R.S. Switchgears, Noida V. ITO, New Delhi

ITA 3490/DEL/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3017 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 24-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 02-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MUKESH BANSAL
• Keywords: Bogus purchase; Opportunity of being heard; Period of limitation; Deemed to accrue or arise in india; Assessment record; Revenue expenditure
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. L.P.SAHU, ACCOUNTANT MEMBER ITA NO. 3490/DEL/2012 (ASSESSMENT YEAR: 2008-09) R.S.SWITCHGEARS C-115, SECTOR-9 NOIDA VS. ITO WARD-24(2) NEW DELHI PAN : AACFR6439A (APPELLANT) (RESPONDENT) ITA NO. 3312/DEL/2012 (ASSESSMENT YEAR: 2008-09) ITO WARD-24(2) NEW DELHI VS. R.S.SWITCHGEARS C-115, SECTOR-9 NOIDA PAN : AACFR6439A (APPELLANT) (RESPONDENT) REVENUE BY SH. ATIQ AHMAD, SR. DR ASSESSEE BY SH. VINEET GARG, ADV. & SH. MUKESH BANSAL, CA O R D E R PER L.P.SAHU, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE AGAINST ORDER OF THE LD. CIT(A)-XXIII, NEW DELHI ORDER DATED 29.03. 2012 FOR ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS OF APPEAL :- DATE OF HEARING 25 .0 1 .2018 DATE OF PRONOUNCEMENT 23. 0 3 .2018 2 ITA NO. 3490, 3312.DEL.2012 GROUNDS OF ASSESSEES APPEAL :- 1. THAT THE ASSESSMENT UNDER SECTION 143(3) IS BAD IN LAW AND IS LIABLE TO BE ANNULLED. 2. THAT THE LEARNED CIT(A) UNDER THE FACTS AND CIRCUM STANCES OF THE CASE HAS COMMITTED A MISTAKE OF LAW IN SUSTAINING T HE ACTION OF THE ASSESSING OFFICER FOR MAKING THE ADDITION OF RS 20, 28,850/- UNDER SECTION 41(1) OF REMISSION OF LIABILITY WHILE THERE IS NO R EMISSION OR CESSATION OF LIABILITY. EVEN, THERE IS NO EVIDENCE BEING BROUGHT ON RECORD BY THE ASSESSING OFFICER. 3. THAT THE LEARNED CIT(A) UNDER THE FACTS AND CIRCUM STANCES OF THE CASE HAS COMMITTED A MISTAKE OF LAW IN SUSTAINING T HE ACTION OF THE ASSESSING OFFICER FOR MAKING THE ADDITION OF RS 202 8850/- UNDER SECTION 41(1) IGNORING THE DECISION OF THE JURISDICTION DEL HI HIGH COURT IN CASE OF CIT VS AUTO KASHYAP INDIA (P) LTD 330 ITR 435(DE LHI) . 4. THAT THE LEARNED CIT(A) UNDER THE FACTS AND CIRCUM STANCES OF THE CASE HAS COMMITTED A MISTAKE OF LAW IN SUSTAINING T HE ACTION OF THE ASSESSING OFFICER FOR MAKING THE ADDITION OF RS 202 8850/- UNDER SECTION 41(1) WHILE AS PER SECTION 41(1) THERE SHOULD BE AC TUAL CESSATION OF THE LIABILITY. 5. THAT THE LEARNED CIT(A) UNDER THE FACTS AND CIRCUM STANCES OF THE CASE HAS COMMITTED A MISTAKE OF LAW AND FACTS BY CO NFIRMING THE DISALLOWANCE OF RS 262590/- OUT OF TOTAL ADDITIONAL SALES TAX OF RS 4,26,855/-A DISALLOWED BY THE ASSESSING OFFICER BY INCORRECTLY TREATING IT IN THE NATURE OF PENALTY. GROUNDS OF REVENUES APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON A/C OF BOGUS PURCHA SES OF RS. 52,67,008/- AND RS. 1,32,63,979/- TREATING THE SAME AS GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 2,00,000/- AS ESTIMATION OF GROSS PROFIT MADE BY THE AO BY REJECTING BOOKS OF ACCOUNT S OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE FIRST TAKE UP THE A PPEAL OF THE ASSESSEE. 3 ITA NO. 3490, 3312.DEL.2012 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF ELECTRICAL GOODS. THE AS SESSEE FILED RETURN OF INCOME ON 29.09.2008 DECLARING INCOME AT RS. 2,46,780/-. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. DURING THE SCRUTINY PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S SHOWN RS. 20,28,850/- AS PAYABLE TO M/S. LARSEN & TOUBRO LIMITED. IT WAS OB SERVED BY THE ASSESSING OFFICER THAT THIS PAYMENT IS LYING PENDING SINCE 20 04 AS A TRADE CREDITORS. IN THIS REGARD THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTI CE AND ASKED TO EXPLAIN AS TO WHY IT MAY NOT BE HELD THAT THIS AMOUNT IS NO MORE PAYABLE AND THIS AMOUNT MAY NOT BE ADDED TO THE INCOME OF THE ASSESSEE BY INVOK ING PROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT. IN THIS REGARD, THE ASSESSEE SUBMITTED THAT THIS AMOUNT IS IN DISPUTE SINCE 2004 AND THAT THE ASSESSEE WAS DEALIN G WITH M/S. LARSEN AND TOUBRO LIMITED PRIOR TO THAT PERIOD AND TO AVOID THE DISPU TE, THE ASSESSEE HAS MADE SETTLEMENT WITH THEIR REPRESENTATIVES. IN THE SETTL EMENT DEED THE LD. ASSESSING OFFICER NOTED SOME SHORTCOMINGS AND BEING DISAGREE D, MADE ADDITION OF RS. 20,28,850/- BY APPLYING THE PROVISION OF SECTION 41 (1) OF THE IT ACT, 1961. FEELING AGGRIEVED BY THIS ADDITION THE ASSESSEE APPEALED BE FORE THE LD. CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, SUSTAI NED THE ADDITION, OBSERVING AS UNDER : THE CIT (A) OBSERVED THAT THE LIABILITY HAS CEASED TO EXIST BEING BARRED BY THE LAW OF LIMITATION. AS HELD BY THE CALCUTTA HIGH COURT IN THE CASE OF KESORAM INDUSTRIES & COTTON MILLS LTD. VS. CIT (199 2) 196 ITR 845 , THE BURDEN IS ON THE ASSESSEE TO PROVE THAT THE LIABILI TY SUBSITS. THE APPELLANT HAS BEEN UNABLE TO FURNISH A CONFIRMATION OR COPY O F ACCOUNT FROM THE BOOKS OF M/S LARSEN & TURBO THROUGH SPECIALLY REQUIRED TO DO SO. AS THE CONDUCT AND SURROUNDING CIRCUMSTANCES DEMONSTRATE THAT THE AMOUNT HAS BEEN REMITTED OR FORGONE AND THAT THE SUM HAS CEASED TO BE CLAIMABLE AGAINST THE APPELLANT , IT IS CLEAR CASE OF REMISSION OF LIABIL ITY. 4 ITA NO. 3490, 3312.DEL.2012 FEELING AGGRIEVED BY THE ORDER OF CIT ( A) THE ASSE SSEE IS IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 3. THE LD. AUTHORIZED REPRESENTATIVE REITERATED THE SUBMISSION MADE BEFORE THE LD. CIT (A). HE FURTHER SUBMITTED THAT IN THE BOOKS OF L & T, THE PAYMENT OF RS.1,10,63,937/- IS SHOWN STILL PAYABLE, WHICH ARE MORE THAN THE ADDITION MADE BY THE ASSESSING OFFICER. L & T HAS NOT CONSIDERED EAR LIER THE REBATE, DISCOUNT, RATE DIFFERENCE AND RETURN OF MATERIALS. IT WAS FURTHER SUBMITTED THAT SO LONG THE ASSESSEE SHOWS THE CREDIT IN ITS BALANCE SHEET YEAR AFTER YEAR, IT CANNOT BE CONCLUDED THAT THE DEBT IS BARRED AND HAS BECOME UN FORCEABLE. RELIANCE IS PLACED ON FOLLOWING DECISIONS : (I) CIT VS. SHRI BARDHMAN OVERSEASE LTD. (ITA NO. 774/2 009 DATED 23.12.2011) (II) CIT VS HOTLINE ELECTRONICS LTD. (DELHI)(2012) 18 TA XMANN.COM 363 (DELHI) (III) CIT VS. MOHAN MEAKIN LIMITED (DELHI HC) ORDER DATED 30.01.2012 (COPY PLACED ON RECORD) (IV) CIT VS. MIRAA PROCESSORS (P) LTD., (2012) 22 TAXMAN .COM 120 (GUJ) (V) MAHABIR COLD STORAGE VS. CIT, 188 ITR 91 (VI) LARSEN & TOUBRO LTD VS. COMMERCIAL ELECTRIC WORKS, 67(1997)DLT 387. (VII) AMBIKA MILLS LTD. VS. CIT, 54 ITR 167 (GUJ.) (VIII) RISHI PAL GUPTA VS. S.J. KNITTING & FINISHING MILLS PVT. LTD. 73 (1998) DLT 593 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HAS BEEN CONTINUOUSLY S HOWING PAYABLES TO THE L & T IN THE BOOKS OF ACCOUNT, WHICH IS BARRED BY LIMITAT ION AS PER LIMITATION ACT. THE CASE LAWS RELIED BY THE ASSESSEE ARE DISTINGUISHABL E, BEING BASED ON DIFFERENT FOOTINGS. 5. AFTER HEARING THE SUBMISSIONS OF BOTH THE PARTIE S AND CONSIDERING THE MATERIAL AVAILABLE ON RECORD INCLUDING THE ORDERS O F THE AUTHORITIES BELOW, WE FIND 5 ITA NO. 3490, 3312.DEL.2012 THAT THE ASSESSING OFFICER HAS MADE ADDITION ONLY O N THE BASIS THAT THE IMPUGNED LIABILITY WAS BEING SHOWN BY ASSESSEE AS OUTSTANDIN G SINCE 2004 AND THE SAME SHOULD BE TREATED AS CEASED AND IS LIABLE TO BE ADD ED IN THE INCOME OF THE ASSESSEE AS CONTEMPLATED U/S. 41(1) OF THE ACT. THE PROVISI ONS OF SECTION 41(1) OF THE ACT READ AS UNDER : 41. (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN M ADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDI TURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO A S THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETH ER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT O BTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHAL L BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACC ORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREV IOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WH ICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENC E IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST-MENTIONED PERSON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRE D TO IN CLAUSE (A) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT O BTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRU ING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR. EXPLANATION 1.FOR THE PURPOSES OF THIS SUB-SECTION , THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SU CH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUD E THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY T HE FIRST MENTIONED PERSON 6 ITA NO. 3490, 3312.DEL.2012 UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB- SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. EXPLANATION 2.FOR THE PURPOSES OF THIS SUB-SECTION , 'SUCCESSOR IN BUSINESS' MEANS, (I) WHERE THERE HAS BEEN AN AMALGAMATION OF A COMP ANY WITH ANOTHER COMPANY, THE AMALGAMATED COMPANY; (II) WHERE THE FIRST-MENTIONED PERSON IS SUCCEEDED BY ANY OTHER PERSON IN THAT BUSINESS OR PROFESSION, THE OTHER PE RSON; (III) WHERE A FIRM CARRYING ON A BUSINESS OR PROFES SION IS SUCCEEDED BY ANOTHER FIRM, THE OTHER FIRM; (IV) WHERE THERE HAS BEEN A DEMERGER, THE RESULTING COMPANY. THE ABOVE LEGAL ISSUE HAS BEEN DECIDED BY ITAT DELH I BENCH IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN THE CASE OF SAT PAL & SONS (HUF) VS. ACIT, 85 TAXMANN.COM 283 (DELHI-TRIB.) IN THE FOLLOWING TERM S : A PERUSAL OF THE AFORESAID PROVISION OF LAW AS CON TAINED IN SECTION 41(1), WE OPINE THAT THESE PROVISIONS ARE APPLICABLE IN THE CASES WHERE THE LIABILITY STOOD REMITTED OR CEASED DURING THE YEAR UNDER CONSIDERATION. IN THE INSTANT CASE, IT HAS NOT BEEN ESTABLISHED BY THE REVENUE THAT THE ASSESSEE HAS WRITTEN OFF THE OUTST ANDING LIABILITIES IN THE BOOKS OF ACCOUNT, RATHER CONTINUED TO SHOW THE IMPUGNED LIAB ILITIES IN THE BALANCE SHEET. THE REVENUE HAS ALSO FAILED TO ESTABLISH THAT THE ASSES SEE HAD OBTAINED ANY BENEFIT OF REDUCTION IN THE EARLIER YEARS OF SUCH LIABILITIES BY WAY OF THEIR REMISSION OR CESSATION. ALL THESE BEING THE CONDITIONS TO BE SATISFIED UNDER TH E PROVISIONS OF SECTION 41(1) OF THE ACT, THE ADDITION SO MADE TAKING SHELTER OF THESE PROVIS IONS CANNOT BE SUSTAINED FOR WANT OF SATISFACTION OF SUCH CONDITIONS. WE STAND FORTIFIED BY THE PROPOSITION OF LAW LAID DOWN IN THE FOLLOWING DECISIONS : (I). HONBLE SUPREME COURT IN THE CASE OF CIT VS. S UGAULI SUGAR WORKS (P) LTD., 236 ITR 518 (SC) HAS HELD AS UNDER : SEC. 41 CONTEMPLATES THE OBTAINING BY THE ASSESSEE OF AN AMOUNT EITHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER OR A BENEFIT BY WAY OF REMI SSION OR CESSATION AND IT SHOULD BE OF A PARTICULAR AMOUNT OBTAINED BY HIM. THUS, THE O BTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS SINE QUA NON FOR THE APPLICATION OF THIS SECTION. THE MERE FACT THAT THE ASSESSEE HAS MADE AN ENTRY OF TR ANSFER IN HIS ACCOUNTS UNILATERALLY WILL NOT ENABLE THE DEPARTMENT TO SAY THAT S. 41 WOULD A PPLY AND THE AMOUNT SHOULD BE 7 ITA NO. 3490, 3312.DEL.2012 INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. JUST BECAUSE AN ASSESSEE MAKES AN ENTRY IN HIS BOOKS OF ACCOUNTS UNILATERALLY, HE CANNOT GET R ID OF HIS LIABILITY. THE QUESTION WHETHER THE LIABILITY IS ACTUALLY BARRED BY LIMITATION IS N OT A MATTER WHICH CAN BE DECIDED BY CONSIDERING THE ASSESSEE'S CASE ALONE BUT IT IS A M ATTER WHICH HAS TO BE DECIDED ONLY IF THE CREDITOR IS BEFORE THE CONCERNED AUTHORITY. IN THE ABSENCE OF THE CREDITOR, IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO A CONCLUSION THAT THE DEBT IS BARRED AND HAS BECOME UNENFORCEABLE. THERE MAY BE CIRCUMSTANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEEDING FOR ENFORCEMENT OF THE DEBT EVEN AFTER EXPIRY OF THE NORMAL PERIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT, THE P RINCIPLE THAT EXPIRY OF PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT COUL D NOT EXTINGUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT, HAS BEEN WELL SETTLED. IF THAT PRINCIPLE IS APPLIED, IT IS CLEAR THAT MERE ENTRY IN THE BOOK S OF ACCOUNTS OF THE DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PART CREDITOR W ILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS COME TO AN END. APART FROM THAT, THAT WILL NOT BY ITSELF CONFER ANY BENEFIT ON THE DEBTOR AS CONTEMPLATED BY THE SECTION. (II). HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA, 222 TAXMAN 313 (GUJ.) HAS HELD AS UNDER : SECTION 41(1) WOULD APPLY IN A CASE WHERE THERE HA S BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION SUBJE CT TO THE CONDITIONS CONTAINED IN THE STATUTE BEING FULFILLED. ADDITIONALLY, SUCH CESSATI ON OR REMISSION HAS TO BE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, BOTH ELEMENTS ARE MISSING. THERE WAS NOTHING ON REC ORD TO SUGGEST THERE WAS REMISSION OR CESSATION OF LIABILITY THAT TOO DURING THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08 WHICH WAS THE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSELF SEEMS UNDER SERIOUS DOUBT. THE AO UNDERTOOK THE EXERCISE TO VERIFY THE RECORDS OF THE SO CALLED CREDITORS. MANY OF THEM WE RE NOT FOUND AT ALL .IN THE GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HAD NO DEALI NG WITH THE ASSESSEE. IN ONE OR TWO CASES, THE RESPONSE WAS THAT THEY HAD NO DEALING WI TH THE ASSESSEE NOR DID THEY KNOW HIM. OF COURSE, THESE INQUIRIES WERE MADE EX PARTE AND I N THAT VIEW OF THE MATTER, THE ASSESSEE WOULD BE ALLOWED TO CONTEST SUCH FINDINGS. NEVERTHE LESS, EVEN IF SUCH FACTS WERE ESTABLISHED THROUGH BI-PARTE INQUIRIES, THE LIABILI TY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AND THAT THEREFORE, THE AMOUNT IN QUESTION CANNOT BE ADDED BACK AS A DEEMED INCOME UNDER SECTI ON 41(C) OF THE ACT. THIS IS ONE OF THE STRANGE CASES WHERE EVEN IF THE DEBT ITSELF IS FOUND TO BE NON-GENUINE FROM THE VERY INCEPTION, AT LEAST IN TERMS OF SECTION 41(1) OF TH E ACT THERE IS NO CURE FOR IT. THE FINDINGS OF TRIBUNAL UPHELD. (III). THE ITAT AHMEDABAD BENCH VIDE ORDER DATED 01 .10.2010 IN THE CASE OF DCIT VS. RATNAMANI METALS & TUBES PVT. LTD. (ITA NO. 3783/AH D/2008, RELYING ON THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F SMT. SITA DEVI JUNEJA 187 TAXMAN 96 AND OF HONBLE MADRAS HIGH COURT IN THE C ASE OF TAMILNADU WAREHOUSING CORPN., 292 ITR 319, HAS HELD AS UNDER : 11. THE LEARNED DR RELIED UPON THE ORDER OF THE AO . ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 8 ITA NO. 3490, 3312.DEL.2012 HOWEVER, CONSIDERING THE ABOVE PROVISIONS AND DECIS IONS NOTED ABOVE, IT IS CLEAR THAT THE AMOUNT IN QUESTION RELATES TO PURCHASE OF BUILDING MATERIAL ON WHICH THERE WAS A DISPUTE OF PAYMENT. THE AO ADMITTED THAT THE AMOUNT REMAINE D UNPAID IN THE BOOKS OF ACCOUNT. SINCE THE ASSESSEE EXPLAINED THAT THE AMOUNT RELATE S TO PURCHASE OF BUILDING MATERIALS FOR THEIR PROJECT AT KUTCH WHICH HAS BEEN SHOWN AS CAPI TAL GOODS IN PROGRESS AND THAT THE AMOUNT HAS NOT BEEN PAID DUE TO INFERIOR QUALITY OF THE MATERIAL, WOULD PROVE THAT THE ASSESSEE HAS NOT CLAIMED ANY ALLOWANCE OR DEDUCTION IN ANY ASSESSMENT YEAR IN RESPECT OF LOSS/EXPENDITURE OR TREATING OF LIABILITY AND HAS N OT OBTAINED ANY BENEFITS WHATSOEVER IN SUBSEQUENT YEAR. THEREFORE, THERE IS NO QUESTION OF REMISSION OR CESSATION OF LIABILITY. SINCE THE LIABILITY SHOWN IN THE BALANCE SHEET OF T HE ASSESSEE, THEREFORE, FACTS AND CIRCUMSTANCES OF THE CASE WOULD PROVE THAT THE CASE OF THE ASSESSEE IS NOT COVERED BY THE PROVISIONS OF SECTION 41 (I) OF THE IT ACT. WE, THE REFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). WE CONFIRM HIS FINDINGS AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. FOLLOWING THE AFORESAID DECISIONS, WE ARE OF THE OP INION THAT THE LD. AUTHORITIES BELOW ARE NOT JUSTIFIED TO MAKE ADDITION BY RESORTING TO THE PROVISIONS OF SECTION 41(1) OF THE ACT. ACCORDINGLY, THE ADDITION OF RS.90,36,451/- MADE BY THE AUTHORITIES BELOW IS FOUND FIT TO BE DELETED . 6. THERE IS NO MATERIAL ON BEHALF OF THE REVENUE TO TAKE A CONTRARY VIEW. THEREFORE, FOLLOWING THE ORDER OF THE CO-ORDINATE B ENCH AND ALSO THE DECISIONS RELIED ON BY THE ASSESSEE, WE DO NOT FIND ANY GOOD REASON TO SUSTAIN THE ADDITION OF RS. 20,28,850/- U/S. 41(1) OF THE ACT. ACCORDINGLY, THIS ADDITION STANDS DELETED. 7. THE LD. ASSESSING OFFICER FURTHER NOTED THAT IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.4,26,855/- UNDER THE HEAD ADDITIONAL SALES TAX. IN THIS REGARD THE ASSESSEE SUBMITTED TH AT THE ADDITIONAL SALES TAX WAS PAID ON ACCOUNT OF SHORT/LESS SALES TAX FORMS, WHIC H WERE SUBMITTED BY THE ASSESSEE AND THE AMOUNT SO PAID DID NOT RELATE TO A NY KIND OF PENALTY. THESE PAYMENTS PERTAIN TO THE F.Y. 2002-03 AND 2003-04. T HE ASSESSING OFFICER DID NOT AGREE WITH THE REPLY OF THE ASSESSEE STATING THAT T HE DEMAND SO PAID WAS IN THE NATURE OF PENALTY, AS THE ASSESSEE HAD NOT COMPLIED WITH CERTAIN SALES TAX PROVISIONS. HE, ACCORDINGLY, TREATING THE IMPUGNED PAYMENT AS IN THE NATURE OF PENALTY, OBSERVED THAT IT IS NOT DEDUCTIBLE AS PER LAW AND ADDED THE SAME TO THE TOTAL 9 ITA NO. 3490, 3312.DEL.2012 INCOME OF THE ASSESSEE. IN APPEAL, THE LD. CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, RESTRICTED THE ADDITION TO RS.2,62 ,590/-. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 8. THE LD. AR, REITERATING THE SUBMISSIONS MADE BEF ORE THE LD. CIT(A), SUBMITTED AS UNDER : ASSESSEE,S CONTENSION - DEMAND WAS RAISED ON 24/03/2005 FOR AY 2002-2003 BY TRADE TAX OFFICER FOR NON SUBMISSION OF STATUTORY FORMS IE C FORM AND FOR M 3 B. - BEFORE FILING AN APPEAL IN SALE TAX BEFORE APPELL ATE AUTHORITY , A SUM OF RS 262590/- WAS DEPOSITED TOWARD DISPUTED DEMAND AND D EBITED UNDER HEAD 'SECURITY DEPOSIT TRADE TAX, AND NO DEDUCTION WAS CLAIMED AS REVENUE EXPENDITURE IN AY 2005 -5006 AS DEMAND WAS IN DISPUTE . AN APPEAL BEFORE SALE TAX COMMISSIONER WAS FILED AF TER DEPOSIT OF RS 262590/ . - THE APPELLATE ORDER WAS PASSED ON 20/03/2008 BY G IVING RELIEF OF RS 147171/-. AFTER APPELLATE ORDER DATED 20/03/2008, THE DEMAND WAS CRYSTALIZED IN AY 2008- 2009 AND DEPOSIT OF RS 262590/- WHICH WAS DEPOSITED IN AY 2006-2007 TOWARDS DISPUTED DEMAND FOR AY 2008-2009. 9. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ER OF THE LD. CIT(A). HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS MADE REAS ONED ORDER AFTER THOROUGH EXAMINATION OF DOCUMENTS SUBMITTED BY THE ASSESSEE. 10. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE OBSERVE THAT THE ASSESSEE W AS UNABLE TO PRODUCE ANY EVIDENCE OR EXPLANATION SO AS TO ASCERTAIN THE EXAC T NATURE OF PAYMENT AMOUNTING TO RS.2,62,590/-. A PERUSAL OF THE IMPUGNED ORDER, SHOWS THAT THE LD. CIT(A) HAS RIGHTLY ACCEPTED THOSE AMOUNTS NOT IN THE NATURE OF PENALTY, WHICH WERE SUPPORTED BY THE ASSESSEE BY RESPECTIVE CHALLANS. THE LD. CIT ( 10 ITA NO. 3490, 3312.DEL.2012 A) HAS ALSO TAKEN INTO ACCOUNT THE AMOUNT OF RELIEF GIVEN BY THE JOINT COMMISSIONER (APPEALS), SALES TAX NOIDA VIDE ORDER DATED 20.03.2008 (COPY PLACED ON RECORD). HOWEVER, SINCE THE ASSESSEE COUL D NOT BE ABLE TO PRODUCE ANY EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY AS WE LL AS BEFORE US TO ASCERTAIN THE TRUE NATURE OF PAYMENT WORTH RS.2,62,590/-, THEREFO RE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION REACHED BY THE LD.CIT(A ) ON THIS COUNT. THEREFORE, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE BY SUSTAINING THE ORDER OF LD. CIT(A). 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 12. THE BRIEF FACTS RELEVANT TO APPEAL OF THE REVEN UE ARE THAT DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER OBSE RVED THAT THE ASSESSEE HAS SHOWN TOTAL PURCHASE OF RS.7,70,30,126/-, OUT OF WH ICH THE PURCHASE TO THE TUNE OF RS.3,09,90,323/- SHOWN TO HAVE BEEN MADE FROM THE F OLLOWING PARTIES WERE DOUBTED BY THE AO, THE DETAILS OF WHICH ARE AS UNDE R : S.NO. NAME & ADDRESS OF THE PARTY TOTAL PURCHASES CASH PAYMENTS SHOWN CHEQUE PAYMENTS SHOWN BALANCE OUTSTANDING 1. M/S MAHA LAXMI TRADERS, OPP MANOJ DHARAM KANTA, MAJOR ASHA RAM TYAGI MARG. NR. DPS SCHOOL, GHAZIABAD, UP 20,90,144 7,21,500 -- RS. 13,68,644 2. M/S SHRI RAM TRADERS, VILLAGE ACHHEJA, G.T.ROAD, GAUTAM BUDH NAGAR, UP 62,86,181 6,82,500 5,09,817 RS. 50,93,864 3. M/S. SHREE SAI SALES CORPORATION. SHOP NO. 171, QURESHI MARKET KALLUPURA, GHAZIABAD (UP) 12,71,550 -- 3,67,802 RS. 9,03,748 4. M/S SHREE GANESH 49,01,605 -- 48,16,629 RS. 34,1 5,309 11 ITA NO. 3490, 3312.DEL.2012 ENTERPRISES, LGF-73, DURGA TOWER, TDS RAJ NAGAR, GHAZIABAD (INCLUDING OP BAL. OF 33,30,333/-) 5. M/S R.K. TRADERS 52,67,008 -- 35,86,250 RS. 62,1 9,453 (INCLUDING OP BAL 45,38,695) 6. M/SHEMANT TRADERS & SUPPLIERS 13/78, TRANSPORT NAGAR, NEAR WATER TANK, MEERUT 50,55,171 23,74,816 -- RS. 26,80,355 7. M/S M.S. TRADERS & SUPPLIERS, SAMAR COLONY, LISADI ROAD MEERUT (UP) 22,16,158 24,98,858 (INCLUDING OPENING BAL. OF 2,82,700) -- NIL 8. M/S KUMAR TRADING CO., NEAR MILL, SAKOTI, MEERUT (UP) 22,26,540 22,26,540 -- NIL 9. M/S V.K. SALES CORPORATION, BURARA ROAD, KHATAULI, DISTT. MUZAFFAR NAGAR (UP) 16,75,966 16,75,966 -- NIL TOTAL 3,09,90,323 13. THE AO OBSERVED THAT THE ABOVE PARTIES WERE REP ORTED BY THE INSPECTOR NOT IN EXISTENCE ON THE GIVEN ADDRESS; THAT THE NOTICES U/S. 133(6) ISSUED TO THEM STOOD RETURNED BACK UNSERVED; AND THAT THE ASSESSEE FAILE D TO PRODUCE ANY OF THE ABOVE PARTIES. THE AO ALSO OBSERVED THAT FROM MOST OF THE PARTIES, THE PURCHASES WERE SHOWN TO HAVE BEEN MADE IN CASH. IT WAS FURTHER OBS ERVED THAT OUT OF TOTAL PURCHASES OF RS.3,09,90,323/-, THE PURCHASES OF RS. 1,77,26,344/- WERE SHOWN TO HAVE BEEN MADE THROUGH CHEQUES. OUT OF THESE PURCHA SES, THE ASSESSEE HAD MADE PURCHASE WORTH RS.52,67,008/- FROM M/S. R.K. TRADER S, AND FATHER OF R.K. TRADERS PROPRIETOR CATEGORICALLY DENIED IN HIS STATEMENT TO HAVE MADE ANY SALE TO THE ASSESSEE. THEREFORE, THE LD. ASSESSING OFFICER MADE ADDITION OF RS.52,67,008/- IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED PURCHASES. 12 ITA NO. 3490, 3312.DEL.2012 14. REGARDING THE NEXT ADDITION OF RS.1,32,63,979/- , THE BRIEF FACTS ARE THAT THE ASSESSEE HAD SHOWN PURCHASES TO THE ABOVE EXTENT AG AINST CASH PAYMENT FROM M/S. MAHALAXMI TRADER, M/S. HEMANT TRADERS AND SUPPLIERS , M/S. M.S. TRADERS AND SUPPLIER, M/S. KUMAR TRADING AND CO. AND M/S. V.K. SALES CORPORATION ALL SITUATED AT MEERUT AND MUZAFFARNAGAR. THE ASSESSING OFFICER HAS CONSIDERED THE MODUS OPERANDI ADOPTED BY THE ASSESSEE IN THE ACCOU NT OF ABOVE PARTIES IN HIS BOOKS AND HAS ALSO GIVEN SAMPLE ACCOUNTS OF TWO PAR TIES, I.E., MAHALAXMI TRADERS AND M/S. HEMANT TRADERS AND SUPPLIERS IN THE ASSESS MENT ORDER. ON PERUSAL OF THE SAID ACCOUNTS, THE AO NOTICED THAT IN THE CASE OF M AHALAXMI TRADERS, FIRST 10 BILLS WERE RAISED BY THIS CREDITOR TILL JAN. 2008 AND THE REAFTER ONLY FIVE MORE BILLS WERE RAISED IN MARCH, 2008 AND THEREAFTER, THE ASSESSEE HAS CLAIMED TO HAVE MADE PAYMENT IN CASH DURING FEBRUARY AND MARCH, 2008 OF IDENTICAL SUM OF RS.19500/-. SIMILARLY, ON PERUSAL OF ACCOUNT OF HEMANT TRADER, THE AO NOTICED THAT THE CREDITOR HAS RAISED 30 BILLS TO THE ASSESSEE AND THE ASSESSE E HAS CLAIMED TO HAVE MADE PAYMENTS IN CASH OF RS.19,500/- OR LOWER AMOUNTS. S OMETIMES, 15 TO 25 PAYMENTS OF CASH WERE SHOWN TO HAVE BEEN MADE ON A SINGLE DA Y. ON PERUSAL OF THESE ACCOUNTS, THE AO OPINED THAT IT IS NOT FEASIBLE FOR THE DEALERS OF MEERUT OR MUZAFFARNAGAR THAT THEY WOULD COME TO THE ASSESSEE TO RECEIVE CASH OF RS.19,500/- DAILY OR AT NUMEROUS TIMES IN A DAY; THAT THE ASSES SEE FAILED TO PRODUCE ANY BILLS AND VOUCHERS IN SUPPORT OF THESE PURCHASES AND THAT SIMILAR DISALLOWANCE OF BOGUS PURCHASES WAS MADE IN PRECEDING ASSESSMENT YEAR, WH ICH STOOD CONFIRMED BY THE LD. CIT(A). HOWEVER, THE APPEAL AGAINST THE ORDER O F CIT( A) IS STATED TO BE PENDING IN THE TRIBUNAL. IN VIEW OF ALL THESE FACTS, THE AO MADE ADDITION OF RS.1,32,63,979/- AS BOGUS PURCHASES. 15. HOWEVER, THE ASSESSING OFFICER IN VIEW OF THE A FORESAID FINDINGS GIVEN WITH RESPECT TO BOGUS PURCHASES, FURTHER DOUBTED THE STO CK VALUATION SHOWN BY THE 13 ITA NO. 3490, 3312.DEL.2012 ASSESSEE, ALLEGEDLY ON THE BASIS OF PHYSICAL VERIFI CATION. SINCE THE ASSESSEE DID NOT PRODUCE COMPLETE BOOKS OF ACCOUNT AND BILLS & VOUCH ERS SHOWN TO HAVE BEEN LOST BY HIM FOR NO GOOD REASON, THE LD. ASSESSING OFFICE R FURTHER MADE A LUMP SUM TRADING ADDITION OF RS. 2 LACS AFTER REJECTION OF B OOKS OF ACCOUNT. 16. THE ASSESSEE CHALLENGED THE ABOVE ADDITIONS IN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE FACTS OF THE CASE, CONTEN TIONS OF THE ASSESSEE, REMAND REPORT ETC. DELETED THE ABOVE ADDITIONS VIDE IMPUGN ED ORDER. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 17. IN RESPECT OF DISALLOWANCE OF RS.52,67,008/-, T HE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD . AR REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND RELIED ON THE IMPUGNED O RDER. 18. AFTER HEARING BOTH THE SIDES AND PERUSING THE M ATERIAL ON RECORD, WE FIND THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.52,67,008/- MADE BY THE ASSESSING OFFICER. THE FINDINGS RECORDED BY THE CIT (A) ARE AS UNDER : (6.2) I HAVE CAREFULLY EXAMINED THE ABOVE EVIDENCES . THE APPELLANT'S PAPER BOOK COMPRISING 476 PAGES ALONG WITH WRITTEN SUBMISSIONS WERE FORWARDED TO THE ASSESSING OFFICER VIDE THIS OFFICE LETTER DATED 7.0 7.2011 FOR PARA-WISE COMMENTS. ON THE ISSUE OF DISALLOWANCE OF RS. 52,67,008/-, TH E ASSESSING OFFICER SUBMITTED THAT M/S. R. K. TRADERS HAD REPLIED TO NOTICE UNDER SECTION 133(6) BY A LETTER SENT THROUGH SPEED POST IN WHICH THE TRANSACTIONS WERE D ENIED. MOREOVER, THE APPELLANT FAILED TO PRODUCE THE PARTY FOR VERIFICAT ION. THE ASSESSMENT RECORDS OF THE APPELLANT WERE CALLED FOR AND VERIFIED, AND A C OPY OF THE LETTER RECEIVED FROM M/S. R. K. TRADERS WAS PROVIDED TO THE COUNSEL OF T HE APPELLANT FOR REJOINDER. IT IS SUBMITTED ON BEHALF OF THE APPELLANT THAT THE STATE MENT BEING RELIED UPON HAS BEEN GIVEN BY THE FATHER OF THE PROPRIETOR OF M/S. R. K. TRADERS, WHICH CANNOT BE REGARDED AS EVIDENCE AGAINST THE APPELLANT. IT IS C ONTENDED THAT THE STATEMENT OF A THIRD PARTY RECORDED AT THE BACK OF THE APPELLANT CANNOT BE USED AGAINST THE APPELLANT. I FIND FROM THE REPLY RECEIVED FROM M/S. R. K.TRADERS, THAT THE SAME HAS BEEN SIGNED BY SHRI SUBHASH KUMAR, THE FATHER A THE PROPRIETOR, WHEREIN HE 14 ITA NO. 3490, 3312.DEL.2012 HAS SUBMITTED THAT THERE HAS BEEN NO DEALING WITH T HE APPELLANT. THE SAID LETTER WAS RECEIVED BY POST SOME TIME IN NOVEMBER, 2010, B UT WAS NEVER PROVIDED TO THE APPELLANT FOR EXAMINATION AND REBUTTAL. THE APPE LLANT HAS FURNISHED A SWORN AFFIDAVIT OF SHRI RAVI KUMAR, PROPRIETOR OF M/S. R. K. TRADERS DATED 02.12.2010, COPY OF ACCOUNT WHICH SHOWS TOTAL PAYMENTS OF RS. 3 5,86,250/- BY CHEQUE, AND PROOF OF IDENTITY OF THE PROPRIETOR IN THE FORM OF PAN CARD AND REGISTRATION NUMBER UNDER UPTT. THE APPELLANT HAS ALSO CORRELATED EACH ITEM OF PURCHASE WITH SUBSEQUENT SALE AND GROSS PROFIT OF 4.85% IS S EEN TO BE EARNED ON THESE TRANSACTIONS. THE ASSESSING OFFICER HAS NOT AVAILED THE OPPORTUNITY GRANTED THROUGN REMAND PROCEEDINGS TO ENFORCE THE ATTENDANC E OF SHRI RAVI KUMAR, OR TO PRODUCE SHRI SUBHASH KUMAR FOR CROSS EXAMINATION. N O COMMENTS ARE OFFERED ON THE SALES MADE OUT OF THE PURCHASES WHICH ARE ALLEG ED TO BE BOGUS, OR ON THE EVIDENCE REGARDING THE PAYMENTS MADE THROUGH BANK A CCOUNT. AFTER CAREFUL CONSIDERATION, IT IS HELD THAT THE ASSESSING OFFICE R HAS NOT DISCHARGED THE BURDEN OF PROVING THAT THE PURCHASES ARE NON-GENUINE AND H AS FAILED TO COUNTER THE VARIOUS EVIDENCES FURNISHED BY THE APPELLANT IN THI S REGARD. THE STATEMENT RECEIVED THROUGH POST FROM THE FATHER OF THE PROPRI ETOR OF M/S. R.K. TRADERS CANNOT BE HELD TO CONSTITUTE SUFFICIENT EVIDENCE FO R DISBELIEVING THE PURCHASES, PARTICULARLY WHEN THE STATEMENT WAS NOT CONFRONTED TO THE APPELLANT, AND NO OPPORTUNITY OF REBUTTAL OR CROSS EXAMINATION ALLOWE D. HENCE, THE ADDITION MADE OF RS. 52,67,008/- IS DELETED. 19. FROM THE ABOVE FINDINGS, IT IS CLEAR THAT THE A SSESSEE HAD MADE PAYMENT BY CHEQUE TO M/S. R,K, TRADERS OF RS.35,86,250/- DURIN G THE YEAR, WHICH HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. THE ASSESSEE HAS SUBMITTED DETAILS BEFORE THE LD. CIT(A) WHO HAS DULY EXAMINED THE FACTS OF THE CASE THAT THE REPLY SUBMITTED IN RESPONSE TO NOTICE U/S. 133(6) RELATES TO FATHER OF PROPRIETOR OF R.K. TRADERS, WHICH HAS NOT BEEN CONFRONTED TO THE ASSESSEE. THE ASSESS EE SHOULD BE GIVEN AN OPPORTUNITY TO REBUT THE EVIDENCE COLLECTED BEHIND THE BACK OF THE ASSESSEE. THEREFORE, IN VIEW OF THE DECISION RENDERED BY HON BLE SUPREME COURT IN THE CASE OF KISHAN CHAND CHELLARAM VS. CIT, 125 ITR 713 (SC) , THE LD. CIT(A) WAS JUSTIFIED IN DISCARDING THE FINDINGS REACHED BY THE ASSESSING OFFICER. IN VIEW OF THIS, THE GROUND RAISED BY THE REVENUE ON THIS ISSU E IS DISMISSED. 15 ITA NO. 3490, 3312.DEL.2012 20. FURTHER, IN RESPECT OF DELETION OF RS.1,32,63,9 79/-, THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT T HE LD. CIT(A) HAS DECIDED THIS ISSUE WITHOUT CONSIDERING THE FINDINGS RECORDED BY THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT THE AO HAD CATEGORICALLY STA TED IN THE ASSESSMENT ORDER THAT THE NOTICE ISSUED TO THE CREDITORS STOOD RECEIVED B ACK UN-SERVED, WHEREAS THE LD. CIT(A) HAS RECORDED A FINDING THAT THE COPIES OF NO TICES SERVED UPON THE PARTIES WERE FILED BY THE ASSESSEE BEFORE HIM. THE LD. CIT( A) IN VIEW OF THESE CONTRADICTORY FACTS HAS NOT VERIFIED THE TRUE STATE OF AFFAIRS, WHETHER THE NOTICES U/S. 133(6) WERE SERVED UPON THE PARTIES OR WERE RETURNE D BACK UNSERVED. SIMILARLY, THE LD. FINDING OF THE LD. CIT(A) THAT NO CASH PAYMENT EXCEEDING RS.20,000/- WAS MADE BY THE ASSESSEE IN A SINGLE DAY WHEN HE VERIFI ED THE LEDGER ACCOUNT. TO THE CONTRARY, THE ASSESSING OFFICER HAS REPRODUCED THE ACCOUNT OF MAHA LAKSHMI TRADERS AND M/S. HEMANT TRADES & SUPPLIERS IN THE A SSESSMENT ORDER, WHICH CLEARLY REVEAL THE CASH PAYMENTS AT 15 TO 25 OCCASI ONS IN A SINGLE DAY, THOUGH EACH PAYMENT BELOW RS.20,000/-. THE LD. CIT(A) HAS FAILE D TO CONSIDER THE MODUS OPERANDI ADOPTED BY THE ASSESSEE. MOREOVER, THE ASS ESSEE DID NOT FILE BILLS/VOUCHERS, WHICH HE STATED TO HAVE BEEN LOST. THE LD. DR, ACCORDINGLY, URGED TO SUSTAIN THE ASSESSMENT ORDER. 21. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE R EITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND RELIED ON THE IMPUGN ED ORDER. 22. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE ENTIRE MATERIAL ON RECORD, WE FIND SUBSTANCE IN THE CONTEN TIONS OF THE ASSESSEE. IT IS NOTABLE THAT THERE IS SHARP CONTRADICTION IN THE FI NDINGS OF THE LD. CIT(A) AND THAT OF THE ASSESSING OFFICER ON THE SERVICE OF NOTICES ISSUED U/S. 133(6) BY ASSESSING OFFICER. ONCE, THE ASSESSING OFFICER OBSERVED THAT THE NOTICES SO ISSUED WERE RECEIVED UN-SERVED, HOW THE ASSESSEE SUBMITTED THE COPIES OF SUCH NOTICES BEFORE 16 ITA NO. 3490, 3312.DEL.2012 THE LD. CIT(A) STATING THEM TO BE SERVED UPON THE A SSESSEE. THE LD. CIT(A) HAS ALSO NOT VERIFIED THIS CONTRADICTION. WE FURTHER FIND FA CTUAL CONTRADICTION IN THE FINDING OF BOTH THE AUTHORITIES BELOW ON CASH PAYMENTS MADE BY ASSESSEE TO VARIOUS TRADE CREDITORS. THE LD. CIT(A) HAS OBSERVED THAT NO CASH PAYMENT EXCEEDING RS.20,000/- WAS MADE BY THE ASSESSEE IN A SINGLE DA Y, WHEREAS FROM THE ACCOUNTS OF TWO CREDITORS REPRODUCED IN THE ASSESSMENT ORDER CLEARLY REVEAL CONTRARY FACTS THAT THE ASSESSEE HAS MADE CASH PAYMENTS OF THE AMO UNTS RANGING FROM 15000/- TO RS.18,000/- WERE MADE ON 31.08.2007 TO THE CREDITOR M/S. HEMANT TRADERS AND SUPPLIERS AT FIVE OCCASIONS, THIRTEEN TIMES ON 10.0 9.2007 RANGING FROM 15000/- TO RS.19,000/-, EIGHT TIMES ON 25.09.2007, MORE THAN T WENTY FIVE TIMES ON 05.10.2007 AND SO ALSO ON OTHER VARIOUS DATES. THEREFORE, THE CASH PAYMENTS ON A SINGLE DAY MADE BY THE ASSESSEE NEED PROPER VERIFICATION AND E XAMINATION AT THE STAGE OF ASSESSING OFFICER BEFORE TAKING ANY ADVERSE VIEW AG AINST THE ASSESSEE ON THE GENUINENESS OF THE PURCHASES AND THE FINDING OF LD. CIT(A) MAY ALSO NEEDS TO BE CONSIDERED AS PER LAW, IF THE PAYMENTS MADE ARE FOU ND IN CONTRAVENTION OF SECTION 40A(3). IN VIEW OF THE ABOVE CONTRADICTORY FACTS, RECORDED BY BOTH THE AUTHORITIES BELOW, WE FIND NO REASON TO JUSTIFY THE OTHER FINDI NGS OF THE LD. CIT(A) WHILE DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . WE, THEREFORE, DEEM IT APPROPRIATE TO REMIT THE CASE BACK TO THE FILE OF A SSESSING OFFICER FOR PASSING THE ASSESSMENT AFRESH AFTER PROPERLY EXAMINING THE COMP LETE FACTS AND THE SUBMISSIONS OF THE ASSESSEE MADE BEFORE THE LD. CIT(A) ON THIS ISSUE. NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF B EING HEARD. ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 23. REGARDING THE LAST ADDITION OF RS.2,00,000/-, W E FIND THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS CATEGORICALLY H ELD THAT THE RESULTS DECLARED BY THE ASSESSEE CANNOT BE RELIED UPON AS THEY ARE NOT CAPABLE OF DEDUCING COMPLETE 17 ITA NO. 3490, 3312.DEL.2012 AND CORRECT INCOME OF ASSESSEE. TO THE CONTRARY, TH E LD. CIT(A) HAS RECORDED A FINDING THAT THE ASSESSING OFFICER HAS NOT RECORDED CLEAR FINDING THAT CORRECT PROFITS CANNOT BE DEDUCED FROM THE BOOKS OF ACCOUNTS MAINTA INED BY THE ASSESSEE. THIS FINDING OF THE LD. CIT(A) IS IN SHARP CONTRADICTION TO THE FINDING CATEGORICALLY RECORDED BY THE ASSESSING OFFICER, AS NOTED ABOVE. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO HOW HE WORKED OUT THE DECLARED PROFIT S WHEN HE FAILED TO PRODUCE THE BILLS AND VOUCHERS FOR EXPENSES. HOWEVER, SINCE, TH E MATTER PERTAINING TO ADDITION OF RS.1,32,63,979/- HAS BEEN RESTORED TO THE FILE O F ASSESSING OFFICER, THE FRESH DECISION ON WHICH MAY CHANGE THE TRADING RESULTS OF THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS ALSO RESTORED TO THE FILE OF ASSESSING OFF ICER FOR DECIDING THE SAME AFRESH AFTER MAKING PROPER EXAMINATION OF RECORDS AND GIVI NG REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, AS THE ADHOC ESTIMATIO N OF PROFIT MADE BY THE ASSESSING OFFICER CAN ALSO NOT BE RELIED UPON. ACCO RDINGLY, THIS GROUND OF REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 24. IN THE RESULT, BOTH THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2018. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 23.03.2018 BINITA COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI 18 ITA NO. 3490, 3312.DEL.2012 S.NO. DETAILS DATE 1 DRAFT DICTATED ON 26.02.2018 2 DRAFT PLACED BEFORE AUTHOR 26.02.2018 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT ON 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R. 10 DATE OF DISPATCH OF ORDER 19 ITA NO. 3490, 3312.DEL.2012