASSESSMENT ORDER DOES NOT REFER A NY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH IN RESPECT OF JOB WORK OF M/S SHRI RAM EXPORT WHICH WAS THE PROPRIETARY CONCERN OF SH. SUBHASH CHAND GUPTA. ONL Y EVIDENCE WHICH HAVE BEEN REFERRED IN THE ASSESSMENT ORDER WAS THAT AT THE ADDRESS MENTIONED IN THE INCOME TAX RETURN OF SH. SUBHASH CHAND GUPTA OF SHRI RAM EXPORT, SEARCH WAS UNDERTAKEN AND THAT PREMISES WAS OCCUPIED BY THE SI STER AND BROTHER IN LAW OF SH. SUBHASH CHAND GUPTA IN WHICH THE SISTER AND BROTHER IN LAW TOLD TO THE SEARCH TEAM T HAT SH. SUBHASH CHAND GUPTA RESIDES IN DISTRICT ROHTAK, HAR YANA AND THAT SH. SUBHASH CHAND GUPTA RUNS A BUSINESS OF SELLING BELTS AND EARNS ONLY RS. 15,000/- PER MONTH . AND THAT AUDITOR OF SH. SUBHASH CHAND GUPTA PROP. OF M/S SHR I RAM EXPORT IS M/S V.K. DHINGRA & CO. WHO HAPPENS TO BE AUDITOR OF THE APPELLANT COMPANY ALSO AND THAT EMAIL-ID ON INCOME TAX RETURN OF SH. SUBHASH CHAND GUPTA AND ON THE RE TURN OF THE APPELLANT COMPANY IS THAT OF AN EMPLOYEE OF THE APPELLANT COMPANY AND FURTHER THAT STATEMENT OF THE WIFE OF S H. SUBHASH CHAND GUPTA WAS RECORDED ACCORDING TO WHICH SH. SUBHASH CHAND GUPTA WAS IN THE BUSINESS OF TRADING IN BELTS I.T.AS. NO.3312 & 5039/DEL/2019 11 WITH MONTHLY INCOME OF RS. 10,000 AND HAVING NO CON NECTION WITH M/S ORIENT CRAFT LTD. 8. FROM THE FINDINGS RECORDED IN THE ASSESSMENT ORDER, IT CAN BE SAID THAT THERE IS NO INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH IN RESPECT OF JOB WORK CARRIED OUT BY M/S SHRI RAM EXPORT. EVEN THE SURVEY PROCEEDING REFERRED IN THE ASSESSMENT ORDER DOES NOT INDICATE ANY INCRIMINATIN G MATERIAL. FINDING OF BOOKS OF ACCOUNT OF M/S SHRI R AM EXPORT AT THE PREMISES OF THE ASSESSEE CANNOT BE TAKEN AS THE ADVERSE MATERIAL WHEN IT HAS BEEN THE CASE THAT M/S SHRI RAM EXPORTS WAS DOING SUBSTANTIAL FOR JOB WORK OF TH E ASSSESEE COMPANY ONLY. 9. ARGUMENTS WERE MADE ON THE BASIS OF EVIDENC ES REFERRED AT PAGE 1879-1884 OF THE PAPER BOOK AND IT IS SEEN FROM THE EVIDENCES PLACED BEFORE US AND RELIED UPON BY LD. C OUNSEL FOR THE ASSESSEE THAT THE JOB WORKER M/S SHRI RAM EXPOR T HAS RAISED INVOICES (PB 1430-1520) ON THE ASSESSEE COMP ANY AND PAYMENT HAVE BEEN MADE BY THE ASSESSEE COMPANY TO T HE JOB WORKER THROUGH ACCOUNT PAYEE CHEQUES (PB 1638-1688) (PB 1521-1561)AND TAX HAVING BEEN DEDUCTED AT SOURCE (P B 1564- 1569) AND DOCUMENTS AT PAGE 451-458, 489-1688 OF TH E PAPER BOOK ESTABLISH THE EXISTENCE OF THE JOB WORKER AND THE JOB WORK CARRIED OUT BY M/S SHRI RAM EXPORTS. WE HAV E ALSO SEEN THE EVIDENCES REFERRED IN THE PAPER BOOK, WHIC H ALSO ESTABLISH THE JOB WORK DONE BY M/S SHRI RAM EXPORT. WE HAVE ALSO REFERRED TO THE COPIES OF THE RELEVANT DO CUMENTS I.T.AS. NO.3312 & 5039/DEL/2019 12 FILED BEFORE THE LOWER AUTHORITIES FROM THE WORKER S PERSONAL FILES (PB 489-581) SUCH AS AADHAR CARD, APPLICATION FORM, APPOINTMENT LETTER, JOINING REPORT, ESI CARD, FAMILY PHOTOS, PF FORM -11, 16 & 2 AS PER PF RULES, ID PROOF, MEDI CAL TEST REPORT ETC. AND SAMPLE COPY OF MUSTER ROLL OF THE A LL THE EMPLOYEES (PB 582-712) , EMPLOYED BY THE JOB WORKER FOR TWO MONTHS FOR ALL THE YEARS INVOLVED AND SO ALSO WE HA VE SEEN SALARY SHEET FOR TWO MONTHS ON SAMPLE BASIS (PB 713 -1313), ON ACCOUNT OF PAYMENT OF WAGES AND ACTUARIAL CERTIF ICATE. SIMILARLY PAGES 1335-1395 OF THE PAPER BOOK IS THE SAMPLE COPY OF BONUS REGISTER SHOWING ACTUAL PAYMENT PROOF OF BONUS TO THE EMPLOYEES OF JOB WORKERS AND PAPER BOOK PAGE 1396- 1401 IS THE SAMPLE COPY OF LEAVE REGISTER OF THE EM PLOYEE OF THE JOB WORKERS. SIMILARLY PAPER BOOK PAGE 1402-141 6 IS THE COPY OF MONTH WISE PF AND ESI DEDUCTION AND DEPOSIT AND SAMPLE COPY OF TWO MONTHS CHALLAN OF EACH YEAR ALON G WITH LEDGER ACCOUNT OF PF, OTHER EVIDENCES OF THE PAPER BOOK AT PAGES 451-458, 459-488, 423-443, 461-481, 1314-1334 , 1417-1429, BEING REPEATED SUBMISSIONS MADE BEFORE ASSESSING OFFICER, COPY OF INCOME TAX RETURNS BALAN CE SHEET ETC OF THE JOB WORKER FOR A Y 2015-16, 2014-15, 2013-14 , COPY OF ACTUARIAL CERTIFICATE, COPY OF LICENSE TO WORK AT F ACTORY UNDER THE FACTORIES ACT ETC ARE THE EVIDENCES OF M/S SHRI RAM EXPORT CLEARLY ESTABLISH THAT GENUINENESS OF JOB WO RK CHARGES INCURRED BY THE ASSESSEE COMPANY THROUGH M/S SHRI R AM EXPORT AND THEREFORE THE DISALLOWANCE MADE IN THE ASSESSMENT ORDER AND CONFIRMED BY CIT(A) IS NOT SUS TAINABLE I.T.AS. NO.3312 & 5039/DEL/2019 13 ON MERIT. THE ADVERSE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORDER HAVE BEEN MET BY THE ASSESSEE ONE BY ONE IN ITS WRITTEN SUBMISSIONS (PB 1882-1884) FILED BEFORE CIT (A) WHICH IS PART OF THE PAPER BOOK BEFORE US AND WE HA VE TAKEN OURSELVES TO THESE ADVERSE OBSERVATIONS AND RESPONS E OF THE ASSESSEE AND WE AGREE WITH THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADVERSE OBSERVATIONS MADE BY THE A.O. ARE NOT OF SUBSTANCE AND MISPLACED ON FACTS. CIT (A) HAVE MENT IONED IN HIS ORDER THE ADVERSE OBSERVATIONS OF THE A.O. ONLY WHICH IN OUR OPINION ARE MISPLACED ON FACTS. CONTENTION OF C IT(A) THAT EVIDENCE FILED BY THE ASSESSEE SELF-SERVING DOCUMEN TS AND CIRCUMSTANTIAL EVIDENCE LEADS TO THE CONCLUSION OF A.O., ARE BALD ASSERTION. IT WOULD BE ENOUGH FOR US TO SAY TH AT VOLUMINOUS DOCUMENTARY EVIDENCES FILED BY THE ASSES SEE AS REFERRED ABOVE AND CONSIDERED BY US CLEARLY ESTABLI SH THE GENUINENESS OF THE JOB WORK EXPENSES COVERED BY THE GROUNDS OF APPEAL UNDER CONSIDERATION. WE HAVE GONE THROUGH THE ARGUMENTS OF THE ASSESSEE IN RESPECT OF OBSERVATION S MADE BY CIT(A) AS CONTAINED AT PAGE 2-5 OF THE SYNOPSIS FIL ED BEFORE US AND WE FIND THAT THE EVIDENCES FILED BY THE ASSESSE E TO PROVE GENUINENESS OF THE JOB WORK HAVE NOT BEEN FOUND FAUL T WITH BY CIT(A) AND THERE IS NO CORROBORATIVE EVIDENCE PR ODUCED AGAINST THE ASSESSEE. WE FURTHER FIND THAT CIT(A) M IS- APPRECIATED THE NATURE OF JOB WORK BEING DONE BY TH IS JOB WORKER AND WAS NOT RELATED TO THE ASSESSEE COMPANY OR ITS DIRECTORS. STATEMENT OF THE WIFE OF THE PROPRIETOR CANNOT BE USED AGAINST THE ASSESSEE. IN THE RESULT GROUNDS OF APPEAL OF I.T.AS. NO.3312 & 5039/DEL/2019 14 THE ASSESSEE IN THIS REGARD ARE ALLOWED & THE ADDIT ION OF RS. 19,46,05,259/- IS HEREBY DELETED. 10. GROUND NO. 5 & 6 OF THE ASSESSEES APPEAL ARE IN RESPECT OF DISALLOWANCE OF RS. 27,19,08,768/- MADE BY THE A .O. AND CONFIRMED BY CIT(A) AND ARE ON ACCOUNT OF NOT-GENUI NE PURCHASES OF FABRIC MADE BY THE APPELLANT FROM M/S JINDAL FASHION AND M/S AKANSHHA FASHION. ASSESSING OFFICER AT PAGE 27-36 OF HIS ORDER HELD SUCH PURCHASES WERE NO T GENUINE WHICH WAS UPHELD BY CIT(A) VIDE DISCUSSION MADE AT PAGE 53-60. 11. LD. COUNSEL FOR THE ASSESSEE FIRST OF ALL ARG UED THAT THERE WAS NO INCRIMINATING MATERIAL FOUND AS A RESU LT OF SEARCH IN RESPECT OF IMPUGNED DISALLOWANCE. FURTHER , IT WAS SUBMITTED BY THE LD. COUNSEL WITH THE HELP OF VARIO US EVIDENCES REFERRED AT PAGE 1862-1869 OF THE PAPER BOOK & IT WAS ARGUED THAT APPELLANT IS INTO THE BUSINESS OF G ARMENTS MANUFACTURING IN WHICH FABRIC IS THE MAIN RAW MATER IAL AND INPUT. THE APPELLANT HAS PURCHASED FABRIC FROM THE ABOVE SAID FIRM DURING THE YEAR UNDER APPEAL, WHICH IS EV IDENT FROM THE CHART ENCLOSED IN THE PAPER BOOK (PB 138(I)- 13 8(II). LD. CIT (DR) RELIED UPON THE FINDINGS CONTAINED IN THE ASSESSMENT AND FIRST APPELLATE ORDER. 12. IT IS SEEN THAT PAGE 27-36 OF THE ASSESSMENT O RDER DOES NOT REFER ANY INCRIMINATING MATERIAL FOUND AS A RES ULT OF SEARCH IN RESPECT OF PURCHASE OF FABRIC MADE BY THE APPELLANT I.T.AS. NO.3312 & 5039/DEL/2019 15 FROM M/S JINDAL FASHION AND M/S AKANSHA FASHION. ON LY EVIDENCE WHICH HAVE BEEN REFERRED IN THE ASSESSMENT ORDER WAS THAT LEDGER ACCOUNT OF APPELLANT IN THE BOOKS O F THE ABOVE SAID CONCERN, I.E. M/S JINDAL FASHION, M/S AKANSHA FASHION FROM WHOM THE PURCHASES WERE MADE, SHOW THAT BILLS RAISED TO THE APPELLANT BY THE SAID CONCERN HAD MOSTLY CON SECUTIVE SERIAL NUMBERS AND THE PAYMENTS MADE TO THE SAID CO NCERN WERE ALWAYS IN THE ROUND FIGURES AND THAT THE BANK ACCOUNT OF THE SUPPLIER REVEALED THAT IT RECEIVED PAYMENTS AND ON THE SAME DAY OR WITHIN A SHORT SPAN OF TIME, THE FUNDS WERE USED TO BE TRANSFERRED TO OTHER ENTITIES AND FURTHER MEN TIONS THAT THE NAMES OF CERTAIN PARTIES TO WHOM THE PAYMENTS H AVE BEEN MADE BY THE SAID CONCERN AND THE NAMES OF SUCH PART IES HAVE BEEN MENTIONED BY THE LD. AO IN THE ASSESSMENT ORDE R AND THAT SEVERAL ADVERSE THINGS REGARDING THE ABOVE SUP PLIER BASED UPON SOME ALLEGED ENQUIRIES MADE. 13. WE HAVE CONSIDERED THE ENTIRE FACTS AND CIRCUM STANCES AS REFERRED IN BOTH THE ORDERS, SUBMISSIONS OF THE ASSESSEE AND LD. CIT(DR) AND VARIOUS PAGES OF THE PAPER BOOK S FILED. FROM THE FINDINGS RECORDED IN THE ASSESSMENT ORDER, IT CAN BE SAID THAT THERE IS NO INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH IN RESPECT OF PURCHASE OF FABRIC MADE BY THE APPELLANT FROM M/S JINDAL FASHION AND M/S AKANSHA FASHION WHICH CAN BE REGARDED AS INCRIMINATING MATE RIAL. EVEN THE SURVEY PROCEEDING REFERRED IN THE ASSESSME NT ORDER DOES NOT INDICATE ANY INCRIMINATING MATERIAL. I.T.AS. NO.3312 & 5039/DEL/2019 16 14. ARGUMENTS WERE MADE ON THE BASIS OF EVIDENCES REFERRED AT PAGE 1862-1869 OF THE PAPER BOOK AND IT IS SEEN FROM THE EVIDENCES PLACED BEFORE US AND RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE THAT THE PURCHASES OF FABR IC MADE BY THE APPELLANT FROM M/S JINDAL FASHOIN AND M/S AKSNS HA FASHION ARE GENUINE PURCHASES, WHICH IS EVIDENT FRO M VOLUMINOUS DOCUMENTARY EVIDENCES FILED BY THE ASSES SEE COMPANY AND PAYMENT HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES AND DOCUMENTS AT PAGE 132-134, 135-13 6, 137-138, AND VARIOUS PAGES OF THE PAPER BOOK REFERR ED IN THE WRITTEN SUBMISSIONS AND SHOWN TO US WHICH ESTABLISH THE PURCHASES MADE BY THE ASSESSEE. CIT(A) AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE THOUGH UPHELD THE DISAL LOWANCE BUT THE SUBMISSIONS AND THE EVIDENCES FURNISHED BY THE ASSESSEE AND HELD IN THE PAPER BOOK TO WHICH OUR AT TENTION WAS DRAWN, WE FIND THAT THE ACTION OF CIT(A) IN CON FIRMING THE IMPUGNED ADDITION WAS NOT JUSTIFIED. 15. IN VIEW OF THE EXHAUSTIVE PLEADINGS AND EVIDE NCES FILED BY THE ASSESSEE AND CONSIDERED BY US, THE DISALLOWA NCE MADE IN THE ASSESSMENT ORDER AND CONFIRMED BY CIT (A) IS NOT SUSTAINABLE ON MERIT. COMPREHENSIVE EVIDENCES HAVE BEEN BROUGHT ON RECORD BY THE ASSESSEE WHICH PROVE THAT PURCHASES OF THE FABRIC WERE MADE BY THE ASSESSEE. WITHOUT PURCHASES OF THE FABRIC, THE BUSINESS OF THE ASSESS EE INVOLVING SUCH LARGE EXPORT WOULD NOT HAVE BEEN POSSIBLE. BOT H THE SUPPLIERS ARE UNRELATED PARTIES AND ASSESSED TO INC OME TAX. I.T.AS. NO.3312 & 5039/DEL/2019 17 THE ADVERSE OBSERVATIONS MADE BY THE A.O. IN THE AS SESSMENT ORDER HAVE BEEN MET BY THE ASSESSEE ONE BY ONE AND PAPER PAGES 1866-1869 AND WE HAVE TAKEN OURSELVES TO THES E ADVERSE OBSERVATIONS AND RESPONSE OF THE ASSESSEE A ND WE AGREE WITH THE LD. COUNSEL FOR THE ASSESSEE THAT TH E ADVERSE OBSERVATIONS MADE BY THE A.O. ARE NOT OF SUBSTANCE AND MISPLACED ON FACTS. CIT(A) TOO HAS MENTIONED IN HIS ORDER THE ADVERSE OBSERVATIONS OF THE A.O. ONLY WHICH IN OUR OPINION ARE MISPLACED ON FACTS. CONTENTION OF CIT(A) THAT EVIDE NCE FILED BY THE ASSESSEE SELF-SERVING DOCUMENTS AND CIRCUMSTANT IAL EVIDENCE LEADS TO THE CONCLUSION OF A.O. IT WOULD B E ENOUGH FOR US TO SAY THAT VOLUMINOUS DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE ARE CLEARLY ESTABLISHING THE GENUINENE SS OF PURCHASES FABRIC FROM M/S JINDAL FASHION AND M/S AK ANSHA FASHION. WE DO NOT WANT TO BURDEN OUR ORDER BY REPE ATING THE WHOLE HOSTS OF DOCUMENTARY EVIDENCES FILED IN THIS CASE WHICH ESTABLISH THAT THE PURCHASES MADE BY THE ASSESSEE F ROM THE ABOVE SAID TWO SUPPLIERS ARE GENUINE PURCHASES. WE HAVE GONE THROUGH THE OBSERVATIONS MADE BY CIT(A) IN HIS APPEAL ORDER AND WE DO NOT AGREE WITH THEM. OPENING OF THE BANK ACCOUNT BY THE SUPPLIERS IN THE SAME BANK IN WHICH ASSESSEE HAD BANK ACCOUNT IS NOT SOMETHING WHICH IS UNUSUAL AS IT MAY BE NECESSARY FOR THE SMOOTHNESS OF THE BANKING AND AVOID THE LOSS OF TIME IN COLLECTING THE CHEQUES ET C. WE FIND THAT THE BURDEN TO PROVE PURCHASES WAS VERY WELL DI SCHARGED BY THE ASSESSEE. WE HAVE DELETED SIMILAR DISALLOWAN CE MADE IN AY 2013-14 AND 2014-15. FACTS ARE IDENTICAL IN T HOSE YEARS I.T.AS. NO.3312 & 5039/DEL/2019 18 ALSO. IN THE RESULT GROUND OF APPEAL NUMBER 5 & 6 O F THE ASSESSEES APPEAL OF THE ASSESSEE ARE ALLOWED AND T HE ADDITION OF RS. 27,19,08,768- IS DELETED. 16. GROUND NO. 7, 8, 9 & 10 OF THE ASSESSEES APPEAL ARE IN RESPECT OF DISALLOWANCE OF RS. 1,04,00175/- AND RS. 6,63,79,551/- AGGREGATING TO RS. 7,67,79,726/- MADE BY THE A.O. AND CONFIRMED BY CIT(A) AND ON ACCOUNT OF PURC HASES MADE BY THE APPELLANT FROM M/S SUPER CONNECTION IND IA P. LTD. (SCIPL)& OTHER COMPANIES. ASSESSING OFFICER AT PAGE 18- 19, 23-27OF HIS ORDER HELD SUCH PURCHASES WERE NOT GENUINE WHICH WAS UPHELD BY CIT(A) VIDE DISCUSSION MADE AT PAGE 60, 63-68. 17. LD. COUNSEL FOR THE ASSESSEE FIRST OF ALL ARGU ED THAT THERE WAS NO INCRIMINATING MATERIAL FOUND AS A RESU LT OF SEARCH IN RESPECT OF IMPUGNED DISALLOWANCE. FURTHER , IT WAS SUBMITTED BY THE LD. COUNSEL WITH THE HELP OF VARIO US DOCUMENTARY EVIDENCES REFERRED AT PAGE 1869-1879 OF THE PAPER BOOK& IT WAS ARGUED THAT THAT APPELLANT IS IN TO THE BUSINESS OF GARMENTS MANUFACTURING IN WHICH FABRIC IS THE MAIN RAW MATERIAL AND INPUT. THE APPELLANT HAS PURC HASED FABRIC FROM THE ABOVE SAID SIX FIRMS DURING THE YEA R UNDER APPEAL, WHICH IS EVIDENCED BY THE COPIES OF PURCHAS E INVOICES, COPY OF STATEMENT OF ACCOUNT OF M/S SCIPL & OTHER C OMPANIES IN THE BOOKS OF IN THE ASSESSEE COMPANY AS ENCLOSED IN THE PAPER BOOK AND ALSO STATEMENT OF ACCOUNT IN THE BOO KS OF M/S SCIPL & OTHER PARTIES ALSO ENCLOSED IN THE PAPER BO OK WHICH I.T.AS. NO.3312 & 5039/DEL/2019 19 WOULD SHOW THAT THE PAYMENTS HAVE BEEN MADE TO M/S SCIPL & OTHER THESE COMPANIES THROUGH BANKING CHANNEL. IT WAS ALSO SUBMITTED THAT SALES MADE BY M/S SCIPL TO THE ASSESSEE HAS BEEN ACCEPTED IN THE ASSESSMENT OF M/S SCIPL. C OPY OF ASSESSMENT ORDER OF M/S SCIPL FOR A.Y. 2013-14 HAS BEEN ENCLOSED IN THE PAPER BOOK. ON THE OTHER HAND, LD. CIT(DR) HAS RELIED UPON THE FINDINGS RECORDED IN THE ASSESS MENT ORDER AND IN THE ORDER PASSED BY CIT(A). 18. WE HAVE CONSIDERED THE ENTIRE MATERIAL INCLUD ING THE ORDERS PASSED BY THE LOWER AUTHORITIES. WE HAVE TAK EN OURSELVES TO THE PAGES OF THE SYNOPSIS AND PAPER BO OK FILED. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS SEE N THAT THE ASSESSMENT ORDER DOES NOT REFER ANY INCRIMINATING M ATERIAL FOUND AS A RESULT OF SEARCH IN RESPECT OF PURCHASE OF FABRIC MADE BY THE APPELLANT FROM M/S SUPER CONNECTION IND IA P. LTD. & OTHER COMPANIES. ONLY EVIDENCE WHICH HAVE BE EN REFERRED IN THE ASSESSMENT ORDER WAS THAT STATEMENT S OF THE DIRECTORS NAMELY SH. AKSHAY DHANDA AND SH. AJAY NAG PAL WERE RECORDED ON 22.06.2015, WHICH SHOW THAT THEY D ID NOT HAVE KNOWLEDGE OF THE AFFAIRS OF THE COMPANY AND TH AT SH. SUDHIR DHINGRA, DIRECTOR OF THE APPELLANT COMPANY H AS PROVIDED PERSONAL GUARANTEE FOR THE LOAN RAISED BY M/S SCIPL FROM KOTAK MAHINDRA BANK AND ALSO REGARDING SH. AKS HAY DHANDA AND SH. AJAY NAGPAL ON THE BASIS OF THEIR STA TEMENTS AND FURTHER THAT BULK OF PURCHASES WERE MADE BY M/S SCIPL FROM THE ENTITIES CONTROLLED BY SH. SANJAY JINDAL AN D SINCE AMOUNT REMITTED WERE WITHDRAWN IN CASH IT SHOWS THA T I.T.AS. NO.3312 & 5039/DEL/2019 20 ULTIMATE BENEFICIARY WAS THE APPELLANT COMPANY AND ENTITIES CONTROLLED BY SH. SANJAY JINDAL WERE MERE ENTRY PROV IDERS AND THAT SEVERAL ADVERSE THINGS REGARDING THE ABOVE SUPPLIER BASED UPON SOME ALLEGED ENQUIRIES MADE. 19. IN OUR CONSIDERED VIEW, FROM THE FINDINGS RECO RDED IN THE ASSESSMENT ORDER IT CAN BE SAID THAT THERE IS N O INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH IN RESPECT OF PURCHASES FABRIC MADE BY THE APPELLANT FROM M/S SUPER CONNECTION INDIA P. LTD. & OTHER COMPANIES AND WHAT EVER HAS BEEN MENTIONED IN THE FORM OF STATEMENTS CANNOT BE REGARDED AS INCRIMINATING MATERIAL. EVEN THE SURVEY PROCEEDI NG REFERRED IN THE ASSESSMENT ORDER DOES NOT INDICATE ANY INCRIMINATING MATERIAL. 20. ARGUMENTS WERE MADE ON THE BASIS OF EVIDENCES R EFERRED AT PAGE 1869-1879 OF THE PAPER BOOK AND IT IS SEEN FROM THE EVIDENCES PLACED BEFORE US AND RELIED UPON BY LD. C OUNSEL FOR THE ASSESSEE THAT THE PURCHASES OF FABRIC MADE BY T HE APPELLANT FROM M/S SUPER CONNECTION INDIA P. LTD. & OTHER COMPANIES ARE GENUINE PURCHASES, WHICH IS EVIDENT F ROM VOLUMINOUS DOCUMENTARY EVIDENCES FILED BY THE ASSES SEE COMPANY AND PAYMENT HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES AND DOCUMENTS ENCLOSED IN THE PAPER B OOK ESTABLISH THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE DISALLOWANCE. AT THIS STAGE, IT WOULD BE OF HELP IF SUBMISSIONS MADE BY THE ASSESSEE AND DOCUME NTARY I.T.AS. NO.3312 & 5039/DEL/2019 21 EVIDENCES FILED IN THIS REGARD ARE REPRODUCED SO AS TO BRING THE DEPTH OF THE EVIDENCES PROVING THE GENUINENESS OF THE PURCHASES PLACED & REFERRED AT PAGES 1869-1879 OF T HE PAPER BOOK: IT IS RESPECTFULLY SUBMITTED THAT ASSESSEE HAS PURC HASED FABRIC FROM SIX COMPANIES NAMELY M/S TRENDY ATTIRE P LTD OF RS. 1,22,98,493/-, M/S FASHIONABLE ATTIRE P LTD OF RS. 1,26,16,330/-, M/S FASHIONARA APPAREL P LTD OF RS.1,40,72,045/-, M/S MODERNISTIC ATTIRE P LTD OF R S. 1,72,49,024/-, M/S STARLINE CLOTHING P LTD OF RS.1,01,43,659/- & M/S SUPER CONNECTION INDIA P. LT D. OF RS. 1,04,00,175/-, DURING THE YEAR WHICH COMES TO A N AGGREGATE AMOUNT OF RS. 7,67,79,726/-, WHICH IS EVI DENCED BY THE COPIES OF PURCHASE INVOICES, COPY OF STATEME NT OF ACCOUNT IN RESPECT OF SAID ENTITIES IN THE BOOKS OF APPELLANT COMPANY AT ( PB 2463-2464, 2465-2640, 1739-1764 ( WHICH ARE ALREADY ENCLOSED IN THE PAPER BOOK FOR A. Y. 2013-14 IN ASSESSEES OWN CASE), AND ALSO STATEMENT OF ACCOUNT IN THE BOOKS OF SAID ENTITIES I.E. SIX COMP ANIES AT ( PB 1875-1902).WHICH ARE ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14, WHICH WOULD SHOW THAT THE PAYMENTS HAVE BEEN MADE TO SAID ENTITIES THROUGH BA NKING CHANNEL. IT IS FURTHER IMPORTANT TO SUBMIT THAT SAL E MADE BY THE SAID ENTITIES TO THE ASSESSEE COMPANY HAS BEEN ACCEPTED IN THE ASSESSMENT OF SAID COMPANIES. COPY OF ASSESSMENT ORDERS OF SAID SIX ENTITIES ARE ENCLOSED IN THE PAPER BOOK AT PB 1491-1617 OF EARLIER YEARS, WHICH I.T.AS. NO.3312 & 5039/DEL/2019 22 ARE ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 201 4- 15) AND AT PB 1729-1826 OF AY 2015-16 TOGETHER WITH COPY OF ACKNOWLEDGMENT OF RETURN, COMPUTATION OF IN COME, AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT TOGETH ER WITH ALL ANNEXURE ARE ALSO ENCLOSED AT PB 218-350. PB 193-350 IS THE COPY OF ACKNOWLEDGMENT OF RETURN, COMPUTATION OF INCOME, AUDITED BALANCE SHEET, PROFI T & LOSS ACCOUNT TOGETHER WITH ALL ANNEXURE OF THE SIX ENTIT IES NAMELY OF M/S SUPER CONNECTION INDIA PVT. LTD., M/S FASHIO NABLE ATTIRE P LTD, M/S FASHIONARA APPAREL P LTD, M/S MOD ERNISTIC ATTIRE P LTD, M/S STARLINE CLOTHING P LTD, & M/S TR ENDY ATTIRE P LTD FOR A.Y. 2015-16. PB 165-192 IS THE COPY OF ACKNOWLEDGMENT OF RETURN, COMPUTATION OF INCOME, AUDITED BALANCE SHEET, PROFI T & LOSS ACCOUNT AND TAX AUDIT REPORT FOR A.Y. 2014-15 OF M/ S SUPER CONNECTION INDIA P LTD. IN SUPPORT OF THIS FACT. PB 351-422 IS THE COPY OF ACKNOWLEDGMENT OF RETURN, COMPUTATION OF INCOME, AUDITED BALANCE SHEET, PROFI T & LOSS ACCOUNT TOGETHER WITH ALL ANNEXURE FOR A.Y. 2014-1 5 OF M/S, FASHIONABLE ATTIRE P LTD, M/S FASHIONARA APPAREL P LTD, M/S MODERNISTIC ATTIRE P LTD, M/S STARLINE CLOTHING P LTD, & M/S TRENDY ATTIRE P LTD. PB 179-199 IS THE COPY OF ACKNOWLEDGMENT OF RETURN, COMPUTATION OF INCOME, AUDITED BALANCE SHEET, PROFI T & LOSS ACCOUNT AND TAX AUDIT REPORT FOR A.Y. 2013-14 OF M/ S SUPER I.T.AS. NO.3312 & 5039/DEL/2019 23 CONNECTION INDIA P LTD. IN SUPPORT OF THIS FACT WHI CH ARE ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2014-15 . IT IS ALSO SUBMITTED THAT A DETAILED SUBMISSIONS VI DE LETTERS DATED 11.12.2017 (PB 160-162), 12.12.2017 (PB 163-1 64) WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDING A COPY OF WHICH IS ENCLOSED IN THE PAPER BOOK AND WHI CH HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER ALSO, IN WH ICH AND ALONG WITH WHICH DETAILED JUSTIFICATION WAS MAD E WITH THE HELP OF SEVERAL ANNEXURES THAT EXPORT WOULD NOT HAVE BEEN POSSIBLE BY THE ASSESSEE, IF IT HAD NOT PURCHA SED THE GOODS FROM ABOVE SAID COMPANIES. IN FACT INPUT / OU TPUT RATIO AND INDUSTRY CONSUMPTION WERE ALSO FURNISHED AT PB 1908-1909 ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14) . ALL THE ANNEXURE REFERRED IN THAT LETTER ARE ALSO ENCLOSED IN THE PAPER BOOK TO SHOW THAT PURCHASES MADE BY THE ASSESSEE FROM SIX COMPANIES C OULD NOT BE DISBELIEVED AT PB 1617-2460, PB 2463-2936 ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y . 2013-14) . PB 1739-1764 ARE THE LEDGER ACCOUNTS OF M/S, FASHIONABLE ATTIRE P LTD, M/S FASHIONARA APPAREL P LTD, M/S MODERNISTIC ATTIRE P LTD, M/S STARLINE CLOTHING P LTD, M/S TRENDY ATTIRE P LTD & M/S SUPER CONNECTION INDI A P. LTD IN THE BOOKS OF APPELLANT COMPANY, ( WHICH ARE ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14 ) . I.T.AS. NO.3312 & 5039/DEL/2019 24 PB 1875-1902 ARE THE LEDGER ACCOUNT OF APPELLANT COMPANY IN THE BOOKS SIX COMPANIES NAMELY M/S, FASHIONABLE ATTIRE P LTD, M/S FASHIONARA APPAREL P LTD, M/S MODERNISTIC ATTIRE P LTD, M/S STARLINE CLOTHING P LTD, M/S TRENDY ATTIRE P LTD & M/S SUPER CONNECTION INDI A P. LTD, ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14) . PB 1903 IS THE DETAILED CHART SHOWING THE YEAR-WISE PURCHASES FROM SAID SIX COMPANIES, ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14). PB 1908-1909 IS THE CATEGORY-WISE SHEET SHOWING TOTAL SALES IN PIECES ON SAMPLE BASIS AND CONSUMPTION OF FABRIC ALONG WITH STANDARD INPUT / OUTPUT NORMS ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14 ) . PB 1910 IS THE RECONCILIATION OF PURCHASE QUANTITY AND VALUE OF FABRIC IN THE BOOKS OF APPELLANT SHOWING O PENING STOCK OF FABRIC PURCHASE, CONSUMPTION, COST OF FABR IC SOLD AND CLOSING STOCK ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14 IN ASSESSEES OWN CASE) . PB 1911-1958 IS THE DETAILED CHART SHOWING THE STANDARD INPUT/OUTPUT RATIO, AS PRESCRIBED BY THE STANDARD I NPUT / OUTPUT NORMS UNDER HAND BOOK OF PROCEDURE VOLUMEII OF FOREIGN TRADE POLICY, PUBLISHED BY THE MINISTRY OF COMMERCE ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y . 2013-14) . I.T.AS. NO.3312 & 5039/DEL/2019 25 PB 1959 IS THE DETAIL OF COMPARISON BETWEEN OTHER GARMENT EXPORTER AND THE APPELLANT COMPANY FOR MATERIAL CONSUMPTION AS A PERCENTAGE OF SALES ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14) . THEREFORE, PURCHASES MADE BY THE ASSESSEE FROM M/S, FASHIONABLE ATTIRE P LTD, M/S FASHIONARA APPAREL P LTD, M/S MODERNISTIC ATTIRE P LTD, M/S STARLINE CLOTHING P LTD, M/S TRENDY ATTIRE P LTD & M/S SUPER CONNECTION INDI A P. LTD WERE THE GENUINE PURCHASES AND THE ADDITION MAD E MAY THEREFORE PLEASE BE DELETED. ADVERSE OBSERVATIONS MADE BY LD. A.O. ARE MET AS UN DER:- 1. LD. A.O. HAS MENTIONED IN PARA 5.1.3 TO 5.1.5, 5.2 TO 5.2.5, OF THE ASSESSMENT ORDER THAT THE STATEMENTS OF THE DIRECTORS NAMELY SH. VIJENDER KUMAR JAIN, SH. VIJAY KUMAR SHARMA AND SH. BALKISHANLUTHRA, SH. ASHOK KUMAR SHARMA, WERE RECORDED ON 29.04.2015, WHICH SHOWS T HAT THEY DID NOT HAVE KNOWLEDGE OF THE AFFAIRS OF THE C OMPANY. IN REPLY, IT IS RESPECTFULLY SUBMITTED THAT ASSESSE E WAS NOT MADE AWARE AT ANY POINT OF TIME DURING ASSESSMENT PROCEEDING THAT ANY STATEMENT OF THESE FOUR PERSONS WERE RECORDED NOR THE COPIES OF SUCH STATEMENTS WERE SUP PLIED TO THE ASSESSEE. SO MUCH SO COPIES OF SUCH STATEMENTS HAVE NOT BEEN MADE PART OF THE ASSESSMENT ORDER. THEREFO RE SUCH STATEMENTS HAVE TO BE EXCLUDED FROM CONSIDERATION I N VIEW OF HONBLE SUPREME COURT DECISION IN THE CASE OF KISHNICHAND CHELLARAM VS. CIT 125 ITR 713. MOREOVER, I.T.AS. NO.3312 & 5039/DEL/2019 26 NO OPPORTUNITY OF CROSS EXAMINATION HAS BEEN ALLOWE D TO THE ASSESSEE FOR THAT REASON ALSO SUCH SETTLEMENTS HAVE TO BE EXCLUDED FROM CONSIDERATION. IT HAS ALSO COME TO TH E NOTICE OF THE APPELLANT THAT SUCH STATEMENTS WERE RECORDED AT THE BACK OF THE ASSESSEE AND THEREFORE UNDER WHAT CIRCUMSTANCES, THESE STATEMENTS WERE GIVEN IS NOT K NOWN TO THE ASSESSEE. ACCORDING TO THE APPELLANT THERE IS N O REASON WHY SHOULD THE DIRECTORS OF M/S TRENDY ATTIRE PVT. LTD., WOULD HAVE NO KNOWLEDGE OF THE AFFAIRS OF TAPL. THE REFORE THIS OBJECTION OF LD. A.O. MAY PLEASE BE REJECTED. 2. LD. AO HAS MENTIONED IN PARA 5.2, 5.4.2, 5.5.2 & 5.6.4 OF THE ASSESSMENT ORDER THAT POST SEARCH ENQUIRIES REVEALS THAT THE ASSESSEE COMPANY MADE PURCHASES FR OM VARIOUS COMPANIES AND THESE COMPANIES NO ACTUAL MAT ERIAL HAS BEEN SUPPLIED. IN REPLY, IT IS RESPECTFULLY SUBMITTED THAT OVERWHE LMING EVIDENCES HAVE BEEN FURNISHED SUBSTANTIATING THE BU SINESS DONE BY THE ASSESSEE, WHICH HAVE NOT BEEN DISPUTED BY LD. AO. FURTHER, THE LD. AO HAS FAILED TO BRING ON RECO RD ANY MATERIAL OR EVIDENCE TO CORROBORATE ARRIVE AT THE C ONCLUSION THAT PURCHASES FROM VARIOUS COMPANIES AND THESE COMPANIES NO ACTUAL MATERIAL HAS BEEN SUPPLIED. THE ALLEGATIONS MADE BY LD. AO ARE BASELESS AND THIS IS EVIDENT FROM THE VERY FACT HE HAS PROCEEDED TO ASSESS THE I NCOME ON THE BASIS OF RETURN FILED BY THE ASSESSEE COMPANY. THEREFORE, THE OBSERVATION MADE BY LD. AO THAT THE I.T.AS. NO.3312 & 5039/DEL/2019 27 PURCHASES MADE BY THE ASSESSEE COMPANY IS BOGUS AND IS BASELESS AND WITHOUT ANY BASIS, MATERIAL OR EVIDENC E. 3. LD. A.O. HAS MENTIONED IN PARA 5.6.2 OF THE ASSESSMENT ORDER THAT STATEMENTS OF THE DIRECTORS NAMELY SH. AKSHAYDHANDA AND SH. AJAY NAGPAL WERE RECORDED ON 22.06.2015, WHICH SHOW THAT THEY DID NOT HAVE KNOWL EDGE OF THE AFFAIRS OF THE COMPANY. IN REPLY, IT IS RESPECTFULLY SUBMITTED THAT ASSESSE E WAS NOT MADE AWARE AT ANY POINT OF TIME DURING ASSESSMENT PROCEEDING THAT ANY STATEMENT OF THESE TWO PERSONS WERE RECORDED NOR THE COPIES OF SUCH STATEMENTS WERE SUP PLIED TO THE ASSESSEE. SO MUCH SO COPIES OF SUCH STATEMENTS HAVE NOT BEEN MADE PART OF THE ASSESSMENT ORDER EVEN THO UGH IT HAS BEEN MENTIONED THAT THEY ARE ENCLOSED AS ANNEXU RE B AND ANNEXURE C AT PB 1903, 1908-1909 ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14 IN ASSESSEES OWN CASE) .THEREFORE SUCH STATEMENTS HAVE TO BE EXCLUDED FROM CONSIDERATION IN VIEW OF HONBLE SUPREME COURT DECISION IN THE CASE OF KISHNICHANDCHELLARAM VS. CIT 125 ITR 713. MOREOVER, NO OPPORTUNITY OF CROSS EXAMINATION HAS BEEN ALLOWE D TO THE ASSESEEE FOR THAT REASON ALSO SUCH SETTLEMENTS HAVE TO BE EXCLUDED FROM CONSIDERATION. IT HAS ALSO COME TO TH E NOTICE OF THE APPELLANT THAT SUCH STATEMENTS WERE RECORDED AT THE BACK OF THE ASSESSEE AND BY CALLING THESE PERSONS I N THE INCOME TAX DEPARTMENT AND THEREFORE UNDER WHAT CIRCUMSTANCES, THESE STATEMENTS WERE GIVEN IS NOT K NOWN TO I.T.AS. NO.3312 & 5039/DEL/2019 28 THE ASSESSEE. ACCORDING TO THE APPELLANT THERE IS N O REASON WHY SHOULD THE DIRECTORS OF M/S SUPER CONNECTION IN DIA P. LTD. (SCIPL), WOULD HAVE NO KNOWLEDGE OF THE AFFAIR S OF SCIPL. THEREFORE THIS OBJECTION OF LD. A.O. MAY PLE ASE BE REJECTED. 4. LD. A.O. HAS ALSO MENTIONED IN PARA 5.6.2 OF THE ASSESSMENT ORDER THAT SH. SUDHIR DHINGRA, DIRECTOR OF THE APPELLANT COMPANY HAS PROVIDED PERSONAL GUARANTEE F OR THE LOAN RAISED BY M/S SCIPL FROM KOTAK MAHINDRA BANK. IN REPLY, IT SUBMITTED THAT WHAT IS SOUGHT TO BE CO NVEYED BY LD. A.O. FROM THIS OBSERVATION HAS NOT BEEN CLEAR. BUSINESS RELATIONSHIP OF THE APPELLANT COMPANY WITH M/S SCIP L WAS THERE AND THEREFORE, OUT OF BUSINESS EXPEDIENCY, IF GUARANTEE WAS EXTENDED BY MR. DHINGRA TO M/S SCIPL, NOTHING ADVERSE CAN BE READ INTO IT. 5. LD. A.O. HAS MENTIONED HIS CONCLUSIONS IN THIS PARA I.E. PARA 5.6.2 OF THE ASSESSMENT ORDER REGARDING SH. AKSHAYDHANDA AND SH. AJAY NAGPAL ON THE BASIS OF TH EIR STATEMENTS. IN REPLY, IT IS SUBMITTED THAT FIRST OF ALL AS SUBM ITTED ABOVE, THESE STATEMENTS HAVING BEEN RECORDED AT THE BACK O F THE ASSESSEE AND COPIES OF STATEMENTS HAVING NOT BEEN SUPPLIED, HAVE TO BE EXCLUDED FROM CONSIDERATION. E VEN IF THESE STATEMENTS ARE TAKEN AT THEIR FACE VALUE THEN ALSO IT IS SUBMITTED THAT THERE IS NOTHING WHICH ESTABLISHES T HAT SALES MADE BY M/S SCIPL MADE BY THE ASSESSEE COMPANY IS N OT GENUINE. MR. DHANDA BEING AN EMPLOYEE OF A GROUP CO NCERN I.T.AS. NO.3312 & 5039/DEL/2019 29 CANNOT BE READ AGAINST THE ASSESSEE AS THERE IS NO BAR FROM AN EMPLOYEE OF THE GROUP CONCERN RUNNING HIS OWN COMPANY. SINCE MAJOR SALES OF M/S SCIPL ARE TO THE ASSESSEE AND M/S SCIPL SOUGHT HELP FROM THE APPELLA NT COMPANY TO MAINTAIN ITS BOOKS OF ACCOUNTS AND IF IN THAT PROCESS EMPLOYEE OF THE APPELLANT COMPANY IF HELPED M/S SCIPL TO MAINTAIN ITS BOOKS OF ACCOUNTS AT THE PREM ISES OF THE APPELLANT COMPANY ONLY FOR THE SAKE OF MUTUAL CONVENIENCE AND BECAUSE OF COST CONSIDERATIONS MOUN TAIN CANNOT BE MADE OUT OF THE MOLE HILLS. IN OTHER WORDS INFERENCES DRAWN BY LD. A.O. FROM TH E STATEMENTS OF MR. DHANDA AND MR. NAGPAL DO NOT ESTA BLISH THAT THE SALES MADE BY M/S SCIPL TO THE ASSESSEE WA S NOT GENUINE, MORE SO WHEN SUCH SALES BY M/S SCIPL AND PURCHASES BY THE APPELLANT ARE SUPPORTED BY ABOVE MENTIONED COMPREHENSIVE EVIDENCES AND PAYMENTS HAVI NG BEEN RECEIVED / PAID THROUGH BANKING CHANNEL AND MO RE SO WHEN THE SALES MADE BY M/S SCIPL HAVE BEEN ACCEPTED BY INCOME TAX DEPARTMENT ITSELF IN THE ASSESSMENT OF S CIPL, IT IS SUBMITTED ABOVE. 6. LD. A.O. HAS MENTIONED IN PARA 5.6.3,6.4, 6.5, OF THE ASSESSMENT ORDER THAT BULK OF PURCHASES WERE MADE BY M/S SCIPL FROM THE ENTITIES CONTROLLED BY SH. SANJA Y JINDAL AND SINCE AMOUNT REMITTED WERE WITHDRAWN IN CASH IT SHOWS THAT ULTIMATE BENEFICIARY WAS THE APPELLANT C OMPANY AND ENTITIES CONTROLLED BY SH. SANJAY JINDAL WERE M ERE ENTRY PROVIDERS. I.T.AS. NO.3312 & 5039/DEL/2019 30 IN REPLY, IT IS RESPECTFULLY SUBMITTED THAT THESE O BSERVATIONS OF LD. A.O. ARE MERE SURMISES AND CONJECTURES AND T HERE IS NO CAUSE AND EFFECT RELATIONSHIP. IF PURCHASES HAVE BEEN MADE FROM VARIOUS ENTITIES OF SH. SANJAY JINDAL HOW COULD THAT FACT ALONE BE TAKEN AS THE BASIS TO HOLD THAT PURCHASES MADE BY THE APPELLANT FROM SUCH ENTITIES OF SH. SAN JAY JINDAL ARE NOT GENUINE. SIMILARLY, IF THE PAYMENT M ADE BY THESE ENTITIES FROM M/S AKANSHA FASHION AND M/S JIN DAL FASHION ARE WITHDRAWN IN CASH BY THE SUPPLIER, HOW COULD IT ESTABLISH THAT BENEFICIARY WAS NONE OTHER THAN THE APPELLANT AND THE SUPPLIERS WERE ENTRY PROVIDERS. I N FACT ENTIRE CASE MADE OUT BY LD. A.O. SEEMS TO HAVE PROC EEDED ON A PRECONCEIVED NOTION THAT PURCHASES MADE BY THE APPELLANT ARE NOTHING BUT BOGUS PURCHASES. IT IS SE TTLED LAW THAT SUSPICION HOWSOEVER GRAVE CANNOT PAR-TAKE THE CHARACTER OF EVIDENCE. IT IS SUBMITTED AT THE COST OF REPETITION THAT ASSESSEE HAS ESTABLISHED THE GENUINENESS OF TH E PURCHASES WITH THE HELP OF DIRECT AND DOCUMENTARY EVIDENCES ON THE ONE HAND AND CIRCUMSTANTIAL EVIDEN CES ON THE OTHER. DETAILED SUBMISSIONS WAS MADE IN THE ASSESSMENT PROCEEDING, WHICH IS REPRODUCED IN THE ASSESSMENT ORDER BY WHICH APPELLANT HAS SOUGHT TO S HOW AND SUBMIT THAT THE EXPORTS COULD NOT HAVE BEEN POS SIBLE BUT FOR THE PURCHASES MADE BY THE ASSESSSEE AND IN THIS REGARD ASSESSEE HAS SOUGHT TO PROVE THIS BY FILING QUANTITATIVE RECONCILIATION STANDARD INPUT / OUTPUT NORMS I.T.AS. NO.3312 & 5039/DEL/2019 31 ( PB 1908-1909, 1911-1958 ) ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14) , COMPARISON BETWEEN OTHER GARMENTS EXPORT SO AND IN SO FORTH ( PB 1959 ) ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y . 2013-14) . THEREFORE, THE ACTION OF LD. A.O. IN MAKING THE IMPUGNED ADDITION OF RS. 7,67,79,726/- IS NEITHER C ORRECT OF FACT IN LAW AND THE SAME MAY PLEASE BE DELETED. 7. LD. AO HAS MENTIONED SEVERAL ADVERSE THINGS REGA RDING THE ABOVE SIX SUPPLIERS BASED UPON SOME ALLEGED ENQ UIRIES MADE. IN REPLY, IT WOULD SUFFICE TO SAY THAT SO FAR AS AB OVE ENQUIRIES WERE NOT CONFRONTED TO THE APPELLANT. MOREOVER, DURING THE COURSE OF IMPUGNED ASSESSMENT PROCEEDING ALSO IN OUR REPLY DATED 11.12.2017 ( PB 160- 162 ) FILED TO LD. A.O., WE MADE OUT SPECIFICALLY AND W E FURNISHED SUCH DETAILS IN ANNEXURE G, WHICH IS ENCLOSED IN THE PAPER BOOK AT PB 24632640, ( WHICH IS ALREADY ENCLOSED IN THE PAPER BOOK FOR A.Y. 2013-14) THAT THE SAID SUPPLIER WAS SELLING THE FABRIC TO THE APPELLA NT COMPANY AND THE MATERIAL / FABRIC PURCHASED FROM TH E M/S SCIPL HAS BEEN USED IN PRODUCTION GARMENTS, WHICH H AVE BEEN EXPORTED BY THE ASSESSEE COMPANY TO VARIOUS PA RTIES. 21. IN VIEW OF THE ABOVE PLEADINGS AND EVIDENCES FILED BY THE ASSESSEE THE DISALLOWANCE MADE IN THE ASSESSMEN T ORDER AND CONFIRMED BY CIT(A) IS NOT SUSTAINABLE ON MERIT . ASSESSEE HAS PROVED THAT THE MATERIAL WAS PURCHASED FROM THE VENDORS I.T.AS. NO.3312 & 5039/DEL/2019 32 INVOLVED HERE AND PAYMENTS HAVE BEEN MADE THROUGH B ANKING CHANNEL. OTHER EVIDENCES AS REFERRED CLEARLY ESTABL ISH THE PURCHASE MADE BY THE ASSESSEE. WE DO NOT WANT TO DI SCUSS EACH AND EVERY EVIDENCE AND IT WOULD SUFFICE TO HOL D THAT IN THE LIGHT OF THESE EVIDENCES WHICH HAVE NOT BEEN RE BUTTED WITH THE HELP OF ANY COGENT MATERIAL, PURCHASES MAD E BY THE ASSESSEE FROM THE ABOVE SAID VENDORS CANNOT BE DISB ELIEVED. THE ADVERSE OBSERVATIONS MADE BY THE A.O. IN THE AS SESSMENT ORDER HAVE BEEN MET BY THE ASSESSEE ONE BY ONE AND PAPER PAGES 1873-1878 REPRODUCED ALSO ABOVE BY US AND WE HAVE TAKEN OURSELVES TO THESE ADVERSE OBSERVATIONS AND R ESPONSE OF THE ASSESSEE AND WE AGREE WITH THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADVERSE OBSERVATIONS MADE BY THE A.O. ARE NOT OF SUBSTANCE AND MISPLACED ON FACTS. CIT(A) TOO HAS MENTIONED IN HIS ORDER THE ADVERSE OBSERVATIONS OF THE A.O. ONLY WHICH IN OUR OPINION ARE MISPLACED ON FACTS. C ONTENTION OF CIT(A) THAT EVIDENCE FILED BY THE ASSESSEE SELF- SERVING DOCUMENTS AND CIRCUMSTANTIAL EVIDENCE LEADS TO THE CONCLUSION OF A.O. IT WOULD BE ENOUGH FOR US TO SAY THAT VOLUMINOUS DOCUMENTARY EVIDENCES FILED BY THE ASSES SEE ARE CLEARLY ESTABLISHING THE GENUINENESS OF PURCHASES F ABRIC FROM M/S SUPER CONNECTION INDIA P. LTD. & OTHER VENDOR COMPANIES. OTHER INDICATORS SUCH AS PERCENTAGE RATI O OF MATERIAL TO SALE ETC ALSO ESTABLISH THE GENUINENESS OF THE PURCHASES. WE DO NOT AGREE WITH THE OBSERVATIONS MA DE BY THE FIRST APPELLATE AUTHORITY. IN OUR CONSIDERED OP INION, ASSESSEE HAS BEEN SUCCESSFUL TO DISCHARGE THE BURDE N OF I.T.AS. NO.3312 & 5039/DEL/2019 33 PROVING THE PURCHASE FROM M/S SUPER CONNECTION INDI A P LTD. & OTHER VENDOR COMPANIES. IN THE RESULT, GROUND NO . 7 TO10 OF THE ASSESSEES APPEAL OF THE ASSESSEE ARE ALLOWED A ND THE AGGREGATE ADDITION OF RS. 7,67,79,726/- IS DELETED. 22. GROUND NO. 11 OF THE ASSESSEES APPEAL & GROUND NO. (III) TO (VIII) OF THE DEPARTMENTAL APPEAL ARE IN R ESPECT OF ADDITION OF RS. 4,50,90,494/- MADE BY AO UNDER SECT ION 14A OUT OF WHICH A SUM OF RS. 72,740/- WAS CONFIRMED BY CIT(A) AND ON THE GROUND THAT ASSESSEE COMPANY HAS SHOWN DIVIDEND INCOME ON MUTUAL FUND / SHARES AMOUNTING T O RS. 72,740/- AND BALANCE WAS DELETED BY CIT(A). THAT IS HOW BOTH HAVE COME BEFORE US AND GRIEVANCES ARE COVERED BY T HE ABOVE MENTIONED GROUNDS OF APPEAL. ASSESSING OFFICER AT P AGE 37-39 OF HIS ORDER AND CIT (A) VIDE DISCUSSION MADE AT PA GE 75-76 OF THE APPEAL ORDER DISCUSSED THE ISSUE. 23. IT IS SEEN THAT THERE IS EXEMPT INCOME ONLY TO THE EXTENT OF RS. 72,740/- AND FOR THIS REASON ALSO, DISALLOWA NCE UNDER SECTION 14A COULD NOT HAVE EXCEEDED THIS AMOUNT IN VIEW OF THE DECISION OF DELHI HIGH COURT IN THE CASE OF JOI NT INVESTMENT LTD. 372 ITR 694 AND HENCE WE UPHOLD THE ORDER OF CIT(A) TO THIS EXTENT. IN THE RESULT, GROUND NO. 11 OF THE ASSESSEES APPEAL IS DISMISSED AND GROUNDS NO. (III ) TO (VIII) OF THE DEPARTMENTAL APPEAL ARE ALSO DISMISSED. I.T.AS. NO.3312 & 5039/DEL/2019 34 24. GROUND NO. 12 & 15 OF THE ASSESSEES APPEAL ARE GENERAL AND DO NOT CALL FOR ANY ADJUDICATION UNDER THESE GR OUNDS OF APPEAL HERE. 25. GROUND NO. 13 OF THE ASSESSEES APPEAL IS REGARDING APPROVAL UNDER SECTION 153D BUT NOTHING SPECIFIC SUBMISSIONS HAVE BEEN MADE BEFORE US AND HENCE, THE SAME IS REJECTED& DISMISSED. 26. GROUND NO. 14 OF THE ASSESSEES APPEAL RELATING TO INTEREST U/S 234B IS CONSEQUENTIAL IN NATURE. DEPARTMENTAL APPEAL NO. ITA 5039/DEL/2019 27. GROUNDS OF APPEAL PREFERRED BY REVENUE HAVE B EEN REPRODUCED BY ABOVE. 28. GROUND OF APPEAL NO. (I) OF REVENUES APPEAL IS IN REGARD TO A DISALLOWANCE OF RS. 16,06,31,683/- MADE BY AO BY TREATING THE PRODUCT DEVELOPMENT EXPENSE AS DEFE RRED REVENUE EXPENSE WHICH WAS HOWEVER DELETED BY CIT(A) . 29. AO HAS DISCUSSED THIS ISSUE AT PAGE 36-37 OF TH E ASSESSMENT ORDER WHEREAS CIT(A) HAS DISCUSSED THIS ISSUE AT PAGE 73-75 OF THE APPEAL ORDER. 30. LD. CIT (DR) RELIED UPON THE FINDINGS RECORDED BY AO WHEREAS LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPO N THE FINDINGS RECORDED BY CIT(A). 31. WE HAVE CONSIDERED RIVAL CONTENTIONS AND HAV E GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES. THIS VERY ISSUE WAS THERE IN A.Y. 2013-14 & 2014-15 ALSO. IT IS SEEN I.T.AS. NO.3312 & 5039/DEL/2019 35 THAT CIT(A) HAS ALLOWED AND DELETED THE ADDITION MA DE BY THE AO BY ITATS ORDER IN ASSESSEES OWN CASE IN AY 200 7-08 & 2008-09 AND ORDER OF HONBLE DELHI HIGH COURT IN CA SE OF THE ASSESSEE ONLY IN ITA 566/2016 AND ITA 569/2016 DATE D 30.9.2016. SINCE ISSUED INVOLVED IN THE PRESENT APP EAL IS IDENTICAL TO THE ISSUE INVOLVED IN THE ABOVE REFERR ED TRIBUNALS ORDER AND ORDER PASSED BY HONBLE HIGH COURT , SUPR A, HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND HENCE WE DISMISS GROUND NO. (I) OF THE REVENUES APPEAL B EFORE US. 32. GROUND NO. (II) OF REVENUES APPEAL IS IN REGARD TO THE RELIEF ALLOWED BY CIT(A) AMOUNTING TO RS. 9,20,23,6 23/- ON ACCOUNT OF UNEXPLAINED CASH SALES THE ADDITION OF W HICH WAS MADE BY AO IN HIS ASSESSMENT ORDER VIDE DISCUSSION MADE AT PAGE 39-41 OF THE ASSESSMENT ORDER WHEREAS CIT(A) H AS DELETED THIS BY MAKING DISCUSSION AT PAGE 77-78 OF THE APPEAL ORDER. 33. FACTS LEADING TO THE PRESENT CONTROVERSY ARE THAT SEIZED DOCUMENT SHOWED THE CASH SALE OF SCRAP AND THIS WAS SO ADMITTED BY THE DIRECTOR AT THE TIME OF SEARCH ON 2 9.5.2015. ADDITION WAS ACCORDINGLY MADE BY THE ASSESSING OFFI CER WHICH WAS HOWEVER DELETED BY THE FIRST APPELLATE AUTHORIT Y. 33. LD. CIT(DR) RELIED UPON THE FINDINGS RECORDED BY THE ASSESSING OFFICER WHEREAS LD. COUNSEL FOR THE ASSES SEE RELIED UPON THE ORDER OF CIT(A). I.T.AS. NO.3312 & 5039/DEL/2019 36 34. IT WOULD BE APPROPRIATE TO REPRODUCE THE WRITT EN SUBMISSIONS FILED BY THE ASSESSEE BEFORE LEARNED FI RST APPELLATE AUTHORITY: IT IS RESPECTFULLY SUBMITTED THAT ASSESSEE HAS CRED ITED THE SALES ACCOUNT IN ITS BOOKS FOR THIS VERY AMOUNT IN AGGREGATE ON 31.03.2015 AND THEREFORE, A SEPARATE ADDITION OF THIS AMOUNT BY LD. A.O. IS NOTHING BUT DOUBLE ADDITION. PB 1724-1728 IS THE COPY OF SEIZED DOCUMENT PAGE NOS. 117-121 OF ANNEXURE A-8 (PARTY OS-I), WHICH WOULD S HOW THAT TOTAL AMOUNT OF SALE WAS TO THE TUNE OF RS. 9,20,23,623/-. PB 28 IS THE COPY OF PROFIT AND LOSS ACCOUNT SHOWING LOCA L SALE TO THE TUNE OF RS. 48,43,89,100.30/- WHICH COM PRISES LOCAL SALE / FABRIC TAX FREE TO THE TUNE OF RS. 17,49,29,197.60/- PB 1689-1721(N) IS THE COPY OF ASSESSEES REPLY DATED 06.12.2017 IN WHICH THIS ASPECT OF DOUBLE ADDITION WAS SPECIFICALLY PLEADING / EXPLAINED TO LD. A.O. AND A LSO EXPLAINED THAT THE SAID UNACCOUNTED SALE HAS BEEN O FFERED TO TAX BY THE ASSESSEE. PB 1721(H)-1721(I) IS THE BREAKUP OF INCOME / LOCAL SALE OF RS. 48,43,89,100.30/- WHICH FURTHER SHOWS THAT IT I NCLUDES LOCAL SALE-FABRIC TAX FREE OF RS. 17,49,29,197.60/- PB 1721(J)-1721(N) IS THE DETAIL OF LOCAL SALE / FABRIC TAX FREE AMOUNTING TO RS. 17,49,29,197.60/- WHICH WOULD I.T.AS. NO.3312 & 5039/DEL/2019 37 FURTHER SHOW THAT IT INCLUDES CASH SALE FOR THE YEA R POSTED ON 31.03.2015 AMOUNTING TO RS. 9,20,23,623/-. THERE FORE, IT IS MORE THAN CLEAR THAT SALE BASED ON THE SEIZED DO CUMENT WAS ACCOUNTED FOR AS INCOME / SALE IN THE PROFIT AN D LOSS ACCOUNT AND THEREFORE ADDITION MADE AGAIN BY LD. A. O. BECOME THE DOUBLE ADDITION, WHICH MAY PLEASE BE DEL ETED. LD. A.O. HAS MADE CERTAIN ADVERSE OBSERVATIONS WHIL E MAKING THE IMPUGNED ADDITION WHICH ARE MET AS UNDER :- 1. LD. A.O. HAS MENTIONED THAT STATEMENT OF SH. SUDHIR DHINGRA CMD OF THE APPELLANT COMPANY WAS RECORDED U /S 132(4) IN WHICH HE WAS ASKED TO EXPLAIN ABOUT THE S ALES REFLECTED IN THE SEIZED DOCUMENTS IN REPLY TO WHICH HE ACCEPTED THAT THE SAID SALE OF RS. 9,20,23,623/- HA S NOT BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS OF THE COMPANY AND IT NEEDS TO BE ADDED TO THE TAXABLE INC OME OF THE COMPANY. LD. A.O. HAS FURTHER MENTIONED THAT TH IS AMOUNT HAS NOT BEEN OFFERED TO TAX SEPARATELY. IN REPLY, IT IS RESPECTFULLY SUBMITTED THAT LD. A.O . HAS NOT APPRECIATED THE ISSUE INVOLVED CORRECTLY IN AS MUCH AS WHEN THE SAID AMOUNT HAS BEEN MADE PART OF SALES AND OFF ERED AS INCOME IN THE PROFIT AND LOSS ACCOUNT, WHAT DOES IT MEAN BY SAYING THAT IT HAS NOT BEEN SHOWN SEPARATELY. EV EN GOING BY THE CASE OF LD. A.O., LET US TAKE OUT THE SAID AMOUNT FROM THE CREDIT OF PROFIT & LOSS ACCOUNT AND OFFERED IT IN THE COMPUTATION OF INCOME. HOW DOES THIS PRESENT ATION IN THIS MANNER GOING TO SUPPORT THE CASE OF LD. A.O. F OR MAKING THE SAID ADDITION. FACT OF THE MATTER IS THAT SUCH SALE MADE I.T.AS. NO.3312 & 5039/DEL/2019 38 OUTSIDE THE BOOKS OF ACCOUNT DISCOVERED DURING THE SEARCH HAS BEEN INCORPORATED IN A CONSOLIDATED MANNER IN T HE BOOKS OF ACCOUNTS ON 31.03.2015. THEREFORE, THE DOU BLE ADDITION MADE BY LD. A.O. FOR THIS AMOUNT NEEDS TO BE DELETED. 35. WE HAVE CONSIDERED THE ENTIRE MATERIAL INCLU DING THE ORDERS PASSED BY THE LOWER AUTHORITIES AND HAVE ALS O TAKEN INTO ACCOUNT THE WRITTEN SUBMISSIONS MADE BY THE AS SESSEE BEFORE THE FIRST APPELLATE AUTHORITY. IT IS SEEN TH AT ASSESSEE HAS TAKEN INTO ACCOUNT THIS SALE OF RS. 9,20,23,623 /- IN ITS PROFIT AND LOSS ACCOUNT AND THUS THE SALE OF SCRAP HAS BEEN CONSIDERED WHILE WORKING OUT THE RESULT OF THIS YEA R. SEPARATE ADDITION OF THIS VERY AMOUNT WOULD LEAD TO DOUBLE A DDITION. THIS WAS SO HELD BY CIT(A) ALSO. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY IN TH IS REGARD AND HENCE DISMISS THE GROUND OF REVENUES APPEAL AND UP HOLD THE DELETION OF THE ADDITION OF RS. 9,20.23.623/-. ACCO RDINGLY, GROUND OF APPEAL NO. (II) IN REVENUES APPEAL IS DI SMISSED. 36. GROUND NO. (III) TO (VIII) OF THE DEPARTMENTAL APPEAL RELATING TO DISALLOWANCE MADE U/S 14A HAVE BEEN TAK EN BY US ALONG WITH THE ASSESSEES APPEALS GROUND NUMBER 11 . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH SEPTEMBER, 2021 SD/ - SD/ - [DR. B.R.R. KUMAR] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 24/09/2021 PKK: