ITO, Madikeri V. Sri. M.L. Krupal, Somwarpet

ITA 382/BANG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0443 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 16-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K Y NINGOJI RAO
• Keywords: Unexplained cash credit; Rejection of books of accounts; Opportunity of being heard; Peak credit; Period of limitation; Additional evidence; Tax effect; Time period of passing order
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.380(BANG) 2012 (ASSESSMENT YEAR : 2005-06) & ITA NO.1051(BANG)/2013 (ASSESSMENT YEAR 2006-07) SHRI M.L.KRUPAL, PROP: PRIME COMMODITIES, BLV COMPLEX, IB ROAD, SOMWARPET-571 236 PAN NO.ACNPK9093N APPELLANT VS THE INCOME TAX OFFICER, WARD-1 MADIKERI RESPONDENT AND ITA NO.382(BANG)/2012 (ASSESSMENT YEAR 2005-06) & ITA NO.1061(B)/2013 (ASSESSMENT YEAR 2006-07) THE INCOME TAX OFFICER, WARD-1, MADIKERI APPELLANT VS SHRI M.L.KRUPAL, PROP: PRIME COMMODITIES, BLV COMPLEX, IB ROAD, SOMWARPET-571 236. PAN NO.ACNPK9093N RESPONDENT ASSESSEE BY : SHRI K.Y NINGOJI RAO, CA REVENUE BY : SHRI SUNIL KUMAR AGARWALA, JCIT DATE OF HEARING : 29-03-2016 DATE OF PRONOUNCEMENT : : 06-05-2016 ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 2 O R D E R PER BENCH: THESE ARE FOUR APPEALS OUT OF WHICH TWO ARE FILED B Y THE ASSESEE AND TWO ARE FILED BY THE REVENUE FOR TWO ASSESSMENT YEA RS I.E. 2005-06 & 2006-07. ALL THESE APPEALS HAVE BEEN HEARD TOGETH ER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE. 2. FIRST WE TAKE UP THE APPEAL IN ITA NO.380(B)/201 2 FOR THE ASSESSMENT YEAR 2005-06. 2.1 GROUND NO.1 IS GENERAL IN NATURE AND GROUND NO. 2 IS AS UNDER; 2. THAT THE RESPONDENT OFFICER ERRED IN MAKING AN ADDITION OF RS.6,34,501/- TOWARDS THE ALLEGED SUPPR ESSION OF SALES WITH COMPLETE DISREGARDED TO THE FACTS OF THE CASE AND AS SUCH THE IMPUGNED ADDITION IS LIABLE TO SET ASIDE. IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESEE T HAT A COPY OF THE WRITTEN SUBMISSION DATED 22-07-2009 FILED BEFORE TH E CIT(A) IS AVAILABLE AT PAGE NOS.1 TO 21 OF THE PAPER BOOK AND IN PARTICULA R, OUR ATTENTION WAS DRAWN TO PAGE NO.8 OF THE PAPER BOOK AND IT WAS POI NTED OUT THAT AS PER THE DETAILS GIVEN IN PARA-21 OF THE WRITTEN SUBMISS ION, THE FIGURE OF SALE AS PER BOOKS IS TALLYING WITH THE DETAILS, AS PER MONT HLY RETURNS IN FORM NO.3, BUT BY MISTAKE, IN THE ANNUAL RETURN IN FORM NO.4, A HIGHER AMOUNT OF SALE WAS REPORTED AND THE ADDITION WAS MADE BY THE AO ON THE BASIS OF THIS FIGURE OF SALE IN THE ANNUAL RETURN BY IGNORIN G THE FIGURES OF SALE IN THE MONTHLY RETURN OF VAT. IT WAS FURTHER SUBMITTE D THAT ON PAGE NO.102 OF THE PAPER BOOK IS THE MONTHLY ABSTRACT OF SALES TURNOVER AS PER MONTHLY SALES TAX RETURN FOR THE FINANCIAL YEAR ENDING 31-0 3-2005 AND AS PER THE SAME, THE TOTAL CST TURNOVER FOR THIS YEAR IS RS. 1 0,28,93,012 WHICH IS TALLYING WITH FIGURE OF SALES AS PER ASSESSEES BOO KS OF ACCOUNTS. HE HAS ALSO DRAWN OUR ATTENTION TO PAGE NO.151 TO 154 OF T HE PAPER BOOK ON WHICH THERE IS COPY OF ANNUAL RETURN OF TURNOVER FI LED WITH CST AUTHORITY FOR THE YEAR ENDING 31-03-2005 AND HE POINTED OUT T HAT AS PER THE SAME, THE CST TURNOVER WAS REPORTED AT HIGHER FIGURE OF 1 035.28 LAKHS AND THE ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 3 ADDITION WAS MADE BY THE AO ON THE BASIS OF THIS FI GURE OF CST SALES IN ANNUAL RETURN. HE SUBMITTED THAT SINCE THE FIGURE AS PER MONTHLY SALES TAX RETURN IS TALLYING WITH THE BOOKS OF ACCOUNTS, NO ADDITION IS JUSTIFIED. 3. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THERE IS NO DISPUTE THAT THE ANNUAL TURNOVER OF CST SALES A S PER ANNUAL RETURN FILED BEFORE THE SALES TAX AUTHORITY IS RS.1035.28 LAKHS AND THE ANNUAL SALE OF CST SALES AS PER BOOKS OF ACCOUNT IS ONLY R S.1028.93 LAKHS. THE ADDITION MADE BY THE AO IS ON ACCOUNT OF HIGHER TUR NOVER AS PER ANNUAL RETURN FILED WITH SALES TAX AUTHORITY AS COMPARED T O SALES REPORTED BY THE ASSESSEE IN THE P&L ACCOUNT. THEREFORE, IF IT IS FOUND THAT THE FIGURE OF CST SALES AS PER ANNUAL RETURN FILED BEFORE THE SAL ES TAX AUTHORITIES IS CORRECT THEN, THE ADDITION MADE BY THE AO IS JUSTIF IED. WHILE EXAMINING THE CORRECTNESS OF THE FIGURE OF SALES REPORTED IN ANNUAL RETURN IN FORM NO.4 FILED WITH CST AUTHORITIES AS AVAILABLE AT PAG ES 151 TO 154 OF PAPER BOOK, IT IS SEEN THAT IN THE ANNUAL RETURN, IT IS R EPORTED THAT THE AMOUNT OF SALES TAX PAYABLE ON CST SALES IS AT THE RATE OF 4% AND THE SAME WAS WORKED OUT AT RS.41,41,120/- BEING THE AMOUNT OF SA LES TAX COLLECTED, AMOUNT OF SALES TAX PAYABLE AS WELL AS AMOUNT OF SA LES TAX PAID. IF THERE IS A MISTAKE IN THE ANNUAL RETURN FILED BEFORE THE SALES TAX AUTHORITIES, THE ASSESSEE COULD HAVE SHOWN BEFORE US, THE COPY OF AP PLICATION OF RECTIFICATION OF ANNUAL RETURN IF ANY, FILED BEFORE THE SALES TAX AUTHORITIES. WHEN THE ASSESEE HAD FILED ANNUAL RETURN SHOWING HI GHER TURNOVER AND PAID THE AMOUNT OF CST ON THE BASIS OF CST SALES RE PORTED IN ANNUAL RETURN AND THIS IS NOT SHOWN TO US THAT ANY RECTIFI CATION REQUEST WAS MADE BEFORE SALES TAX AUTHORITY OR THAT ANY REFUND WAS R ECEIVED OR CLAIMED FROM THE SALES TAX AUTHORITY ON ACCOUNT OF HIGHER AMOUNT OF CST SALES REPORTED IN ANNUAL RETURN BY MISTAKE, THIS IS NOT ACCEPTABLE THAT THERE IS A MISTAKE IN THE AMOUNT OF CST SALES AS PER THE ANNUAL RETURN FILED BEFORE THE SALES TAX AUTHORITY. MONTHLY RETURNS ARE FILED EARLIER AF TER EACH MONTH AND ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 4 THEREAFTER, ANNUAL RETURN IS FILED AFTER THE END OF THE FINANCIAL YEAR AND IN THE PRESENT CASE, THE ANNUAL RETURNS FOR THE FINANC IAL YEAR 2004-05 WAS FILED ON 01-06-2005. HENCE, IT CANNOT BE CLAIMED T HAT THERE IS A MISTAKE IN THE ANNUAL RETURN ONLY ON THIS BASIS ALONE THAT FIGURE OF SALE REPORTED IN MONTHLY RETURN IS LESS, AS COMPARED TO FIGURE OF TURNOVER REPORTED IN ANNUAL RETURN BECAUSE THE ANNUAL RETURNS ARE FILED AFTER PROPER VERIFICATION AND GENERALLY, WE FIND THAT THERE MAY BE MISTAKE IN THE MONTHLY RETURN AND NOT IN THE ANNUAL RETURN. WE D O NOT WANT TO SAY THAT THERE CANNOT BE ANY MISTAKE IN THE ANNUAL RETURN BU T THEN THE ASSESSEE HAS TO ESTABLISH THAT THERE IS MISTAKE IN THE ANNUA L RETURN BY BRINGING COGENT MATERIAL ON RECORD AND SIMPLY SAYING THAT SI NCE THE ANNUAL RETURN IS NOT TALLYING WITH MONTHLY RETURN, THERE IS MISTA KE IN ANNUAL RETURN IS NOT SUFFICIENT BECAUSE MISTAKE MAY BE IN MONTHLY RE TURNS ALSO. MERE COMPARISON WITH THE MONTHLY RETURN IS NOT SUFFICIEN T, PARTICULARLY WHEN THERE IS NO RECTIFICATION APPLICATION FILED BEFORE THE SALES TAX AUTHORITY, ASKING FOR RECTIFICATION IN ANNUAL RETURN AND ASKIN G FOR REFUND OF EXCESS SALES TAX PAID ON THE BASIS OF MISTAKE IN THE ANNUA L RETURN. HENCE, WE FIND THAT NO MERIT IN THIS CONTENTION THAT THERE IS MISTAKE IN THE ANNUAL RETURN AND THEREFORE, THIS GROUND OF ASSESSEE IS RE JECTED. 5. GROUND NO.3 IS A UNDER; 3. THAT THE RESPONDENT OFFICER ERRED IN ADDING A SUM OF RS.15,95,091/- TO GROSS PROFIT, THE SAME B EING THE DIFFERENCE BETWEEN THE VALUE OF STOCKS FALSELY DECLARED TO CANARA BANK AS AT 31-03-2004 AND 31-03- 2005 WITH COMPLETE DISREGARD TO THE FACTS OF THE CA SE AND AS SUCH THE IMPUGNED ADDITION IS LIABLE TO SET ASIDE. IT WAS FAIRLY CONCEDED BY THE LEARNED AR OF THE AS SESSEE THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUN AL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO. 1234(B)/2001 DATED 31-08-2012. HE SUBMITTED A COPY OF THE TRIBUNAL OR DER. IN THAT YEAR, THE CLOSING STOCK AS ON 31-03-2004 DECLARED TO THE BANK WAS RS.35,74,910/- ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 5 BUT OUT OF THIS, THE TRIBUNAL HELD THAT THE CLOSING STOCK OF RS.19.25 LAKHS IS OUT OF OPENING STOCK AND TO THAT EXTENT, THE ADD ITION WAS DELETED AND THE BALANCE ADDITION OF WAS CONFIRMED ON THIS BASIS THAT THIS MUCH STOCK WAS PURCHASED IN THAT YEAR OUT OF UNDISCLOSED SOURC ES. IT WAS SUBMITTED FURTHER THAT ON THE SAME BASIS, IN THE PR ESENT YEAR ALSO, CLOSING STOCK AS ON 31-03-2004 OF RS.35,74,910/- WILL BE CO NSIDERED AS OPENING STOCK AS ON 01-04-2004 AND THEREFORE, ONLY INCREASE IN THE CLOSING STOCK AS ON 31-03-2005 MAY BE ADDED. 6. THE LEARNED DR OF THE REVENUE SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT AS PER THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2004-05 WHEREIN IT WAS HELD THAT CLOSING STOCK AS ON 31-03- 2004 SHOULD BE CONSIDERED AS OPENING STOCK ON 01-04-2004 RELEVANT FOR THE ASSESSMENT YEAR 2005-06. IN THE PRESENT YEAR, THE CLOSING S TOCK AS PER STOCK STATEMENT GIVEN TO CANARA BANK AS ON 31-03-2005 IS RS.51.70 LAKHS. THE CLOSING STOCK AS PER THE STOCK STATEMENT SUBMIT TED TO CANARA BANK AS ON 31-03-22004 WAS OF RS.35,74,910/- AND THE AO MADE THE ADDITION OF DIFFERENCE AMOUNT ONLY OF RS.15,95,091/-. THIS IS IN LINE WITH THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 2004-05 AND THEREFORE, THIS GROUND OF THE ASSESSEE IS ALSO REJECTED. 7.1 GROUND NO.4 IS AS UNDER; 4. THAT THE RESPONDENT OFFICER ERRED IN TREATING T HE CREDITORS TO THE EXTENT OF RS.7,24,000/- AS BOGUS C REDITS IN AN ARBITRARY MANNER WITH COMPLETE DISREGARD TOP THE FACTS OF THE CASE AND AS SUCH HE IMPUGNED ADDITION IS LIABLE TO SET ASIDE. IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT COPY OF THE CONFIRMATORY LETTER DATED 09-11-2012 GIVEN BY THREE CREDITORS IN RESPECT OF RS.2.98 LAKHS, RS. 3.60 LAKHS AND RS.5.30 LAKHS ARE AVAILABLE ON PAGES 338 TO 340 OF THE PAPER BOOK. HE SUBMITTED THAT IT SHOULD BE ADMITTED AS ADDITIONAL ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 6 EVIDENCE AND THE ADDITION MADE BY THE AO AND CONFIR MED BY THE CIT(A) SHOULD BE DELETED. 8. THE LEARNED DR OF THE REVENUE SUBMITTED THAT TH E ADDITIONAL EVIDENCE SHOULD NOT BE ADMITTED AND HE SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT ON PAGE NO.16 OF THE ORDER, IT IS NOTED BY THE LEARNED CIT( A) THAT THE AO HAD ASKED THE ASSESSEE TO FURNISH THE NAMES AND DETAILED ADDRESS OF THE SUNDRY CREDITORS ALONG WITH THE CONFIRMATION AND IN REPLY, THE ASSES SEE FILED A LETTER STATING THAT THERE WAS A BALANCE OF RS.42,36,272/- WHICH WA S CLEARED SUBSEQUENTLY OUT OF AMOUNTS RECEIVED FROM SUNDRY DEBTORS, BUT DE TAILS CALLED FOR WERE NOT FURNISHED. WHEN THE AO ASKED AGAIN FOR FILING THE DETAILS, THE ASSESSEE FILED NAMES AND ADDRESS WITHOUT ANY CONFIRMATION LETTERS AND ACCOUNT EXTRACTS. THE AO ADDRESSED LETTERS TO THESE CREDITORS TO APPE AR ALONG WITH VARIOUS DETAILS AND IN RESPONSE, ONLY THREE PERSONS APPEARE D AND CONFIRMED ONLY PART OF THE CREDITS. THE AO HAD GIVEN DUE CREDIT FOR TH E AMOUNTS CONFIRMED BY THEM AND TREATED THE BALANCE CREDIT APPEARING IN TH EIR NAMES AS NOT GENUINE. THE ADDITION IN DISPUTE AS PER THIS GROUND OF RS.7. 24 LAKHS IS IN RESPECT OF THESE CREDITORS. IT IS ALSO NOTED BY THE LEARNED C IT(A) THAT EVEN IN APPEAL, THE ASSESSEE COULD NOT ESTABLISH ANYTHING BETTER. THE A SSESSEE HAS FILED CONFIRMATION OF THESE THREE CREDITORS BY WAY OF ADD ITIONAL EVIDENCE ON PAGES 338 TO 340 OF THE PAPER BOOK BUT THIS IS NOT A CASE WHERE CONFIRMATION WAS NOT AVAILABLE EARLIER. IN FACT, THESE THREE CREDITO RS FILED CONFIRMATION BEFORE THE AO ALSO AND THEY APPEARED BEFORE THE AO AND CONFIRM ED ONLY PART AMOUNT OF THE CREDITS AND THE AO ALLOWED THE BENEFIT TO THE E XTENT OF CREDIT AMOUNT CONFIRMED BY THESE CREDITORS. THERE IS NOTHING BRO UGHT ON RECORD BEFORE ANY OF THE AUTHORITIES BELOW OR BEFORE US THAT WHY THES E PARTIES CONFIRMED ONLY PART OF THE AMOUNT OF THE CREDIT WHEN THEY APPEARED BEFORE THE AO. THEREFORE, ON THE BASIS OF THESE CONFIRMATION LETTE R SUBMITTED BEFORE US AS ADDITIONAL EVIDENCE, NO RELIEF CAN BE ALLOWED TO TH E ASSESSEE IN VIEW OF THE FACT THAT THESE PARTIES APPEARED BEFORE THE AO AND CONFI RMED ONLY PART AMOUNT OF ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 7 CREDIT AND NOTHING HAS BEEN BROUGHT ON RECORD BY TH E ASSESSEE TO SHOW THAT THERE WAS ANY MISTAKE IN THE STATEMENT OF THESE THR EE PARTIES BEFORE THE AO, AS PER WHICH THEY CONFIRMED ONLY PART AMOUNT OF CRE DITS. THEREFORE, THIS GROUND OF ASSESSEE IS ALSO REJECTED. 9.1 GROUND NO.5 IS AS UNDER; 5. THAT THE RESPONDENT OFFICER ERRED IN TREATING THE CREDITORS TO THE EXTENT OF RS.11,88,000/- AS BOGUS CREDITS IN AN ARBITRARY MANNER WITH COMPLETE DISREGARD TO THE FACTS OF THE CASE AND AS SUCH THE IMPUGNED ADDITION IS LIABL E TO SET ASIDE. REGARDING THIS GROUND ALSO, IT WAS SUBMITTED BY TH E LEARNED AR OF THE ASSESSEE THAT THE ASSESSEE COULD NOT FURNISH CONFIR MATION OF THE PARTIES, BUT THE CREDITS ARE GENUINE AND THEREFORE, THE ADDITION SHOULD BE DELETED. 10. THE LEARNED DR OF THE REVENUE SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT ON PAGE 17 OF HIS ORDER, IT IS NOTED BY THE LD. CIT(A) THAT THE NEXT BUNCH OF CREDITORS HAVE NOT RESPONDED AND FOR THE AMOUNTS OF THESE CRE DITS OF RS.11,88,000/-, EVEN AFTER REPEATED OPPORTUNITIES, THE ASSESSEE COU LD NOT ESTABLISH THESE CREDITS. THEREFORE, THE AFORESAID ADDITION IS CONFI RMED. 12. BEFORE US ALSO, THE ASSESSEE COULD NOT ESTABLI SH THESE CREDITS BY BRINGING THE CONFIRMATION AND ANY DOCUMENTS IN SUPP ORT OF IDENTIFY OF THE CREDITORS AND THEIR CREDIT WORTHINESS. THEREFORE, W E FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. AC CORDINGLY, GROUND NO.5 IS ALSO REJECTED. ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 8 13. GROUND NO.6 & 7 ARE AS UNDER; 6. THAT THE RESPONDENT OFFICER ERRED IN MAKING AN ADDITION ON ACCOUNT OF THE ALLEGED UNEXPLAINED CASH DEPOSIT IN TO THE OVERDRAFT ACCOUNT NO.1147 WITH THE CANARA BANK WITH COMPLETE DISREGARD TO THE FACTS OF THE CASE AN D AS SUCH THE IMPUGNED ADDITION SO MADE IS LIABLE TO SET ASID E. 7. THAT THE LD.CIT(A) ERRED IN DIRECTING TO MAKE A N ADDITIONS TO THE EXTENT OF RS.37,20,061/- ON ACCOUN T OF THE ALLEGED UNEXPLAINED CASH DEPOSITS IN TO THE OVERDRA FT ACCOUNT NO.1147 WITH THE CANARA BANK WITH COMPLETE DISREGAR D TO THE FACTS OF THE CASE AND AS SUCH THE IMPUGNED ADDI TION SO MADE IS LIABLE TO SET ASIDE. IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT THE LEARNED CIT(A) HAD DELETED THE PART OF THE AMOUNT OF ADDITI ON, WHEREAS HE SHOULD HAVE DELETED THE ENTIRE AMOUNT OF ADDITION. 14. THE LEARNED DR OF THE REVENUE SUPPORTED THE AO S ORDER. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT REGARDING THIS ISSUE, ON PAGE 4 & 5 OF HIS ORDER, IT IS STATE D BY THE LD.CIT(A) THAT IT WOULD BE MORE APPROPRIATE TO WORK OUT THE PEAK OF T HE CREDITS TO ARRIVE AT THE UNACCOUNTED MONEY DEPOSITED FOR THE PURPOSE OF THES E TRANSACTIONS AND DIRECTED THE AO TO WORK OUT THESE PURCHASES AND SA LES AND MAKE APPROPRIATE ADDITION ON THIS COUNT. HE HAS REFERRED TO THE ORD ER OF LD.CIT(A) FOR A.Y. 2004 05 WHEREIN IT WAS OBSERVED THAT OPENING STOCK AS ON 31-03-2003 IS AVAILABLE FOR SALE FOR DEPOSITING INTO OD ACCOUNT A ND ON THIS BASIS, HE DIRECTED THE AO TO KEEP THIS ASPECT ALSO IN CONSIDE RATION WHILE WORKING OUT THE PEAK CREDIT WHILE GIVING DUE CREDIT FOR THE CLO SING STOCK OF EARLIER YEAR WHICH WOULD NATURALLY BE AVAILABLE FOR DEPOSIT. IN OUR CONSIDERED OPINION, THE ENTIRE AMOUNT OF CLOSING STOCK OF EARLIER YEAR HAS BEEN CONSIDERED BY THE AO AS OPENING STOCK OF THE PRESENT YEAR AND THE ADD ITIONS WAS MADE BY THE AO TO THE EXTENT OF EXCESS OF CLOSING STOCK OF THE PRESENT YEAR OVER SUCH OPENING STOCK. IT MEANS THAT THE ENTIRE AMOUNT OF O PENING STOCK HAS BEEN ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 9 CONSIDERED AS PART OF THE CLOSING STOCK OF THE PRE SENT YEAR AND THEREFORE, SUCH OPENING STOCK CANNOT BE AVAILABLE FOR EXPLAINI NG CASH DEPOSIT IN THE BANK BECAUSE, EVEN IF IT IS HELD THAT OPENING STOCK WAS SOLD AND THE SALE PRICE WAS USED FOR PURCHASING DIFFERENT ITEMS WHICH WERE AVAILABLE IN CLOSING STOCK THEN ALSO, G.P ADDITION HAS TO BE MADE IN RESPECT O F SUCH SALES OUT OF OPENING STOCK. UNDER THESE FACTS, THE ASSESSEE DOES NOT DE SERVE ANY RELIEF ON THIS POINT. MOREOVER, LD.CIT(A) HAS NO POWER TO SET ASID E THE MATTER TO THE FILE OF THE AO AND HE HAS TO DECIDE THE ISSUE HIMSELF AND I F REQUIRED, HE MAY OBTAIN REMAND REPORT FROM THE AO. IN THE PRESENT CASE, LD .CIT(A) HAS RESTORED THE MATTER TO THE FILE OF THE AO WITH SOME DIRECTIONS. THE ORDER OF THE LD. CITA) IS NOT SUSTAINABLE AND THEREFORE, WE SET ASIDE HIS OR DER ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FILE FOR A FRESH DEC ISION WITH A DIRECTION THAT HE SHOULD DECIDE THE ISSUE HIMSELF INSTEAD OF SETTING ASIDE THE MATTER TO THE AO AND IF REQUIRED, HE MAY OBTAIN A REMAND REPORT FROM THE AO BUT HE SHOULD DECIDE THE ISSUE HIMSELF. NEEDLESS TO SAY, HE SHOUL D PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. ACCORDING LY, GROUND NO.6 & 7 ARE ALLOWED FOR STATISTICAL PURPOSES. 15.1. GROUND NO.8 IS GENERAL IN NATURE AND GROUND N O.9 IS CONSEQUENTIAL. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 17. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR A SSESSMENT YEAR 2005-06 IN ITA NO.382(B)/2012. 17.1 THE GROUNDS RAISED BY THE REVENUE ARE AS UNDE R; 1. WHETHER THE CIT(A) IS RIGHT IN DELETING THE ADD ITION MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS ON A PRESUMPTION THAT SUCH CASH CREDITS HAVE RESULTED FR OM THE CASH FLOW GENERATED ON ACCOUNT OF THE TRADING ACTIV ITY OF THE ASSESSEE & HENCE THE ADDITION SHOULD BE RESTRIC TED TO THE PEAK OF THE SAME? WHEREAS THE FACT IS THAT NO NEXUS COULD BE ESTABLISHED BETWEEN THE CASH DEPOSITS AND THE ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 10 TRADING ACTIVITY OF THE ASSESSEE AND THE SO CALLED TRADING ACTIVITY IS NOT ACCOUNTED IN THE BOOKS OF ACCOUNT A T ALL. 2. WHETHER THE CIT(A) IS RIGHT IN DELETING THE ADD ITION MADE ON ACCOUNT OF EXCESS CLOSING STOCK WORKED OUT AFTER GIVING DUE CREDENCE TO THE ASSETS AND LIABILITIES AND TAKING INTO CONSIDERATION THE TRADING RESULTS BASED ON A PRESUMPTION THAT THE ADDITION ON ACCOUNT OF GROSS P ROFIT AND CLOSING STOCK DIFFERENCE AMOUNTS TO DOUBLE ADDI TION? WHEREAS THE FACT IS THAT THE CLOSING STOCK DIFFEREN CE IS NOT EXPLAINED AND ENTIRE TRADING TRANSACTION WAS NOT AC CRUED AT ALL. 3. WHETHER THE CIT(A) IS RIGHT IN DELETING THE ADD ITION MADE ON ACCOUNT OF BOGS CREDITORS IN THE LIGHT OF T HE FACT THAT THE GENUINENESS OF THE CREDITORS COULD NOT BE PROVED BY THE ASSESSEE. 4. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 18. THE LEARNED DR OF THE REVENUE SUPPORTED THE OR DER OF THE AO WHEREAS THE LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THIS ISSUE HAS BEEN DECIDED BY THE LD.CIT(A) BY MAKING FOLLOWING O BSERVATIONS AT PAGES 4 & 5 OF HIS ORDER; HOWEVER ON THE ISSUE OF DEPOSITS IN THE BANK ACC OUNT, I FIND IT IS NOT A CASE WHERE THERE WERE CONTINUOUS D EPOSITS. AS COULD BE SEEN FROM THE BANK STATEMENTS ANNEXED TO T HE ASSESSMENT ORDER THERE ARE PERIODICAL DEPOSITS AND ISSUE OF CHEQUES TO VARIOUS INDIVIDUALS. THIS APPEARS TO BE A COMPLETE SET OF TRADING OUTSIDE THE BOOKS OF ACCOUNTS FOR WH ICH THIS BANK OD IS USED. THE AO ONLY COUNTED THE DEPOSITS WHILE THERE IS NO ACCUMULATION OF SUCH DEPOSITS. I AM O F THE VIEW THAT OWING BY THE NATURE OF THE ACCOUNT, IT LOOKS L IKE A PERIODICAL TRADING WHEREIN THE PEAK OF THE BANK DEP OSITS WOULD BE THE INVESTMENT IN THIS PARTICULAR TRANSACT ION AND THE PERIODICAL DEPOSITS WOULD BE OUT OF SALE PROCEEDS A ND THE ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 11 WITHDRAWALS ARE FOR PAYMENT OF PURCHASES. AS SEEN F ROM THE ASSESSMENT ORDER ALSO, THE ASSESSEE HAS EXPLAINED T HESE TRANSACTIONS ON THESE LINES. IT WOULD BE MORE APPR OPRIATE TO WORK OUT THE PEAK OF THE CREDITS TO ARRIVE AT THE U NACCOUNTED MONEY DEPOSITS FOR THE PURPOSE OF THESE TRANSACTION S. FURTHER, THE AO IS DIRECTED TO WORK OUT THE RESULT OF THESE PURCHASES AND SALES AND MAKE APPROPRIATE ADDITION O N THIS COUNT ALSO. FOR THE AY: 2004-05 IN THE APPEAL ORDE R CITED SUPRA, IT IS OBSERVED THAT THE OPENING STOCK AS ON 31-03-2003 IS AVAILABLE FOR SALE FOR DEPOSITING INTO OD ACCOUN T. THE AO IS DIRECTED TO KEEP THIS ASPECT ALSO AND WORK OUT THE PEAK CREDIT WHILE GIVING DUE CREDIT FOR THE CLOSING STOCK OF EA RLIER YEAR WHICH WOULD NATURALLY BE AVAILABLE FOR DEPOSIT. AC CORDINGLY, THE APPEAL ON THIS GROUND IS PARTLY ALLOWED. FROM THE ABOVE PARA REPRODUCED FROM THE ORDER OF T HE LD.CIT(A), IT IS SEEN THAT THE LD.CIT(A) HAD IN FACT RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR HIS DECISION WITH SOME DIRECTIONS BUT THE CIT(A) CA NNOT SET ASIDE AND RESTORE THE MATTER BACK TO THE FILE OF THE AO. HE HAS TO DECID E THE ISSUE HIMSELF AND IF REQUIRED, HE CAN OBTAIN REMAND REPORT FROM THE AO. IT IS ALSO SEEN THAT HE HAS HELD THAT THE OPENING STOCK SHOULD BE CONSIDERED AS AVAILABLE FOR SALE FOR DEPOSIT IN BANK ACCOUNT AND HE DIRECTED THE AO TO KEEP THIS ASPECT IN CONSIDERATION WHILE WORKING OUT PEAK CREDIT BY GIVING THE CREDIT FOR THE CLOSING STOCK OF THE EARLIER YEAR BUT WHILE DECIDING THE ISSUE IN RESPEC T OF OPENING STOCK ON THE BASIS OF CLOSING STOCK AT THE END OF THE LAST YEAR, THE A O HAS HELD IN HIS ASSESSMENT ORDER THAT THE CLOSING STOCK OF THE PRESENT YEAR IS INCLUSIVE OF THE OPENING STOCK AND HE HAS MADE ADDITION TO THE EXTENT OF THE BALAN CE AMOUNT ONLY BEING THE EXCESS OF CLOSING STOCK OVER OPENING STOCK. IF THE OPENING STOCK WAS PART OF THE CLOSING STOCK OF THE PRESENT YEAR THEN HOW THE SAME CAN BE SOLD AND SALE PROCEEDS CAN BE DEPOSITED IN THE BANK ACCOUNT. THE REFORE, WE FEEL IT PROPER THAT THIS MATTER SHOULD GO BACK TO THE FILE OF LD.CIT(A) FOR FRESH DECISION. LEARNED CIT(A) SHOULD DECIDE THE ISSUE HIMSELF INSTEAD OF R ESTORING THE MATTER TO THE FILE OF THE AO AND FOR DOING SO, HE MAY OBTAIN REMAND RE PORT FROM THE AO. LD. CIT(A) SHOULD PASS NECESSARY ORDER AS PAW, AS PER T HE ABOVE DISCUSSION, AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO BOTH S IDES. ACCORDINGLY GROUND NO.1 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURP OSES. ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 12 20. REGARDING GROUND NO.2 OF THE REVENUE, WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE LD.CIT(A) BY MAKING FOLLOWING T HE OBSERVATION ON PAGES 15 & 16 OF HIS ORDER. THE SAME ARE REPRODUCED AS UNDER; IN THE STATEMENT OF FACTS, IT IS ARGUED THAT THE DIFFERENCE BETWEEN THE ALLEGED VALUE OF STOCK AS AT 31.3.2004 AND 31.3.2005 HAS ALREADY BEEN ADDED AND HENCE SEPARATE ADDITION IS NOT WARRANTED. I HAVE EXAMINED THE ISS UE CAREFULLY. AS FAR AS THE CLOSING STOCK IS CONCERN ED, IT IS ALREADY COVERED IN THE RECASTING TRADING ACCOUNT AN D THE ADDITION MAD IS ALSO CONFIRMED. NOW ON THE SAME LO SING STOCK MAKING ANOTHER ADDITION ON ACCOUNT OF INCREAS E IN ASSET WOULD ONLY BE A DOUBLE ADDITION. ELSEWHERE IN THIS ORDER, BASED ON THE TRANSACTIONS IN OD ACCOUNT THE AO IS DIRECTED TO WORK OUT THE PURCHASE AND SALES AND THE PEAK CREDIT. IN THE PROCESS, THIS ISSUE GETS COVERED IN BOTH THESE ADDITIONS AND THIS SEPARATE ADDITION ON ACCOUNT OF EXCESS ASSET IS NOT WARRANTED. ACCORDINGLY, THE SAME IS D IRECTED TO BE DELETED. FROM THE ABOVE PARA REPRODUCED FROM THE ORDER OF T HE LD.CIT(A), IT IS SEEN THAT THE LD.CIT(A) HAD DIRECTED THE AO TO WORK OUT THE PURCHASES AND SALES AND THE PEAK CREDIT AND BASED ON THAT, HE HAS ALLOWED R ELIEF ON THIS ISSUE. THE ISSUE REGARDING THE WORKING OUT OF ALL PURCHASE AND SALE AND PEAK CREDIT RAISED BY THE REVENUE AT GROUND NO.1 AND BY THE ASSESSEE, AS GROU ND NO.6 & 7 HAS ALREADY BEEN RESTORED BACK TO THE FILE OF THE LD.CIT(A) FOR A FRESH DECISION AND IT WAS HELD THAT LD.CIT(A) SHOULD DECIDE THE ISSUE HIMSELF INST EAD OF RESTORING THE MATTER BACK TO THE FILE OF AO. THEREFORE, ON THIS ISSUE A LSO, WE SET ASIDE THE ORDER OF CIT (A) AND RESTORE THE MATTER TO THE LD.CIT(A) SHOULD AND HE SHOULD DECIDE THE ISSUE HIMSELF AFRESH AFTER DECIDING THE ISSUE IN RESPECT OF UNACCOUNTED PURCHASE AND SALE AND PEAK CREDIT. ACCORDINGLY, GROUND NO. 2 IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 21. REGARDING GROUND NO.3, WE FIND THAT THE ADDITI ON OF RS.20,74,272/- WAS MADE BY THE AO. AS PER PARA NO.9.1 TO 9.3 OF AS SESSMENT ORDER BY STATING THAT THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE PARTIES COULD NOT BE VERIFIED. THESE AMOUNTS ARE IN RESPEC T OF FIVE CREDITORS WHO HAVE ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 13 FILED REPLY IN TAPAL ON 17-12-2008 BEFORE THE AO. THIS ADDITION WAS DELETED BY THE LD. CIT(A) BY OBSERVING THAT THESE CREDITORS H AVE CONFIRMED THE TRANSACTION AND THERE IS NO DISPUTE THAT THEY ARE IN EXISTENCE AND THEY DID CONFIRM HAVING AGRICULTURAL LANDS. UNDER THESE FACTS, IT WAS HELD BY THE LD. CIT(A) THAT THE PRIMARY ONUS OF ASSESSEE GETS DISCHARGED. THE ASSES SEE HAS SUBMITTED ENGLISH TRANSLATION OF THE RECORDS OF RTC CERTIFICATE ISSUE D BY THE REVENUE AUTHORITIES IN RESPECT OF LAND HELD BY CREDITORS WHICH ARE IN KANN ADA AND ARE AVAILABLE ON PAGES 215 TO 247 OF THE PAPER BOOK. THE IDENTITY O F THE CREDITORS IS NOT DOUBTED BY THE AO ALSO AND THE ADDITION WAS MADE BY HIM ON THIS BASIS ALONE THAT THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINES S OF THE CREDITORS COULD NOT BE ESTABLISHED. THIS IS NOT THE CASE OF THE AO TH AT COFFEE WAS NOT PURCHASED BY THE ASSESSEE FROM THE PARTIES. THE LEDGER ACCOUNT OF FIRST PARTY SHRI M.L.RAJU IS AVAILABLE AT PAGE NO.205 OF PAPER BOOK WHICH SHOWS OPENING BALANCE OF RS.2,17,272/- AND FRESH PURCHASE OF COFFEE FROM THI S PARTY DURING THIS YEAR OF 2.25 LAKHS RESULTING INTO CLOSING BALANCE OF RS.4,4 2,272/-. THE LEDGER ACCOUNT OF SECOND PARTY M.K.SUVEENA, IS AVAILABLE AT PAGE 2 07 AT PAPER BOOK AS PER WHICH, IT SHOWS CLOSING BALANCE OF RS.3,60,000/- FR OM THIS PARTY IN THE PRESENT YEAR ON ACCOUNT OF PURCHASES IN THE PRESENT YEAR. SIMILARLY, THE LEDGER ACCOUNT OF THIRD PARTY SHRI K.M.JAYAPAKASH IS AVAILABLE AT PAGE 210 OF PAPER BOOK AS PER WHICH THERE IS FRESH PURCHASE OF COFFEE DURING THE PRESENT YEAR OF 5.30 LAKHS. THE LEDGER COPY OF 4 TH PARTY SHRI K.M.LOKANATH IS AVAILABLE AT PAGE 211 O F PAPER BOOK AND IN THIS LEDGER ACCOUNT ALSO SHOWS AN AMOUN T OF RS.5.22 LAKHS ON ACCOUNT OF PURCHASES IN THE PRESENT YEAR. THE LED GER COPY OF 5 TH PARTY SHRI H.M.SUDHEER IS AVAILABLE AT PAGE 214OF PAPER BOOK A ND IT SHOWS FRESH PURCHASES OF COFFEE OF RS.2.20 LAKHS. HENCE, IT IS SEEN TH AT THE ENTIRE CREDIT OF LEDGER ACCOUNT OF THESE PARTIES IS ON ACCOUNT OF FRESH PUR CHASE OF COFFEE DURING THE PRESENT YEAR EXCEPT OPENING BALANCE OF RS.2,17,272/ - IN THE ACCOUNT OF ONE SHRI M.L.RAJU. NO ADDITION CAN BE MADE ON ACCOUNT OF OP ENING BALANCE AND IN RESPECT OF THE CREDITS ON ACCOUNT OF FRESH PURCHASE OF COFFEE ALSO, THE GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED U NLESS THE AO REJECTS THE PURCHASE. THE PURCHASE IS NOT DOUBTED BY THE AO AS PER THE ASSESSMENT ORDER AND THEREFORE, THE GENUINENESS OF THE TRANSACTION R EGARDING PURCHASES AS ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 14 APPEARING IN THE LEDGER ACCOUNT CANNOT BE DOUBTED. REGARDING THE CREDIT WORTHINESS OF THESE PARTIES, THE ASSESSEE HAS SUBMI TTED THE EVIDENCE REGARDING LAND HOLDING OF FIVE CREDITORS AND THIS IS NOT THE CASE OF THE AO THAT THE SAME IS NOT CORRECT. CONSIDERING ALL THESE FACTS, WE ARE O F THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD.CIT ( A) ON THIS ISSUE. ACCORDINGLY, GROUND NO.3 OF THE REVENUE IS REJECTED. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 23. NOW WE TAKE UP APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006- 07 IN ITA NO.1051(B)/2013. THE GROUNDS RAISED BY T HE ASSESSEE ARE AS UNDER; 1. THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE IN SOFAR AS IT IS INCORRECT 2. THE LD.CIT(A) MYSORE ERRED IN UPHOLDING THE ADDI TION OF RS.82,69,825/- MADE BY THE AO TOWARDS THE ALLEGE D INFLATION IN PURCHASES AND AS SUCH THE IMPUGNED ADD ITION OF RS.82,69,825/- SO SUSTAINED IS LIABLE TO SET ASI DE. 3. THE LD.CIT(A) ERRED IN UPHOLDING THE IMPUGNED ADDITION OF RS.82,69,825/- MADE BY THE AO OUT OF M ERE SUSPICION AND SURMISE AND WITH COMPLETE DISREGARD T O THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LD.CIT(A) ERRED IN NOT DIRECTING THE DEDUCT ION OF STOCK IN TRADE ADDITION OF RS.51,70,000/- AS AT 31- 03-20- 05 WHILE COMPUTING THE CURRENT YEARS INCOME AND AS SUCH THE IMPUGNED ORDER IS LIABLE TO SET ASIDE. 5.THAT THE IMPUGNED LEVY OF INTEREST U/S 234B AND 234C ARE LIABLE TO SET ASIDE INSOFAR AS THE ASSESSE ES IS NOT LIABLE THERE FOR. RELIEF CLAIMED IN VIEW OF THE GROUNDS HEREIN URGED AND OF THOSE WH ICH MAY BE URGED AT THE TIME OF HEARING, THE ASSESSEE P RAYS THAT HONBLE ITAT MAY PLEASE; ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 15 1. SET ASIDE THE IMPUGNED ADDITION OF RS.82,69,825/ - MADE BY THE RESPONDENT OFFICER. 2. DIRECT DEDUCTION OF THE STOCK OF RS.51,70,000/- CONSIDERED BY THE AO FOR AY: 2005-06; AND 3. TO SET ASIDE THE IMPUGNED LEVY OF INTEREST U/S 2 34B AND 234C OF THE IT ACT. 24. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND S WHICH ARE AS UNDER; 1. THE IMPUGNED ORDER OF ASSESSMENT MADE ON 21-12-2011 BY THE LD. AO U/S 143(3) R.W.S. 254 IS N ULL AND VOID AND IS LIABLE TO BE ANNULLED IN SOFAR AS T HE SAME IS BARRED BY LIMITATION OF TIME SPECIFIED UNDE R SUB- SECTION(2A) OF SEC.153 OF THE IT ACT, 1961. 2. THE LD. CIT(A) MYSORE ERRED IN UPHOLDING THE IMPUGNED ORDER OF ASSESSMENT MADE ON 21-12-2011 BY THE LD.AO U/S 143(3) R.W.S.254 THOUGH, IT IS NULL A ND VOID AND IS LIABLE TO BE ANNULLED IN SOFAR AS IT IS BARR ED BY LIMITATION OF TIME SPECIFIED UNDER SUB-SEC.(2A) OF SEC.153 OF THE IT ACT, 1961. 25. GROUND NO.4 WAS NOT PRESSED BY THE LEARNED AR OF THE ASSESSSEE AND REGARDING GROUND NO.5, IT WAS SUBMITTED THAT TH IS IS CONSEQUENTIAL. ACCORDINGLY, GROUND NO.4 OF THE ASSESSEE IS REJECTE D AS NOT PRESSED AND GROUND NO.5 IS HELD TO BE CONSEQUENTIAL IN NATURE. 26. REGARDING GROUND NO.1, 2 & 3, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT AT PAGES 127 TO 170 OF THE PAPER BOOK IS COPY OF URD PURCHASE REGISTER FOR THE PERIOD 01-04-2005 TO 31-08-2005 SE IZED BY THE ITO AT THE TIME OF SURVEY ON 09-03-2007. IT WAS ALSO SUBMITTED THA T MONTHLY ABSTRACT OF STOCK LEDGERS IN RESPECT OF ARABICA AND ROBUSTA COFFEE FO R THE YEAR ENDED ON 31-03- 2006 IS AVAILABLE AT PAGES 171 TO 171A OF PAPER BOO K. HE ALSO POINTED OUT THAT PRINT OUT OF STOCK LEDGER FOR ARABICA COFFEE F OR THE YEAR ENDED 31-03-2006 EXTRACTED FROM THE COMPUTERIZED ACCOUNTS IS AVAILAB LE AT PAGES 172-198 OF THE PAPER BOOK AND THE SIMILAR PRINT OUT FOR ROBUSTA CO FFEE IS AVAILABLE AT PAGES ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 16 199 TO 274 OF THE PAPER BOOK. IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PAGE NO.132 OF THE PAPER BOOK AND IT WAS POINTED OUT THA T THE FIRST EIGHT ITEMS ON THIS PAGE IS HAVING RATE OF RS.43.75 PER KG, WHEREA S THE REMAINING EIGHT ITEMS ARE HAVING THE RATE OF RS.95.75 PER KG. THEREAFTER , HE HAS DRAWN OUR ATTENTION TO PAGE NO.171 & 171A OF THE PAPER BOOK C ONTINUING MONTHLY SUMMARY OF ARABICA COFFEE AND ROBUSTA COFFEE RESPEC TIVELY. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT AS PER THE TOT AL AVAILABLE ON PAGE NO.134 OF THE PAPER BOOK FOR THE MONTH OF APRIL, 2005, THE TOTAL PURCHASE OF BOTH COFFEE IS SHOWN AS 3,13,450 KGS. WHEREAS AS PER THE MONTHLY SUMMARY AVAILABLE ON PAGE 171 OF THE PAPER BOOK, PURCHASE O F ARABICA COFFEE DURING APRIL 2005 IS 98,450 KGS AND PURCHASE OF ROBUSTA CO FFEE FOR THE MONTH OF APRIL 2005 AS PER PAGE 171A OF THE PAPER BOOK IS 3, 21,550 KGS. IT WAS POINTED OUT BY THE BENCH THAT AS PER THE MONTHLY SUMMARY, TOTAL PURCHASE DURING THE MONTH OF APRIL, 2005 OF ARABICA COFFEE AND ROBU STA COFFEE TAKEN TOGETHER COMES TO 4.20 LACS KGS. BUT AS PER MONTHLY SUMMARY BUT AS PER COPY OF URD PURCHASE REGISTER FOR THE MONTH OF APRIL, 2005 AVAI LABLE ON PAGES 127 TO 134 OF THE PAPER BOOK, THE TOTAL PURCHASE DURING THE MO NTH OF APRIL 2005 IS ONLY 313450 KGS. THEN HOW THIS PURCHASE REGISTER IS COR RECT AND MOREOVER IT WAS ALSO POINTED OUT THAT THE QUALITY OF COFFEE IS NOT MENTIONED IN THE PURCHASE REGISTER. THE BENCH ALSO WANTED TO KNOW WHETHER ANY DETAILS OF MONTHLY SUMMARY AVAILABLE ON PAGES 171 TO 171A OF THE PAPER BOOK IS AVAILABLE TO FIND OUT FROM WHERE THE SEPARATE QUANTITY OF PURCHASE OF BOTH TYPE OF COFFEE WAS WORKED OUT. IN REPLY, IT WAS SUBMITTED BY THE LD.AR OF THE ASSESSEE THAT SUCH WORKING IS NOT AVAILABLE AND ALTHOUGH, THE QUALITY OF COFFEE IS NOT MENTIONED IN THE PURCHASE REGISTER, BUT THE DIFFERENCE IN RAT ES OF THE PURCHASE PRICE OF BOTH COFFEE IS INDICATIVE OF THE TYPE OF COFFEE PUR CHASED. 27. THE LD. DR OF THE REVENUE SUPPORTED THE ORDER OF THE A.O. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY THE LD.CIT(A) AT PARA-4.10 OF HIS OR DER AND THE SAME IS REPRODUCED BELOW FOR READY REFERENCE; ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 17 4.10 I HAVE CONSIDERED THE RIVAL CONTENTIONS CAR EFULLY. EVEN AFTER HONBLE TRIBUNAL SET ASIDE THE MATTER TO THE FILE OF THE AO, THE ASSESSEE COULD NOT PRODUCE ANY CREDIBLE EVIDENCE IN SUPPORT OF ITS ARGUMENT THAT THE PURCHASES OF AR ABICA ARE RECORDED AS ROBUSTA. IF THAT IS TO BE TRUE, THEN, CORRESPONDING HIGHER VALUE PAYMENTS SHOULD HAVE BEEN REFLECTED IN DAY BOOK WHICH IS ALSO NOT ESTABLISHED. AS SEEN FROM THE PURCHASE REGISTERS, THERE ARE DETAILED ENTRIES FOR EACH PURCHASE AND ONLY ONE YEAR END ENTRY OF REDUCING TH E PURCHASE VALUE WITHOUT ANY BASIS. IN THE ABSENCE O F ANY CREDIBLE EVIDENCE, THE ENTIRE EFFORT OF RECASTING A CCOUNTS IN ONLY TO BRIDGE THE GAP WITH SOME ASSUMPTION S WHICH HAS NO BASIS. UNDER THESE CIRCUMSTANCES, I AGREE WITH TH E FINDINGS OF THE AO THAT THE PRIMARY DOCUMENTS LIKE PURCHASE REGISTER OR THE ACTUAL EVIDENCES AVAILABLE IN THIS CASE BESIDES THE RETURNS FOR SALE TAX PURPOSE ETC., ALL THE AVAILABLE EVIDEN CES GOES TO PROVE THAT THE RECORDED PURCHASE ARE LESS THAN THE RETURNED PURCHASE. THE RECAST ACCOUNTS ARE BASED ON PRESUMP TIONS AND ASSUMPTIONS WHICH ARE NOT SUPPORTED BY ANY EVID ENCES. I DO NOT FIND STRENGTH IN THE ARGUMENT OF THE ASSES SEE THAT THE AO SHOULD HAVE REJECTED THE BOOKS OF ACCOUNTS. THE AO ONLY MADE THE ADDITION BASED ON THE SAME BOOKS OF ACCOUN TS. IT IS THE ASSESSEE WHO REWORKED THE ACCOUNTS TO SUIT THEI R ARGUMENT. HENCE, THE NECESSITY FOR REJECTION OF BO OKS IS NOT THERE. HOWEVER, IN VIEW OF THE REMAND REPORT THE U NACCOUNTED PURCHASES WOULD GET MODIFIED TO RS.80,98,625/-. TO THAT EXTENT, THE ASSESSEE GETS RELIEF. FURTHER I FIND STRENGTH IN THE ARGUMENT OF THE ASSESSEE THAT THE CLOSING STOCK OF 31-03-2005 WOULD BECOME THE OPENING STOCK OF 1.4.2005, AO IS D IRECTED TO MAKE APPROPRIATE CORRECTIONS AS PER THE ORDER OF CI T(A) FOR THE AY: 2005-06, THESE GROUNDS ARE PARTLY ALLOWED. FROM THE ABOVE PARA REPRODUCED FROM THE ORDER OF T HE LD.CIT(A), IT IS SEEN THAT EVEN IN THE SECOND ROUND OF APPEAL, THE A SSESSEE COULD NOT PRODUCE ANY CREDIBLE EVIDENCE IN SUPPORT OF ITS ARGUMENT TH AT THE PURCHASES OF ARABICA ARE RECORDED AS ROBUSTA ALTHOUGH IN FIRST R OUND ALSO, ON THIS ISSUE, WAS THE ARGUMENT OF THE ASSESSEE THAT THE PURCHASE OF ARABIC COFFEE HAS BEEN REPORTED AS ROBUSTA COFFEE. CATEGORICAL FINDING HA S BEEN GIVEN BY THE LD.CIT(A) THAT EVEN AFTER RESTORING THE MATTER BACK BY THE TRIBUNAL TO THE FILE OF THE AO, THE ASSESEE COULD NOT PRODUCE ANY CREDIB LE EVIDENCE IN SUPPORT OF ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 18 HIS ARGUMENT THAT THE PURCHASE OF ARABICA COFFEE WA S REPORTED AS ROBUSTA COFFEE. 29. BEFORE US ALSO, SUCH EVIDENCE COULD NOT BE PRO DUCED BY THE LD, AR OF THE ASSESSSEE. IN FACT, AS DISCUSSED ABOVE, THE PURCHASE QUANTITY, AS PER PURCHASE REGISTER HAVING THE DETAILS OF PRICE IS LE SS THAN THE PURCHASE SHOWN BY THE ASSESSEE IN MONTHLY SUMMARY AVAILABLE ON PAG E NO.171 AND 171A OF THE PAPER BOOK FOR THE MONTH OF APRIL 2005. HENCE, WE FIND NO MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE AND THE SAME IS HE REBY REJECTED. NOW, WE DECIDE THE ADDITIONAL GROUNDS. IT WAS SUBMI TTED BY THE LD.AR OF THE ASSESSEE THAT THE ORIGINAL TRIBUNAL ORDER SETTI NG ASIDE THE MATTER TO THE FILE OF THE AO WAS PASSED ON 26-06-2009 AND THE CON SEQUENTIAL ASSESSMENT ORDER IS DATED 21-12-2011 PASSED BY THE AO U/S 143( 3)RWS 254 OF THE IT ACT, 1961 AND THEREFORE, THE ASSESSMENT ORDER IS TIME BA RRED. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. DR OF THE REVENUE THAT AFT ER PASSING OF THE TRIBUNAL ORDER ON 26-06-2009 WHICH IS AVAILABLE ON PAGES 95 TO 303 OF THE PAPER BOOK, THE REVENUE MOVED A M.P. BEFORE THE TRIBUNAL AND TH E TRIBUNAL PASSED ORDER IN M.P.NO.96(B)/2009 ON DATED 06-08-2010, COPY OF WHICH IS AVAILABLE ON PAGES 304 TO 305 OF THE PAPER BOOK AND THEREFORE, T HE LIMITATION PERIOD HAS TO BE CONSIDERED FROM THIS DATE OF M.P ORDER AND HENCE , THE ASSESSMENT ORDER IS NOT TIME BARRED, AS PER PROVISIONS OF SECTION 153 O F I T ACT. 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER THE PROVISIONS OF SUB-SEC.2A OF SEC. 153 OF THE IT ACT, 1961, THE AO HAD TO PASS A CONSEQUENTIAL ASSESSMENT ORDER AFTER SETTING ASIDE OF THE MATTER TO HIS FILE BY THE TRIBUNAL AS PER ITS ORDER U/S 254 OF THE IT ACT . THE PRESENT ASSESSMENT ORDER HAD BEEN PASSED BY THE AO AFTER PASSING OF TH E ORDER BY THE TRIBUNAL U/S 254(2) OF THE IT ACT IN MP NO.96(B)/2009, AS PE R WHICH, THE SCOPE OF THE ORIGINAL TRIBUNAL ORDER WAS ENLARGED BY THE TRIBUNA L AND THEREFORE, WE FIND FORCE IN THE SUBMISSION OF THE LD. DR OF THE REVENU E THAT THE PERIOD OF LIMITATION AS PROVIDED IN SUB-SEC.2A OF SEC.153 HAS TO BE CONSIDERED FROM THE RECEIPT OF THIS ORDER IN M.P. IN THE OFFICE OF CIT AND WHEN THIS IS DONE THAN IT ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 19 IS CLEAR THAT THE PRESENT ASSESSMENT ORDER IS NOT TIME BARRED BECAUSE THE SAME IS PASSED BEFORE THE EXPIRY OF ONE YEAR FROM T HE END OF FY IN WHICH THE ORDER U/S 254(2) OF THE IT ACT WAS PASSED BY THE TR IBUNAL. THEREFORE, ADDITIONAL GROUNDS OF THE ASSESSEE ARE ALSO REJECTE D. 31. IN THE RESULT, THE APPEAL OF THE ASSESEE IS DI SMISSED. NOW TAKE UP THE APPEAL FOR THE REVENUE FOR THE AY: 2005-06 IN ITA NO.1601(B)/2013. THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS; 1. WHETHER THE CTA) IS RIGHT IN GIVING RELIEF TO THE EXTENT OF THE BROUGHT FORWARD STOCK AGAINST THE ADDITIONS MADE ON THE FINDINGS OF INFLATED PURCHASES. 2. WHETHER THE CIT(A) IS RIGHT IN ISSUING DIRECTIO NS TO ADOPT THE CLOSING STOCK OF THE YEAR ENDED 31-03-200 5 AS THE OPENING STOCK OF THE CURRENT YEAR RELEVANT TO THE A SSESSMENT YEAR IN QUESTION AND TO EFFECT NECESSARY CORRECTION S IN COMPUTING THE INCOME ACCORDINGLY, IN THE BACKDROP O F THE ASSESSEES CLAIM WHICH ARE AMBIGUOUS AND HAVE NO BA SIS AND IN THE BACKDROP OF THE FACT, THAT THE ADDITIONS ARE MADE ON THE FINDINGS OF THE INFLATED PURCHASES, FOUND OU T DURING THE COURSE OF SURVEY PROCEEDINGS IN THE ASSESSEES PREMISES AND STOCK VARIATIONS HAS NO IMPACT ON THE SAME 3. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. THIS APPEAL OF THE REVENUE IS NOT MAINTAINABLE AS P ER CBDT INSTRUCTIONS AS PER WHICH NO APPEAL HAS TO BE FILED BEFORE THE TRIBUNAL WHERE TAX EFFECT IS BELOW RS.10.00 LAKHS. AS PER THIS IN STRUCTION, EVEN THE PENDING APPEALS ARE ALSO AFFECTED AND THEREFORE, THIS APPEA L IS ALSO AFFECTED BY THESE INSTRUCTIONS. IN THE RESENT CASE, THE ADDITION WAS MADE BY THE AO OF RS.82,69,825/- OUT OF WHICH LD. CIT(A) HAS UPHELD T HE ADDITION OF RS.80,98, 625/- AND GRANTED RELIEF OF ONLY ABOUT RS.2.00 LAKH S AND THEREFORE, THE TAX EFFECT IN THE APPEAL OF THE REVENUE IS DEFINITELY L ESS THAN RS.10.00 LAKHS AND THEREFORE, THE APPEAL OF THE REVENUE IS NOT MAINTAI NABLE IN THE LIGHT OF THE BOARD INSTRUCTION. IN VIEW OF THIS, THE APPEAL OF THE REVENUE IS DISMISSED FOR LOW TAX EFFECT. ITA NO.380(B)12,1051(B)/13 AND ITA NOS.382(B)/12 &1061(B)2013 20 32. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. 33. IN THE COMBINED RESULT, THE APPEAL OF THE ASSES SEE AS WELL AS OF THE REVENUES FOR AY: 2005-06 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES, WHEREAS THE APPEAL OF THE ASSESSEE AND REVENUE FOR AY: 2006-07 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/ - (SUNIL KUMAR YADAV) SD/ - (A.K. GARODIA) JUDICAL MEMBER AC C OUNTANT MEMBER BANGALORE: D A T E D : 06/05/2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE