MR. DINESH C. MEHTA, MUMBAI V. THE ITO WD. 21(3)(1), MUMBAI

ITA 372/MUM/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55427 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-04-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 16-01-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARSHASARTHI NAIR
• Keywords: Bogus purchase; Rejection of books of accounts; Period of limitation; Additional evidence; Onus to prove; Time period of passing order
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI PRAMOD KUMAR (A.M.) AND SHRI. VIJAY PAL RAO (J.M.) ITA NO.371/MUM/2006 ASSESSMENT YEAR : 1999-2000 ITA NO.372/MUM/2006 ASSESSMENT YEAR : 2000-2001 DINESH C. MEHTA JEEVAN ANAND, FLAT NO.604, 6 TH FLR., M.G. ROAD NO.4, BEHIND PATEL NAGAR, KANDIVALI (W), MUMBAI 400 067. PAN : ACJPM8726G VS. I.T.O. WD. 21(3)(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAMOD KUMAR PARIDA. RESPONDENT BY : SHRI PARSHASARTHI NAIR. O R D E R PER VIJAY PAL RAO, J.M. THESE APPEALS BY THE ASSEESSEE AGAINST THE COMPOSIT E ORDER OF CIT(A) DATED 22.11.2005 FOR THE ASSESSMENT YEAR 1999-2000 AND 2000-2001. ITA NO.371/MUM/2006 ASSESSMENT YEAR : 1999-2000 2. FOR THE A.Y. 1999-2000 THE ASSESSEE HAS RAISED F OLLOWING GROUNDS: 1. ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASE RS.88,000/- : THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION WITHOUT APPRECIATING THAT AGAINST THE ALLEGED BOGUS PURCHAS ES, BEING THE DIFFERENCE IN ACCOUNTS OF THE APPELLANT AND THE SELLER, THE SALES AND SUBSEQUENT PAYMENTS AGAINST THE PURCHASE HAVE NOT BEEN DOUBTED. AS THE REQUEST TO CROSS EXAMINE M/S. RIL WAS BRUSHED ASIDE AND PURCHASES ARE MADE AFTER GETTING THE SALS CONFIRMED, THE ADDITION OF RS.88,15,000/- BEING THE ALLEGED INFLATION OF PURCHASES IS NOT JUSTIFIED AND THE SAM E MAY BE DELETED. 2. ADDITION ON ACCOUNT OF ALLEGED UNDISCLOSED SALES RS.1,38,60,506/- ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 2 I) THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION BY TREATING THE DIFFERENCE IN BANK BALANCES AS PER APP ELLANTS BOOK AND BANK STATEMENT AS SUPPRESSED SALES IN SPIT E OF THE FACT THAT THE APPELLANT HAD FURNISHED THE RECONCILI ATION STATEMENTS AND EXPLAINED THE ENTRIES; WHEN ALL EVID ENCES PRODUCED, THE ALLEGED ADDITION IS UNFOUNDED AND THE SAME MAY BE DELETED. II) WITHOUT PREJUDICE TO ABOVE, THE DIFFERENCE BETWEEN CLOSING BANK BALANCES CANNOT BE TREATED AS UNDISCLOSED SALE S IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE. 3. ADDITION U/S.43B RS.1,00,017/- THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION TOWARDS SALES TAX LIABILITY WITHOUT APPRECIATING THAT ALL THE PAY MENT SHAD BEEN MADE BEFORE THE DUE DATE OF FILING OF RETURN U /S.139(1). AS THE CHALLONS FOR PAYMENT OF SALES TAX WERE PROVI DED, ADDITION OUGHT TO HAVE BEEN DELETED. 4. DISALLOWANCE OF SELLING & DISTRIBUTION EXPENSES RS.5,00,000/- THE LD CIT(A)ERRED IN GIVING PARTIAL RELIEF IN A SU MMARY MANNER WITHOUT APPRECIATING THE FACT THAT THE AMOUNT REPRE SENTS THE SHORT COLLECTION OUT OF CASH SALES. SINCE BOOKS WE RE PRODUCED, THE SUMMARY DISALLOWANCE IS UNCALLED FOR THE SAME M AY BE DELETED. 5. DISALLOWANCE OF SALES COMMISSION RS.50,000/- THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE IN AN AD-HOC MANNER. AS THE PARTIES IDENTIFIED PAYMENTS ARE MADE BY CHEQUES AND SERVICES RENDERED ARE GENUINE, THE PARTIAL GRANT OF RELIEF IS NOT JUSTIFIED; THEREFORE , THE DISALLOWANCE MAY BE DELETED. 6. AD-HOC DISALLOWANCE OF CONVEYANCE AND TRAVELLING RS.5,000/- THE LD CIT(A) ERRED IN CONFIRMING THE AD-HOC DISALL OWANCE WITHOUT APPRECIATING THAT THE SAME WAS EXCLUSIVELY MADE FOR THE PURPOSE OF APPELLANTS BUSINESS. 7. DISALLOWANCE OF MEMBERSHIP AND SUBSCRIPTION RS.50,000/- THE LD CIT(A) ERRED IN ENHANCING THE DISALLOWANCE C E FROM 25,000 TO 50,000 WITHOUT ISSUING ENHANCEMENT NOTICE AND WITHOUT APPRECIATING THAT THE PAYMENTS HAVE BEEN MA DE OUT OF BUSINESS EXIGENCY. THEREFORE, THE DISALLOWANCE IS UNCALLED FOR AN THE SAME MAY BE DELETED. 8. AD-HOC DISALLOWANCE OF TELEPHONE EXPENSES RS.9,502/- THE LD CIT(A) ERRED IN CONFIRMING THE AD-HOC DISALL OWANCE WITHOUT APPRECIATING THAT THE NATURE OF EXPENSES WE RE PURELY BUSINESS RELATED; HENCE THE SAME MAY BE DELETED. ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 3 3. GROUND NO.1 IS REGARDING ADDITION ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN KEROSENE OIL IN THE NAME AND STYLE OF M/S. SHWETA ENTERPRICES, A PROPRI ETARY CONCERN. THE ASSESSEE PURCHASED SUPERIOR KEROSENE OIL (SKO) FROM VARIOUS PARTIES INCLUDING RELIANCE INDS. LTD. THE AO OBSERVED CER TAIN DISCREPANCY IN THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. R.I.L. AND LEDGER A/C. OF ASSESSEE. THE AO NOTED THAT THERE WAS A DIFFERENCE OF ` 88,15,500/- IN THE ACCOUNTS MAINTAINED BY THE R.I.L. AND LEDGER A/C. O F THE ASSESSEE. ACCORDINGLY THE DIFFERENCE AMOUNT OF ` 88,15,500/- ADDED TO THE TOTAL INCOME OF THE ASSESSEE BEING BOGUS PURCHASE. ON AP PEAL, THE ASSESSEE MAINLY CONTENDED BEFORE THE LD CIT(A) THAT IN THE S UBSEQUENT YEAR ASSESSEE MADE THE PAYMENTS OF ` 88,15,500/- TO THE R.I.L. AND THEREFORE, THERE WAS NO DISCREPANCY WITH RESPECT TO THE PURCHASE OF SUPERIO R KEROSENE OIL FROM R.I.L. THE CIT(A) ISSUED THE REMAND ORDER AND AFTE R RECEIVING THE REMAND REPORT CONFIRMED THE ADDITION ON THIS ACCOUNT. 4. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE BEING A TRADER EARNS COMMISSION WHICH RANGES FROM 2 TO 7 PAISA PER LTR. OF KEROSENE. IN THE NORMAL COURSE OF BUSINESS THE ASS ESSEE USED TO PROCURE ORDERS FROM THE RETAILERS AND THEN PLACED ORDER TO THE SUPPLIER WHO DELIVERS THE SUPERIOR KEROSENE OIL TO CUSTOMERS ON CASH BASI S. HE HAS FURTHER SUBMITTED THAT IN THIS TRANSACTION WHILE THE ASSESS EE WAS PLACING THE ORDERS FOR SUPPLY OF KEROSENE ONLY AS PER THE ORDER PROCUR ED FROM THE RETAILERS AND AS SUCH NO CLOSING STOCK REMAINS WITH THE ASSESSEE. HE HAS POINTED OUT THAT IN THE ASSESSEES BOOK BALANCE STAND AT ` 1,79,19,000/- WHERE AS THE AO FOUND THE BALANCE IN THE NAME OF THE ASSESSEE IN THE BOOK OF RIL AT ` 91,03,500/-. THUS THE AO FOUND A DIFFERENCE OF ` 88,15,500/- IN THE BALANCE STAND IN THE ASSESSEES BOOK AND RILS BOOK . THE LD AR FURTHER CONTENDED THAT THE ASSESSEE PAID THE ENTIRE OUTSTAN DING PAYMENT TO THE RIL IN THE MONTH OF APRIL, 1999 AND JUNE, 1999 WHICH FA LLS IN THE SUBSEQUENT YEAR. THE AO DID NOT SUMMON THE CONCERNED PERSON FROM THE R.I.L. TO VERIFY THE CORRECTNESS OF THE AMOUNT RECORDED IN TH E THEIR BOOKS SINCE THE ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 4 ASSESSEE CLOSED ITS BUSINESS IN THE VERY NEXT YEAR I.E. 2000-2001 AND DUE TO LAPSE OF CONSIDERABLE TIME IT WAS PRACTICALLY NOT P OSSIBLE FOR THE ASSESSEE TO PRODUCE ALL THE RELEVANT BILLS PERTAINING TO THE PU RCHASE OF SUPERIOR KEROSENE OIL FROM THE R.I.L. HOWEVER, ALL THESE TRANSACTIO NS ARE DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE. THE LD AR HAS FURTHE R CONTENDED THAT THE ASSESSEE MADE THE PAYMENT OF ENTIRE AMOUNT DUE AGAI NST THE PURCHASE FROM THE R.I.L. UNDER THESE CIRCUMSTANCES IT IS TO BE V ERIFIED FROM THE RIL AS FOR WHICH PURPOSE AND AGAINST WHICH TRANSACTION THE ASS ESSEE MADE THE SAID PAYMENT. ALTERNATIVELY THE LD AR HAS SUBMITTED THA T SINCE THE ASSESSEE CLOSED HIS BUSINESS LONG BACK AND THEREFORE TO END THE LITIGATION AND TO BUY PEACE WITH THE DEPARTMENT, THE ASSESSEE IS READY TO OFFER NET PROFIT RATIO FOR TAXATION AS IT IS NOT PRACTICALLY POSSIBLE TO PRODU CE THE EVIDENCE EXCEPT IN SUPPORT OF THE PAYMENT MADE BY THE ASSESSEE. THE L D AR HAS PROPOSED TO OFFER THE G.P. RATIO AT 0.34% AND N.P. RATIO OF 0.0 2 % ON THE AMOUNT OF ` 88,15,500/-. THIS ALTERNATIVE PROPOSAL OF THE ASSESSEE WAS NOT A CCEPTABLE TO THE BENCH BECAUSE THE ADDITION WAS MADE ON ACCOU NT OF BOGUS PURCHASE AND NOT ON ACCOUNT OF BOGUS OR OUT OF RECORD SALE T HEREFORE, THE QUESTION OF G.P. OR N.P. WOULD NOT ARISE. THE LD AR OF THE ASS ESSEE THEN SUBMITTED THAT WHEN THERE IS NO CASH PURCHASE INVOLVED AND SALES W ERE NEVER DOUBTED BY THE DEPARTMENT THEN THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASE IS NOT WARRANTED. HE HAS RELIED UPON FOLLO WING DECISIONS: 49 ITD 177 (MUM) BALAJI TEXTILES INDUS. P. LTD. VS . I.T.O. 254 ITR 259 (SC) SWASTIK OIL TRADERS 252 ITR 476 (GUJ) DCIT VS. ADINATH INDS. 247 ITR (SC) 35 ADINATHS SLP REJECTED 5. ON THE OTHER HAND THE LEARNED DR HAS SUBMITTED T HAT THE ADDITION WAS MADE DUE TO DISCREPANCY FOUND BY THE ASSESSING OFFICER IN THE BOOKS OF THE ASSESSEE AND M/S. R.I.L. EVEN DURING THE REMAND PROCEEDING THE ASSESSEE FAILED TO RECONCILE THE DIFFERENCE IN THE AMOUNT STAND IN THE BOOKS OF R.I.L. AND ASSESSEE. HE HAS FURTHER SUBMITTED TH AT THE ASSESSEE FAILED TO PRODUCE THE PRIMARY EVIDENCE OF INVOICE FOR PURCHAS E OF SUPERIOR KEROSENE OIL FROM THE R.I.L. THUS WHEN THE ASSESSEE FAILED TO DISCHARGE HIS ONUS TO PRODUCE ATLEAST PRIMARY EVIDENCE, THE ADDITION MADE BY THE ASSESSING ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 5 OFFICER AND CONFIRMED BY THE LEARNED CIT(A) IS JUST IFIED. HE HAS RELIED UPON THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE THE ADDITION BECAUSE THERE WAS A DISCREPANCY IN THE PURCHASE AS PER THE ACCOUNTS OF R.I.L. AND THAT OF ASSESSEES BOOKS OF ACCOUNT. THE ASSESSING OFFICE R FOUND THAT FOUR TRANSACTIONS OF PURCHASES WERE NOT REFLECTED IN THE ACCOUNT OF M/S. R.I.L. THE TOTAL QUANTITY OF OIL IN THESE FOUR TRANSACTION S WAS 1306000 LITERS AMOUNTING TO ` 88,15,500/-. IT IS PERTINENT TO NOTE THAT THOUGH THE ASSESSEE COULD NOT PRODUCE THE VOUCHER IN RESPECT OF THE ABO VE PURCHASES, HOWEVER, THE ASSESSEE HAS BROUGHT ON RECORD THE PROOF OF THE PAYMENT OF ENTIRE OUTSTANDING OF PURCHASES FROM THE R.I.L. AS PER THE ASSESSEES BOOKS OF ACCOUNTS. THEREFORE, THE QUESTION ARISES THAT IF T HE ASSESSEE DID NOT PURCHASE THE SUPERIOR KEROSENE OIL FROM R.I.L. TO T HE EXTENT OF ` 88,15,500/- THEN WHY THE SAID PAYMENT WAS MADE BY THE ASSESSEE TO THE R.I.L. THIS ASPECT HAS NOT BEEN VERIFIED/EXAMINED BY THE LOWER AUTHORITIES. PRIMA FACIA, WHEN THE ASSESSEE WAS HAVING THE TRANSACTIONS OF PU RCHASE OF OIL, THEN ANY PAYMENT MADE BY THE ASSESSEE TO THE R.I.L. HAS TO B E PRESUMED AS AGAINST THE PURCHASE BUT SINCE THERE WAS A DISCREPANCY IN T HE PURCHASE AS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE PARTIES THEN IT BEC OMES NECESSARY TO FIND OUT THE REASONS OF THE DISCREPANCY AND THE PAYMENT MADE BY THE ASSESSEE IS AGAINST PURCHASE OR OTHER THAN THE PURCHASE TRANSAC TION. THIS TRIBUNAL DIRECTED THE REVENUE/ASSESSING OFFICER TO OBTAIN TH E COPY OF ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF THE R.I.L. IN RESPONSE TO THE SAID DIRECTION, THE LEARNED DR HAS FILED A COPY OF THE LETTER DATED 08. 08.2011 WRITTEN BY THE R.I.L. TO THE ASSESSING OFFICER WHEREBY IT WAS EXPL AINED THAT SINCE THE DETAILS CALLED FOR RELATING TO VERY OLD PERIOD AND CONCERNE D ACCOUNTS WERE MAINTAINED IN THE ACCOUNTING PACKAGE WHICH SINCE DI SCONTINUED THEREFORE, INABILITY WAS SHOWN TO PRODUCE REQUIRED INFORMATION . THE SAID LETTER IS REPRODUCED AS UNDER: ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 6 7. IN VIEW OF THE FACT THAT THE RELEVANT INFORMATIO N HAS NOT BEEN OBTAINED FROM THE R.I.L. TO SHOW THE PURPOSE FOR WHICH THE P AYMENT WAS MADE BY THE ASSESSEE AND ACCEPTED BY THE R.I.L., IT IS NOT CLEA R WHETHER THE PAYMENT WAS MADE FOR THE PURCHASE OF SUPERIOR KEROSENE OIL. THE REFORE, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER REQUIRES PROPER EXA MINATION OF THE RECORD AND FACTS TO REACH THE CONCLUSION/ FINDINGS. ACCOR DINGLY WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO REC ONSIDER AND ADJUDICATE THE SAME AFTER BRINGING OUT THE FACT AS FOR WHAT PURPOS E THE PAYMENT WAS MADE TO THE R.I.L. THE ASSESSING OFFICER IS DIRECTED TO SUMMON RELEVANT RECORD AND CONCERN PERSON FROM THE R.I.L. TO BRING OUT THE FACT AND THEN DECIDE THE ISSUE AS PER THE LAW. ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 7 8. GROUND NO.2 REGARDING ADDITION ON ACCOUNT OF ALL EGED UNDISCLOSED SALES. DURING THE ASSESSMENT THE ASSESSING OFFICE R NOTED THAT CLOSING BALANCE AS PER THE BANK STATEMENT COME TO ` 2.29 CRORES WHEREAS THE BANK BALANCE AS PER THE BALANCE SHEET WAS ONLY ` 66,29,494/-. ACCORDINGLY, THE ASSESSING OFFICER MADE AN ADDITION OF ` 1,62,70,506/- ON ACCOUNT OF DIFFERENCE OF SALES. ON APPEAL, THE LEARNED CIT(A ) ISSUED A REMAND ORDER AND IN THE REMAND REPORT THE ASSESSING OFFICER STAT ED THAT THE ASSESSEE FAILED TO RECONCILE THE DIFFERENCE. AFTER CONSIDE RING THE REMAND REPORT THE CIT(A) GRANTED RELIEF IN RESPECT OF THE AMOUNT ` 11,70,000/- AND ` 12,40,000/- HAVING CHEQUES ISSUED TO M/S. R.I.L. BU T NOT PRESENTED FOR PAYMENT. ACCORDINGLY, THE DIFFERENCE OF ` 1,62,70,506/- WAS REDUCED BY THE LEARNED CIT(A) TO ` 1,00,60,508/- AND CONFIRMED THE ADDITION TO THAT E XTENT. 9. BEFORE US THE LEARNED AR OF THE ASSESSEE HAS SUB MITTED THAT THE ASSESSEE FURNISHED ALL THE DETAILS AND EXPLANATION DURING THE ASSESSMENT PROCEEDINGS ALONG WITH ACCOUNT VIDE BANK RECONCILIA TION STATEMENT. HE HAS FURTHER SUBMITTED THAT ALL THESE DIFFERENCE WERE DU E TO CHEQUE ISSUED BUT NOT PRESENTED AND CHEQUE DEPOSITED BUT NOT CREDITED BY THE BANK IN THE VARIOUS ACCOUNTS OF THE ASSESSEES PROPRIETARY CONC ERN. THE LEARNED AR HAS SUBMITTED THAT THE ASSESSING OFFICER AFTER SCRUTINI SING RECONCILIATION STATEMENT HAS FOUND ALL THE ENTRIES AS CORRECT, EXC EPT AMOUNT OF ` 7,06,139/- WHICH HAS BEEN RECONCILE BY ASSESSEE. EVEN THIS AMOUNT WAS DISPUTED BY THE ASSESSING OFFICER INCLUDES DIFFEREN CE OF ` 9,000/- WHICH WAS RECEIVED AS LATE PAYMENT CHARGES AND EXPLAINED BY T HE ASSESSEE. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE L EARNED CIT(A) HAS FAILED TO CONSIDER AND APPRECIATE THE FACT THAT DURING THE REMAND PROCEEDING THE ASSESSEE HAS RECONCILE THE DIFFERENCE BY WAY OF PRO DUCING ALL THE ENTRIES IN THE BANK RECONCILIATION STATEMENT. 10. ON THE OTHER HAND THE LEARNED DR HAS RELIED UPO N THE ORDER OF LEARNED CIT(A) AND SUBMITTED THAT WHEN THE ASSESSEE FAILED TO RECONCILE THE ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 8 DIFFERENCE IN ACCOUNT BEFORE THE ASSESSING OFFICER, THE ADDITION CONFIRMED BY THE CIT(A) IS JUSTIFIED. 11. WE HAVE CONSIDERED THE RIVAL CONTENTION AND CAR EFULLY PERUSED THE MATERIAL ON RECORD. THE ADDITION WAS MADE BY THE A SSESSING OFFICER DUE TO DIFFERENCE IN THE CLOSING BALANCE AS PER THE BANK A CCOUNT AND CASH BOOK OF THE ASSESSEE. DURING THE REMAND PROCEEDINGS, THE ASSESSEE PRODUCED THE BANK RECONCILIATION STATEMENT AND OTHER DETAILS. T HE ASSESSING OFFICER AFTER EXAMINATION AND VERIFICATION OF THE DETAILS FILED B Y THE ASSESSEE HAS CONCLUDED IN THE REMAND REPORT AS UNDER: AS REGARDS AMOUNT OF `. 7,06,139=20 DEPOSITED BUT NOT CREDITED BY BANK AS SHOWN IN THE RECONCILIATION AS MENTIONED AB OVE (B-4), THE ASSESSEE HAS CLARIFIED THAT THE AMOUNT RECEIVED FRO M STAR ENTERPRISES DEPOSITED ON 27.03.1999 BUT NOT CREDITED BY BANK. T HE ASSESSEE WAS FURTHER ASKED TO EXPLAIN THE ENTRY SUBSEQUENTLY PAS SED/CREDITED BY THE BANK. THE ASSESSEE VIDE LETTER DATED 19 TH AUGUST, 2005 FILED ON 22.08.2005 STATED THAT THE MATCHING CREDITS ARE AS FOLLOWS (FLAG C). SR. NO. CHEQUE DATE CHEQUE AMOUNT 1 16.04.1999 `. 69,570/- 2 16.04.1999 `. 69,570/- 3 16.04.1999 `. 92,400/ - 4 16.04.1999 `. 2,84,400/- 5 16.04.1999 `. 1,99,200/- TOTAL `. 7,15,140/- WHATEVER STATED VIDE LETTER DATED 16 TH AUGUST, 2005 DIFFERS FROM THE EXPLANATION DATED 19 TH AUGUST, 2005 AND NOT EXPLANATORY. THE REASON IS ALSO NOT GIVEN WHY THESE AMOUNTS HAVE BEE N CREDITED 16.04.1999 ONWARDS THOUGH IT WAS SHOWN IN THE BOOKS OF ACCOUNT AS ONE SINGLY ENTRY OF `. 7,06,139=20 IN THE NAME OF STAR ENTERPRISES ON 27.03.1999. THE EXPLANATION OFFERED TO THIS EXTENT IS NOT SATI SFACTORY AND CONVINCING. THE ASSESSEE COULD NOT GIVE PROPER EXPL ANATION IN RESPECT OF AMOUNT OF `. 7,06,139=20 DEPOSITED BUT NOT CREDITED BY BANK. THEREFORE, THE EXPLANATION IS NOT ACCEPTABLE AND TH E AMOUNT REQUIRED TO BE ADDED BACK FOR UNDISCLOSED INCOME U/S.68 OF T HE I.T. ACT, 1961. HOWEVER, THE CASE MAY BE DECIDED ON MERIT BY YOUR HONOUR. DOCUMENTS FURNISHED BY THE ASSESSEE IN SUPPORT OF H IS EXPLANATION HEREWITH FOR YOUR READY REFERENCE AND KING PERUSAL. 12. FROM THE REMAND REPORT IT IS MANIFEST THAT EXCE PT THE AMOUNT OF ` 7,15,140/- THE ASSESSING OFFICER HAS NOT RAISED ANY OBJECTION, ABOUT OTHER ITEMS OF DIFFERENCE AND RECONCILIATION BY THE ASSES SEE. EVEN THE OBJECTION ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 9 RAISED BY THE ASSESSING OFFICER FOR TOTAL SUM OF ` 7,15,140/- WAS ONLY DUE TO THE DIFFERENCE OF ` 9,000/- IN THE BALANCE AS PER CHEQUES AND SHOWN IN THE BOOKS OF ACCOUNTS. THE LEARNED CIT(A) WHILE ADJUDI CATING THE ISSUE HAS DISCUSSED ONLY THE OBJECTION RAISED BY THE ASSESSIN G OFFICER REGARDING ` 7,15,140/- BECAUSE IN THE BOOKS OF ACCOUNTS THERE W AS A SINGLE ENTRY OF ` 7,06,139/- IN THE NAME OF STAR ENTERPRISES ON 27.03 .1999 WHEREAS THE CREDITS ARE OF DIFFERENT AMOUNTS TOTALLING TO ` 7,15,140/- ON DIFFERENT DATES. THUS ONLY BECAUSE OF DIFFERENCE OF ` 9,000/- BETWEEN THE ENTRY IN THE BOOKS ON 27.03.1999 AND LATER CREDITS IN THE BANK STATEME NT, THE CIT(A) REJECTED THE ENTIRE RECONCILIATION EXCEPT THE TWO AMOUNTS OF ` 11,70,000/- AND ` 12,40,000/- PRODUCED BY THE ASSESSEE BEFORE THE ASS ESSING OFFICER DURING THE REMAND REPORT. THE ASSESSEE CONTENDED AND EXPL AINED BEFORE THE ASSESSING OFFICER AS WELL AS CIT(A) THAT THIS DIFFE RENCE OF ` 9,000/- WAS DUE TO LATE PAYMENT PENALTY RECEIVED BY THE ASSESSEE. IN ANY CASE WHEN THE ASSESSING OFFICER DID NOT OBJECT REGARDING THE OTHE R DIFFERENCES RECONCILATED BY THE ASSESSEE EXCEPT THE DIFFERENCE OF ` 9,000/- BETWEEN THE SINGLE ENTRY IN THE BOOKS OF ACCOUNT IN THE NAME OF STAR ENTERPRISE S AND DIFFERENT AMOUNTS CREDITED IN THE BANK ACCOUNT THEN THE ENTIRE RECONC ILIATION EXERCISE CANNOT BE REJECTED PARTICULARLY WHEN THE ASSESSEE EXPLAINE D THAT THE SAID DIFFERENCE IS DUE TO LATE PAYMENT CHARGES RECEIVED. EVEN OTHE RWISE KEEPING IN VIEW OF THE VOLUME OF THE TRANSACTION THE DIFFERENCE OF ` 9,000/- SHOULD NOT BE TAKEN AS VITAL AS TO REJECT THE ENTIRE EXERCISE OF RECONC ILIATION WHICH WAS FOUND AS ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDINGLY W E ARE OF THE VIEW THAT LEARNED CIT(A) HAS NOT TAKEN A CORRECT VIEW ON THIS ASPECT AND THE ADDITION MADE ON THIS ACCOUNT IS DELETED. 13. GROUND NO.3 REGARDING ADDITION ON ACCOUNT OF SA LES TAX PAYMENT. THE ASSESSING OFFICER MADE THE ADDITION OF ` 1,00,017/- TOWARDS SALES TAX PAYMENT FOR WANT OF PROOF OF PAYMENT OF THE AMOUNT BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME U/S.139(1), THUS TH E ASSESSING OFFICER MADE THE ADDITION OF THE SAID AMOUNT U/S.43B. ON APPEAL , THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 10 14. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS S UBMITTED THAT THE ASSESSEE PAID THE SALES TAX OF ` 1,00,017/- ONLY BEFORE THE DUE DATE OF FILING THE RETURN. HE HAS FURTHER SUBMITTED THAT THE PAYM ENT OF SALES TAX WAS DULY REPORTED IN THE TAX AUDIT REPORT AS WELL AS NE CESSARY CHALLANS WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE RE MAND PROCEEDINGS. ON THE OTHER HAND THE LEARNED DR HAS RELIED UPON THE O RDER OF THE LEARNED CIT(A). 15. WE HAVE CONSIDERED THE RIVAL CONTENTION AND REL EVANT RECORD. WE FIND THAT THE FIVE CHALLANS WERE STATED TO HAVE BEEN PRO DUCED BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEED ING BUT THE CIT(A) WITHOUT EXAMINING THE RECORD HAS DECLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE. EVEN ADDITIONAL EVIDENCE SOUGHT TO BE FIL ED DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) WAS ALSO REJECTED. THE LEARNED CIT(A) HAS DECIDED THE ISSUE IN PARA 11 OF THE CIT(A) ORDER AS UNDER: 11. I HAVE CAREFULLY EXAMINED THE APPELLANTS SUBMISSIONS. I FIND THAT IN THE TAX AUDIT REPORT, IT IS STATED THAT THE SALES TAX OF ` 1,00,017/-IS PAID BEFORE THE DUE DATE OF FILING THE RETURN. HOWEVER, PROVISIONS OF SECTION 43B PROVISO ALSO REQUIRE THAT THE EVIDENCE OF SUCH PAYMENTS IS FURNISHED BY THE ASSESSEE ALONG WITH THE RETURN. THERE IS NOTHI NG TO SHOW THAT THIS REQUIREMENT IS SATISFIED. MOREOVER, BY O RDER SHEET ENTRY DT.27.03.2002, THE ASSESSING OFFICER GAVE A S PECIFIC OPPORTUNITY TO THE APPELLANT TO SUBMIT PROOF FOR TH E PAYMENT OF SALES TAX. THE ASSESSEE HAS STATED THAT THE 5 CHAL LANS WERE PRODUCED AT THE TIME OF ASSESSMENT BUT HAS NOT SPEC IFIED THE DETAILS AND MANNER IN WHICH THESE CHALLANS WERE PRO DUCED BEFORE THE ASSESSING OFFICER. THEREFORE, THE ADDIT IONAL EVIDENCE SOUGHT TO BE FILED DURING THE COURSE OF THE PRESENT APPELLATE PROCEEDINGS IS NOT ADMITTED. THE ADDITION OF ` 1,00,017/- U/S.43B OF THE ACT IS CONFIRMED. GROUND NO.3 FOR A SSESSMENT YEAR 1999-00 IS DISMISSED. 16. HAVING REGARD TO THE FACT THAT THE ASSESSEE CLA IM TO HAVE PRODUCE THE CHALLAN TO ESTABLISH THE PAYMENT OF SALES TAX BEFOR E THE DUE DATE OF FILING OF THE RETURN OF INCOME U/S.139(1) AND FURTHER THE ASS ESSEE REQUESTED FOR FILING THE ADDITIONAL EVIDENCE BEFORE THE LEARNED CIT(A) W HICH WAS REJECTED, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER IS REQUIRED TO BE RECONSIDERED AND DECIDED IN THE LIGHT OF THE EVIDENCE SO CLAIMED BY THE ASSESSEE BEING A PROOF ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 11 OF PAYMENT OF SALES TAX BEFORE THE DUE DATE OF FILI NG OF THE INCOME. ACCORDINGLY THIS ISSUE IS SET ASIDE TO THE RECORD O F THE ASSESSING OFFICER FOR VERIFICATION OF THE FACT AND THE EVIDENCE REGARDING PAYMENT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME AND IF IT IS FOU ND THAT ASSESSEE PAID THE SUM BEFORE DUE DATE THEN THE CLAIM OF THE ASSESSEE HAS TO BE ALLOWED. 17. GROUND NO.4 TO 9 REGARDING AD-HOC ADDITION/DISA LLOWANCE OF CERTAIN ITEMS OF EXPENSES. I) DISALLOWANCE OF SELLING AND DISTRIBUTION EXPENSE S : THE ASSESSING OFFICER DISALLOWED ` 10 LAKHS OUT OF SELLING AND DISTRIBUTION EXPENSES FOR WANT OF NAME AND ADDRESS OF THE PERSON AND SUPPORTING BILLS/VOUCHERS. THE ASSESSEE PLEADED BEFORE THE LO WER AUTHORITIES THAT ` 20,13,788/- REPRESENTS SHORT COLLECTION FROM VARIO US PARTIES OUT OF CASH SALES AND IN SUPPORT OF HIS CLAIM IN CASH BOOK OF LEDGER ACCOUNT WAS PRODUCED. THE CIT(A), HOWEVER, RESTRICTED THE DISALLOWANCE TO ` 5,00,000/-. WE HAVE HEARD THE LEARNED AR AS WELL AS LEARNED DR AND CONSIDERED THE RELEVANT RECORD. IT IS TRITE LAW THAT THE ONUS IS ON THE ASSESSEE TO PROVE THE CLAIM OF EXPENSES BY PRODUCING THE SUPPOR TING EVIDENCE. IN THE CASE IN HAND THE ASSESSEE EVEN DID NOT PRODUCE THE RELEVANT DETAILS REGARDING NAME AND ADDRESS OF THE PERSON TO WHOM THE EXPENSES PAID AND SERVICES RENDERED BY THEM. FURTH ER THE ASSESSEE ALSO DID NOT FURNISH THE BILLS/VOUCHERS IN SUPPORT OF THE CLAIM OF EXPENDITURE. THE ASSESSEE CLAIMED THAT THE EXPENS ES ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND THEREFORE NO A D-HOC DISALLOWANCES CAN BE MADE. WE DO NOT AGREE WITH TH E CONTENTIONS OF THE ASSESSEE THAT EXPENDITURE RECORDED IN THE BOOKS OF ACCOUNTS IS SUFFICIENT FOR CLAIM. SINCE THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THE CLAIM OF THE EXPENDITURE BY PRODUCING SUP PORTING EVIDENCE OF BILLS/VOUCHERS AND RELEVANT DETAILS OF THE PERSO N, THEREFORE, THE DISALLOWANCE RESTRICTED BY THE CIT(A) TO ` 5,00,000/- IN OUR VIEW IS JUST AND PROPER. ACCORDINGLY WE DO NOT FIND ANY RE ASON TO INTERFERE THAT THE IMPUGNED ORDER OF THE CIT(A) QUA THIS ISSU E. ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 12 II) DISALLOWANCE OF SALES COMMISSION : THE ASSESSING OFFICER DISALLOWED ` 1,00,000/- ON ACCOUNT OF SALES COMMISSION FOR WANT OF DETAILS REGARDING NAMES AND ADDRESS OF THE PERSONS TO WHOM THE COMMISSION WAS PAID AS WELL AS THE EXPLANATION ABOUT THE SERVICE RENDERED BY THEM. ON APPEAL, TH E LEARNED CIT(A) RESTRICTED THE DISALLOWANCE TO ` 50,000/-. WE HAVE HEARD THE LEARNED AR AS WELL AS LEARNED DR AND CONSIDERED THE RELEVANT RECORD. THE MAIN CONTENTION OF THE LE ARNED AR OF THE ASSESSEE IS THAT THE PAYMENT WAS MADE BY CHEQUES AN D IN THE ABSENCE OF FINDINGS THAT THE PAYMENTS WERE EXCESSIV E, THE DISALLOWANCE ON AD-HOC BASIS WAS NOT JUSTIFIED. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDER OF THE LOWER AUTHO RITIES AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF PROVING THE CLAIM BY PRODUCING THE NECESSARY DETAILS AND EV IDENCE. IT IS UNDISPUTED FACT THAT THE ASSESSEE DID NOT PRO DUCE ANY DETAIL AS WELL AS DOCUMENTARY EVIDENCE IN SUPPORT OF THIS CLA IM EXCEPT THE CONTENTION THAT THE PAYMENT WAS MADE THROUGH CHEQUE . IN VIEW OF THE FACTS THAT THE ASSESSEE DID NOT PRODUCE THE REQ UISITE DETAILS AND DOCUMENTARY EVIDENCE THE DISALLOWANCE RESTRICTED BY THE CIT(A) TO ` 50,000/- IS JUST AND PROPER. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) FOR THIS ISSUE. III) TELEPHONE EXPENSES : THE ASSESSING OFFICER DISALLOWS THE SUM OF ` 19,004/- BEING 1/4 TH TELEPHONE AND FAX EXPENSES ON ACCOUNT OF PERSONAL U SE. ON APPEAL, THE LEARNED CIT(A) HAS CONFIRMED THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSEE HA S NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE TELEPHONE EXPEN SES ARE WHOLLY AND EXCLUSIVELY INCURRED FOR ASSESSEES BUSINESS. HOWEVER, THE CIT(A) NOTED THAT THE DISALLOWANCE OF ` 19,004/- IS 50% OF THE TELEPHONE AND FAX EXPENSES AND NOT 1/4 TH . ACCORDINGLY, THE CIT(A) GRANTED THE RELIEF TO THE EXTENT OF ` 9,502/-. ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 13 WE HAVE HEARD THE LEARNED AR AS WELL AS LEARNED DR AND CONSIDERED THE RELEVANT RECORD. AS IT IS EVIDENT FROM THE RECO RD THAT THE ASSESSEE DID NOT FURNISH THE RELEVANT RECORD TO SHOW THAT TH E ENTIRE EXPENDITURE PERTAINING TO TELEPHONE AND FAX HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS OF ASSESSEE. THE LEARNED CIT(A) DECIDED THIS ISSUE IN PARA 29 AS UNDER: 29. I HAVE CAREFULLY EXAMINED THE APPELLANTS SUBMISSIONS. THE APPELLANT HAS NOT BROUGHT ANY EVI DENCE ON RECORD TO SHOW THAT THE TELEPHONE EXPENSES ARE WHOL LY AND EXCLUSIVELY INCURRED FOR THE APPELLANTS BUSINESS. THEREFORE, THE ASSESSING OFFICER IS JUSTIFIED IN THANKING THE DISA LLOWANCE AND THE QUANTUM OF DISALLOWANCE BEING 25% IS ALSO REASO NABLE. HOWEVER, THE ASSESSING OFFICER HAS COMPUTED THE DIS ALLOWANCE AT ` 19,004/-[15% OF TELEPHONE EXPENSES AND FAX CHARGES OF ` 30,008/-] WHEREAS THE DISALLOWANCE SHOULD HAVE BEEN COMPUTED AT ` 9,502/-. THERE WILL BE A RELIEF OF ` 9,502/-. GROUND NO.9 FOR ASSESSMENT YEAR 1999-00 IS PARTLY A LLOWED. THE ASSESSEE IS AN INDIVIDUAL AND THEREFORE, THE PE RSONAL USE OF TELEPHONE CANNOT BE RULED OUT. NOTHING HAS BEEN BR OUGHT BEFORE US BY THE ASSESSEE TO CONTRADICT THE FINDINGS OF AUTHO RITIES BELOW. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) QUA THIS ISSUE QUA. ITA NO.372/MUM/2006 ASSESSMENT YEAR : 2000-2001 18. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS. 1. ADDITION ON ACCOUNT OF ESTIMATION OF G/P : ` 25,91,528/- I) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ESTIMATI ON OF G/P @ 0.25% WITHOUT APPRECIATING THAT DURING THE YEAR T HE APPELLANT HAD SUFFERED GENUINE LOSS OF ` 1,65,11,135/-. 2. REJECTION OF BOOKS OF ACCOUNTS AND CONFIRMATION OF VARIOUS AD-HOC DISALLOWANCES. THE LEARNED CIT(A) ERRED IN CONFIRMING VARIOUS DISA LLOWANCES AND DISREGARDING THE FACT HAT WHEN BOOKS OF ACCOUNT S ARE REJECTED AND THE PROFITS ESTIMATED, THERE SHOULD NO T BE ANY RECOURSE/ATTEMPT TO MAKE ANY FURTHER ADDITION BY DI SALLOWING VARIOUS EXPENSES SINCE THE ESTIMATION OF PROFIT IS DEEMED TO HAVE TAKEN CARE OF ALL EXPENSES. THEREFORE, THE SE PARATE DISALLOWANCES OF FOLLOWING EXPENSES ARE UNCALLED FO R AND MAY BE DELETED. ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 14 I) BROKERAGE ON IMPORT PURCHASE - ` 5,33,000/- II) COMMISSION OF IMPORT PURCHASE - ` 4,85,655/- III) DISALLOWANCE OF FREIGHT FORWARDING AND SURVEYOR CHARGES - ` 3,26,654/- IV)DISALLOWANCE ON COMMISSION ON SALES - ` 7,05,901/- IV) AD-HOC DISALLOWANCE OF VARIOUS EXPENSES DEBITED TO P & L A/C. - ` 70,922/- 19. GROUND NO.1: THE ASSESSEE DID NOT FILE ANY RET URN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER IS SUED A NOTICE U/S.148 ON 21.05.2002 AND SUBSEQUENTLY NOTICE U/S.143(2) AND U /S.142(2)(1) WERE ISSUED ONLY ON 26.03.2004. THE ASSESSEE FILED RETU RN OF INCOME DECLARING TOTAL INCOME AT NIL AND REFLECTING TOTAL LOSS OF ` 1,83,16,563/-. THE LOSS IS NOT CARRY FORWARD DUE TO CLOSURE OF BUSINESS. THE ASSESSEE DID NOT FILE TAX AUDIT REPORT ALONG WITH THE RETURN OF INCOME. THE ASSESSING OFFICER AFTER ANALYSING THE SALES AS WELL AS CORRESPONDING PURCHA SE OF THE ASSESSEE AND AFTER CONSIDERING THE INFORMATION AVAILABLE ON RECO RD ESTIMATED THE G.P. RATIO AT 0.25% AND MADE ADDITION OF ` 1,91,02,663/- ON ACCOUNT OF G.P. RATIO. THE ASSESSING OFFICER DISALLOWED CERTAIN EXPENDITUR E AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) CONF IRMED THE G.P. ESTIMATE MADE BY THE ASSESSING OFFICER. 20. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS S UBMITTED THAT THE RETURN OF INCOME WAS FILED BELATEDLY BECAUSE THERE WAS NO ACCOUNTANT TO PREPARE THE FINAL ACCOUNTS NOR THERE WAS ANY C.A. W ILLING TO RENDERED THE PROFESSIONAL SERVICES. HE HAS FURTHER SUBMITTED TH AT THE ASSESSEE HAD IMPORTED KEROSENE FROM UP COUNTRIES AND SOLD IT INT O LOCAL MARKET. THE ASSESSEE HAVING LOSS DUE TO HIGH COST OF IMPORTED K EROSENE WHICH IS MORE THAN LOCAL SALES PRICE, HE HAS REITERATED THE CONTE NTIONS RAISED BEFORE LOWER AUTHORITIES AND SUBMITTED THAT THE G.P. FOR THE ASS ESSMENT YEAR 1999-2000 WAS 0.34% AND NET PROFIT RATIO WAS 0.02% THEREFORE, THE ADOPTION OF G.P.R. IS 0.25% AND DISALLOWANCE OF THE EXPENDITURE WOULD AMOUNTING TO ABNORMAL RESULT WHICH IS NOT POSSIBLE IN THE BUSINESS OF THE ASSESSEE. HE HAS FURTHER CONTENDED THAT THOUGH THERE WAS LOSS DURING THE YEA R UNDER CONSIDERATION BUT SINCE THIS IS THE LAST YEAR OF THE BUSINESS OF THE ASSESSEE, THEREFORE, THE ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 15 ASSESSEE DID NOT CLAIM THE CARRY FORWARD OF THE LOS S. HE HAS FURTHER SUBMITTED THAT IN ANY CASE THE NET PROFIT RATIO SHO ULD NOT BE MORE THAN THE PREVIOUS YEAR I.E.0.02%. 21. ON THE OTHER HAND THE LEARNED DR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS NOT PRODUCE THE RELEVANT RECORD AND NO TAX AUDIT REPORT WAS FILED THEREFORE, THE ASSESSING OFFICER WAS LEFT WIT H NO OPTION BUT TO ESTIMATE THE INCOME OF THE ASSESSEE. THE CONDUCT OF THE ASS ESSEE IS ALSO NON COOPERATIVE SINCE THE ASSESSEE FILED A RETURN OF IN COME DELIBERATELY AT THE END OF THE LIMITATION PERIOD OF ASSESSMENT. HE RE LIED UPON THE ORDER OF THE LOWER AUTHORITIES. 22. WE HAVE CONSIDERED RIVAL CONTENTION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE NOTICE U/S.148 WAS ISSUED TO THE AS SESSEE ON 21.05.2002 WHICH WAS DULY SERVED ON THE ASSESSEE. THE ASSESSE E FILED A RETURN OF INCOME ONLY ON 26.03.2004 NEARLY ABOUT 2 YEARS AFTE R THE NOTICE U/S.148. THUS THE ASSESSING OFFICER WAS HAVING ONLY 5 DAYS T O FRAME THE ASSESSMENT. HOWEVER THE ASSESSEE DID NOT FILE THE TAX AUDIT REP ORT AS WELL AS THE NECESSARY DETAILS AND EVIDENCES ALONG WITH THE RETU RN OF INCOME DESPITE VARIOUS NOTICES U/S.143(2) AND U/S.142(1) WHEREBY T HE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH PARTY-WISE DETAILS OF SALES AND PURCHASE, COPIES OF BILLS AND LEDGER ACCOUNTS AND EXPENSES, B UT THE ASSESSEE FAILED TO PRODUCE THE SALE BILL, PURCHASE BILL, ANY VOUCHER O R ANY OTHER DOCUMENTARY EVIDENCES OF THE EXPENSES. IN THESE CIRCUMSTANCES WHEN THE ASSESSMENT WAS GETTING TIME BARRED WE SEE NO FAULT ON THE PART OF THE ASSESSING OFFICER IN ESTIMATING THE INCOME OF THE ASSESSEE BY REJECTI NG THE BOOKS OF ACCOUNTS. SINCE THE G.P. RATE IN THE EARLIER YEAR WAS 0.34%, THEREFORE, THE G.P. RATE ESTIMATED BY THE ASSESSING OFFICER FOR THE YEAR UND ER CONSIDERATION AT 0.25% IS PROPER AND JUSTIFIED. WE DO NOT FIND ANY ERROR IN ESTIMATION OF G.P. RATE AT 0.25% BY THE ASSESSING OFFICER. ACCORDINGLY GROUN D NO.1 IS DECIDED AGAINST THE ASSESSEE. 23. NOW GROUND NO.2 REGARDING DISALLOWANCE OF VARIO US EXPENDITURE. ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 16 24. WE HAVE HEARD THE LEARNED AR AS WELL AS LEARNED DR AND CONSIDERED THE RELEVANT RECORD. ONCE THE ASSESSING OFFICER HA S ESTIMATED THE G.P. THEN THE DIRECT EXPENDITURE RELATING TO THE PURCHASE AND SALE OF THE KEROSENE OIL CANNOT BE FURTHER EITHER ALLOWED OR DISALLOWED. ONL Y THOSE EXPENDITURE WHICH ARE NOT PART OF TRADING ACCOUNT OF THE ASSESS EE AND BELOW THE LINE OF GROSS PROFIT CAN BE EITHER ALLOWED OR DISALLOWED FR OM THE G.P. THE EXPENDITURE REGARDING BROKERAGE ON MATERIAL PURCHAS E, COMMISSION ON PURCHASE, FREIGHT, FORWARD AND SERVICE CHARGES, COM MISSION ON SALES ACTIVITY OF THE ASSESSEE ARE TRADING A/C ITEMS OF EXPENDITUR E AND THEREFORE THE SAME CANNOT BE CONSIDERED ONCE G.P. RATIO IS ESTIMATE. IN OTHER WORD THE DIRECTED EXPENDITURE WHICH ARE PART OF THE TRADING ACCOUNT O F THE ASSESSEE NEITHER CAN BE ALLOWED NOR CAN BE ADDED BACK TO G.P. ESTIMA TE THEREFORE, THE FIRST FOUR ITEMS OF THE EXPENDITURE WHICH ARE DISALLOWED BY THE ASSESSING OFFICER AND ADD BACK TO THE INCOME OF THE ASSESSEE ARE NOT REQUIRED TO BE ADDED BACK ONCE THE G.P. RATE HAS BEEN ESTIMATED. AS RE GARDS AD-HOC DISALLOWANCES OF VARIOUS EXPENDITURES DEBITED TO P & L A/C ARE CONCERNED, THE CIT(A) HAS ALREADY RESTRICTED THE DISALLOWANCES TO 15% FROM 25% DISALLOWED BY THE ASSESSING OFFICER. SINCE THE ASS ESSEE DID NOT FILE ANY DOCUMENTARY EVIDENCES IN SUPPORT OF THE CLAIM OF TH E EXPENDITURE THEREFORE, IN OUR CONSIDERED VIEW THE CIT(A) HAS TAKEN REASONA BLE AND PROPER VIEW ON THIS ISSUE. IN THE ABSENCE OF THE MATERIAL IN SUPPO RT OF THE CLAIM OF THE ASSESSEE, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF THE CIT(A) IN THIS REGARD. ACCORDINGLY WE CONFIRMED THE DISA LLOWANCE OF 15% OF THE EXPENSES. 25. IN THE RESULT, APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF SEPTEMBER, 2011. SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) MUMBAI, DATED 30.09.2011 ITA NO.371/MUM/2006 ITA NO.372/MUM/2006 17 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUM BAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI