SAPPHIRE INDIA (P) LTD., Alwar V. ITO, Alwar

ITA 374/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5317 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BATEJA CIT DHK
• Section: 43B; 68; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO.374/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 M/S SAPPHIRE INDIA (P) LTD., B- 491 INDUSTRIAL AREA, BHIWADI CUKE VS. ITO, WARD 2(3), ALWAR LFKK;H YS[KK LA-@THVKBZB KJ LA-@ PAN NO. AACCS 4054 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO.426/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 ITO, WARD 2(3), ALWAR CUKE VS. M/S SAPPHIRE INDIA (P) LTD., B-491 INDUSTRIAL AREA, BHIWADI LFKK;H YS[KK LA-@THVKBZB KJ LA-@ PAN NO. AACCS 4054 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY :S HRI O.P. BATEJA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17.03.2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 31 /03/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE A ND REVENUE AGAINST THE ORDER OF LD. CIT(A) ALWAR DATED 10/03/2014 WHER EIN THE ASSESSEE AS WELL AS REVENUE HAVE TAKEN FOLLOWING GROUNDS OF APPEAL: ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 2 GROUND TAKEN BY ASSESSEE: (1) THAT THE AO HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN FRAMING THE ASSESSMENT ORDER U/S 14 4 OF THE IT ACT 1961 IN AS MUCH AS THE ACCOUNTANT OF THE ASSESSEE COMPANY W AS CONFIRMED TO BED, HENCE THE ASSESSEE COMPANY WAS PREVENTED BY SUFFICIENT CAUSE IN ATTENDING THE ASSESSMENT PROCEEDINGS, HENCE ON THIS GROUND THE ASSESSMENT SO FRAMED DESERVED TO BE QUASHED AND TH E LD. CIT(A) HAS ERRED IN SUSTAINING THE SAME. (2) THAT THE A.O. HAS ERRED IN LAW AS WELL AS ON TH E FACTS AND CIRCUMSTANCES OF THE CASE IN APPLYING THE GROSS PROFIT RATE OF 23 .4% AS AGAINST 13.4% DISCLOSED BY THE ASSESSEE COMPANY AND HAS ALSO ERR ED IN MAKING A TRADING ADDITION OF RS. 62,16,114/- WITHOUT REJECTI NG THE BOOKS OF ACCOUNT AND ALSO WITHOUT INVOKING THE PROVISION OF SECTION 145(3) OF THE IT ACT, 1961 AND LD. CIT(A) ERRED IN APPLYING A RA TE OF 18% AND ALSO ERRED IN CONFIRMING AN ADDITION OF RS. 28,52,477/-. (3) THAT THE A.O. HAS ERRED IN LAW AS WELL AS ON TH E FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING AN ADDITION OF RS.2,00,000/- BEING THE CASH CREDIT OF SHRI AMARJIT SINGH GUJRAL WITHIN THE MEANING O F SECTION 68 OF THE IT ACT, 1961 IN AS MUCH AS THE DETAILED POSTAL ADDRESS OF THE CASH CREDIT ARE ALREADY GIVEN IN THE TAX AUDIT REPORT IN PARA NO.24 AND THE LD. CIT(A) HAS ERRED IN SUSTAINING THE SAME. (4) THAT THE A.O. HAS ERRED IN LAW AS WELL AS ON TH E FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING AN ADHOC DISALLOWANCE OF RS. 4,16,366/- BEING 10% OUT OF ADMINISTRATIVE AND OTHER EXPENSES AND FINANC IAL EXPENSES IN AS MUCH AS ALL THE DESIRED DETAILS OF EXPENSES WERE FI LED BEFORE THE LD. AO AND THE LD. CIT(A) HAS ERRED IN SUSTAINING THE SUM OF RS. 1,00,000/- OUT OF THE SAME. ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 3 GROUND TAKEN BY REVENUE (1) THAT THE LD. CIT(A), ALWAR HAS ERRED IN LAW AS WEL L AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN REDUCING THE ADDITION OF RS. 62,16,114/- TO RS. 28,52,477/- MADE BY THE AO ON A/C OF TRADIN G ADDITION MADE BY THE AO ON A/C OF GP RATE DECLARED.2QA (2) THAT THE LD. CIT(A), ALWAR HAS ERRED IN LAW AS WEL L AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING THE DISAL LOWANCE OF RS. 4,16,368/- TO RS. 1,00,000/- MADE BY THE AO ON A/C OF VARIOUS EXPENSES WITHOUT APPRECIATING MATERIAL FACTS OF THE CASE. (3) THAT THE LD. CIT(A), ALWAR HAS ERRED IN LAW AS WEL L AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE DISALLOW ANCE OF RS. 15,71,482/- MADE BY THE AO ON A/C OF DISALLOWANCE U/S 43B OF THE IT ACT, 1961 WITHOUT APPRECIATING MATERIAL FACTS OF TH E CASE. 2. FIRSTLY, REGARDING GROUND NO 1 OF THE ASSESSEE, THE SAME IS NOT PRESSED DURING THE COURSE OF HEARING. HENCE, THE SAME IS D ISMISSED AS NOT PRESSED. 2.1 REGARDING GROUND NO.2 OF ASSESSEE & GROUND NO.1 OF REVENUE, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF MANUFACTURING OF DISPOSABLE CYLINDERS. DURING THE YEAR, IT DECLARED GROSS PROFIT OF RS. 83,59,646/- ON TURNOVER OF RS. 6,22,89,572/- GIVING A G.P. RATE OF 13.42% AS AGAINST GROSS PROFIT OF RS. 8,83,870/- ON TURNOV ER OF RS. 37,92,884/- GIVING A G.P. RATE OF 23.30% IN THE IMMEDIATELY PRECEDING YE AR. THE AO MADE THE FOLLOWING OBSERVATIONS:- (I) THE G.P. RATE DECLARED BY THE ASSESSEE AT 13.4% IS MUCH LOW IN COMPARISON TO THE PRECEDING YEAR G.P. RATE OF 23.4% (CORRECT G .P. RATE IS 23.30%). NO EXPLANATION HAS BEEN FURNISHED BY THE ASSESSEE WITH REGARD TO SAME. (II) NO DETAILS REGARDING CONSUMPTION OF DIFFERENT TYPE OF RAW MATERIAL, MANUFACTURING OF DIFFERENT TYPE OF CYLINDERS (WEIGH T WISE) AND OTHER DETAILS REGARDING MANUFACTURING ACTIVITIES WAS FURNISHED BY THE ASSESSEE. (III) BOOKS OF ACCOUNTS, STOCK REGISTER ETC. WERE NEVER P RODUCED FOR VERIFICATION ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 4 ACCORDINGLY, THE AO MADE TRADING ADDITION OF RS.62, 16,114/- (CORRECT AMOUNT RS.61,53,824/-) BY APPLYING PRECEDING YEAR G .P. RATE OF 23.4% (CORRECT G.P. RATE IS 23.30%) ON DECLARED TURNOVER OF RS.6,22,89,572/-. 2.2 THE FINDINGS OF LD CIT(A)S ARE REPRODUCED AS UNDER: I FINDS THAT THE APPELLANT HAS FAILED TO PRODUCE TH E BOOKS OF ACCOUNT AND VOUCHERS BEFORE THE AO AT THE TIME OF ASSESSMENT PR OCEEDINGS. FURTHER I FIND THAT THE APPELLANT HAS CHOSEN NOT TO COMPLY WITH TH E NOTICES ISSUED BY THE AO IN THE COURSE OF REMAND PROCEEDINGS AS MAY BE SEEN FROM THE REMAND REPORT, WHICH HAS BEEN REPRODUCED ABOVE THE AO HAS GIVEN A T LEAST 4 TO 5 OPPORTUNITIES BUT THE APPELLANT FAILED TO COMPLY E VEN ON ONE OCCASION AND NO BOOKS OF ACCOUNTS AND VOUCHERS WERE PRODUCED BEFORE THE AO. THE APPELLANT ALSO DID NOT FILE ANY SUCH DETAILS PERTAINING TO TH E CONSUMPTION OF RAW MATERIALS AND DETAILS OF PRODUCTION OF CYLINDERS ET C. IN THE COURSE OF PRESENT PROCEEDINGS. THE APPELLANT HAS MADE BALD STATEMENT S STATING THAT THE DETAILS WERE AVAILABLE IN THE TAX AUDIT REPORT AND SAME MAY BE CONSIDERED AS SUFFICIENT. THERE IS NO FORCE IN THE ARGUMENTS OF THE APPELLANT THAT NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO AS NO BOOKS O F ACCOUNTS AND VOUCHERS WERE EVER PRODUCED BY THE APPELLANT. EVEN THE APPE LLANT FAILED TO PRODUCE THE SAME IN THE COURSE OF REMAND PROCEEDINGS BEFORE THE AO. THUS CONSIDERING ALL THE FACTS I HOLD THAT THE AO WAS JUSTIFIED IN INVOK ING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT FOR ESTIMATING THE PROFIT OF T HE APPELLANT. BASED ON THE MATERIAL AVAILABLE ON RECORD, I FIND THAT IT WOULD BE FAIR AND JUST TO ADOPT THE GP RATE OF 18% (BEING THE MIDDLE OF 13% TO 23%) ON THE DECLARED SALES OF RS. 6,22,89,571/-. IT WOULD RESULT IN CONFIRMING AN AD DITION OF RS. 28,52,477/- MADE BY THE AO UNDER THIS HEAD. THE APPELLANT WOUL D ACCORDINGLY GET A RELIEF OF RS. 33,63,637/- ON THIS ACCOUNT. 2.3 THE LD AR SUBMITTED THAT THE ASSESSEE HAS MAIN TAINED DAY TO DAY BOOKS OF ACCOUNTS. THE SAME IS SUBJECT TO AUDIT. THERE IS NO QUALIFICATION BY THE AUDITOR ON THE ACCOUNTS OF THE ASSESSEE. IN THE COU RSE OF ASSESSMENT PROCEEDINGS/REMAND PROCEEDINGS, BOOKS OF ACCOUNTS C OULD NOT BE PRODUCED BECAUSE OF DISPUTE AMONGST THE DIRECTORS SH. MANVIN DER SINGH AND SH. AJIT SINGH AHUJA. THE BOOKS WERE TAKEN BY SH. AJIT SINGH AHUJA AND THERE WERE COUNTER SUITS BETWEEN SH. MANVINDER SINGH AND SH. A JIT SINGH AHUJA WHO DID ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 5 NOT COOPERATE TO PRODUCE THE BOOKS OF ACCOUNTS. THI S IS ALL THE MORE EVIDENT FROM SETTLEMENT DEED DATED 19.10.2011. HOWEVER, THE DETAILS OF OPENING, PURCHASES, CONSUMPTION AND CLOSING STOCK OF RAW MAT ERIAL, COMPONENTS, CONSUMABLE STORES, SCARP AND FINISHED CYLINDERS WER E AVAILABLE IN ANNEXURE D OF THE TAX AUDIT REPORT. THE AO HAS INVOKED SECTION 144 OF THE IT ACT, 1961. SECTION 144 PROVIDES FOR MAKING THE BEST JUDGMENT AFTER TAKING INTO ALL THE MATERIAL, WHICH THE AO HAS GATHERED. IN MAKING A BEST JUDGMENT THE AO MUST NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY BECAUSE HE MUST EXERCI SE JUDGMENT IN THE MATTER. HE MUST MAKE WHAT HE HONESTLY BELIEF TO BE A FAIR E STIMATE OF THE PROPER FIGURE OF ASSESSMENT AND FOR THIS PURPOSE HE MUST B E ABLE TO TAKE INTO CONSIDERATION LOCAL KNOWLEDGE AND REPUTE IN REGARD TO THE ASSESSEES CIRCUMSTANCES AND HIS OWN KNOWLEDGE OF PREVIOUS RET URNS BY AND ASSESSMENT OF THE ASSESSEE AND ALL OTHER MATTERS WHICH HE THIN KS WILL ASSIST HIM IN ARRIVING AT A FAIR AND PROPER ESTIMATE AND THOUGH THERE MUST NECESSARILY BE GUESS WORK IN THE MATTER, IT MUST BE HONEST GUESS WORK. IN MAK ING BEST JUDGMENT ASSESSMENT, THE AO DOES NOT POSSESS ABSOLUTELY ARBI TRARY AUTHORITY TO ASSESS AT ANY FIGURE HE LIKES. HE MUST BE GUIDED BY RULE OF J USTICE EQUITY AND GOOD CONSCIENCE. A BEST JUDGMENT ASSESSMENT IS NOT A PUN ITIVE ASSESSMENT. THE ABOVE PRINCIPLE AS LAID DOWN BY THE VARIOUS COU RTS WHEN APPLIED TO THE FACTS OF THE ASSESSEES CASE, IT CAN BE NOTED THAT THE G.P. RATE DECLARED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IS BET TER AS COMPARED TO EARLIER YEARS AS TABULATED UNDER . PARTICULARS A.Y. 05-06 A.Y. 04-05 A.Y. 03-04 TURNOVER 6,22,89,572/- 37,92,884/- 7,36,276/- EXCISE DUTY REFUND - 18,77,556/- - GROSS PROFIT (INCLUDING ED REFUND) 83,59,646/- 8,83,870/- 81,352/- GROSS PROFIT (EXCLUDING ED REFUND) 83,59,646/- (9,93,686/-) 81,352/- ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 6 G.P. RATE (WITH ED REFUND) 13.42% 23.30% 11.05% G.P. RATE (WITHOUT ED REFUND) 13.42% (26.20%) 11.05% IT IS A SETTLED LAW THAT NO TRADING ADDITION SHOULD BE MADE IF THE RESULT DECLARED IS BETTER AS COMPARED TO THE RESULT DECLAR ED IN EARLIER YEAR. THE AO IN HOLDING THAT THE G.P. RATE DECLARED BY TH E ASSESSEE DURING THE YEAR IS MUCH LOW IN COMPARISON TO THE PRECEDING YEAR, HA S INCORRECTLY COMPARED THE G.P. RATE OF 13.42% DECLARED DURING THE YEAR WI TH THE G.P. RATE OF 23.30% DECLARED IN THE PRECEDING YEAR. THE LD. CIT(A) HAS NOT FULLY APPRECIATED THESE FACT S. HE APPLIED AVERAGE G.P. RATE OF THIS YEAR AND LAST YEAR WITHOUT CONSIDERING THAT THE LAST YEAR G.P. RATE IS ABNORMAL CONSIDERING THE IMPACT OF EXCISE D UTY REFUND. FURTHER, WHEN THE AO HAS HIMSELF ACCEPTED THE G.P. RATE OF 1 3% IN WORKING OUT THE AVERAGE G.P. RATE, IT IMPLIEDLY MEANS THAT HE ACCEP TS THAT G.P. RATE DECLARED DURING THE YEAR IS CORRECT. FURTHER, IN A.Y. 03-04, G.P. RATE OF 11.05% IS ACCEPTED. THE G.P. RATE FOR THE YEAR IS BETTER AS C OMPARED TO A.Y. 03-04. HENCE, TRADING ADDITION SUSTAINED BY THE LD. CIT(A) IS NOT JUSTIFIED. 