Sajjankumar Suganchand, Surat V. The ACIT.,Circle-2, Surat

ITA 383/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9741 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDANDR
• Assessee Lawyers: RASESH SHAH
• Keywords: Rejection of books of accounts; Question of law; Cost of acquisition; Bad and doubtful debts; Commercial expediency; Onus to prove; Revenue expenditure
• Section: 37(1); 145; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.383/AHD/2008 A. Y.: 2004-05 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF, PROP. ADARSH SYNTHETICS, 3008, MOMAI COMPLEX, KADODARA ROAD, SURAT VS THE A. C. I. T., CIRCLE-2, AAYAKAR BHAVAN, MAJURA GATE, SURAT PA NO. AAEHS 1773G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RASESH SHAH, AR RESPONDENT BY SHRI K. MADHUSUDAN,DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-II, SURAT DATED 29-11-2007 FOR ASSESSMENT YEAR 2004-05. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. 3. GROUNDS NO.1 AND 3 OF THE APPEAL READ AS UNDER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF RS.16,51,175/- BY ESTIMATING GROSS PROFIT AT THE RA TE OF 3.52% I. E. AVERAGE GROSS PROFIT RATIO OF YEAR UNDE R CONSIDERATION AND GROSS PROFIT RATIO OF LAST YEAR. ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 2 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT IN THE C OURSE OF THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASS ESSEE HAS DISCLOSED A GROSS PROFIT RATIO OF 1.92% ON A TURNOVER OF RS.1 0,31,98,422/- AS AGAINST THE GROSS PROFIT RATIO OF 5.13% ON A TURNOV ER OF RS.3,30,46,302/- IN THE IMMEDIATELY PRECEDING YEAR. THERE WAS THUS A FALL IN GROSS PROFIT RATIO BY 3.21%. MOREOVER, THE COAL HANDLING CHARGES HAD INCREASED FROM 9.15% IN THE PRECEDING YEAR TO 15.37% IN THE YEAR U NDER CONSIDERATION, THE INCREASE BEING 7.22%. ALL THE CHARGES WERE PAID TO A SINGLE PARTY. THE AO THEREFORE, ISSUED SHOW CAUSE NOTICE TO THE ASSES SEE ASKING THE ASSESSEE TO EXPLAIN WHY THE BOOK RESULTS SHOULD NOT BE REJECTED U/S 145(3) OF THE IT ACT AND THE GROSS PROFIT ESTIMATED ACCORDINGLY. THE ASSESSEE EXPLAINED THAT DURING THE YEAR MOST OF THE SALES WERE OF IMPORTED COAL WHEREAS IN THE EARLIER TWO YEARS IT W AS LIGNITE WHICH WAS PURCHASED FROM GMDC LTD. IT WAS STATED THAT IMPORTE D COAL WAS SUPPLIED ALONG WITH BAGGASSE AS PER T4HE DEMANDS OF THE DYEING AND PRINTING MILLS. THE FUEL CAPACITY OF IMPORTED COAL IS MORE AS COMPARED TO LIGNITE, HOWEVER, PROFIT MARGIN OF BOTH IMPORTED CO AL AND OF BAGGASSE WERE LOWER AS COMPARED TO LIGNITE. THE BAGGASSE IS LIFTED FROM SUGAR FACTORY AND THE ASSESSEE WAS FORCED TO LIFT THE SAI D ITEM SINCE OTHERWISE ITS DEPOSITS WITH THE SUGAR FACTORY WOULD HAVE TO B E FORFEITED. THE SALE PRICE OF BAGGASSE IS DEPENDENT ON MARKET CONDITIONS . THE ASSESSEE SUBMITTED THE CHART SHOWING THAT ALL THE REQUISITE DETAILS AND COMPARING THE PURCHASES, SALES, GROSS PROFIT AND GROSS PROFIT PERCENTAGE OF LIGNITE, IMPORT4ED COAL AND BAGGASSE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND TWO PRECEDING YEARS. THE SALE OF IMPORTED COAL DURING THE YEAR WAS 67% OF THE TOTAL TURNOVER WHEREAS, IN THE PRECEDING YEAR, IT WAS ONLY 21%. THERE WAS NO SALE OF IMPORTED COAL TH E YEAR BEFORE. THE PURCHASE PRICE OF THE IMPORTED COAL WAS FIXED BY TH E IMPORTERS AND THE PRICE OF COAL AND HANDLING CHARGES WAS BILLED SEPAR ATELY. HOWEVER, BOTH THE PRICES WENT INTO THE TOTAL PURCHASE COST OF IMP ORTED COAL. WITH REGARD TO CASH SALES IT WAS SUBMITTED BY THE ASSESSEE THAT IMPORTED COAL WAS ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 3 PURCHASED AT THE PORT ITSELF WHERE THERE ARE MANY B UYERS, WHO PURCHASE THE COAL IN CASH AND THEREFORE, IT WAS NOT POSSIBLE TO PROVIDE THE ADDRESSES OF SUCH BUYERS. THE ASSESSEE THEREFORE, C ONTENDED THAT THERE WAS NO GROUND FOR REJECTING THE BOOKS OF ACCOUNT SI NCE THE ASSESSEE HAD MAINTAINED COMPLETE RECORDS ALONG WITH BILLS AND VO UCHERS WHICH WERE IN ACCORDANCE WITH THE STIPULATED ACCOUNTING PRINCIPLE S. THE AO REJECTED THE SUBMISSION OF THE ASSESSEE OBSERVING THAT THE A SSESSEE HAS SOLD BAGGASSE IN THE EARLIER YEARS AS WELL AS THE AGREEM ENT WITH THE SUGAR FACTORY WAS DATED 20-11-2001 AND THAT ALL CIRCUMSTA NCES PERTAINING TO THE DEALING IN BAGGASSE HAD THEREFORE REMAINED THE SAME THROUGH THE YEAR AND CONSEQUENTLY THE TRADING IN BAGGASSE COULD NOT BE A REASON FOR THE LOWERING OF THE GROSS PROFIT. THE BILLS RELATIN G TO BAGGASSE WERE NOT PROPERLY MAINTAINED AND THERE WERE A LOT OF PRICE V ARIATIONS. WITH REGARD TO COAL HANDLING CHARGES THE AO OBSERVED THAT THE A SSESSEE HAD FAILED TO QUANTIFY PER UNIT CHARGES. MOREOVER, EVEN THOUGH TH E ASSESSEE CLAIMED THAT THE IMPORTED COAL WAS SOLD ONLY TO THE DYEING AND PRINTING HOUSES YET, SUBSEQUENTLY IT WAS STATED THAT SUCH COAL WAS ALSO SOLD TO BHATTAWALAS AT THE PORT ITSELF. THEREFORE, EXPLANAT ION FURNISHED EARLIER BY THE ASSESSEE WAS PROVED TO BE UNRELIABLE AND IN ANY CASE, THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM WITH SUPPORTIN G EVIDENCE. FURTHER, THE AO OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN ANY DAY-TO-DAY STOCK REGISTER. MOREOVER, THE BILLS RAISED BY ASSOCIATED TRANSPORT COMPANY AND THE CONFIRMATION FURNISHED BY THEM VARIED WITH THEI R LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE. THE AO THUS CAME TO THE CONCLUSION THAT THE BOOK RESULT OF THE ASSESSEE WERE NOT RELIABLE AND C ONSEQUENTLY HE REJECTED THE SAME U/S 145(3) OF THE IT ACT AND PROC EEDED TO ESTIMATE THE GROSS PROFIT OF THE ASSESSEE FOR THE YEAR. HE FOUND THREE ALTERNATIVES FOR ESTIMATING THE SAME AND THAT THIRD OPTION WHICH INV OLVED THE APPLICATION OF THE AVERAGE OF THE GROSS PROFIT RATIO OF THE CUR RENT YEAR AND THE PRECEDING YEAR WHICH WORKED OUT TO 3.52%. HE APPLI ED THIS RATIO TO THE ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 4 TURNOVER FOR THE YEAR AND AFTER ADJUSTING THE GROSS PROFIT DISCLOSED BY THE ASSESSEE MADE ADDITION OF RS.16,51,175/-. 5. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A) AND IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HAT THE ASSESSEE HAD PROVIDED COGENT EXPLANATION REGARDING FALL IN THE G ROSS PROFIT RATIO WHICH HAD BEEN REPRODUCED BY THE AO IN PARA 16 OF THE ASS ESSMENT ORDER. THE AO HAD REJECTED THE SAME ON IRRELEVANT CONSIDERATIO N. THE GROSS PROFIT RATIO OF THE CURRENT YEAR COULD NOT BE COMPARED WIT H THE GROSS PROFIT RATIO OF THE EARLIER YEARS SINCE THERE WAS SIGNIFICANT DI FFERENCE IN THE QUANTITY OF VARIOUS ITEMS TRADED DURING THE YEAR AD THE EARL IER YEARS. REITERATING THE SUBMISSIONS MADE BEFORE THE AO IT HAS BEEN CONT ENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT SALE OF IMPOR TED COAL HAD INCREASED 6 TIMES DURING THE YEAR AND SINCE THE PROFIT MARGIN ON THIS ITEM WAS VERY LOW, IT HAD RESULTED IN REDUCTION IN OVERALL GROSS PROFIT RATE FOR THE YEAR. WITH REGARD TO COAL HANDLING CHARGES, IT HAS BEEN C LAIMED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE CHARGES ARE REQUI RED TO BE PAID ONLY ON IMPORTED COAL AND THEREFORE, THE AO HAD ERRED IN CO MPARING THE RATIO OF COAL HANDLING CHARGES WITH REFERENCE TO THE TOTAL T URNOVER WHICH INCLUDED BAGGASSE AND LIGNITE AS WELL, INSTEAD OF WORKING OU T THE RATIO OF SUCH CHARGES TO THE TURNOVER OF ONLY IMPORTED COAL. IF O NLY THE TURNOVER OF THE IMPORTED COAL WAS CONSIDERED THEN THE PERCENTAGE OF COAL HANDLING CHARGED DURING THE YEAR WOULD WORK OUT TO 18.39% AS COMPARED TO 18.94% IN THE IMMEDIATELY PRECEDING YEAR. THERE WAS THUS A REDUCTION IN THE EXPENDITURE AS COMPARED TO THE PRECEDING YEAR. THERE WAS NO QUESTION OF ANY INFLATION IN SUCH EXPENDITURE. NO A DVERSE INFERENCE COULD BE DRAWN FROM THE FACT THAT THE COAL HANDLING CHARG ES WAS PAID TO A SINGLE PARTY SINCE THE SAID PARTY WAS NEITHER AN AS SOCIATED NOR A SISTER CONCERN OF THE ASSESSEE. THE CHARGES PAID COULD BE CONTRA VERIFIED FROM THE SUPPLIERS OF IMPORTED COAL SUCH AS BHATIA INTER NATIONAL LTD. OR GUPTA COAL (INDIA) LTD. ETC. WITH REGARD TO VARIATION IN THE ACCOUNT OF M/S. ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 5 ASSOCIATED TRANSPORT COMPANY AND THAT OF THE ASSESS EE IT HAS BEEN SUBMITTED THAT THE DIFFERENCE WAS ONLY OF RS.74,142 /- WHICH WAS NOT MATERIAL CONSIDERING THE TOTAL VOLUME OF ACTIVITY. WITH REGARD TO BAGGASSE, REITERATING THE SUBMISSIONS MADE BEFORE THE AO, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THERE WAS TOUGH COMPETI TION IN THE MARKET AND BECAUSE OF FEAR OF LOSING CUSTOMERS THE ASSESSE E HAD TO OPERATE WITH LOW MARGINS. WITH REGARD TO CASH SALES, IT HAS BEEN SUBMITTED THAT IT WAS NOT THE CASE OF THE AO THAT GOODS SOLD IN CASH WERE AT RATES WHICH WERE LOWER THAN THE RATES AT WHICH GOODS WERE SOLD AND P AYMENTS RECEIVED THROUGH CHEQUES. THE GENUINENESS OF THE CASH SALES THUS WAS ALSO ESTABLISHED. THE PURCHASE PRICE AS ALSO THE QUANTIT Y OF BAGGASSE WAS FIXED BY THE SUGAR FACTORY. THE AVERAGE PURCHASE PR ICE OF THIS ITEM HAD INCREASED DURING THE YEAR TO RS.539.28 PER KG. FROM RS.445 PER KG. IN THE PRECEDING YEAR AND THE SALE PRICE HAD INCREASED TO RS.552.27 PER KG. AS AGAINST RS.504.65 PER KG. ACCORDING TO THE LEARN ED COUNSEL FOR THE ASSESSEE THE AO HAD MADE A VAGUE OBSERVATION THAT T HE BILLS RELATING TO BAGGASSE WERE NOT PROPER AND THAT THERE WAS A LOT O F VARIATION IN THE PRICE AND NO SPECIFIC INSTANCE OR EXAMPLE HAD BEEN POINTED BY THE AO. IT WAS FURTHER EXPLAINED BY THE LEARNED COUNSEL FOR TH E ASSESSEE THAT NOWHERE THE ASSESSEE HAD CONTRADICTED HIMSELF IN EX PLAINING THE SALE OF IMPORTED COAL. THE AO HAD ERRED IN INTERPRETING THE SUBMISSION OF THE ASSESSEE WITH REGARD TO SUCH SALES TO THE DYEING & PRINTING MILLS AS ALSO TO BHATTAWALAS. THE ASSESSEE EXPLAINED THAT HE WAS REQUIRED TO DEAL IN IMPORTED COAL BECAUSE OF THE REQUIREMENTS OF THE MI LLS AND THAT DID NOT MEAN THAT THE ASSESSEE HAD NOT SOLD ANY IMPORTED CO AL TO THE BHATTAWALS AT THE PORT. THERE WAS THUS NO CONTRADICTION IN THE SUBMISSIONS MADE BY THE ASSESSEE. WITH REGARD TO MAINTENANCE OF STOCK R EGISTER, IT HAS BEEN CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HAT ABSENCE OF STOCK REGISTER DID NOT JUSTIFY THE REJECTION OF ENTIRE BO OK RESULTS SINCE, THE ASSESSEE HAD MAINTAINED OVERALL QUANTITATIVE TALLY AND THE SAME HAD ALSO BEEN PROVIDED IN THE TAX AUDIT REPORT. IN SUPPORT O F HIS CONTENTION THE ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 6 LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DE CISION OF ITAT JAIPUR BENCH IN THE CASE OF TRIVENI PHARMA VS ITO 85 TTJ 9 50. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD MAINTAINED ALL THE REQUISITE BOOKS OF ACCOUNT WHICH WERE DULY AUDITED U/S 44AB OF THE IT ACT AND THAT THE AO HAD FAILED TO POINT OUT ANY DEFECT OR DISCREPANCY I N THE ACCOUNT. IT WAS NOT NECESSARY THAT THE GROSS PROFIT RATIO SHOULD GO ON INCREASING FROM YEAR TO YEAR AND THAT UNLESS THERE WAS SOME SPECIFI C DEFECTS IN THE BOOKS OF ACCOUNTS, THE BOOK RESULT COULD NOT BE REJECTED AND NO ADDITION COULD BE MADE TO THE GROSS PROFIT. IN SUPPORT OF THE CONT ENTIONS THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: 1. S. CEERIAH REDDIAR VS CIT 38 ITR 152 (KER) 2. C. ARUMUGASWAMI NADAR VS CIT 42 ITR 237 (MAD) 3. JHANDU MAL TARA CHAND VS CIT 73 ITR 192 ( P&H) 4. VIJAYA TRADERS VS CIT 74 ITR 279 (MYSORE) 5. ST. TERESAS OIL MILLS VS STATE OF KERALA 76 ITR 36 5 (KER) 6. M. DURAI RAJ VS CIT 83 ITR 484 (KER) 7. CIT VS VIKRAM PLASTICS AND ORS 239 ITR 161 (GUJ) 6. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE MATERIAL ON RECORD DISMISSED THESE GROUNDS OF APPEAL OF THE ASSESSEE AND CONFIRMED THE ADDITIONS. HIS FINDINGS ARE REPRODUCED AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE FINDINGS AND CO NCLUSION OF THE AO, AS ALSO THE DETAILED SUBMISSIONS OF THE AR. THE BASIS ARGUMENT OF THE ASSESSEE AND THE AR IS THAT, DURING THE YEAR THE ASSESSEE HAD SOLD IMPORTED COAL IN QUANTIT IES WHICH WAS MUCH MORE THAN WHAT HAD BEEN SOLD IN THE EARLIE R YEARS. THIS WAS BECAUSE IMPORTED COAL WAS DEMANDED BY THE BUYERS I.E. THE DYEING & PRINTING MILLS SINCE THE I MPORTED COAL HAS A HIGHER FUEL CAPACITY. IT HAS BEEN CONTENDED T HAT WHILE ON ONE HAND THE PRICE OF IMPORTED COAL WAS DETERMIN ED BY THE IMPORTER, ON THE OTHER HAND, THE PROFIT MARGIN WAS LOW AS COMPARED TO LIGNITE. HOWEVER, IT WAS ALSO STATED BE FORE THE AO (PAGE-9) THAT IMPORTED COAL WAS CHEAPER THAN LIGNIT E WHICH MAKES THIS ITEM MORE PREFERABLE BY THE BUYERS. ON T HE OTHER HAND THE AR HAS STATED IN HIS WRITTEN SUBMISSIONS I N PARA - 15, THAT THE PURCHASE COST OF IMPORTED COAL IS LOWE R THAN THAT OF LIGNITE. THE QUESTION WHICH ARISES IS THAT WHEN THE PURCHASE ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 7 COST AS ALSO THE SELLING PRICE OF IMPORTED COAL WAS LOWER THAN LIGNITE HOW DID IT AFFECT THE GROSS PROFIT: IT WOUL D HAVE MADE SENSE IF THE PURCHASE COST WAS HIGHER OR HAD INCREA SED DURING THE YEAR AS COMPARED TO THE EARLIER YEARS. THIS HAS NOT BEEN SATISFACTORILY EXPLAINED. FURTHER, IF THERE ARE SPO T BUYERS I. E. THE BHATTAWALAS WHO BUY THE COAL FROM THE PORT ITSE LF IN CASH, IT MEANS THAT THE IMPOR4TED COAL IS IN VERY HIGH DE MAND. THIS IN TURN WOULD IMPLY THAT THE SELLER I. E. THE ASSES SEE WAS IN A POSITION TO DICTATE THE PRICE. THIS IS THE SIMPLE P RINCIPLE OF THE ECONOMICS OF SUPPLY, AND DEMAND, WHEN THE DEMAND OUTSTRIPS THE SUPPLY THE PRICE INCREASES. THEREFORE , IN SUCH A SITUATION THE FACT THAT THE ASSESSEES SALE OF IMPO RTED COAL DURING THE YEAR HAD INCREASED MORE THAN 6 TIMES AS COMPARED TO THE PRECEDING YEAR, AND THAT IT CONSTITUTED 67% OF THE TOTAL TURNOVER, COULD NOT BE A GROUND TO EXPLAIN THE FALL IN THE GP RATIO. IN FACT IT WOULD BE A CLEAR CASE FOR INCREAS E IN THE PROFIT MARGIN. 6.1 COMING TO THE PURCHASE AND SALE OF BAGGASSE. IT HAS BEEN CONTENDED BOTH BEFORE THE AO AND BEFORE ME THA T THE PURCHASE PRICE AS ALSO THE QUANTITY OF BAGGASSE TO BE LIFTED ID DETERMINED BY THE SUGAR FACTORY, WHILE ON THE OTHER HAND, BECAUSE OF INCREASED COMPETITION THIS ITEM HAD TO B E SOLD AT LOW MARGIN. FROM THE SUBMISSIONS MADE BY THE AR (PA RA -15) IT IS SEEN THAT WHILE THE AVERAGE PURCHASE PRICE OF THE BAGGASSE HAD INCREASED TO 539.28 PER KG. FROM RS.44 5 PER KG. IN THE IMMEDIATELY PRECEDING YEAR, THE AVERAGE SALE PRICE HAD INCREASED TO RS.552.27 PER KG. AS AGAINST RS.50 4.65 PER KG. IN THE PRECEDING YEAR. HOWEVER, IT IS SEEN THAT THE SALE OF BAGGASSE CONSTITUTED A VERY SMALL PERCENTAGE OF THE TOTAL TURNOVER. IF THE TURNOVER OF IMPORTED COAL WAS 67% AND THAT OF LIGNITE WAS 25% APPROX., THEN THE TURNOVER OF BAGGA SSE WAS ONLY 8%. THEREFORE, THE INCREASE IN THE PURCHASE PR ICE IN GREATER PROPORTION TO THE INCREASE IN SELLING PRICE OF BAGGASSE WOULD NOT HAVE MADE ANY SIGNIFICANT IMPACT ON THE G P RATIO. 6.2 THE AO OBSERVED THAT THE ASSESSEE DID NOT MAINT AIN DAY-TO-DAY STOCK REGISTER. IT IS THE ARS CONTENTIO N THAT SINCE THE ASSESSEE HAD MAINTAINED ALL QUANTITY DETAILS, T HE NON MAINTENANCE OF A STOCK REGISTER COULD NOT BE TAKEN AS A GROUND TO REJECT THE BOOK RESULT. IN SUPPORT OF HIS CONTENTION, THE AR HAS RELIED UPON THE DECISION OF THE ITAT, JA IPUR BENCH IN THE CASE OF TRIVENI PHARMA (SUPRA). HOWEVER, THE FACTS OF THE CASE HAVE NOT BEEN MADE AVAILABLE BY THE AR AND HE HAS ALSO NOT ARGUED AS TO HOW THE RATIO OF THE SAID CAS E WOULD APPLY TO THE FACTS OF THE ASSESSEES CASE. IN THE C ASE OF BINDAL ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 8 JEWELLERS VS ITO (1990) 38 TTJ 404, THE JAIPUR BENC H OF THE ITAT TOOK THE VIEW THAT WHERE STOCK DETAILS HAVE N OT BEEN MAINTAINED AND THE CLOSING STOCK WAS ESTIMATED, THE ASSESSING AUTHORITY WAS JUSTIFIED IN REJECTING THE BOOK RESULTS OF THE ASSESSEE AND MAKE A REASONABLE ESTIMATE. THE ITAT TOOK THIS VIEW EVEN THOUGH THE GP DECLARED DURING T HE YEAR WAS HIGHER THAN IN THE PREVIOUS YEAR. IN THE CASE O F TARACHAND HARI RAM VS (1986) 26 TTJ 145, THE ASSESS EE WHO WAS ENGAGED IN WHOLESALE CLOTH BUSINESS, HAD NOT MA INTAINED ANY STOCK REGISTER OR HAD HE MENTIONED THE QUALITY OF CLOTH SOLD. THE GP RATE WAS LOWER AS COMPARED TO THE PREV IOUS YEARS. EVEN THOUGH, A DETAILED EXPLANATION WAS FURN ISHED REGARDING THE FALL IN GP, THE ITAT TOOK THE VIEW TH AT THE ACCOUNTS WERE DEFECTIVE AND THEREFORE, THE AO WAS F ULLY JUSTIFIED IN REJECTING THE TRADING RESULTS BY APPLY ING THE PROVISIONS OF SECTION 145(1) OF THE I. T. ACT. IN T HE CASE OF PATEL & CO. AND ANOTHER VS ITO (2003) 81 TTJ 445, THE HON ITAT UPHELD THE REJECTION OF THE BOOKS OF ACCOUNT SINCE, THEY WERE FOUND TO BE INCOMPLETE AND ALL THE TRANSACTIONS WER E NOT RECORDED CORRECTLY. THE ITAT FURTHER TOOK THE VIEW THAT THE RESULTS OF THE PAST YEARS AS WELL AS SUBSEQUENT YEA RS COULD FORM A GOOD GROUND FOR FAIR AND REASONABLE ESTIMATI ON OF THE INCOME FOR THE CURRENT YEAR. 6.3 THE NATURE OF THE BUSINESS OF AN ASSESSEE AND T HE ITEMS AND COMMODITIES BEING MANUFACTURED OR DEALT W ITH WOULD BE EXTREMELY RELEVANT IN DETERMINING WHETHER OR NOT THE BOOK RESULTS CAN BE TREATED AS RELIABLE IN THE ABSE NCE OF THE STOCK REGISTER. THE ASSESSEE ONLY DEALT WITH DIFFER ENT TYPES OF COAL. THE COAL WAS PURCHASED FROM FIXED LOCATIONS A ND FROM FIXED SELLERS, TRANSPORTED AND SOLD TO FIXED BUYERS . IT WAS NOT AS IF THE ASSESSEE DEALT IN NUMEROUS ITEMS WHICH WO ULD MAKE IT DIFFICULT TO MAINTAIN DAY-TO-DAY STOCK RECORDS. THEREFORE, IN A BUSINESS LIKE THE ASSESSEES THERE WAS NO REASON WH Y THE STOCK REGISTER COULD NOT BE MAINTAINED. INA TRADING BUSINESS, THE STOCK RECORD IS OF PARAMOUNT IMPORTANCE AND IF SUCH RECORDS ARE NOT PROPERLY MAINTAINED, THE BOOK RESUL TS BECOME UNRELIABLE. EVEN THOUGH THE AR HAS CLAIMED THAT PRO PER QUANTITATIVE DETAILS RELATING TO VARIOUS ITEMS OF C HEMICALS HAD BEEN MAINTAINED AND THAT THE AO HAD NOT POINTED OUT ANY SPECIFIC DISCREPANCY YET, FROM THE OBSERVATIONS OF THE AO, IT IS CLEAR THAT SUCH RECORDS WERE INCOMPLETE AND HENCE, NOT VERIFIABLE. 6.4 IN THE CASE OF AN ASSESSEE ENGAGED IN TRADING A CTIVITY, IF THE STOCK ARE NOT COMPLETE AND HENCE NOT VERIFIABLE , QUESTIONS ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 9 CAN BE RAISED AGAINST THE PURCHASES AND SALES SHOWN , AT LEAST IN QUANTITATIVE TERMS. THE PURCHASES AND SALE S BY THEMSELVES DO NOT ESTABLISH THE COMPLETENESS OF THE ACCOUNTS UNLESS THE STOCK RECORDS, ARE MAINTAINED TO REFLECT THE INCOMINGS AND OUTGOINGS AND THEREFORE, WITHOUT SUCH RECORDS, THE ACCOUNTS CANNOT BE SAID TO BE COMPLETE. THUS, W HERE THE ACCOUNTS ARE NOT COMPLETE, THE TRADING RESULTS CANN OT BE VERIFIED AND, WHERE TRADING RESULTS CANNOT BE VERIF IED, THE AO IS FULLY JUSTIFIED IN REJECTING THE SAME. IN THE CA SE OF ASHWANI KUMAR MEHRA VS 110 (1989) 33 TTJ 300, THE DELHI BEN CH OF THE ITAT OBSERVED THAT, WHILE APPLYING THE PROVISIO NS OF SECTION 145(2) WHAT IS TO BE SEEN IS WHETHER THE RE SULTS DECLARED BY THE ASSESSEE ARE REASONABLE AND FAIR. T HIS CAN BE COMPARED WITHER WITH THE RESULTS DECLARED BY THE AS SESSEE IN EARLIER YEARS OR IN THE ABSENCE OF SUCH MATERIAL, A COMPARISON MAY BE MADE WITH THE RESULTS SHOWN BY TRADERS SIMIL ARLY PLACED IN THE, SAME LINE OF BUSINESS. IN THIS CASE, THERE WAS A FALL IN GP AS COMPARED TO THE PRECEDING YEARS AND T HE ITAT HELD THAT TAKING AN OVERALL VIEW, THE BOOK RESULTS WERE RIGHTLY REJECTED BY THE ASSESSING OFFICER, AND WENT AS FAR AS TO UPHOLD AN ESTIMATION OF THE TURNOVER OF THE ASSESSE E. 6.5 IN THE CASE OF THE ASSESSEE, THERE WAS A DRASTI C FALL IN GP BY IN EXCESS OF 50% AS COMPARED TO THE IMMEDIATE LY PRECEDING YEAR. ON THE OTHER HAND, THE BOOK RESULTS OF THE ASSESSEE COULD NOT BE VERIFIED SINCE THE STOCK RECO RDS WERE NOT COMPLETE. THEREFORE, IN ACCORDANCE WITH THE VIE W EXPRESSED IN THE CASES DISCUSSED ABOVE, THE AO WAS FULLY JUSTIFIED IN REJECTING THE BOOK RESULTS U/S 145 OF THE I. T. ACT. CONSEQUENTLY, HE WAS ALSO JUSTIFIED IN APPLYING THE AVERAGE OF GP RATES OF TO THE CURRENT YEAR AND THE PRECEDING Y EAR TO THE TURNOVER OF THE YEAR FOR THE PURPOSE OF ESTIMATING ASSESSEES GP. THE ADDITION OF THE SUM OF RS.16,51,175 IS THER EFORE, CONFIRMED. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO P B-40 ONWARDS WHICH ARE THE DETAILS OF SALES AND PURCHASES OF VARIOUS I TEMS ALONG WITH COMPLETE DETAILS. HE HAS SUBMITTED THAT IN THE ASSE SSMENT YEAR UNDER APPEAL, THE SALE OF IMPORTED COAL HAS INCREASED SIX TIMES IN WHICH PROFIT MARGIN WERE VERY LESS. HE HAS SUBMITTED THAT QUANTI TATIVE DETAILS WERE SUBMITTED IN THE AUDITED ACCOUNTS. NO SALES OR PURC HASES WERE FOUND ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 10 OUTSIDE THE BOOKS OF ACCOUNTS. NO EXPENSES WERE FOU ND TO BE INFLATED. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN THE MAINT ENANCE OF THE BOOKS OF ACCOUNTS. IN THE CASH SALES, NO DETAILS AND PARTICU LARS ARE NOTED. THE CASH SALES CANNOT BE DOUBTED. HE HAS RELIED UPON TH E DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JESSARAM F ETEHCHAND (R.B.) (SUGAR DEPT.) VS CIT 75 ITR 33 WHEREIN IT WAS HELD THAT NON-INCLUSION OF ADDRESS OF CUSTOMERS IN RESPECT OF CASH TRANSACTION S CANNOT BE A BASIS OF REJECTION OF BOOKS OF ACCOUNT. IT WAS ALSO HELD THA T THERE WAS NO NECESSITY FOR ASSESSEE TO MAINTAIN THE ADDRESSES OF THE CUSTO MERS AND FAILURE TO MAINTAIN THE SAME OR TO SUPPLY THEM AS AND WHEN CAL LED FOR CANNOT GIVE RISE TO SUSPICION WITH REGARD TO GENUINENESS OF THE TRANSACTION. THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT WAS FOLLOWED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF M. DURAI R AJ VS CIT 83 ITR 484. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UP ON THE ORDER OF THE ITAT JAIPUR BENCH (TM) IN THE CASE OF TRIVENI PHARM A VS ITO 85 TTJ (JAIPUR) (TM) 950 IN WHICH IT WAS HELD REJECTION OF BOOKS OF ACCOUNTS IN THE ABSENCE OF DAY TO DAY STOCK REGISTER AND QUA NTITATIVE DETAILS. THE ASSESSEE FILED RETURN WITH TAX AUDIT R EPORT CONTAINING QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASES, S ALES AND CLOSING STOCK. THE ASSESSEE THROUGH OUT CLAIMED THAT IT MAD E PURCHASES AND SALES OF POULTRY FEED IN THE BOOKS ON WHOLESALE BASIS AND PRODUCED PHOTO COPIES OF THE INVOICES OF THE LEDGER ACCOUNT IN SUPPORT. SINCE COMPLETE LEDGER OF ACCOUNT OF SALES AND PURCHASES WAS MAINTAINED BY THE ASSESSEE, THERE WAS NO WARRAN T FOR REJECTION OF BOOKS OF ACCOUNTS ON THE GROUND THAT THEY WERE I NCORRECT OR INCOMPLETE OR NOT SUBJECT TO VERIFICATION. ADDITION DELETED . HE HAS ALSO RELIED UPON THE ORDER OF THE ITAT CHANDIGARH B ENCH IN THE CASE OF SATINDERJIT KAUR VS ITO 52TTJ 388 (CHD) IN WHICH IT WAS HELD THAT MERE NON-MAINTENANCE PRODUCTION REGISTER CANNOT LEA D TO REJECTION OF BOOK RESULTS OF THE ASSESSEE. EVEN SO, G. P. RAT E OF 15% OR 16% ACCEPTED IN THE PAST IN THE CASE OF THE ASSESSEE AN D AT 17% IN ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 11 COMPARABLE CASES DELETION ON THAT ACCOUNT JUSTIFI ED. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT REJECTION OF BOOK RESULTS IS CLEARLY UNJUSTIFIED AND ADDITION MAY BE DELETED. 8. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT BOOKS OF ACCOU NT WERE RIGHTLY REJECTED BECAUSE OF FALL IN THE GROSS PROFIT RATE A S COMPARED TO EARLIER YEARS, DIFFERENCE IN BALANCES OF THE CREDITORS AND THAT NO DAY TO DAY STOCK REGISTER HAS BEEN MAINTAINED. THE LEARNED DR SUBMIT TED THAT THERE WERE DEFECTS IN THE BILLS ALSO. THEREFORE, ADDITION IS R IGHTLY MADE. THE LEARNED DR RELIED UPON THE FOLLOWING DECISIONS: 1. BRITISH PAINTS (INDIA) LTD. 188 ITR 44 2. SAMIR DIAMONDS EXPORTS LTD. 71 ITD 75 3. ABDUL REHMAN & BROTEHRS 210 ITR 406 4. HARI SHANKAR GOPAL HARI 97 ITR 716 5. MACMILLAN & CO. 33 ITR 182 6. S. N. NAMASIVAYAM CHETTIAR 38 ITR 579 7. K. Y. PILLAI & SONS 63 ITR 411 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIALS AVAILABLE ON RECORD. IT IS ADMITTED FACT THAT TURNO VER OF THE ASSESSEE HAS INCREASED SUBSTANTIALLY AS COMPARED WITH THE EARLIE R YEARS. IN THE ASSESSMENT YEAR UNDER APPEAL, THE TURNOVER OF THE A SSESSEE IS RS.10,31,98,422/- AS AGAINST THE TURNOVER OF THE PR ECEDING ASSESSMENT YEAR IN RS.3,30,46,302/-. THE MOMENT THE TURNOVER O F THE ASSESSEE HAS INCREASED SEVERAL TIMES AS COMPARED WITH THE EARLIE R YEARS, THERE ARE BOUND TO BE REDUCTION IN THE PROFIT RATE OTHERWISE THE TURNOVER OF THE ASSESSEE WOULD NOT EXCEED. THE ASSESSEE FURTHER EXP LAINED THAT ALL REQUISITE DETAILS OF PURCHASES, SALES AND GROSS PRO FIT OF LIGNITE, IMPORTED COAL AND BAGGASSE FOR THE ASSESSMENT YEAR UNDER APP EAL AND PRECEDING ASSESSMENT YEAR HAVE BEEN FILED. THE DETAILS SHOW T HAT THE SALE OF IMPORTED COAL DURING THE YEAR UNDER APPEAL WAS 67% OF THE TURNOVER WHICH IN THE PRECEDING ASSESSMENT YEAR WAS ONLY 21% . IT WAS ALSO ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 12 EXPLAINED THAT THERE WAS NO SALE OF IMPORTED COAL P RIOR TO THAT. IT WAS ALSO EXPLAINED THAT PURCHASE PRICE OF THE IMPORTED COAL HAS INCREASED AND THAT NO SUPPRESSION OF SALES HAVE BEEN POINTED OUT BY THE AO. IT WAS ALSO EXPLAINED THAT IN THE SALE OF IMPORTED COAL PR OFIT MARGIN WAS LOWER BECAUSE SUCH SALES HAVE EXCEEDED SIX TIMES. THE ASS ESSEE, THEREFORE, SUCCESSFULLY EXPLAINED THAT TRADING ITEM IN THE ASS ESSMENT YEAR UNDER APPEAL WAS DIFFERENT AS COMPARED TO THE EARLIER YEA RS. THE DETAILS OF THE SAME ARE ALSO FILED IN THE PAPER BOOK WHICH HAVE NO T BEEN DISPUTED BY THE AUTHORITIES BELOW, RATHER IN THE ASSESSMENT YEA R 2002-03 THERE WAS NO SALE OF IMPORTED COAL. IN THE CASH SALES, THE AS SESSEE IS NOT REQUIRED TO MAINTAIN THE PARTICULARS AND NAMES OF THE PURCHASER S. MOREOVER, ACCORDING TO THE ASSESSEE CASH SALES ARE MADE AT DE LIVERY POINT ITSELF. THEREFORE, IT IS POSSIBLE THAT IN CASH SALES AT DEL IVERY POINT ITSELF, THE ASSESSEE COULD AVOID FURTHER EXPENSES FOR LIFTING A ND CARRYING THE PURCHASED ITEMS. THOUGH, THE ASSESSEE DID NOT MAINT AIN DAY TO DAY STOCK REGISTER BUT QUANTITATIVE DETAILS HAVE BEEN M ENTIONED IN THE AUDIT REPORT IN THE PRESCRIBED FORM. THE AO HAS NOT POINT ED OUT IF THE ASSESSEE HAS MADE ANY SALES, PURCHASES OUTSIDE THE BOOKS OF ACCOUNT. IT IS ALSO NOT POINTED OUT IF THE ASSESSEE HAS INFLATED THE EX PENSES. ACCORDING TO THE EXPLANATION OF THE ASSESSEE COMPLETE BOOKS OF A CCOUNT HAVE BEEN MAINTAINED IN THE SAME PATTERN AS HAVE BEEN MAINTAI NED IN THE EARLIER YEARS. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN THE MAINTENANCE OF BOOKS OF ACCOUNT BY THE ASSESSEE. THOUGH THE ASSESS EE MAINTAINED PROPER BOOKS OF ACCOUNT AND THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE BOOKS OF ACCOUNT WERE INCORRECT OR INCOMPLETE AND THAT NO PROFIT COULD BE DEDUCED THERE FROM. HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS SMT. POONAM RANI 326 ITR 223 HELD AS UNDER: DURING THE COURSE OF ARGUMENTS BEFORE US, IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE APPELLANT THAT THE ASSESSEE WAS NOT MAINTAINING THE DAILY STOCK REGISTER. WE, HOWEVER, FIND NO SUCH FINDING IN THE ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 13 ASSESSMENT ORDER. ON THE OTHER HAND, WE NOTE THAT T HE ASSESSEE HAD SUBMITTED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT FORM NO.3 CONTAINING ALL QUANTITATIVE DETAILS IN RESPECT OF RAW MATERIALS AS WELL AS THE FINISHED GOODS, DULY AUDITED BY THE CERTIFIE D ACCOUNTANT HAD BEEN PLACED ON RECORD, BUT, THE ASSESSING OFFICER IGNORED THOSE ACTUAL FIGURES ENCL OSED WITH THE RETURN. IN ANY CASE, NO STATUTORY PROVISIO N UNDER THE INCOME-TAX REGIME REQUIRING THE ASSESSEE TO MAINTAIN THE DAILY STOCK REGISTER HAS BEEN BROUGHT TO OUR NOTICE. HENCE, EVEN IF NO SUCH REGISTER BEING MAINTAINED BY THE ASSESSEE AS IS CONTENDED BY THE LEARNED COUNSEL FOR THE APPELLANT, THAT BY ITSELF D OES NOT LEAD TO THE INFERENCE THAT IT WAS NOT POSSIBLE TO DEDUCE THE TRUE INCOME OF THE ASSESSEE FROM THE ACCOUNTS MAINTAINED BY HER, NOR CAN THE ACCOUNTS BE SAID TO BE DEFECTIVE OR INCOMPLETE FOR THIS REASON ALONE. IF STOCK REGISTER IS NOT MAINTAINED BY THE ASSESSEE THAT MAY PUT THE ASSESSING OFFICER ON GUARD AGAINST TH4E FALSITY OF THE RETURN MADE BY THE ASSESSEE AND PERS UADE HIM TO CAREFULLY SCRUTINIZE THE ACCOUNT BOOKS OF TH E ASSESSEE. BUT THE ABSENCE OF ONE REGISTER ALONE DOE S NOT AMOUNT TO SUCH A MATERIAL AS WOULD LEAD TO THE CONCLUSION THAT THE ACCOUNT BOOKS WERE INCOMPLETE O R INACCURATE. SIMILARLY, IF THE RATE OF GROSS PROFIT DECLARED BY THE ASSESSEE IN A PARTICULAR PERIOD IS LOWER AS COMPARED TO THE GROSS PROFIT DECLARED BY HIM IN THE PRECEDING YEAR, THAT MAY ALERT THE ASSESSING OFFICE R AND SERVE AS A WARNING TO HIM, TO LOOK INTO THE ACCOUNTS MORE CAREFULLY AND TO LOOK FOR SOME MATERI AL WHICH COULD LEAD TO THE CONCLUSION THAT ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT CORRECT. BUT, A LOW RATE OF GROSS PROFIT, IN THE ABSENCE OF ANY MATERIA L POINTING TOWARDS FALSEHOOD OF THE ACCOUNT BOOKS, CANNOT BY ITSELF BE A GROUND TO REJECT THE ACCOUNT BOOKS UNDER SECTION 145(3) OF THE ACT. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RAJNI KANT DAVE 281 ITR 6 HELD AS UNDER: HELD, THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE NOT FOUND INCOMPLETE OR INCORRECT AND IT HAD ALSO NOT BEEN HELD THAT THE METHOD ADOPTED BY T HE ASSESSEE WAS SUCH BY WHICH THE CORRECT INCOME COULD NOT BE DEDUCED. HENCE THE PROVISIONS OF SECTION 145 (1) ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 14 OF THE ACT HAD WRONGLY BEEN INVOKED. THE TRIBUNAL W AS ALSO RIGHT IN HOLDING THAT WHERE THE PROPER BOOKS O F ACCOUNT AND DOCUMENTS HAVE BEEN MAINTAINED UNDER RULE 6F OF THE INCOME-TAX RULES, THE INCOME CAN PROPERLY BE DEDUCED THEREFROM AND THE PROVISIONS OF SECTION 145(1) OF THE ACT COULD NOT BE INVOKED. THE ACCOUNTS COULD NOT BE REJECTED. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF GOTAN L IME KHANIJ UDHYOG 256 ITR 243 HELD THAT MERE REJECTION OF BOOKS OF ACCOUNT DOES NOT MEAN ADDITION HAS TO BE NECESSARILY MADE. 10. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE SUBMISSIONS OF THE PARTIES AND THE FINDINGS OF THE AUTHORITIES BEL OW, IT IS CLEAR THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WAS NOT FOUND TO BE INCORRECT OR INCOMPLETE AND IT HAS ALSO NOT BEEN HE LD THAT THE METHOD ADOPTED BY THE ASSESSEE WAS SUCH BY WHICH THE CORRE CT INCOME COULD NOT BE DEDUCED. THE AO HAS NOT BROUGHT ANY OTHER MATERI AL AGAINST THE ASSESSEE FOR REJECTION OF THE BOOK RESULTS. THE CAS H SALES MADE TO THE CUSTOMERS BY ITSELF IS NO GROUND FOR REJECTION OF BOOK RESULTS. CONSIDERING THE ABOVE CIRCUMSTANCES, WE DO NOT FIND IT TO BE A FIT CASE FOR REJECTION OF THE BOOK RESULTS OR TO MAKE ADDITION B Y APPLYING AVERAGE GROSS PROFIT RATE. WE ACCORDINGLY, SET ASIDE THE OR DERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. IN THE RESULT , GROUNDS NO.1 AND 3 OF THE APPEAL ARE ALLOWED. 11. GROUND NO.2 OF THE APPEAL READS AS UNDER: 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF RS.6,02,721/- FOR COMMISSION ON SALES. 12. THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED A SUM OF RS.6,02,721/- AS COMMISSION ON SALES. SUCH EXPENDIT URE HAD NOT BEEN INCURR3ED I THE EARLIER YEARS. THE NATURE OF BUSINE SS HAD REMAINED THE ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 15 SAME. THE ASSESSEE HAD FAILED TO PROVIDE ANY DETAIL REGARDING THE SERVICES RENDERED BY THE CONCERNED PERSONS OR TO PRODUCE ANY CONTRACT OR AGENCY AGREEMENT WITH THEM AND THE ENTIRE COMMISSION PAYME NT HAD REMAINED UNPAID. THE AO THEREFORE, ISSUED SHOW CAUSE NOTICE INTIMATING SUCH FINDINGS AND ASKING THE ASSESSEE TO EXPLAIN WHY THE ENTIRE SUM SHOULD NOT BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOM E OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT IT HAD STARTED DEALING WITH BROKERS DURING THE YEAR FOR THE PURPOSE OF INCREASING BUSINESS AND FOR GUARANTEEING QUICK RECOVERY OF PAYMENTS. THE SERVICES PROVIDED B Y THE BROKERS INCLUDED BOOKING OF ORDERS AND RECOVERY OF PAYMENTS . THE ASSESSEE FURNISHED A LIST OF BROKERS WITH THEIR ADDRESSES, P HONE NUMBERS AND PANS. PHOTOCOPIES OF BILLS RAISED BY THEM AND CONFI RMATION LETTERS WERE ALSO FURNISHED. REGARDING NON PAYMENT OF COMMISSION UP TO THE END OF THE YEAR, IT WAS EXPLAINED THAT SUCH PAYMENTS WERE TO BE MADE ONLY AFTER THE PAYMENTS WERE RECEIVED FROM THE PARTIES TO WHOM GOODS HAD BEEN SOLD THROUGH THE BROKERS. NO COMMISSION PAYMENT HAD BEEN MADE EITHER TO ANY SISTER CONCERN OR RELATIVE. SUCH PAYMENTS TH EREFORE, WERE GENUINE AND SHOULD NOT BE DISALLOWED. THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE OBSERVING THAT THE ASSESSEE FAILED TO ESTA BLISH THAT THE RECIPIENTS OF THE COMMISSION HAD RENDERED SERVICES TOWARDS PROMOTING ASSESSEES BUSINESS. ONLY THE FACT OF THE PAYMENT O F COMMISSION DID NOT ESTABLISH EITHER THE RELEVANCE OR THE GENUINENESS O F SUCH EXPENSES. SINCE, THE ASSESSEE HAD FAILED TO ESTABLISH THAT AC TUAL SERVICES HAD BEEN RENDERED BY THE CONCERNED PARTIES, SUCH EXPENDITURE DID NOT SATISFY THE POSITIVE CONDITION OF SECTION 37(1) OF THE IT ACT. THE ONUS WAS ENTIRELY ON THE ASSESSEE TO PROVIDE EVIDENCE IN SUPPORT OF HIS CLAIM AND TO PROVE THAT SUCH EXPENDITURE WAS NOT ALLOWABLE AS A DEDUCTION. IN DOING SO, THE AO OBSERVED THAT THE ASSESSEE HAD NOT ONLY FAILED TO P ROVE THE SERVICES RENDERED BUT ALSO TO SHOW THAT BECAUSE OF THE ROLE PLAYED BY THE BROKERS PAYMENTS HAD BEEN RECOVERED QUICKLY. THE ASSESSEE H AD CLEARLY STATED THAT THE COMMISSION PAYMENTS HAD REMAINED OUTSTANDI NG BECAUSE ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 16 PAYMENTS FROM THE BUYERS TO WHOM THE GOODS HAD BEEN SOLD THROUGH THE BROKERS HAD NOT BEEN RECEIVED. THIS CLEARLY SHOWED THE CONTRADICTION IN THE ASSESSEES CLAIM AND ALSO NO, NEXUS COULD BE ES TABLISHED BETWEEN THE ACTIVITIES OF THE BROKERS AND THE INCREASE IN THE V OLUME OF BUSINESS. THE AO, THEREFORE, ADDED THE SUM OF RS.6,02,721/- TO TH E TOTAL INCOME OF THE ASSESSEE. 13. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LEA RNED CIT(A) AND IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASS ESSEE THAT COMPLETE DETAILS PERTAINING TO THE COMMISSION EXPENSES HAD B EEN FURNISHED BEFORE THE AO. A LIST OF BROKERS ALONG WITH THEIR RELEVANT DETAILS HAD BEEN FURNISHED ALONG WITH PHOTOCOPIES OF BILLS RAISED BY THEM AND CONFIRMATION LETTERS. THESE BILLS SHOWED THE RATE A T WHICH COMMISSION WAS PAYABLE AND THE TOTAL AMOUNT OF TRANSACTION. TH E ASSESSEE HAD ALSO OFFERED TO PRODUCE THE BROKERS BEFORE THE AO. IN SP ITE OF SUCH COGENT EVIDENCES, THE AO HAD REJECTED THE GENUINENESS OF T HE CLAIM OF THE ASSESSEE. THERE WAS NO WRITTEN CONTRACT WITH THE BR OKERS. THE ASSESSEE HAD DEDUCTED TAX AT SOURCE WHICH WOULD SHOW THAT TH E EXPENSES WERE GENUINE. THE AO HAD NO EVIDENCE WHICH WOULD SHOW TH AT THE CONCERNED PARTIES HAD NOT WORKED POSITIVELY FOR THE ASSESSEE TO INCREASE ITS BUSINESS OR TO RECOVER PAYMENTS. THE DISALLOWANCE W AS THEREFORE, MADE ENTIRELY ON CONJECTURES AND SURMISES. THE TURNOVER OF THE ASSESSEE HAD INCREASED SUBSTANTIALLY. WITH REGARD TO THE AOS OB SERVATION THAT THE BROKERS HAD NOT RENDERED ANY SERVICES SINCE PAYMENT S FROM PURCHASING PARTIES HAD NOT BEEN RECOVERED, IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THE PAYMENT HAD REMAINED O UTSTANDING AT THE END OF THE YEAR, IT DID NOT MEAN THAT NO SERVICE HAD BE EN RENDERED BY THE BROKERS SINCE, DELAY IN CERTAIN CASES WAS UNCONTROL LABLE. THE POINT WAS THAT BY APPOINTING BROKERS THE CHANCES OF BAD DEBTS AND UNUSUAL DELAY IN RECEIVING PAYMENTS WERE MINIMIZED. THERE WAS THE REFORE NO CONTRADICTION, IN THE CLAIM MADE BY THE ASSESSEE. I N SUPPORT OF HIS CLAIM ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 17 THAT COMMISSION EXPENDITURE SHOULD BE TREATED AS GE NUINE AND ALLOWED, THE LEARNED COUNSEL FOR THE ASSESSEE PLACE RELIANCE ON THE FOLLOWING CASES: 1. SMT. SATINDERJIT KAUR VS ITO 52 TTJ 388 (CHD) 2. N. K. RAJGARTHIA VS DCIT 52 TTJ 631 (DEL) 14. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE ON THIS GROUND . HIS FINDING IN PARA 10 AND 10.1 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 10. I HAVE CAREFULLY CONSIDERED BOTH THE POSITION S. THERE WAS NO DISPUTE THAT SUMS TOTALING RS.6,02,721 WAS ACTUALLY PAID BY THE ASSESSEE TO CERTAIN PERSONS. M ONIES HAD FLOWED FROM OUT OF THE BOOKS OF THE ASSESSEE. THE S AME HAD BEEN RECEIVED. THE RECIPIENTS WERE IDENTIFIABLE. TH EY HAD ALSO CONFIRMED THE RECEIPTS. YET, WHAT WAS NOT ESTABLISH ED WAS WHETHER THESE PARTIES HAD ACTUALLY RENDERED ANY SER VICE TO THE ASSESSEE TO BECOME ELIGIBLE FOR RECEIVING BROKE RAGE PAYMENTS. FOR ANY EXPENDITURE TO BE ALLOWED AS A DE DUCTION IT HAS TO BE ESTABLISHED THAT IT WAS INCURRED WHOLLY A ND SOLELY FOR THE PURPOSE OF BUSINESS, AND THAT, IT WAS NOT A CAPITAL EXPENDITUR3E OR INCURRED FOR ANY PERSONAL PURPOSES. SUCH IS THE CLEAR PROVISIONS OF SEC. 37(1) OF THE IT ACT. T HEREFORE, FOR EXPENDITURE SUCH AS COMMISSION OR BROKERAGE TO BE A LLOWED AS REVENUE EXPENDITURE, IT WAS NECESSARY FOR THE AS SESSEE TO SHOW THAT SUCH EXPENDITURE HAD BEEN INCURRED WHOLLY AND SOLELY FOR THE PURPOSE OF HIS BUSINESS. IN OTHER WO RDS, IT WAS NECESSARY TO JUSTIFY THE PAYMENT OF COMMISSION BY S HOWING THAT SUCH PERSONS HAD INDEED PROVIDED CERTAIN AGREE D SERVICES. EVEN THOUGH THE ASSESSEE CLAIMED THAT THE BROKERS WERE SUPPOSED TO PROCURE ORDERS AND TO ENSURE RECOV ERY OF PAYMENTS YET, NO EVIDENCE WAS FURNISHED BEFORE THE AO TO SHOW THAT THESE PERSONS HAD INDEED PROCURED CERTAIN ORDERS FOR THE ASSESSEE OR EVEN HELPED IN RECOVERING PAYME NTS. EVEN THOUGH THE NAMES AND ADDRESSES, THEIR PHONE NOS. AN D PANS OF BROKERS WERE FURNISHED YET, THE PARTIES FROM WHO M THEY HAD ALLEGEDLY PROCURED ORDERS FOR THE ASSESSEE OR T HE PARTIES FROM WHOM THEY HAD ALLEGEDLY RECOVERED PAYMENTS, WE RE NOT SHOWN. THERE WAS NO DOCUMENT TO PROVIDE ANY EVIDENC E OF ANY SERVICE RENDERED BY ANY OF THE ALLEGED BROKERS. EVEN THOUGH THE ASSESSEES TURNOVER MAY HAVE HAD SUBSTAN TIALLY ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 18 INCREASED YET, IT WAS NOT ESTABLISHED AS TO HOW THE ALLEGED BROKERS HAD CONTRIBUTED TO THE INCREASE. MOST IMPOR TANTLY, AND THIS WAS A CLINCHING EVIDENCE, THE ASSESSEE HAD NOT PAID THE BROKERS BECAUSE APPARENTLY, THE PARTIES TO WHOM GOO DS HAD BEEN SOLD BY THE ASSESSEE THROUGH THE BROKERS HAD N OT PAID UP. THIS CLEARLY SHOWED THAT NO SERVICE HAD BEEN PR OVIDED AT LEAST AS FAR AS RECOVERY OF PAYMENTS WAS CONCERNED. THE AR HAD VAGUELY ATTEMPTED TO COUNTER THIS FINDING AND C ONCLUSION OF THE AO BY SIMPLY SAYING THAT EVEN THOUGH IT WAS EXPECTED OF THE BROKERS TO RECOVER THE PAYMENT, DELAYS IN CE RTAIN CASES WERE BEYOND CONTROL. BUT, THE VERY FACT THAT NO PAY MENT HAD BEEN MADE TO ANY OF THE BROKERS, CLEARLY SHOWED THA T IN NONE OF THE CASES PAYMENTS COULD BE RECOVERED BY THE ALL EGED BROKERS. 10.1 FROM THE FACTS BROUGHT OUT BY THE AO AND CONSIDERING THE CLAIMS AND ARGUMENTS OF THE AR, IT IS VERY CLEAR THAT THE CLAIM OF THE ASSESSEE WAS ABSOLUTELY BOGUS. IT WAS A CLAIM MADE DELIBERATELY TO LOWER HIS PROFIT F OR THE YEAR AND THEREBY TO MINIMIZE THE INCIDENCE OF TAX. THE A CTION OF THE AO IS SUSTAINED, AND THE ADDITION OF RS.6,02,721 IS CONFIRMED. 15. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO P B-9 WHICH ARE THE DETAILS OF THE BROKERS TO WHOM COMMISSION/BROKERAGE HAVE BEEN PAID WHICH INCLUDES THEIR COMPLETE DETAILS, PAN AND PHON E NUMBERS. HE HAS SUBMITTED THAT PAYMENTS TO THEM ARE NOT IN DISPUTE AND THAT THEY HAVE RENDERED SERVICES FOR THE ASSESSEE FOR REALIZATION OF THE PAYMENTS. HE HAS RELIED UPON THE FOLLOWING DECISIONS IN SUPPORT OF H IS CONTENTIONS: (1) CIT VS BHARAT MEDICAL STORES 308 ITR 373 (P & H) IN WHICH THE TRIBUNAL RECORDED THE FINDINGS THAT AGENTS WERE APPOINTED BY THE ASSESSEE FIRM FOR COMMERCIAL EXPEDIENCY AND THE Y WERE INSTRUMENTAL IN CARRYING OUT THE TERMS OF THE CONTR ACT. COMMISSION PAID TO THE AGENTS WAS HELD TO BE ALLOWA BLE DEDUCTION. HONBLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBU NAL. ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 19 (2) CIT VS SPECIALTY PAPER CO. - 316 ITR 415 (MAD) IN WHICH DETAILS OF VOLUME OF BUSINESS WAS FILED BY THE ASSE SSEE TO SHOW THAT ITS PROFIT INCREASED SUBSTANTIALLY AS A RESULT OF SERVICES OF R. F. LTD. BOTH CIT(A) AND TRIBUNAL HAVE ARRIVED AT THE C ONCURRENT FINDING THAT THE COMMISSION PAID FOR RENDERING SERV ICES. DEPARTMENTAL APPEAL DISMISSED. (3) CIT VS SEPTU INDIA PVT. LTD. 305 ITR 295 (P & H) IN WHICH THE TRIBUNAL ON APPRECIATION OF FACTS HAVE REACHED THE CONCLUSION THAT THE ASSESSEE HAS PROVED THE PAYMENT OF COMMISS ION, TRIBUNAL WAS HELD TO BE JUSTIFIED IN DELETING THE ADDITION. NO INTERFERENCE CALLED FOR. (4) LAXMI ENGINEERING INDUSTRIES VS ITO 298 ITR 2 03 (RAJ) IN WHICH THE ASSESSEE FIRM ADDUCED EVIDENCE OF PAYMENT OF COMMISSION WHO PROMOTED THE SALES OF THE ASSESSEE. IT WAS HELD THAT COMMISSION CANNOT BE DISALLOWED. (5) ACIT VS SAJJAN MILLS LTD. 115 TTJ 145 ( TM ) IN WHICH IT WAS HELD THAT THE ASSESSEE PAID SALES COMMISSION AN D BROKERAGE AS PER THE BUSINESS PRACTICE AND ON THE BASIS OF TH E AGREEMENT WHICH WAS HELD TO BE ALLOWABLE DEDUCTION. 16. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT NO SUCH EXPEND ITURE WAS INCURRED IN THE EARLIER YEAR AND IT IS CLAIMED FOR THE FIRST TIME IN THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE COULD NOT GIVE DETA ILS OF SERVICES RENDERED BY THE COMMISSION AGENTS. NO AGENCY AGREEM ENT WAS PRODUCED. NO BASIS OF PAYMENT OF COMMISSION WAS PROVED. WHOLE OF THE COMMISSION EXPENSES REMAINED UNPAID AT THE END OF THE YEAR. IT WAS, THEREFORE, DOUBTFUL WHETHER EXPENDITURE WAS LAID OUT WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE FAILED TO DISCHAR GE THE ONUS TO PROVE ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 20 THAT EXPENDITURE WAS LAID OUT FOR THE PURPOSE OF BU SINESS. MERE PAYMENT ITSELF WOULD NOT PROVE THAT COMMISSION WAS PAID FOR COMMERCIAL CONSIDERATION. THE LEARNED DR RELIED UPON 122 ITR 8 39 (ALL) - SIDDHO MAL AND SONS VS ITO, 137 ITR 58 (BOM) - GOODLAS NAROLAC PAINTS PVT. LTD. VS CIT, 49 ITR 57 (CAL) - ANDREW YULE & CO. LTD. VS C IT, 227 ITR 846 (GAU) - ASSAM PESTICIDES & AGRO CHEMICALS AND 257 I TR 701 (A.P.) - CIT VS TRANSPORT CORPORATION OF INDIA. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A). IT IS NOT IN DISPUTE THAT SUCH EXPENDITURE HAD NOT BEEN INCURRED IN THE EARLIER YEAR. THE NATURE OF BUSINESS OF THE ASSESSEE REMAINED SAM E. THE ASSESSEE FAILED TO PROVIDE THE DETAILS REGARDING SERVICES RE NDERED BY THE COMMISSION AGENTS AND ALSO FAILED TO PRODUCE ANY AG ENCY AGREEMENT AND ALSO FAILED TO PROVE THE BASIS OF PAYMENT OF COMMIS SION. IT IS ALSO NOT IN DISPUTE THAT WHOLE OF THE COMMISSION EXPENSES REMAI NED UNPAID AT THE END OF THE YEAR. NO EVIDENCE IS PRODUCED AS TO HOW MUCH RECOVERY OF PAYMENTS HAS BEEN MADE BY THE AGENTS. EVEN THOUGH, THE NAME, ADDRESS AND PANS OF THE AGENTS WERE FURNISHED, BUT THE PART IES FROM WHOM COMMISSION AGENTS HAVE PROCURED ORDERS FOR THE ASSE SSEE OR THE PARTIES FROM WHOM THE COMMISSION AGENTS HAD MADE RECOVERY O F PAYMENTS WERE NOT SHOWN. THE LEARNED CIT(A) SPECIFICALLY NOTED TH AT IT WAS NOT ESTABLISHED AS TO HOW THE BROKERS HAD CONTRIBUTED T HE INCREASE OF THE BUSINESS OF THE ASSESSEE AND THAT THE PARTIES FROM WHOM RECOVERY HAS TO BE MADE HAVE NOT PAID ANY AMOUNT TO THE ASSESSEE. T HE ABOVE FINDINGS OF FACT RECORDED BY THE LEARNED CIT(A) HAVE NOT BEEN D ISPUTED BY THE ASSESSEE THROUGH ANY MATERIAL OR EVIDENCE ON RECORD . IT WOULD, THEREFORE, PROVE THAT THE COMMISSION AGENTS HAVE NOT PROCURED ANY ORDERS FOR THE ASSESSEE TO INCREASE ITS VOLUME OF BUSINESS AND ALS O FAILED TO PROVE THAT THE COMMISSION AGENTS HAVE MADE ANY RECOVERY OF PAY MENTS FROM THE PARTIES. THE ABOVE FACTS WOULD CLEARLY PROVE THAT T HE ASSESSEE HAS FAILED ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 21 TO PROVE IF THE COMMISSION AGENTS HAD IN FACT RENDE RED ANY SERVICES FOR THE ASSESSEE. SINCE THE ASSESSEE CLAIMED DEDUCTION OF THE EXPENDITURE, THEREFORE, BURDEN IS UPON THE ASSESSEE TO PROVE THA T THE COMMISSION AGENTS HAVE RENDERED SERVICES FOR THE BUSINESS OF T HE ASSESSEE. HOWEVER, THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS IN TH IS CASE. MERE PAYMENT TO THE COMMISSION AGENTS WOULD NOT SATISFY THE REQU IREMENTS OF THE LAW TO ALLOW DEDUCTION IN FAVOUR OF THE ASSESSEE PARTIC ULARLY WHEN THE ENTIRE COMMISSION PAYMENT TO THE AGENTS HAD REMAINED UNPAI D AT THE END OF THE YEAR. HONBLE SUPREME COURT IN THE CASE OF LACH MINARAYAN MADAN LAL VS CIT 86 ITR 439 HELD AS UNDER HELD, THAT THE FINDINGS OF THE TRIBUNAL WERE FINDI NGS OF FACT AND NO QUESTION OF LAW AROSE OUT OF THE TRIBUN ALS ORDER. THIS WAS A CASE WHERE THE ASSESSEE, BY ADOPTING A D EVICE, HAD MADE IT TO APPEAR THAT THE INCOME WHICH BELONGE D TO IT HAD BEEN EARNED BY SOME OTHER PERSON. THE MERE EXISTENCE OF AN AGREEMENT BETWEEN THE ASSESSEE AND ITS SELLING AGENTS OR PAYMENT OF CERTA IN AMOUNTS AS COMMISSION, ASSUMING THERE WAS SUCH PAYM ENT, DOES NOT BIND THE INCOME-TAX OFFICER TO HOLD THAT T HE PAYMENT WAS MADE EXCLUSIVELY AND WHOLLY FOR THE PURPOSE OF THE ASSESSEES BUSINESS. ALTHOUGH THERE MIGHT BE SUCH A N AGREEMENT IN EXISTENCE AND THE PAYMENTS MIGHT HAVE BEEN MADE, IT IS STILL OPEN TO THE INCOME-TAX OFFICER TO CONSIDER THE RELEVANT FACTS AND DETERMINE FOR HIMSELF WHETHER TH E COMMISSION SAID TO HAVE BEEN PAID TO THE SELLING AG ENTS OR ANY PART THEREOF IS PROPERLY DEDUCTIBLE UNDER SECTI ON 37 OF THE ACT. 17.1 HONBLE KARNATAKA HIGH COURT IN THE CASE OF DC IT VS MCDOWELL & CO. 291 ITR 107 HELD THAT NO EVIDENCE TO PROVE COMMISSION AGENTS RENDERED SERVICES TO THE ASSESSEE NOT ENTITLED TO DEDUCTION. 18. CONSIDERING THE ABOVE DISCUSSIONS IN THE LIGHT OF THE FACTS RECORDED BY THE AUTHORITIES BELOW, WE ARE OF THE VIEW THAT T HE ASSESSEE FAILED TO DISCHARGE THE ONUS TO PROVE THAT COMMISSION HAVE BE EN PAID FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THE DECISIONS CIT ED BY THE LEARNED ITA NO.383/AHD/2008 SAJJANKUMAR SUGANCHAND AGRAWAL- HUF VS ACIT, CIR-2, SURAT 22 COUNSEL FOR THE ASSESSEE ARE CLEARLY DISTINGUISHABL E ON FACTS OF THIS CASE AND WOULD NOT SUPPORT THE CLAIM OF THE ASSESSEE. WE ACCORDINGLY, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. WE CONFIRM THEIR FINDINGS AND DISMISS THIS GROUND O F APPEAL OF THE ASSESSEE. 19. NO OTHER POINT IS ARGUED OR PRESSED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17-09-2010 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 17-09-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD