M/s. Jay Vijay Prints Pvt.Ltd., Surat V. The ACIT., Circle-1(1), Surat

ITA 3882/AHD/2007

• Counselvise Citation: 388220514 RSA 2007
• Duration Of Justice: 4 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: U S BHATI
• Keywords: Gross profit estimation; Rejection of books of accounts; Fair market value; Corroborative evidences
• Section: 143(3)

Judgement Text

, , , , , , . .. .' ' ' ' ' ' ' ' , # # # # $ $ $ $ IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD BEFORE HONBLE SHRI BHAVNESH SAINI, J.M. & HONBLE SHRI A.MOHAN ALANKAMONY, A.M.) . ITA NO. 3882/AHD./2007 : %& - 2004-2005 JAY VIJAY PRINTS PVT. LTD., SURAT VS- THE A .C.I.T., CIRCLE-1(1), SURAT (PAN : AAACJ 5969J) ( '( /APPELLANT) ( )*'( /RESPONDENT ) '( + , / APPELLANT BY : SHRI U.S.BHATI, A.R. )*'( + , / RESPONDENT BY : SHRI SAMIR TEKRIWAL, SR.D.R. -. + /0# / DATE OF HEARING : 04/10/2011 1'% + /0# / DATE OF PRONOUNCEMENT: 29/12/2011 / ORDER PER SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, SURAT IN AP PEAL NO.CAS- I/268/06-07 DATED 14.08.2007 FOR THE ASSESSMENT YEA R 2004-05 PASSED UNDER SECTION 250 R.W.S 143(3) OF THE I.T. ACT, 196 1. 2. THE ASSESSEE COMPANY HAD, ORIGINALLY, RAISED ITS GROUNDS IN A NARRATIVE AND ILLUSTRATIVE MANNER. SUBSEQUENTLY, IT CAME UP WITH REVISED GROUNDS IN A CONCISE MANNER, WHICH ARE REPRODUCED H EREUNDER: 1. THE LD CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE DISALLOWANCE OF INTEREST PAID TO SPECIFIED PERSONS U/S 40A(2)(B) OF THE INCOME-TAX ACT, 1961 WITHOUT APPRECIATING THE F ACT THAT THE APPELLANT HAD BORROWED AT THE SAME RATE OF INTEREST FROM ALL OTHER UNSECURED CREDITORS. ITA NO. 3882-AHD-07 2 2. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN UP HOLDING THE FINDING OF THE LD. AO THAT THE APPELLANT COMPANY HAD PAID JOB CHARGES AT HIGHER RATE(S) TO M/S. GANGA FASHION PVT. LTD. (A S PECIFIED PERSON) WITHOUT APPRECIATING THE FACTS AND SUBMISSIONS OF THE APPELLANT COMPANY. 3. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN H OLDING THAT BOOKS OF ACCOUNT OF THE APPELLANT WERE NOT RELIABLE THOUGH N O SUCH FINDING WAS GIVEN BY THE LD. AO. 4. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN HO LDING THAT AO HAS RIGHTLY REJECTED BOOKS OF ACCOUNT AND ADOPTED THE L AST YEARS GP @ 12.8% WITHOUT CONSIDERING THE DETAILED SUBMISSIONS DULY SUPPORTED BY THE EVIDENCE. 5. THE APPELLANT MAY BE ALLOWED TO ADD, AMEND, ALTER O R RAISE ADDITIONAL GROUNDS OF APPEAL. 3. THE ASSESSEE COMPANY [THE ASSESSEE HENCEFORTH] ENGAGED IN PURCHASE OF ART SILK CLOTH AND AFTER GETTING THE SA ME PROCESSED ON JOB WORK BASIS AND SALES FINISHED FABRICS, FURNISHED IT S RETURN, ADMITTING A TOTAL INCOME OF RS.12,25,448/- WHICH WAS INITIALLY PROCESSED U/S 143(1)(A) OF THE ACT. SUBSEQUENTLY THE CASE WAS TAK EN UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT ORDER WAS PASSED ON 1 5/12/2006 U/S. 143(3) OF THE ACT. DURING THE COURSE OF SCRUTINY AS SESSMENT PROCEEDINGS, THE AO, AFTER EXAMINATION OF THE DETAILS FURNISHED AND CONSIDERATION OF THE ASSESSEES CONTENTIONS, MADE THE FOLLOWING ADDI TIONS/DISALLOWANCES UNDER DISTINCTIVE CAPTIONS, NAMELY: I. DISALLOWANCE U/S 40A(2)(B) OF THE ACT : IT WAS THE STAND OF THE AO THAT THE ASSESSEE HAD OB TAINED UNSECURED LOANS FROM SPECIFIED PERSONS COVERED U/S 40A(2)(B) OF THE ACT AND HAD PAID INTEREST THE RATE OF 18% TO TH E TUNE OF RS.16,40,519/- TO THOSE PERSONS AND OF RS.11,63,484 /- TO OTHER PERSONS. HE HAD ALSO REASONED THAT THE ASSESSEE HA D PAID HIGHER ITA NO. 3882-AHD-07 3 INTEREST AT 18% TO ITS SISTER CONCERN AND OTHER PAR TIES WHEREIN THE BANK PLR AT THE RELEVANT TIME WAS ONLY AT 11.25%. THE AO TOOK A VIEW THAT WHEN IT WAS EASIER TO OBTAIN LOAN FROM TH E BANKS AT A LOWER RATE, THE ASSESSEE HAD TAKEN LOANS FROM ITS S ISTER CONCERN AND SPECIFIED PERSONS AT A HIGHER RATE OF INTEREST WITHOUT ASSIGNING ANY REASON AND, THEREFORE, PROPOSED TO DISALLOW THE EXCESS INTEREST PAYMENT OF 6.75% ON LOANS BEING OVER AND ABOVE THE PLR RATE OF BANKS AS NON-BUSINESS PURPOSE. ACCORDINGLY, THE DI SALLOWANCE MADE WAS AT RS.10,51,502/-. II. JOB WORK CHARGES PAID TO GANGA FASHIONS PVT. LT D : IT WAS THE CASE OF THE AO THAT THE ASSESSEE HAD PAI D RS.2.9 CRORES AS JOB WORK CHARGES TO GANGA FASHIONS PVT. LTD [GFP L] WHICH WAS SPECIFIED U/S 40A(2)B). BRUSHING ASIDE THE ASSESSE ES CLAIM THAT IT WAS PAYING JOB CHARGES TO GFPL AT THE SAME RATE AS THE JOB CHARGES PAID TO OTHER PARTIES INCLUDING FLORAL CREA TION, THE AO DISPUTED THAT THE BILL IN RESPECT OF ASSESSEE WAS A BOUT 14 ITEMS WHEREAS THE BILL OF FLORAL CREATION WAS ONLY OF 3 I TEMS AND, HENCE, THE RATE APPLIED BY GFPL IN THE ASSESSEES CASE WAS NOT COMPARABLE WITH THE OUTSIDE PARTIES. THE AO ALSO N OTICED THAT THE ASSESSEE DID NOT JUSTIFY THE CLAIM OF HAVING PAID M ARKET RATE TO GFPL WHO WAS A SPECIFIED PERSON BY SUBMITTING AS MA NY COMPARABLE BILLS AS IT COULD. SINCE THE AO HAS JUR ISDICTION OVER GFPL, HE NOTICED THAT THE AVERAGE JOB CHARGES PAID BY THE ASSESSEE AND AVERAGE JOB CHARGES RECEIVED BY GFPL S HOWS THAT ON AN AVERAGE GFPL WAS CHARGING MUCH LESS RATE FROM OTHER PARTIES THAN THE ASSESSEE. AS PER THE CHART PREPAR ED BY THE AO, THE GFPL HAD CHARGED EXCESS AMOUNT TO THE TUNE OF RS.11,15,155/- WHICH, ACCORDING TO THE AO, HAD REDU CED THE ITA NO. 3882-AHD-07 4 ASSESSEES GP TO THE EXTENT OF RS.11.15 LAKHS WHICH CLEARLY EXHIBITS FROM THE FACT THAT DURING THE YEAR THE ASS ESSEE HAD SHOWN TURNOVER OF RS. 12.2 CRORES AND GP RATE OF ONLY 10. 83% AS COMPARED TO RS.19.49 CRORES AND 12.81% OF GP IN THE PRECEDING YEAR. HOWEVER, THE AO TOOK A VIEW THAT SINCE THE A DDITION IN RESPECT OF FALL IN GP WAS BEING SEPARATELY MADE NO SEPARATE ADDITION IN THIS REGARD IS MADE AS THIS ELEMENT IS CONCERNING TRADING ACCOUNT BEARING CONSEQUENTIAL EFFECT ON GRO SS PROFIT. III. ESTIMATION OF FURTHER GROSS PROFIT OF 2% : THE AO HAD NOTICED THAT THERE WAS A FALL IN GP TO T HE EXTENT OF ALMOST 2% AND ALSO THERE WAS FALL IN TURNOVER BY ALMOST RS .7 CRORES. AS THE ASSESSEE HAD FAILED TO GIVE ANY EXPLANATION FOR FAL L IN GP, THE AO TOOK A VIEW THAT THE BOOKS OF ACCOUNTS WERE NOT RELIABLE BY RELYING ON THE DECISIONS OF (I) HONBLE ITAT, MUMBAI BENCH IN THE CASE OF SAMIR DIAMONDS EXPORTS LTD [71 ITD 75] AND (II) THE HONB LE ALLAHABAD HIGH COURT IN THE CASES OF (A) AVDHESH PRATAPSINGH ABDUL RAHMAN & BROTHERS V. CIT [210 ITR 406] AND (B) HARI SHANKAR GOPAL HARI V. CIT [97 ITR 716]. THE ASSESSEE WAS REQUIRED TO GIVE DE TAILS OF: (I) CLOSING STOCK OF QUANTITY, VALUE, THE BASIS OF VALUATION; (II) THE DESIRED DETAILS IN REGARD TO ITS SISTER C ONCERN; (III) SUPPORTING EVIDENCE AND THE SUPPORTING EVIDEN CE AND BASIS OF VALUATION IN RESPECT OF CLOSING STOCK SINCE THE ASSESSEE DID NOT FURNISH THE ABOVE DETAIL S THE LD.AO OPINED THAT THE ASSESSEE HAD INFLATED ITS JOB CHARGES EXPE NSES PAID TO ITS SISTER CONCERN GANGA FASHION PVT. LTD. FURTHER THE ASS ESSEE HAD FAILED TO JUSTIFY THE FALL IN GP BY 2%, THEREFORE THE LD.AO R EJECTED THE BOOKS OF ACCOUNTS AND MADE THE ADDITION OF RS.24,40,960/- BY ADOPTING THE LAST YEARS GP. ITA NO. 3882-AHD-07 5 4. THE ASSESSEE TOOK UP THESE ISSUES WITH THE LD. C IT (A) FOR RELIEF. THE CONTENTIONS OF THE ASSESSEE BEFORE THE LD. CIT (A) AS WELL AS THE FINDINGS OF THE LD. CIT (A) ARE EXTRACTED FROM THE IMPUGNED ORDER OF THE LD. CIT (A) IN DISTINCTIVE HEADINGS AS UNDER: INTEREST PAYMENT : ASSESSEES SUBMISSION: [PARA 2.2 OF THE CIT(A)S ORDER] DURING THE APPELL ATE PROCEEDINGS THE APPELLANT HAS STATED THAT THE AO HA S FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE WAS ENJOYING BANK FACILITIES AS IS CLEAR FROM THE BALANCE SHEET AND THE RATE OF INTEREST PAID TO SPECIFIED PERSONS WAS SAME AS INTEREST PAID TO OTHE R CREDITORS OF UNSECURED LOANS. IT WAS ALSO ARGUED THAT THESE LOA NS/DEPOSITS FROM SPECIFIED PERSONS WERE OLD LOANS AND INTEREST WAS PAID AT THE RATE OF 18% EVEN EARLIER. THE APPELLANT HAS RE LIED ON THE DECISION OF HONBLE ITAT, AHMEDABAD IN THE CASE OF OMKARMAL GAURISHANKAR V. ITO [39 TTJ 223] WHEREIN IT WAS HEL D THAT CONSIDERING THE EVER INCREASING INFLATION, THE INTE REST RATE OF 24% WAS JUSTIFIED. THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF HONBLE JODHPUR ITAT IN THE CASE OF ITO V. BRAR BRO THER [127 TAXMAN 152] WHEREIN IT WAS STATED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PAYMENT OF INTEREST U/S 40A(2)(B) WAS JUSTIFIED. THE LD. CIT (A)S FINDINGS: 2.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. THE DECISION OF ITAT REL IED ON BY THE APPELLANT ARE ALL ON FACTS OF THOSE CASES AND NOT A PPLICABLE TO THE ASSESSEES CASE AS RATE OF INTEREST VARIES FROM YEA R TO YEAR. THE CASE OF THE AO IS THAT THE ASSESSEE COULD HAVE OBTA INED LOAN FROM BANKS AND THEREFORE PAYMENT OF HIGH RATE OF IN TEREST THAT TOO MUCH HIGHER THAN THE BANK RATE TO THE SPECIFIED PERSONS IS NOT JUSTIFIED AND ANY PRUDENT BUSINESSMAN WOULD HAV E TAKEN CARE TO DISCHARGE THE LOANS TO THE SPECIFIED PERSON S AND OBTAINED LOANS AT THE LOWER RATE EITHER FROM THE MA RKET OR FROM THE BANK. THE APPELLANT HAS FAILED TO SHOW THAT IT COULD NOT HAVE OBTAINED LOAN FROM THE BANK AND IT HAD EXHAUSTED A LL ITS POSSIBILITY OF OBTAINING LOAN FROM BANK AND LOAN A T LOWER RATE OF INTEREST WAS NOT POSSIBLE FROM THE MARKET. CLEARLY , THE HIGHER ITA NO. 3882-AHD-07 6 RATE OF INTEREST AT 18% TO THE SPECIFIED PERSONS IS NOT AS PER THE MARKET RATE SINCE THE BANKS WERE PROVIDING LOANS AT A MUCH LOWER RATE WITH PLR OF 11.25%. THE ONLY ARGUMENT G IVEN IS THAT IT HAD LOANS FROM OTHER PARTIES ALSO AT THE RATE OF 18% BUT THIS DOES NOT ESTABLISH THIS CONTENTION IN THE LIGHT OF LOWER RATE OF INTEREST BEING OFFERED BY THE BANK. THEREFORE, THE DISALLOWANCE OF INTEREST BY AO U/S 40A (2)(B) IN RESPECT OF SPEC IFIED PARTIES IS JUSTIFIED. ALTHOUGH, THE RATE OF INTEREST ON LOANS OBTAINED FROM OTHER PARTIES IS ALSO VERY HIGH AT 18%, HOWEVER, TH E SAME CANNOT BE DISALLOWED U/S 40A(2)(B) AND HENCE, THE DISALLOW ANCE IS RESTRICTED TO THE LOANS OBTAINED FROM THE SPECIFIED PARTIES ONLY AND DELETED IN RESPECT OF INTEREST PERTAINING TO O THER PARTIES. HENCE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. TH E AO IS DIRECTED TO REWORK OUT THE INTEREST THAT WOULD BE D ISALLOWED IN RESPECT OF THE SPECIFIED PARTIES ONLY. JOB WORK CHARGES PAID TO GANGA FASHIONS PVT. LTD : ASSESSEES SUBMISSION: [PARA 3.2 OF THE CIT(A)S ORDER] DURING THE APPEL LATE PROCEEDINGS THE APPELLANT HAS STATED THAT THE AO HAS COMPARED T HE AVERAGE JOB CHARGES OF THE SISTER CONCERN ONLY FOR SEVEN MONTHS AND THE AO HAS NOT TAKEN INTO ACCOUNT THAT THE APPELLANT COMPANY W AS DEALING IN MANY VARIETIES OF PROCESSED CLOTH. ACCORDING TO TH E APPELLANT IT HAS PAID JOB CHARGES WHOSE AVERAGE OF FULL YEAR IS RS.1 0.33 AND THE AVERAGE JOB CHARGES PAID BY THE ASSESSEE TO ALL THE PARTIES IS RS.10.79 MEANING THEREBY THAT THE JOB CHARGES PAID TO GANGA FASHIONS PVT. LTD IS LESS. IT HAS ALSO BEEN ARGUED THAT GANGA FASHIONS PVT. LTD IS PAYING HEAVY TAX AND HENCE IT CANNOT BE SAID THAT THE ASSESSEE HAS EVADED TAXES. IT HAS BEEN AR GUED THAT DURING THE CURRENT YEAR GANGA FASHIONS PVT. LTD HAS SHOWN INCOME OF RS.21.64 LACS MUCH HIGHER THAN THE INCOME DECLARED BY THE ASSESSEE AT RS.12.24 LACS AND HENCE THIS ADDITION S HOULD NOT BE MADE. THE LD. CIT (A)S FINDINGS: 3.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE AO. AS PER THE AO THE ASSESSEE HAS PAID HIGHER JOB CHARGES TO GANGA FASHIONS PVT. LTD THAN OTHER P ARTIES IN THE MONTH OF APRIL, MAY, JULY, AUGUST, SEPTEMBER, OCTOB ER AND NOVEMBER. AS PER THE DETAILS FILED BY THE APPELLA NT ALSO THE APPELLANT HAS PAID HIGHER JOB CHARGES TO GANGA FASH IONS PVT. LTD ITA NO. 3882-AHD-07 7 THAN OTHER PARTIES IN THE MONTH OF APRIL, MAY, JUNE . SINCE THE JOB CHARGES PAID BY ASSESSEE TO GANGA FASHIONS PVT. LTD ARE HIGHER THAN THE AVERAGE OF TOTAL JOB CHARGES PAID TO ALL T HE PARTIES IN SOME MONTHS, THERE IS A CASE FOR DISALLOWANCE OF 40A(2)( B). THIS CLEARLY SHOWS THAT THE APPELLANT HAS AT LEAST TO SOME EXTEN T IN SOME MONTHS TRIED TO REDUCE ITS PROFIT BY MAKING MORE PA YMENT TO ITS SISTER CONCERN. HOWEVER, SINCE THE AO HAS NOT MADE ANY AD DITION ON THIS ISSUE SEPARATELY, SO THIS GROUND OF APPEAL IS DISMI SSED. ADDITION ON ACCOUNT OF LOW GP : ASSESSEES SUBMISSION: [PARA 4.4. OF THE CIT(A)S ORDER] DURING THE APP ELLATE PROCEEDINGS THE APPELLANT HAS STATED THAT IN THE LAST YEAR THER E WAS A SURVEY OPERATION AT THE PREMISES OF THE ASSESSEE AND THE A SSESSEE HAS DECLARED AN AMOUNT OF RS.69, 49,704/- WHICH INCLUDE D THE STOCK AND ALSO THE CASH FOUND AND HAS STATED THAT THE GP WAS MORE IN THE LAST YEAR BY RS.2,36,501/- BECAUSE THE CASH DECLARED WAS INCLUDED THEREIN. IT HAS ALSO BEEN STATED THAT IN THE LAST YEAR THE TRADE DISCOUNT WAS RS.28.34 LACS BUT IN THE CURRENT YEAR IT WAS RS.62.46 LACS. THIS HAS DECREASED THE GP IN THE CURRENT YEA R . THE LD. CIT (A)S FINDINGS: 4.5. I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. THE ASSESSEE HAS FAILED TO PRODUCE THE DETAILS OF CLOSING STOCK, ITS BASIS OF VALUATION AN D DAY TO DAY CONSUMPTION OF RAW MATERIAL QUANTITY-WISE BEFORE TH E AO. THE APPELLANT ALSO PAID HIGHER JOB CHARGES TO ITS SISTE R CONCERN DURING A FEW MONTHS AS DISCUSSED ABOVE. THEREFORE, IT IS CL EAR THAT THE PROFIT SHOWN BY THE APPELLANT CANNOT BE RELIED UPON. THIS IS ALSO CLEAR FROM THE FACT THE APPELLANT HAS ADMITTED IN THE LAS T YEAR DURING THE SURVEY THAT IT HAS OFFERED DISCLOSURE OF UNACCOUNTE D INCOME OF RS.69.49 LACS. ALTHOUGH THE LAST YEAR CANNOT BE MA DE THE BASIS FOR THE CURRENT YEAR BUT THE FACT THAT THE APPELLANT HA S FAILED TO PRODUCE THE DETAILS AND BASIS OF VALUATION OF CLOSING STOCK AND PAID HIGHER JOB CHARGES TO ITS SISTER CONCERN AND THE FACT THAT THERE IS A HUGE FALL IN TURNOVER FROM RS.19 CRORES TO RS.12 CORES WHICH REMAINS UNEXPLAINED AND THE FACT THAT THERE IS A BIG FALL I N GP FROM 12.8% TO 10.8% WHICH REMAINS UNEXPLAINED SHOWS THAT THE ASSE SSEE IS PRONE TO CONCEALING THE INCOME AND HENCE THE BOOKS OF ACC OUNTS ARE NOT RELIABLE. IN VIEW OF THE DECISIONS RELIED UPON BY THE AO, THE AO HAS ITA NO. 3882-AHD-07 8 RIGHTLY REJECTED THE BOOKS OF ACCOUNTS AND ADOPTED THE LAST YEARS GP. THEREFORE, THE GP ADDITION MADE BY THE AO IS C ONFIRMED AND THESE GROUNDS OF APPEAL ARE DISMISSED . 5. AGITATED WITH THE FINDINGS OF THE LD. CIT (A), T HE ASSESSEE HAS COME UP WITH THE PRESENT APPEAL. THE SUBMISSIONS O F THE LD. A R ARE REPRODUCED AS UNDER: [AS ENCLOSURE WITH FORM NO.36] I.REGARDING DISALLOWANCE U/S 40A(2)B) FROM INTEREST PAYMENTS MADE RS.6,15,195: (1) THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE DISALLOWANCE MADE BY THE AO U/S 40A(2)(B) OF THE AC T TO THE EXTENT OF INTEREST PAID TO SPECIFIED PARTIES WITHOUT APPRE CIATING THE CORRECT FACTS RELATING TO THESE BORROWINGS VIS--VIS THE IN TEREST PAID TO OTHER CREDITORS OF THE APPELLANT COMPANY. (2) THE LD. CIT (A) FURTHER ERRED IN LAW IN CONFIRM ING THE SAID DISALLOWANCE ON THE GROUND THAT THE APPELLANT FAILE D TO SHOW THAT IT COULD HAVE OBTAINED LOAN FROM THE BANK AND IT HAD E XHAUSTED ALL THE POSSIBILITY OF OBTAINING LOAN FROM BANK AND LOAN AT LOWER RATE OF INTEREST WAS NOT POSSIBLE FROM THE MARKET. (3) THE LD. CIT (A) ERRED IN LAW IN NOT APPRECIATIN G THE WELL SETTLED LEGAL PROPOSITION THAT A BUSINESSMAN CANNOT BE COMP ELLED TO CARRY ON HIS BUSINESS IN A PARTICULAR MANNER SO AS TO MAK E THE MAXIMUM PROFITS. A BUSINESSMAN IS AT LIBERTY TO CARRY ON H IS BUSINESS IN A MANNER HE LIKES. (4) THE DISALLOWANCE OF INTEREST PARTLY CONFIRMED B Y THE CIT (A) MAY, THEREFORE, BE DELETED IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. II. REG. ALLEGED EXCESSIVE JOB CHARGES PAID TO GANG A FASHION RS.11,15,155/- (THOUGH CONSIDERED IN ADDITION OF RS.24,40,9 60) : (5) THE LD. CIT (A) ERRED IN NOT APPRECIATING THE F ACTS OF THE CASE IN PROPER PERSPECTIVE WHILE UPHOLDING THE ALLEGATION O F EXCESSIVE JOB CHARGES PAID TO SPECIFIED PERSON VIZ., GANGA FASHIO N PVT. LTD FOR THE JOB WORK DONE BY THEM IN A FEW MONTHS THIS YEAR . ITA NO. 3882-AHD-07 9 (6) THE LD. CIT (A) ALSO ERRED IN APPLYING THE LAW OF AVERAGES TO THE JOB CHARGES PAID TO THIS CONCERN VIS A VIS OTHER CO NCERN WITHOUT TAKING INTO CONSIDERATION THAT THESE CHARGES DEPEND UPON THE NATURE OF THE JOB WORK ENTRUSTED I.E., THE NATURE AND EXTE NT OF THE DESIGN INVOLVED AND COLOURS REQUIRED TO BE USED AND PROCES S AND TREATMENT REQUIRED TO BE GIVEN DEPENDING UPON THE QUALITY & T EXTURE OF THE CLOTH TO BE PROCESSED. (7) THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT AS PER APPELLATE ORDER THE CHARGES PAID TO GANGA FASHION P VT. LTD WERE LESS THAN THE CHARGES PAID TO OTHERS IN SOME MONTHS . THEREFORE, THE ALLEGATION OF REDUCING THE PROFITS BY MAKING MORE P AYMENT TO SISTER CONCERN COULD NOT BE JUSTIFIED. (8) THE LD. CIT (A) ERRED IN NOT APPRECIATING THE F ACT THAT THERE HAS BEEN SUBSTANTIAL FALL IN THE TOTAL TURNOVER THIS YE AR AS COMPARED TO THE EARLIER YEAR AND, THEREFORE, THE STANDING CHARG ES REMAINING THE SAME THERE WAS BOUND TO BE SOME FALL IN THE G.P THI S YEAR. (9) THE LD. CIT (A) ERRED IN UPHOLDING THE REASONIN G OF THE AO ON THE ONLY GROUND THAT THERE WAS FALL IN THE GP. THI S YEAR BY ABOUT 2% ALTHOUGH HE HAS NOTED THAT THE FALL IN THE TURNOVER WAS ABOUT 7 CRORES. THEREFORE, THIS COULD NOT BE A VALID GROUN D FOR REJECTING THE BOOK RESULT, IGNORING THE CORRECTNESS AND COMPLETEN ESS OF THE AUDITED BOOKS OF ACCOUNT OF THE APPELLANT COMPANY. III. REGARDING ESTIMATED GP ADDITION OF RS.24,40, 960: (10) THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF THE AO IN REJECTING THE BOOK RESULT AND I N ESTIMATING THE PROFITS AND IN MAKING THE GP ADDITION OF RS.24,24,9 60/- (SIC) RS.24,40,960/- WITHOUT ANY PLAUSIBLE REASON. (11) THE LD. CIT (A) FAILED TO APPRECIATE THE RELEV ANT FACTS AND LEGAL POSITION WHILE DISMISSING THE GROUND(S) REGARDING T HE GP ADDITION. THEREFORE, THE IMPUGNED ADDITION OF RS.24,40,960/- MAY BE DELETED. 6.1. DURING THE COURSE OF HEARING, THE LD. A R FURN ISHED PAPER BOOKS CONTAINING 1 68 PAGES WHICH CONSIST OF, INTER ALI A, COPIES OF (I) WRITTEN SUBMISSION BEFORE THE CIT (A); (II) COMPARATIVE BIL LS OF JOB CHARGES ITA NO. 3882-AHD-07 10 ISSUED BY GFPL AND OTHER PARTIES (III) REVISED GP W ORKING STATEMENT; (IV) CORRESPONDENCE WITH THE LOWER AUTHORITIES ETC., T O STRENGTHEN HIS SUBMISSIONS, THE LD. A R HAD PLACED STRONG RELIANCE ON THE CASE LAWS REPORTED IN (2011) 43 SOT 1 (AHD) AND (2011) 44 SOT 45 (AHD.) 6.2. ON THE OTHER HAND, THE LD. D R SUPPORTED THE S TAND OF THE AUTHORITIES BELOW AND VEHEMENTLY ARGUED THAT THE IS SUES HAVE BEEN ANALYZED IN DEPTH AND ARRIVED AT THE CONCLUSION IN A JUDICIOUS MANNER BY THE AUTHORITIES CONCERNED WHICH REQUIRES NO INTERVE NTION OF THIS BENCH AT THIS STAGE. 6.3. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS, METICULOUSLY PERUSED THE RELEVANT CASE RECORDS AND ALSO THE DOCU MENTARY EVIDENCES ADDUCED BY THE LD. A R DURING THE COURSE OF HEARING IN THE SHAPE OF PAPER BOOKS. WITH DUE RESPECTS, WE HAVE ALSO PERUS ED THE VARIOUS CASE LAWS ON WHICH THE ASSESSEE HAS PLACED ITS UNSTINTED FAITH. 6.4. WE SHALL NOW PROCEED TO ADJUDICATE THE ISSUES CHRONOLOGICALLY. I. DISALLOWANCE U/S 40A(2)(B) OF THE ACT : IT WAS THE CASE OF THE AO THAT THE ASSESSEE HAD OBT AINED UNSECURED LOANS FROM SPECIFIED PERSONS COVERED U/S 40A(2)(B) OF THE ACT AND HAD PAID INTEREST AT THE RATE OF 18% TO THE TU NE OF RS.16,40,519/- TO THOSE PERSONS AND OF RS.11,63,484/- TO OTHER PERSON S AND THAT THE ASSESSEE HAD PAID HIGHER INTEREST TO ITS SISTER CON CERN AND OTHER PARTIES WHEN THE BANK PLR AT THE RELEVANT TIME WAS PEGGED ONLY AT 11.25% THE AO HAD FURTHER ALLEGED THAT WHEN THE LOAN FACI LITIES FROM THE BANKS AT A LOWER RATE WERE AT EASE, THE ASSESSEE HAD AVAI LED LOANS FROM ITS SISTER CONCERN AND SPECIFIED PERSONS AT A HIGHER RA TE OF INTEREST WITHOUT ASSIGNING ANY REASON AND, THEREFORE, RESORTED TO D ISALLOW THE EXCESS ITA NO. 3882-AHD-07 11 INTEREST PAYMENT OF 6.75% BEING OVER AND ABOVE THE PLR RATE OF BANKS AS NON-BUSINESS PURPOSE. HOWEVER, INTERESTINGLY, THE AO HAD NOT BROUGHT ANY CREDIBLE EVIDENCE ON RECORD TO SUGGEST THAT THE ASSESSEE HAD GIVEN MO RE INTEREST ITS SISTER CONCERN THAN TO OTHER PARTIES. ON THE OTHER HAND, THE ASSESSEE DURING THE APPELLATE PROCEEDINGS VOUCHED THAT THE AO HAD F AILED TO APPRECIATE THE FACT THAT THE ASSESSEE WAS ENJOYING BANK FACILI TIES AS COULD BE CLEAR FROM ITS BALANCE SHEET AND THE RATE OF INTEREST PAI D TO SPECIFIED PERSONS WAS SAME AS INTEREST PAID TO OTHER CREDITORS OF UNS ECURED LOANS. IT WAS, FURTHER, ARGUED BY THE ASSESSEE THAT THE LOANS/DEPO SITS FROM THOSE SPECIFIED PERSONS WERE OLD AND THE INTEREST WAS BEI NG PAID AT THE RATE OF 18% EARLIER AS AGREEMENT UPON. AT THIS JUNCTURE, WE RECALL THE FINDING OF THE HON BLE EARLIER BENCH WHICH, IN THE CASE OF DCIT V. M/S.GANGA FASHIONS P VT. LTD (IN ITA NO.568/AHD/2008 DATED: 20.3.2009 ON AN IDENTICAL IS SUE, HAS OBSERVED THUS: 7. SO FAR AS ISSUE RELATING TO DELETION OF INTERES T CONCERNED, WE AFTER HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE FIRST OF ALL, ARE OF THE OPINION THAT IT IS VERY SU RPRISING AS TO HOW THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT I T WAS EASY FOR ASSESSEE TO PROCURE LOAN FROM THE BANK INTEREST LOW ER THAN FROM THE MARKET. CONSEQUENTLY, IF LOAN FROM THE BANK WA S ALSO AVAILABLE ON MARKET RATE, THEN HOW HE CAME TO THE C ONCLUSION THAT RATE OF INTEREST PAID BY THE ASSESSEE WAS HIGH ER THAN THE MARKET RATE. 8. WITHOUT PREJUDICE TO THE ABOVE, WE ARE, FURTHER , OF THE OPINION THAT THE ASSESSING OFFICER COMPLETELY IGNORED THE V ITAL SUBMISSIONS/FACTS OF THE CASE THAT INTEREST @ 18% W AS PAID NOT ONLY TO THE SISTER CONCERN AND OUTSIDERS ALSO AND, THEREFORE, PROVISIONS OF SECTION 40A(2)(B), IN OUR OPINION, W AS APPLIED IN AN ARBITRARY AND UNJUSTIFIED MANNER TO INVOKE THESE PR OVISIONS, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO QUOTE THE M ARKET RATES ITA NO. 3882-AHD-07 12 AND GAVE THE REASONS AS TO HOW THE RATE OF INTEREST PAID BY THE ASSESSEE WAS HIGHER THAN THE RATE OF INTEREST PAYME NT IN THE MARKET OR TO THE OUTSIDERS, NO SUCH EVIDENCE OR FIN DING HAS BEEN ARRIVED AT BY THE ASSESSING OFFICER AND IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHICH IS CONFIRMED . INCIDENTALLY, THE LD. AO HAD NOT QUOTED ANY COMPARA BLE INSTANCES WHEREIN THE INTEREST PAYMENTS MADE TO SPE CIFIED PERSONS WERE MUCH LESS THAN WHAT HAS BEEN PAID BY THE PRESE NT. IN VIEW OF THE ABOVE FACTS AND ALSO IN CONFORMITY WITH THE FIN DING OF THE EARLIER BENCH REFERRED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE LD CIT (A) WAS NOT JUSTIFIED IN SELECTIVELY CONFIRMING THE DISALLOWANCE OF INTEREST U/S 40A(2)(B) OF THE ACT IN RESPECT OF SPE CIFIED PARTIES. IN ESSENCE, THE DISALLOWANCE OF RS.10,51,502/- MADE BY THE AO IS DELETED. II. JOB WORK CHARGES PAID TO GANGA FASHIONS PVT. LT D : BRUSHING ASIDE THE ASSESSEES CLAIM THAT IT WAS PAY ING JOB CHARGES TO GFPL AT THE SAME RATE AS THE JOB CHARGES PAID TO OTHER PARTIES INCLUDING FLORAL CREATION, THE AO TOOK A STAND THAT THE BILL IN RESPECT OF ASSESSEE WAS ABOUT 14 ITEMS WHEREAS THE BILL OF FLO RAL CREATION WAS ONLY OF 3 ITEMS AND, HENCE, THE RATE APPLIED BY GFP L IN ASSESSEES CASE WAS NOT COMPARABLE WITH THE OUTSIDE PARTIES AND THA T THE ASSESSEE DID NOT JUSTIFY THE CLAIM OF HAVING PAID MARKET RATE TO GFPL WHO WAS A SPECIFIED PERSON BY SUBMITTING AS MANY COMPARABLE B ILLS AS IT COULD. TO STRENGTHEN HIS ARGUMENT, THE AO STATED THAT THE AV ERAGE JOB CHARGES PAID BY THE ASSESSEE AND AVERAGE JOB CHARGES RECEIV ED BY GFPL SHOWS THAT ON AN AVERAGE GFPL WAS CHARGING MUCH LESS RATE FROM OTHER PARTIES THAN FROM THE ASSESSEE. ITA NO. 3882-AHD-07 13 HOWEVER, DURING THE COURSE OF HEARING, THE LD. A R HAS HOTLY DENIED THE AOS ALLEGATION AND TO SUBSTANTIATE THE ASSESSEES CLAIM HE HAD FURNISHED COPIES OF INVOICE-CUM-CHALLANS OF GA NGA FASHIONS P.LTD, ACCORDING TO WHICH, THE JOB CHARGE RATE PER LMTR CH ARGED FOR THE ASSESSEE AS WELL AS FOR OTHER CONCERNS ARE ILLUSTRA TED, FOR APPRECIATION OF FACTS, AS UNDER. (SOURCE: P 13 - 42 OF PB) SL. NO. NAME OF THE CONCERN INVOICE NO. DESCRIPTION OF GOODS JOB CHARGE RATE PER LMTR 01 JAY VIJAY PRINTS P. LTD ANJALI EXPORTS CHINTAN SILK MILLS LAXMI FASHION BHAVIN SILK MILLS 429 278 2792 50 1070 DARK RTY PTD 11.00 11.00 11.00 11.00 11.00 02 JAY VIJAY PRINTS P. LTD FLORAL CREATIONS KRUNAL SILK MILLS 157 289 490 GOLD PRINT 15.00 15.00 15.00 03 JAY VIJAY PRINTS P. LTD TARA SYNTEX P.LTD 208 122 SHADED 08.50 08.50 04 JAY VIJAY PRINTS P. LTD CHINTAN SILK MILLS 2761 2792 DARK DISCHAR 13.00 13.00 05 JAY VIJAY PRINTS P. LTD ANIL FABRICS 74 88 DYED POLY MICRO 05.00 05.00 06 JAY VIJAY PRINTS P. LTD FLORAL CREATIONS CHINTAN SILK MILLS 90 311 2909 PRINTED POLY MICRO 10.00 10.00 10.00 05. JAY VIJAY PRINTS P. LTD ANIL INDUSTRIES TARA SYNTEX P.LTD TEXPORT (INDIA) 26 76 1161 2825 DYED POLY LAZER POLY AMERICAN GRAPE 06.00 06.00 06.00 06.00 06 RACHNA FABRICS 141 POLYPOONAM 08.00 ITA NO. 3882-AHD-07 14 DANI THE ABOVE TABULAR DISPELS THE AOS CLAIM THAT THE A SSESSEE HAS BEEN CHARGED MUCH HIGHER THAN THE OTHER PARTIES. T HERE IS STRONG FORCE IN THE SUBMISSION OF THE ASSESSEE TO THE EFFECT THA T THOSE CHARGES DEPEND UPON THE NATURE OF THE JOB WORK ENTRUSTED, N AMELY, THE NATURE AND EXTENT OF THE DESIGN INVOLVED AND THE COULURS R EQUIRES TO BE USED, THE PROCESS AND TREATMENT REQUIRED TO BE APPLIED DE PENDING UPON THE QUALITY AND TEXTURE OF THE CLOTH TO BE PROCEED. NA TURALLY, THE JOB CHARGES VARY FOR THE APPLICATION OF TECHNOLOGY AND TREATMEN T REQUIRED TO BE APPLIED FOR SPECIFIC CLOTHES. THIS VERY VITAL ASPEC T HAS NOT BEEN ADDRESSED TO AS IT DESERVED EITHER BY THE LD. AO OR BY THE LD. CIT (A) MOREOVER, THE ASSESSEES ALLEGATION BEFORE THE APPE LLATE AUTHORITY THAT THE AO HAD COMPARED THE AVERAGE JOB CHARGES OF ITS SISTER CONCERN ONLY FOR SEVEN MONTHS AND THAT THE AO HAD NOT TAKEN INTO ACCOUNT THAT THE APPELLANT COMPANY WAS DEALING IN MANY VARIETIES OF PROCESSED CLOTHES HAS NOT BEEN EFFECTIVELY ADDRESSED TO BY THE LEARNE D FIRST APPELLATE AUTHORITY. THE LD. CIT (A) HAD, PERHAPS, LEANED HE AVILY ON THE AOS ASSERTION THAT THE ASSESSEE HAD PAID HIGHER JOB CHA RGES TO ITS SISTER CONCERN IN STEAD OF LOOKING INTO THE GROUND REALTIE S. IN A NUT-SHELL, NEITHER THE AO NOR THE FIRST APPELLATE AUTHORITY BR OUGHT OUT ANY CASE TO BRING THE ASSESSEES CASE UNDER THE AMBIT OF S. 40A (2)(B) OF THE ACT AS NO DISCREET MATERIAL WAS BROUGHT ON RECORD TO EVEN REMOTELY SUGGEST THAT UNREASONABLE OR EXCESSIVE PAYMENT WAS MADE TO ITS S ISTER CONCERN AS COMPARED WITH THE FAIR MARKET VALUE. STRANGELY, TH E AO HAD FAILED TO QUOTE ANY COMPARABLE RATES WHICH WERE PREVAILED AT THAT RELEVANT TIME FOR SUCH JOB WORKS SO AS TO DISPUTE THE ASSESSEES CLAIM. IN ESSENCE, THE AO HAD NOT POINTED OUT IN HIS IMPUGNED ORDER AS TO WHAT WAS THE UNREASONABLE OR EXORBITANT PAYMENT MADE TO THE ASSE SSEES SISTER ITA NO. 3882-AHD-07 15 CONCERN. AS RIGHTLY POINTED OUT BY THE EARLIER BEN CH IN THE CASE OF DCIT V. ALIDHARA TEXPRO ENGINEERS (P) LTD REPORTED IN ( 2011) 43 SOT 1 (AHD), THE AO CANNOT MAKE AD HOC ADDITION OR DISALLOWANCE WITHOUT BRINGING ANY CONCRETE EVIDENCE ON RECORD ABOUT THE REASONABL ENESS OR EXCESSIVENESS OF THE PAYMENT MADE TO ITS SISTER CON CERN IN COMPARISON WITH FAIR MARKET VALUE. SINCE THE AO WAS CONTEMPLA TING IN HIS IMPUGNED ORDER TO MAKE ADDITION IN RESPECT OF FALL IN GP WHI CH WAS DEALT WITH SEPARATELY, HE HAD NOT VENTURED TO MAKE ANY SEPARAT E ADDITION UNDER THIS HEAD. THUS, THIS ISSUE IS DECIDED IN FAVOUR O F THE ASSESSEE IN RESPECT OF JOB WORK CHARGES.. III. ESTIMATION OF FURTHER GROSS PROFIT OF 2% : THE REASONING OF THE AO WAS THAT THERE WAS A FALL O F ALMOST 2% AS COMPARED TO THE PRECEDING YEAR OF THE ASSESSEES GP . AS THERE WAS NO COMPLIANCE TO THE QUERIES IN RESPECT OF FALL IN GP, HE FELT THAT THERE WAS NO OPTION EXCEPT TO EVALUATE AND DECIDE THE ISSUE O N MERITS. TAKING CUE FROM THE FINDINGS OF THE HONBLE MUMBAI C BENCH A ND THE HONBLE ALLAHABAD HIGH COURT CITED SUPRA AND ALSO IN THE AB SENCE OF DETAILS OF AVERAGE RATE OF JOB CHARGES PAID TO ITS SISTER CONC ERN, DETAILS WITH REGARD TO CLOSING STOCK IN TERMS OF QUANTITY AND VALUE ALO NG WITH THE BASIS OF SUCH VALUATION, HE ARRIVED AT A CONCLUSION THAT BY ALLOWING HIGHER RATE OF JOBS CHARGES, THE ASSESSEE HAD REDUCED ITS PROFITS WHICH HAD RESULTED IN FALL IN GP. HAVING TAKEN INTO ACCOUNT THE ABOVE MEN TIONED FACTS, HE ESTIMATED FURTHER PROFIT BY 2% WHICH CAME TO RS.24. 40 LAKHS AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON HIS PART, THE LD. CIT (A) OBSERVED THAT THOUGH THE LAST YEAR CANNOT BE MADE THE BASIS FOR THE CURRENT YEAR BUT T HE FACT THAT THE APPELLANT HAD FAILED TO PRODUCE THE DETAILS AND BAS IS OF VALUATION OF ITA NO. 3882-AHD-07 16 CLOSING STOCK AND PAID HIGHER JOB CHARGES TO ITS SI STER CONCERN AND THE FACT THAT THERE WAS A HUGE FALL IN TURNOVER FROM RS .19 CRORES TO RS.12 CORES WHICH REMAINS UNEXPLAINED AND THE FACT THAT T HERE WAS A BIG FALL IN GP FROM 12.8% TO 10.8% WHICH REMAINS UNEXPLAINED SH OWS THAT THE ASSESSEE WAS PRONE TO CONCEALING THE INCOME AND HEN CE THE BOOKS OF ACCOUNTS ARE NOT RELIABLE AND, THUS, THE AO HAD RIG HTLY REJECTED THE SAME AND ADOPTED THE LAST YEARS GP. HOWEVER, THE ASSESSEES SUBMISSION BEFORE THE FIRST APPELLATE AUTHORITY THAT THERE WAS A SURVEY OPERATION AT ITS PREMISES, CONSEQUENCE OF WHICH, IT HAD DECLARED RS.69.49 LAKHS WHICH INCL UDED THE STOCK AND ALSO CASH FOUND DURING THE SURVEY AND THIS, ACCORDI NG TO THE ASSESSEE, HAD PUSHED THE GP UPWARD AS THE CASH DECLARATION OF RS.2.36 LAKHS WAS ALSO INCLUDED. THIS ASPECT HAD NOT BEEN GIVEN DUE CONSIDERATION. IT WAS ALSO CLAIMED BY THE ASSESSEE THAT DURING THE LAST Y EAR THE TRADE DISCOUNT WAS RS.28.34 LAKHS AS AGAINST RS.62.46 LAKHS FOR TH E YEAR UNDER CONSIDERATION, THIS HAS, ACCORDING TO THE ASSESSEE, BROUGHT DOWN THE GP CONSIDERABLY. EVEN FROM LEGAL ANGLE TOO, THERE WERE NO VALID REAS ONS FOR NOT RELYING ON THE BOOKS OF ACCOUNTS. EVEN THOUGH THE A O HAD NOT RECORDED ANY SPECIFIC FINDING AS TO WHETHER HE HAD INVOKED T HE PROVISIONS OF S.145 OF THE ACT IN REJECTING THE BOOKS OF ACCOUNT AND IT WAS APPARENT FROM THE ORDER OF THE AO THAT HE HAD NOT RELIED ON THE BOOKS AS THERE WERE DEFECTS. HOWEVER, THERE WERE NO ADEQUATE DEFECTS W HICH WARRANTED THE AO TO TOOK A STAND THAT THE BOOKS WERE NOT RELIABLE . THE MAIN THRUST OF THE AO IN RESORTING TO ESTIMATE THE FURTHER PROFIT BY 2% SOLELY ON THE GROUND THAT THE ASSESSEE HAD NOT FURNISHED THE DETA ILS LIKE AVERAGE RATES OF JOB CHARGES PAID TO SISTER CONCERN, JUSTIFICATIO N AND REASONABLENESS OF ITA NO. 3882-AHD-07 17 JOB CHARGES AND THE SUPPORTING EVIDENCES IN RESPECT OF VALUATION OF CLOSING STOCK. MERELY MAKING A SWEEPING REMARK WIT HOUT ACTUALLY LOOKING INTO BOOKS OF ACCOUNT AND POINTING OUT THE DEFECTS WOULD NOT BE A SUFFICIENT REASON TO RESORT TO ESTIMATION OF PROFIT S. THE ASSESSEE HAD IN FACT FURNISHED COPIES OF INVOICES WITH SUPPORTING E VIDENCES TO JUSTIFY THE REASONABLENESS OF JOB CHARGES PAID TO ITS SISTER CO NCERN. THIS ISSUE HAS ELABORATELY BEEN DEALT WITH AND THE SAME HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE UNDER THE CAPTAIN JOB WORK CHARGES PAID TO GANGA FASHIONS PVT. LTD (SUPRA). INCIDENTALLY, THE EARLIER BENCH IN ITS FI NDING IN THE CASE OF DCIT V. ASSOCIATED PETROLEUM CORPORATIO N REPORTED IN (2011) 44 SOT 45 (AHD) HAS OBSERVED THAT WITHOUT POINTING OUT ANY DEFECT, THE AO CANNOT RESORT TO ESTIMATE OF PROFITS BY APPLYIN G GP RATE. TAKING INTO ACCOUNT THE FACTS OF THE ISSUE AS NARRA TED IN THE FOREGOING PARAGRAPHS AND ALSO IN CONFORMITY WITH TH E FINDING OF THE HONBLE EARLIER BENCH (SUPRA) WE ARE OF THE CONSIDE RED VIEW THAT THE STAND OF THE LD. AO IN ESTIMATING THE FURTHER PROFI T BY 2% CANNOT BE CONSTRUED WAS ON A SOUND FOOTING AND, ACCORDINGLY, THE ADDITION TO THE EXTENT OF RS.24,40,960/- ON THIS COUNT IS DELETED. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT , THE ASSESSEES APPEAL IS ALLOWED. 2 + 1'% 3 & 29 / 12 /2011 ' 4 + 5. 6 SD/- SD/- (BHAVNESH SAINI) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED : 29/12/2011 ITA NO. 3882-AHD-07 18 + ++ + )/7 )/7 )/7 )/7 87%/& 87%/& 87%/& 87%/&- -- - 1. '( 2. )*'( 3. / -= 4. -=- - 5. 75 )/ , , 6 6. 5A B2 , C/ E , 6 TALUKDAR/ SR. P.S.