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 144 OF THE ACT WHERE THE AO HAS TO MAKE BEST JUDGEMENT ASSESSM ENT AFTER TAKING INTO CONSIDERATION ALL AVAILABLE MATERIAL WHICH THE AO H AS GATHERED. THE AO WHILE DISPUTING THE G.P OF THE CURRENT YEAR DECLARE D BY THE APPELLANT HAS RELIED UPON THE LAST YEAR G.P AS A RELIABLE BASIS F OR ESTIMATING THE G.P FOR THE CURRENT YEAR. THE G.P. RATE OF 23.30% DECLARED IN THE PRECEDING YEAR IS INCLUSIVE OF THE EXCISE DUTY REFUND AS EVIDENT FROM THE TRADING AND P&L A/C OF ASSESSEE FOR YEAR ENDING 31.03.2004 WHEREAS THER E IS NO EXCISE DUTY REFUND IN THE YEAR UNDER CONSIDERATION. WHERE THE EXCISE DUTY REFUND IS EXCLUDED, THE RESULTANT G.P RATE OF LAST YEAR WOULD BE IN NEGATIVE I.E, (26.20%) AND AS COMPARED TO THAT, THE APPELLANT HAS ALREADY DECLARED A GP RATE OF 13.42% WHICH IS ON THE HIGHER SIDE. FURTHE R, THE CURRENT YEAR GP IS ALSO HIGHER THAN GP OF 11.3% FOR AY 2003-04. GIVEN THESE FACTS, IT REMAINS UNCONTROVERTED THAT RESULTS DECLARED BY THE APPELLA NT ARE BETTER THAN RESULTS DECLARED FOR THE PAST YEARS. IN LIGHT OF THAT, THE TRADING ADDITIONS OF RS ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 7 62,16,114 IS HEREBY DELETED. HENCE, GROUND OF APPE LLANT IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 3. REGARDING GROUND NO.3 OF THE ASSESSEE, BRIEFLY T HE FACTS OF THE CASE ARE THAT DURING THE YEAR, ASSESSEE HAS TAKEN LOAN OF RS .2 LACS FROM SH. AMARJIT SINGH GUJRAL. THE AO OBSERVED THAT THE CONFIRMATION OF THE CASH CREDIT, HIS NAME AND ADDRESS HAS NOT BEEN FURNISHED BY THE ASSE SSEE. ACCORDINGLY, HE MADE ADDITION OF RS. 2 LACS U/S 68 BY HOLDING THAT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE CREDIT IS N OT PROVED. 3.1 THE LD. CIT(A) HELD THAT THE APPELLANT HAS FAIL ED TO FILE ANY PROOF OF IDENTITY AND COPY OF BANK STATEMENT IN SUPPORT OF T HE TRANSACTION BEFORE THE AO IN THE COURSE OF REMAND PROCEEDINGS. THUS, IN TH E ABSENCE OF ANY EVIDENCE, IT IS HELD THAT THE ASSESSEE HAS COMPLETELY FAILED TO SATISFY THE REQUIREMENT OF SECTION 68 OF THE IT ACT I.E. IDENTITY OF THE CREDI TOR, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR. 3.2 THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS TAKEN LOAN OF RS.2 LACS FROM SH. AMARJIT SINGH GUJRAL ON 30.06.2004 THOUGH CHEQU E. THE SAME ALONG WITH ADDRESS OF THE CREDITOR IS DISCLOSED IN THE TAX AUD IT REPORT. THE LOAN WAS REPAID THROUGH CHEQUE ON 10.01.2005 AND THIS WAS ALSO DISC LOSED IN ANNEXURE C OF THE TAX AUDIT REPORT. THE CONFIRMATION OF THE CREDI TOR IS ALSO SUBMITTED. THUS, THE ASSESSEE HAS PROVED THE IDENTITY OF THE CREDITO R, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR. RELIANCE IS PLACED ON FOLLOWING CASES:- CIT V. HEERA LAL CHAGAN LAL 257 ITR 281 (RAJ.): LABH CHAND BOHRA VS. ITO 219 CTR 571 (RAJ.)(HC) 3.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL ON RECORD. LD CIT(A) HAS NOTED THAT THE APPELLANT HAS SUBMITTED A CONFIRMATION OF SHRI AMARJIT SINGH GUJRAL IN WHICH IT IS CONFIRMED THAT THE SAME AMOUNT HAS BEEN GIVEN TO THE COMPANY ON 30.06.2004 THROUGH CHE QUE NO. 757686 AND THE SAME AMOUNT WAS REPAID ON 10.01.2005 THROUGH CHEQUE NO. 173630. ONCE THE CHEQUE DETAILS ARE SUBMITTED, WE ARE UNABLE TO APPRECIATE AS TO WHY LD CIT(A) HAS HELD THAT IN VIEW OF FAILURE TO FILE A C OPY OF THE BANK STATEMENT IN ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 8 SUPPORT OF THE TRANSACTIONS BEFORE THE AO IN THE CO URSE OF REMAND PROCEEDINGS, APPELLANTS CONTENTION CANNOT BE ACCEP TED. THE TRANSACTION CAN BE VERIFIED FROM THE BANK OF THE BOTH THE PARTIES W HICH AO HAS FAILED TO VERIFY. FURTHER, HE HAS NOTED THAT THE CASH CREDITOR SHRI A MARJIT SINGH GUJRAL IS HAVING PAN AAQPG 8880L, WHICH IS CLAIMED BY THE APPELLANT TO PROVE THE IDENTITY OF THE PERSON GIVING LOAN WHICH AGAIN CAN BE VERIFIED INDEPENDENTLY BY THE AO HAVING ACCESS TO DATA MAINTAINED BY THE REVENUE DEP ARTMENT. IN LIGHT OF THAT, WE DELETE THE ADDITION OF RS 2 LACS AND HENCE, GROU ND NO. 3 OF THE APPELLANT IS ALLOWED. 4. REGARDING GROUND NO.4 OF THE ASSESSEE & GROUND N O.2 OF THE REVENUE, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DEBITED ADMINISTRATIVE AND OTHER EXPENSES OF RS.27,48,849/- AND FINANCIA L EXPENSES OF RS.14,14,833/- IN THE P&L ACCOUNT. THE AO OBSERVED THAT THE DETAILS OF THESE EXPENSES HAVE NOT BEEN FURNISHED AND HE MADE DISALL OWANCE OF RS.4,16,368/- I.E. 10% OF RS.41,63,682/- BY HOLDING THAT IN THE A BSENCE OF DETAILS OF THE EXPENSES, THE SAME ARE NOT SUBJECT TO PROPER VERIFI CATION. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 1 LACS BY HOLDING THAT THE SAME IS JUSTIFIED AS THE APPELLANT HAS FAILED TO PRODUCE THE BOOKS OF AC COUNTS AND VOUCHERS BEFORE THE AO AT THE ASSESSMENT STAGE AND ALSO AT THE APPE LLATE STAGE. 4.1 THE LD. AR SUBMITTED THAT THE ASSESSEE VIDE LET TER DT. 01.11.2007 FURNISHED THE DETAILS OF VARIOUS ADMINISTRATIVE AN D OTHER EXPENSES AND THE DETAILS OF INTEREST ON BANK LOAN. IN THE COURSE O F APPELLATE PROCEEDINGS, FURTHER DETAILS OF THE EXPENSES WERE FURNISHED AS M ENTIONED AT PAGE 13 OF THE CIT(A) ORDER. THE ADMINISTRATIVE AND OTHER EXPENSES AS A PERCEN TAGE OF TURNOVER HAS DECLINED DURING THE YEAR FROM 10.82% TO 4.41%. IT I S NOT THE CASE OF THE AO THAT THE EXPENSES ARE NOT FOR THE PURPOSE OF BUSINE SS. SO FAR AS FINANCIAL EXPENSES ARE CONCERNED, THE SAME COMPRISES OF INTER EST PAID TO BANK AND BANK CHARGES. THE ASSESSEE HAS NO CONTROL OVER THESE EX PENSES AS THE INTEREST RATE AND BANK RATE IS DETERMINE BY THE BANKS. 4.2 WE HAVE GONE THROUGH THE ORDER OF AO AND LD CIT(A) AS WELL AS CONSIDERED THE SUBMISSIONS MADE BY LD AR AND LD DR. THE EXPENSES HAVE BEEN ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 9 DISALLOWED ON PURELY ADHOC BASIS AND NO SPECIFIC EX PENDITURE/TRANSACTION HAS BEEN HIGHLIGHTED BY THE AO WHICH SUGGEST THAT THESE EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSES OF THE BUSINESS. IN LIGH T OF THAT, WE DELETE THE ADHOC DISALLOWANCE OF RS 1 LACS. HENCE, GROUND OF ASSESS EE IS ALLOWED AND GROUND OF REVENUE IS DISMISSED. 5. REGARDING GROUND NO.3 OF THE REVENUES APPEAL, B RIEFLY THE FACTS ARE THAT AS ON 31.03.2005, THE ASSESSEE HAS GOVERNMENT DUES OF RS.15,71,482/- AND AS PER AO, THE ASSESSEE HAS NEITHER FURNISHED T HE EVIDENCE OF PAYMENT OF THE SAID GOVERNMENT DUES NOR ENCLOSED THE SAME WITH THE RETURN OF INCOME. ACCORDINGLY, HE MADE ADDITION OF RS.15,71,482/- BY APPLYING PROVISIONS OF SEC. 43B OF THE IT ACT, 1961. 5.1 THE LD. AR SUBMITTED THAT FROM THE DETAILS OF P AYMENT MADE OF GOVERNMENT DUES, IT CAN BE NOTED THAT DUES AGAINST CST, RST AND ENTRY TAX TOTALLING TO RS.2,23,985/- WERE SET OFF AGAINST THE SALES TAX ADVANCE OF RS.7,65,000/- SHOWN IN THE BALANCE SHEET AS ON 31.0 3.2005 . THE OTHER DUES AGAINST TDS, EMPLOYERS AND EMPLOYEES PF/ESI, EXCISE DUTY AND SERVICE TAX WERE PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INC OME. FURTHER, THE ENTRY TAX OF RS.63,811/- AND PF OF RS.2,663/- NOT DEPOSITED HAS BEEN ADDED BY THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME. IN VIEW ABOVE, CIT(A) HAS RIGHTLY DELETED THE ADDITION AND THUS THE GROUND OF THE DEPARTMENT BE DISMISSED. 5.2 THE LD. CIT(A) DELETED THE ADDITION BY GIVING T HE FOLLOWING FINDINGS (PARA 8.3, PAGE 15-16 OF THE ORDER):- THERE IS NO JUSTIFICATION IN THE ORDER PASSED BY T HE AO AS ALL THE STATUTORY DUES HAVE BEEN DEPOSITED BY THE APPELLANT BEFORE TH E FILING OF ITR. FURTHER, THE PAYMENTS OF RS.63,811/- AND RS.2,663/- WHICH WE RE NOT DEPOSITED BEFORE THE DUE DATE HAVE BEEN ADDED BY THE APPELLANT TO TH E TOTAL INCOME AS STATED IN THE SUBMISSIONS FILED IN THE COURSE OF APPELLATE PROCEEDINGS. CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN CASE OF AL OM EXTRUSIONS, I FIND NO JUSTIFICATION IN THE ACTION OF THE AO IN MAKING DIS ALLOWANCE AND THEREFORE DELETE THE ADDITION OF RS.15,71,482/- MADE BY THE A O UNDER THIS HEAD . 5.3 IN LIGHT OF UNDISPUTED FACTS THAT THE STATUTORY DUES HAVE BEEN DEPOSITED BY THE APPELLANT BEFORE FILING THE RETURN OF INCOME , WE FIND NO REASON TO ITA NO. 374 & 426/JP/14 M/S SAPPHIRE INDIA PVT. LTD. ALWAR VS. ITO WD.2(3) , ALWAR 10 INTEREFERE WITH THE ORDER AND FINDINGS OF LD CIT(A) WHICH IS HEREBY CONFIRMED. HENCE, GROUND OF REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 /03 /2016. SD/- SD/- ( R.P. TOLANI ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 31/ 03 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S SAPPHIRE INDIA (P) LTD. BHIW ADI, ALWAR 2. THE RESPONDENT- THE ITO, WARD 2(3), ALWAR 3. THE CIT(A) ALWAR 4. THE CIT-ALWAR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 374 & 426 /JP/14) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR