The ITO, Ward-2(3), Surat V. Shri Maheshbhai Dhanjibhai Patel, Surat

ITA 3403/AHD/2009

• Counselvise Citation: 340320514 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Unexplained cash credit; Opportunity of being heard; Additional evidence
• Section: 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. MOHAN ALANKAMON Y, AM. INCOME-TAX OFFICER, WARD-2(3), SURAT. VS. SHRI MAHESHBHAI DHANJIBHAI PATEL, PROP. M/S MAHESH TEXTILES, 81, KRUNAL ESTATE, BHATENA IND.SOCIETY-2, ANJANA, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAMIR TEKRIWAL, SR.DR RESPONDENT BY:- SHRI KAMLESH BHATT, AR DATE OF HEARING : 3/11/2011 DATE OF PRONOUNCEMENT : 18.11.11. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 24/09/2009 FOR ASST. YEAR 2006-07 RAIS ING FOLLOWING GROUNDS :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO OF RS.1,58,330/- ON ACCOUNT OF LOW GP. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO OF ITA NO.3403/AHD/2009 ASST. YEAR :2006-07 ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 2 RS.6,83,685/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO OF RS.40,000/- (SALES CONSIDERATION RECEIVED ON SALE O F MACHINE) TREATING THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT IN ABSENCE OF CONSTRUCTIVE EVIDENCE. 2. THE FIRST GROUND RELATES TO DELETION OF ADDITION OF RS.1,58,330/- ON ACCOUNT OF LOW GP. DURING THE ASSESSMENT PROCEEDING S THE AO NOTED THAT ASSESSEE HAS TWO PROPRIETARY CONCERNS IN THE NAME A ND STYLE OF M/S MAHESH TEXTILES WHICH IS ENGAGED IN THE MANUFACTURI NG OF ART SILK CLOTH AND M/S MAHESHBHAI DHANJIBHAI PATEL WHICH IS INVOLV ED IN JOB WORK OF DIAMONDS, WHICH APPARENTLY FUNCTIONED ONLY FOR THRE E MONTHS DURING THE YEAR AFTER WHICH IT WAS SHUT-DOWN. THE AO NOTED THA T IN THE CASE OF M/S MAHESH TEXTILES, THE GP RATIO DISCLOSED DURING THE YEAR WAS 4.33% ON A TURNOVER OF RS.44,09,966/- AS AGAINST THE GP RATIO OF 6.15% ON A TURNOVER OF RS.18,32,963/- IN THE IMMEDIATELY PRECEDING YEAR . THUS THERE WAS A FALL IN THE GP RATIO BY 1.82%. ACCORDING TO THE AO EVEN THOUGH THE ASSESSEE HAD FURNISHED WRITTEN SUBMISSIONS VIDE LET TER DTD. 16.6.2008 AND 24.11.2008, THE ASSESSEE FAILED TO FURNISH ANY EVID ENCE TO SUBSTANTIATE THE FALL IN THE GP RATIO. IT WAS ONLY SUBMITTED BY THE ASSESSEE WITH THE HELP OF THE RELEVANT DETAILS FOR THE CURRENT YEAR AND TH E PRECEDING TWO YEARS THAT THE GP RATES WERE NOT COMPARABLE. THIS WAS BEC AUSE IN THE PRECEDING TWO YEARS, THE TURNOVER INCLUDED RECEIPTS FROM JOB- WORK OF ART SILK CLOTH ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 3 WHICH WAS NOT THERE IN THE CURRENT YEARS TURNOVER. IT WAS ALSO SUBMITTED THAT THE GP RATIO DOES NOT NECESSARILY REMAIN CONST ANT OVER THE YEARS. IT IS BOUND TO FLUCTUATE FOR VARIOUS REASONS. IN THE EARL IER YEARS, THE ASSESSEE WAS ENGAGED IN BOTH JOB-WORK AND MANUFACTURING, WHE REAS IN THE CURRENT YEAR, IT WAS ENGAGED ONLY IN MANUFACTURING. THEREFO RE, THE GP OF THE PRECEDING YEARS AND THE CURRENT YEAR COULD NOT BE C OMPARED, AS THE GP RATIOS COULD NOT BE WORKED OUT SEPARATELY FOR MANUF ACTURING AND FOR JOB- WORK IN THE EARLIER YEARS. IT WAS SUBMITTED THAT TH E INCREASE IN TURNOVER HAD ALSO AFFECTED THE GP MARGIN. THE ASSESSEE ALSO FURNISHED QUANTITATIVE DETAILS OF PRODUCTION CERTIFIED BY THE AUDITORS. 2.1 THE AO HOWEVER, REJECTED THE ASSESSEES SUBMISS IONS, OBSERVING THAT THE BILLS RAISED BY THE ASSESSEE HAD BEEN TAMP ERED WITH, THE NAMES HAD BEEN STRUCK OFF AND SOME OTHER NAMES WRITTEN. T HE ASSESSEE HAD FAILED TO FURNISH CONFIRMATIONS FROM THE PURCHASE P ARTIES. HE ALSO REJECTED THE ASSESSEES CONTENTION THAT THE PRODUCTION COULD NOT BE CORRELATED WITH WAGES AND ELECTRICITY CONSUMPTION, SINCE THE ASSESS EE HAD BEEN MAKING PAYMENTS ON THE BASIS OF PRODUCTION. MOST IMPORTANT LY, THE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN THE FALL IN THE GP RATIO. BASING HIMSELF ON SUCH FINDINGS AND OBSERVATIONS, THE AO REJECTED THE ASSE SSEES BOOK RESULTS U/S 145(3) OF THE IT ACT AND APPLYING THE GP RATIO OF T HE IMMEDIATELY PRECEDING YEAR OF 6.15% MADE THE ADDITION OF RS.1,5 8,330/-. ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 4 3. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A) A ND SUBMITTED WRITTEN SUBMISSIONS. THE A.R. HAD CONTENDED THAT TH E ASSESSEE HAD MAINTAINED THE COMPLETE SET OF BOOKS OF ACCOUNT WHI CH WERE AUDITED U/S. 44AB OF THE I.T. ACT AND THE AUDIT REPORT HAD BEEN FURNISHED BEFORE THE AO. NO ADVERSE REMARK HAD BEEN MADE BY THE AUDITORS . IT WAS FURTHER SUBMITTED THAT IT IS A COMMON PRACTICE IN THE TEXTI LE TRADE IN SURAT THAT THE DEALINGS ARE GENERALLY MADE THROUGH BROKERS AND AGE NTS, AND IT IS THEY WHO PROVIDE THE NAMES OF THE PARTIES WHICH IS OFTEN REQUIRED TO BE CORRECTED ON THE BASIS OF SUBSEQUENT INFORMATION FU RNISHED BY THEM. APART FROM CHANGES IN THE NAMES, THERE WAS NO OTHER ALTERATION IN ANY OF THE BILLS. THE FALL IN THE GP RATIO IS A STATEMENT OF FACT AND IS NOT A DEFECT BY ITSELF, AND HENCE, COULD NOT BE THE BASIS FOR RE JECTING THE BOOKS. REITERATING THE SUBMISSIONS MADE IN ASSESSMENT PROC EEDINGS, IT WAS ARGUED BY THE AR THAT THE GP RATIO OF THE EARLIER Y EARS COULD NOT BE COMPARED WITH THE GP OF THE YEAR IN QUESTION. THE A O WAS ALSO NOT JUSTIFIED IN OBSERVING THAT THE BOOKS WERE NOT PROD UCED. IN PARA-2 OF THE ASSESSMENT ORDER THE AO HAS CLEARLY RECORDED THAT A LL THE DETAILS WERE FILED ALONG WITH TWO SETS OF BOOKS OF ACCOUNT PERTA INING TO THE TWO BUSINESSES. COMPLETE QUANTITY DETAILS WERE ALSO FUR NISHED SHOWING ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 5 PURCHASE, CONSUMPTION, PRODUCTION AND THE CLOSING S TOCK. DETAILS OF PURCHASE AND SALE PARTIES ALONG WITH COPIES OF ELEC TRICITY BILLS, ETC. WERE ALSO FURNISHED. THE AO THEREFORE, WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS IN MAKING THE SAID ADDITION. 4. THE LD. CIT (A) DELETED THE IMPUGNED ADDITION BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE A O AS ALSO THE WRITTEN SUBMISSIONS OF THE AR ALONG WITH THE ENCLOS ED DOCUMENTS. FIRSTLY, I FIND THAT THE AO WAS NOT REALLY CLEAR AS TO WHY THE BOOK RESULTS WERE HELD TO BE DEFECTIVE, ESPECIALLY WHEN AS RECORDED BY HIM IN PARAS 2 AND 4 OF THE ASSESSMENT ORDER, COMPL ETE DETAILS HAD BEEN FURNISHED. THE FALL IN THE GP RATIO WAS DULY E XPLAINED ALONG WITH THE COMPARABLE DETAILS OF THE PRECEDING TWO YE ARS. IN THE EARLIER YEARS, THE ASSESSEE WAS ALSO ENGAGED IN DOI NG JOB-WORK ALONG AS OWN MANUFACTURING. THE VERY NATURE OF JOB- WORK ITSELF, WITHOUT ANY EXPENSES WHICH NECESSARILY HAVE TO BE I NCURRED IN MANUFACTURING, ALLOWS FOR OBTAINING A HIGHER GP RAT IO. THIS WOULD MEAN THAT THE GP RATIOS IN THE EARLIER YEARS WHEN T HE MANUFACTURING ACTIVITY AND THE JOB-WORK ACTIVITY WA S COMBINED, WOULD HAVE BEEN HIGHER THAN THE GP RATIO OF THE CUR RENT YEAR, WHEN THERE WAS NO JOB WORK ACTIVITY BUT ONLY MANUFA CTURING. THE AO HOWEVER, REFUSED TO ACCEPT SUCH AN EXPLANATION W ITHOUT BEING ABLE TO REBUT OR CONTRADICT THE SAME. MORE IMPORTAN TLY, WHAT THE AO FAILED TO CONSIDER WAS THAT, THE TURNOVER OF THE ASSESSEE HAD SUBSTANTIALLY INCREASED DURING THE YEAR TO RS.44.10 LACS FROMRS.18.33 LACS IN THE IMMEDIATELY PRECEDING YEAR , AND 6.16 LACS THE YEAR BEFORE. GP RATIO IS AN EXPRESSION IN PERCE NTAGE TERMS OF THE GP TO THE TOTAL TURNOVER. SINCE THE TURNOVER IS THE NUMERATOR IN THE EQUATION, ANY INCREASE IN THEN NUMERATOR WOULD AUTOMATICALLY RESULT IN A FALL IN THE PERCENTAGE. THUS WHERE THE TURNOVER HAD MORE THAN DOUBLED, THERE WAS BOUND TO BE A FALL IN THE GP RATIO WITH OTHER FACTORS REMAINING MORE OR LESS CONSTANT. THIS ASPECT THE AO FAILED TO APPRECIATE, EVEN THOUGH IT WAS POINTED OUT TO HIM. I AM THEREFORE, OF THE VIEW THAT THE FALL IN THE GP R ATIO BY ONLY 1.82% WAS SATISFACTORILY EXPLAINED. ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 6 4.1 THE AO ALSO MADE SOME COMMENT ABOUT THE ASSESSE ES FAILURE TO PRODUCE CONFIRMATIONS FROM THE PURCHASE PARTIES. HE HAD THE COMPLETE DETAILS OF THE NAMES AND ADDRESS OF SU CH PARTIES. IF THERE WAS A FAILURE ON THE PART OF THE ASSESSEE, NO THING PREVENTED HIM FROM CONDUCTING DIRECT ENQUIRIES WITH SUCH PART IES. HE FURTHER OBSERVED THAT SOME OF THE BILLS HAD BEEN TAMPERED W ITH. SUCH BILLS COULD HAVE ALSO BEEN VERIFIED BY MAKING ENQUIRIES W ITH THE CONCERNED PARTIES WHICH THE AO FAILED TO DO. THE AO ALSO REJECTED THE ASSESSEES SUBMISSION REGARDING THE ABSENCE OF A CORRELATION BETWEEN WAGE, ELECTRICITY CONSUMPTION AND PRODUCTIO N AND YET DID NOT MAKE AN ATTEMPT TO RECORD HIS OWN FINDINGS IN T HIS REGARD. 4.2 GIVEN SUCH FACTS AND CIRCUMSTANCES THE CASE, I HAVE COME TO THE INEVITABLE CONCLUSION THAT THERE WAS NO JUSTIFI CATION IN THE AOS ACTION IN REJECTING THE BOOK RESULTS U/S 145(3) OF THE IT ACT. CONSEQUENTLY THE ADDITION OF RS.1,58,330/- WILL STA ND DELETED. AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US THE LD. DR SUBMITTED THAT THERE WAS A FALL IN THE GP RATIO BY 1.82%. EVEN THOUGH THE ASSESSEE HAD FURNISHED WR ITTEN SUBMISSION VIDE LETTER DTD.16.6.2008 AND 24.11.2008 THE ASSESS EE HAD FAILED TO FURNISH ANY EVIDENCE TO SUBSTANTIATE THE FALL IN THE GP RAT IO. THE AO HAD REJECTED THE ASSESSEES SUBMISSIONS OBSERVING THAT THE BILLS RAISED BY THE ASSESSEE HAD BEEN TAMPERED WITH, THE NAMES HAD BEEN STRUCK O FF AND SOME OTHER NAMES WRITTEN. THE ASSESSEE HAD FAILED TO FURNISH C ONFIRMATIONS FROM THE PURCHASE PARTIES. THE AO REJECTED THE ASSESSEES CO NTENTION THAT THE PRODUCTION COULD NOT BE CORRELATED WITH WAGES AND E LECTRICITY CONSUMPTION, SINCE ASSESSEE HAD BEEN MAKING PAYMENT S ON THE BASIS OF ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 7 PRODUCTION. THE ASSESSEE WAS NOT ABLE TO EXPLAIN T HE FALL IN THE GP RATIO. THUS THE AO REJECTED THE ASSESSEES BOOK RESULTS U/ S 145(3) OF THE ACT AND APPLYING THE GP RATIO OF THE IMMEDIATELY PRECED ING YEAR OF RS.6.15% MADE THE ADDITION OF RS.1,58,330/- ACCORDINGLY, THE AO WAS JUSTIFIED IN MAKING THE ADDITION AND THE LD. CIT(A) HAS WRONGLY DELETED THE SAME WITHOUT APPRECIATING THE FACTS OF THE CASE. HIS ORD ER MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE SUBMITTED THAT THE GP RATIO DOES NOT REMAIN CONSTANT EVERY YEAR. THE A SSESSEE WAS ENGAGED IN BOTH JOB-WORK AND MANUFACTURING WHEREAS IN THE C URRENT YEAR, IT WAS ENGAGED ONLY IN MANUFACTURING. THEREFORE, THE GP OF THE PRECEDING YEARS AND THE CURRENT YEAR COULD NOT BE COMPARED AS THE G P RATIOS COULD NOT BE WORKED OUT SEPARATELY FOR MANUFACTURING AND FOR JOB WORK IN THE EARLIER YEARS. THE INCREASE IN TURNOVER HAD ALSO AFFECTED T HE GP MARGIN. THE ASSESSEE HAD FURNISHED COMPLETE QUANTITATIVE DETAIL S OF PRODUCTION WHICH WERE DULY CERTIFIED BY THE AUDITORS. THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION U/S 68. THE AO HAD HIMSELF RECORDED IN PARAS2 & 4 OF THE ASSESSMENT ORDER THAT COMPLETE DETAILS HAD BEEN FUR NISHED. THE FALL IN THE GP RATIO WAS DULY EXPLAINED ALONG WITH THE COMPARAB LE DETAILS OF THE PRECEDING TWO YEARS. THE AO HAD COMPLETE DETAILS OF THE NAMES AND ADDRESS OF THE PARTIES. IF THERE WAS A FAILURE ON T HE PART OF THE ASSESSEE, THE ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 8 AO COULD HAVE CONDUCTED DIRECT ENQUIRIES WITH SUCH PARTIES. THE ALLEGED TAMPERED BILLS COULD HAVE ALSO BEEN VERIFIED BY MAK ING ENQUIRIES WITH THE CONCERNED PARTIES. THUS THE LD. CIT(A) WAS JUSTIFIE D IN DELETING THE ADDITION. HIS ORDER MAY KINDLY BE UPHELD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AO DURING ASSESSMENT PROCE EDINGS FOUND THAT THERE WAS FALL IN GP RATIO BY 1.82% DURING THE YEAR UNDER APPEAL IN COMPARISON TO THE LAST YEAR. THE ASSESSEE WAS ASKED TO EXPLAIN. THE EXPLANATION OFFERED WAS FOUND TO BE GENERAL IN NATU RE BY THE AO AND HE PROCEEDED TO REJECT THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND MADE AN ADDITION OF RS.1,58,330/- BY TAKING THE GP SHOWN BY THE ASSESSEE DURING THE PRECEDING YEAR. IN APPEAL, THE LD. CIT(A ) APPRECIATED THE REASONS GIVEN BY THE ASSESSEE FOR LOW GP DURING THE YEAR UNDER APPEAL. THE EXPLANATION OFFERED BY THE ASSESSEE HAS BEEN AN ALYSED BY LD. CIT(A) IN HIS ORDER WHICH WE HAVE ALREADY REPRODUCED AT PA RA 4 OF THIS ORDER AND CAME TO THE CONCLUSION THAT AO WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS U/S 145(3) OF THE ACT, SHOWN BY THE ASSESSE E AND CONSEQUENTLY ADDITION TO THE EXTENT OF RS.1,58,330/- MADE BY THE AO WAS DELETED. THE FINDING OF THE LD. CIT(A) THAT AO WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS U/S 145(3) OF THE ACT HAS NOT BEEN CHALLENG ED BY THE REVENUE AS NO SUCH GROUND HAS BEEN TAKEN BY THE REVENUE IN THI S APPEAL. THE LAW IS ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 9 SETTLED THAT GP ADDITION CANNOT BE DEFENDED WITHOUT CHALLENGING THE FINDING OF LD. CIT(A) ABOUT UPHOLDING THE BOOK RESU LTS SHOWN BY THE ASSESSEE. SINCE THE SAME HAS NOT BEEN DONE IN THIS CASE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) AND UPHOLD THE SAME. THIS GROUND OF REVENUE IS DISMISSED. 8. THE SECOND GROUND OF THE APPEAL RELATES TO DELET ION OF ADDITION OF RS.6,83,685/- U/S 68 OF THE IT ACT BEING UNEXPLAINE D CASH CREDITS. THE AO NOTED THAT THE ASSESSEE HAD SHOWN UNSECURED LOANS T OTALING RS.6,83,685/- FROM THREE PARTIES, THE DETAILS OF WHICH HAD BEEN R EPRODUCED IN PARA-6 PAGE 7 OF THE ASST. ORDER. IT HAD BEEN RECORDED BY THE AO THAT THE ASSESSEE DID NOT PRODUCE EITHER ANY CONFIRMATION FROM THE AL LEGED DEPOSITORS OR THEIR BANK STATEMENTS OR EVIDENCE OF INCOME-TAX RET URNS FILED BY THEM, ETC. APPARENTLY THE ASSESSEE FURNISHED THE UNSIGNED ACCOUNTS OF THE SAID PARTIES FROM HIS OWN BOOKS. SINCE THE GENUINENESS O F THE LOANS WAS NOT ESTABLISHED THE AO TREATED THE SAME AS UNEXPLAINED CASH CREDITS AND ADDED THE TOTAL SUM OF RS.6,83,685/- UNDER THE PROV ISIONS OF SEC.68 OF THE IT ACT. 9. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APP ELLATE AUTHORITY WHEREIN IT WAS SUBMITTED THAT THE SAID AMOUNTS REPR ESENTED THE CLOSING BALANCES OF THE CURRENT ACCOUNTS OF THE ASSESSEES THREE SISTER CONCERNS. IN COURSE OF THE ASSESSMENT PROCEEDINGS, COPIES OF THE IR ACCOUNTS FROM THE ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 10 ASSESSEES BOOKS ALONG WITH COPIES OF INCOME-TAX RE TURNS OF THE SAID CONCERNS AND COPIES OF THEIR BANK ACCOUNTS HAD BEEN FURNISHED. THE IDENTITY OF THE SAID PARTIES ALONG WITH THEIR CREDI TWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS HAD BEEN ESTABLISHE D. THE AO HAD FAILED TO CONSIDER THE SUBMISSION MADE BY THE ASSESSEE AND HAD ADDED ALL THE CLOSING BALANCES WHICH APPEARED IN THE BALANCE-SHEE T AS UNEXPLAINED CASH CREDITS WITHOUT DISCHARGING HIS OWN BURDEN. COPIES OF THE RELEVANT DOCUMENTS HAD BEEN FURNISHED BY THE ASSESSEE. THE L D. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- 14. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS . I HAVE ALSO GONE THROUGH THE COPIES OF THE SAID ACCOUNTS OF THE SAID THREE PARTIES FROM THE BOOKS OF THE ASSESSEE AS ALSO THE ASSESSEES ACCOUN T IN THEIR BOOKS. I HAVE ALSO EXAMINED THE RELEVANT BANK STATEMENTS. IT IS A BSOLUTELY CLEAR THAT THERE WERE SEVERAL TRANSACTIONS BETWEEN THE ASSESSE E AND THE SAID THREE PARTIES WHICH WERE IN THE NATURE OF CURRENT ACCOUNT TRANSACTIONS. CLEARLY, THERE WERE NO LOANS. WHAT THE AO DID WAS TO TREAT T HE CLOSING BALANCES OF ALL THE THREE ACCOUNTS AS UNEXPLAINED UNSECURED LOA NS, WHICH WAS COMPLETELY ERRONEOUS. THE ADDITION OF THE SUM OF RS .6,89,685/- WILL THEREFORE STAND DELETED. AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 10. BEFORE US THE LD. DR SUBMITTED THAT THE ASSESSE E HAD SHOWN UNSECURED LOANS TOTALLING RS.6,83,685/- FROM THREE PARTIES. THE ASSESSEE DID NOT PRODUCE ANY CONFIRMATION FROM THE ALLEGED D EPOSITORS, OR THEIR BANK STATEMENTS OR EVIDENCE OF INCOME-TAX RETURNS F ILED BY THEM. THE DETAILS ALONG WITH RELEVANT BANK STATEMENT TO SHOW THAT THERE WERE SEVERAL TRANSACTIONS BETWEEN THE ASSESSEE AND THE SAID THRE E PARTIES WHICH WERE IN ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 11 THE NATURE OF CURRENT ACCOUNT TRANSACTIONS AND HENC E WERE NOT LOANS, WERE SUBMITTED BEFORE LD. CIT(A) ONLY. THEREFORE, THE AO SHOULD HAVE BEEN CONFRONTED WITH THESE DETAILS BEFORE GIVING ANY REL IEF TO THE ASSESSEE BY HOLDING THAT THE AO WAS NOT JUSTIFIED IN TREATING T HE CLOSING BALANCES OF THESE THREE PARTIES AS UNEXPLAINED UNSECURED LOANS. HE THEREFORE, PRAYED THAT THE MATTER MAY KINDLY BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER VERIFYING THE SAME. 11. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUBMITTED THAT THE SAID AMOUNTS REPRESENTED THE CLOSING BALANCES O F THE CURRENT ACCOUNTS OF ASSESSEES THREE SISTER CONCERNS. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, COPIES OF THEIR ACCOUNTS FROM THE ASSE SSEES BOOKS ALONG WITH COPIES OF INCOME-TAX RETURNS OF THE SAID CONCE RNS AND COPIES OF THEIR BANK ACCOUNTS HAD BEEN FURNISHED. THE IDENTITY OF T HE SAID PARTIES ALONG WITH THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS HAD BEEN ESTABLISHED. THE AO HAD FAILED TO CONSIDER THE SUBMISSION MADE BY ASSESSEE AND HE HAD ADDED ALL THE CLOSING BALANCES WHICH APPEARED IN THE BALANCE SHEET AS UNEXPLAINED CASH CREDITS. THE AO W AS NOT JUSTIFIED IN MAKING ADDITION. THE LD. CIT(A) HAS RIGHTLY DELETED THE SAME. HIS ORDER MAY KINDLY BE CONFIRMED. 12. AFTER HEARING BOTH THE PARTIES, AND PERUSING TH E MATERIAL ON RECORD, WE FIND THAT THE AO DURING ASSESSMENT PROCEEDINGS I N THE ABSENCE OF ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 12 COMPLETE DETAILS TREATED THE SUM OF RS.6,83,685/- A S UNEXPLAINED CASH RECEIVED FROM THREE PARTIES. BEFORE LD. CIT(A) THE ASSESSEE WAS ABLE TO SHOW BY FILING ADDITIONAL EVIDENCE IN THE FORM OF R ELEVANT BANK STATEMENT THAT THERE WERE SEVERAL TRANSACTIONS BETWEEN THE AS SESSEE AND THE CONCERNED THREE PARTIES WHICH WERE IN THE NATURE OF CURRENT ACCOUNT TRANSACTIONS AND, THEREFORE, THE AO WAS NOT JUSTIFI ED IN TREATING THESE ACCOUNTS AS UNEXPLAINED UNSECURED LOANS. SINCE THE AO WAS NOT GIVEN ANY OPPORTUNITY TO COMMENT ON THIS ADDITIONAL EVIDE NCE WE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER VERIFICATION OF RELEVANT BANK STATEMENTS AND OTHER DETAILS FILED BY THE ASSESSEE BEFORE LD. CIT(A) AFTER PROVIDING REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 13. THE THIRD GROUND OF REVENUES APPEAL IS REGARDI NG DELETION OF ADDITION OF RS.40,000/- MADE U/S 68 OF THE IT ACT. THE AO NOTED THAT THE ASSESSEE HAD SOLD A MACHINE FOR RS.40,000/- ON 15.4 .2005 AGAINST WHICH CASH WAS RECEIVED ON DIFFERENT DATES OF DIFFERENT A MOUNTS IN THE MONTH OF JUNE, 2005. IN SUPPORT OF SUCH CLAIM THE ASSESSEE F URNISHED AN UNSIGNED COPY OF SALE ACCOUNT FROM THE BOOKS OF SHRI PRAFUL D. PATEL, THE ALLEGED BUYER, AS ALSO FROM THE BOOKS OF M/S MAHESH TEXTILE S. THE ASSESSEE ALSO SUBMITTED A COPY OF THE ACKNOWLEDGEMENT OF RETURN O F INCOME FRILLED ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 13 ALLEGEDLY BY SHRI PRAFUL D. PATEL. THE AO TOOK THE VIEW THAT SUCH DOCUMENTS DID NOT ESTABLISH ANY SALE. THERE WAS NO SIGNATURE OF ANY ONE ON ANY OF THE DOCUMENTS. THERE WAS ALSO NO PROOF OF THE TRANSPORTATION (SALE) OF THE MACHINERY OR EVEN ITS DE-COMMISSIONIN G. THE AO THEREFORE DISALLOWED THE CLAIM OF LOSS OF RS.2,200 AND FURTHE R ADDED THE SUM OF RS.40,000/- U/S 68 OF THE IT ACT, TAKING THE VIEW T HAT THIS SUM REPRESENTED THE UNACCOUNTED MONEY OF THE ASSESSEE. 14. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST AP PELLATE AUTHORITY WHEREIN VIDE WRITTEN SUBMISSION THE LD. AR HAD CONT ENDED THAT THE ASSESSEE HAD PROVIDED DETAILED ADDRESS AND PAN OF T HE PERSON TO WHOM THE MACHINERY WAS SOLD. THE PAYMENT WAS RECEIVED BY ACCOUNT PAYEE CHEQUE(S). THE LOSS OF RS.2,200 WAS NEVER CLAIMED I N THE COMPUTATION OF INCOME, NOR WAS IT DEBITED TO THE P & L ACCOUNT. A COPY OF THE ASSESSEES ACCOUNT FROM THE BOOKS OF THE BUYER ALONG WITH HIS BALANCE-SHEET AND ACKNOWLEDGMENT OF RETURN OF INCOME FILED BY HIM, HA D BEEN SUBMITTED. THERE WAS THEREFORE NO BASIS FOR MAKING THE ADDITIO N OF RS.40,000/- U/S 68 OF THE IT ACT. THE LD. CIT(A) AFTER CONSIDERING THE FINDINGS AND CONCLUSION OF THE AO ON ONE HAND AND THE WRITTEN SU BMISSION OF THE AR ON THE OTHER HAND DELETED THE ADDITION BY OBSERVING AS UNDER :- 10. I HAVE CAREFULLY CONSIDERED THE FINDINGS AND C ONCLUSION OF THE AO ON ONE HAND AND THE WRITTEN SUBMISSION OF THE AR ON THE OTHER. IF THERE WAS NO LOSS CLAIMED BY THE ASSESSEE EITHER IN THE P ROFIT AND LOSS ACCOUNT OR IN THE COMPUTATION OF INCOME, THERE WAS SIMPLY N O BASIS FOR THE AO TO ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 14 MAKE ANY ADDITION. IT APPEARS THAT THE AO MISCONSTR UED THE IMPLICATIONS OF THE TRANSACTION. THE ADDITION OF RS.2,200 WILL T HEREFORE STAND DELETED. 10.1 IT HAS BEEN SUBMITTED BY THE AR THAT THE NAME AND ADDRESS AND PAN OF THE BUYER OF THE MACHINERY HAD BEEN FURNISHE D BEFORE THE AO ALONG WITH A COPY OF THE ASSESSEES ACCOUNT IN HIS BOOKS, HIS BALANCE SHEET AS ALSO EVIDENCE OF THE RETURN OF INCOME FILE D BY HIM. THIS HAS BEEN ACKNOWLEDGED BY THE AO IN THE ASST. ORDER. HOWEVER, HE HAS OBSERVED THAT NONE OF THE DOCUMENTS WERE SIGNED BY EITHER TH E ASSESSEE OR THE ALLEGED BUYER. THE AO HAS ALSO STATED THAT PAYMENTS WERE RECEIVED IN CASH IN FOUR INSTALMENTS. ON THE OTHER HAND, THE AR HAS CLAIMED THAT THE PAYMENT WAS RECEIVED BY ACCOUNT PAYEE CHEQUES. HOWE VER, THE POINT REMAINS THAT IF THE AO WAS NOT SATISFIED WITH THE E VIDENCE FURNISHED BY THE ASSESSEE, HE COULD HAVE EASILY MADE RELEVANT EN QUIRIES EITHER DIRECTLY FROM THE ALLEGED BUYER HIMSELF OR FROM HIS ASST. RE CORDS. SINCE THE AO FAILED TO DISCHARGE HIS ONUS, HE COULD NOT HAVE TRE ATED THE SALE CONSIDERATION OF RS.40,000/- AS UNEXPLAINED CASH CR EDIT IN TERMS OF SEC.68 OF THE IT ACT. THE SAID ADDITION WILL THEREFORE STA ND DELETED. AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 15. BEFORE US THE LD. DR SUBMITTED THAT THE AO HAD NOTED THAT THE ASSESSEE HAD SOLD A MACHINE FOR RS.40,000 ON 15.4.2 005 AGAINST WHICH CASH WAS RECEIVED ON DIFFERENT DATES OF DIFFERENT A MOUNTS IN THE MONTH OF JUNE, 2005. IN SUPPORT OF SUCH CLAIM THE ASSESSEE F URNISHED AN UNSIGNED COPY OF SALE ACCOUNT FROM THE BOOKS OF SHRI PRAFUL D. PATEL, THE ALLEGED BUYER AS ALSO FROM THE BOOKS OF M/S MAHESH TEXTILES . THE ASSESSEE ALSO SUBMITTED A COPY OF THE ACKNOWLEDGMENT OF RETURN OF INCOME BY SHRI PRAFUL D. PATEL. THERE WAS NO SIGNATURE OF ANY ONE ON ANY OF THE DOCUMENTS. THERE WAS ALSO NO PROOF OF TRANSPORTATIO N OF THE MACHINERY OR EVEN ITS DE-COMMISSIONING. THUS THE AO HAD RIGHTLY ADDED THE SUM OF RS.40,000/- U/S 68 OF THE ACT WITH A VIEW THAT THE SUM REPRESENTED ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 15 UNACCOUNTED MONEY OF THE ASSESSEE. HENCE THE AO WAS RIGHT IN MAKING THE ADDITION. BEFORE LD. CIT(A) THE ASSESSEE HAS TA KEN A TOTALLY DIFFERENT STAND THAT PAYMENT WAS RECEIVED BY HIM BY ACCOUNT P AYEE CHEQUES AND NOT IN CASH. TAKING INTO CONSIDERATION THIS SUBMISS ION OF THE ASSESSEE THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE WITHOUT GETTING IT VERIFIED BY THE AO. THE LD. DR, THEREFORE, PRAYED THAT THE MATT ER MAY KINDLY BE RESTORED BACK TO THE FILE OF AO FOR VERIFYING THE S UBMISSIONS OF THE ASSESSEE. THE LD. COUNSEL OF THE ASSESSEE DID NOT O BJECT TO THIS PRAYER OF THE LD. DR. THEREFORE, THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION, AFTER GIVING REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF REVENUE IS ALLOWED FO R STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 18.11.11. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- ITA NO.3403/AHD/2009 ASST. YEAR 2006-07 16 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 3/11/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 11/11/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S . 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 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..