The DCIT, Cent Cir-1,., Visakhapatnam V. M/s Sagarika Sea Crafts Ltd, Visakhapatnam

ITA 416/VIZ/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56786 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 05-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C V S MURTHY
• Assessee Lawyers: TH L PETER
• Keywords: Unexplained cash credit; Search and seizure; Assessment record
• Section: 153A

Judgement Text

ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 403 /VIZAG/ 20 07 ASSESSMENT YEAR : 2003 - 04 SAGARIKA SEA CRAFT S LTD VISAKHAPATNAM VS. DCIT CENTRAL CIRCLE - 1 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AABCS 1493H ITA NO.416/VIZAG/2007 ASSESSMENT YEAR : 2003 - 04 DCIT CENTRAL CIRCLE - 1 VISAKHAPATNAM VS. SAGARIKA SEA CRAFTS LTD VISAKHAPATNAM (APPELLANT) (R ESPONDENT) APPELLANT BY: SHRI C.V.S. MURTHY, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) DATE OF HEARING : 17.6.2011 DATE OF PRONOUNCEMENT : 11.8.2011 ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE CROSS APPEALS ARE PREFERRED BY THE ASSESSEE AS WELL AS THE REVENUE AGAINST THE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2003-04. SINCE COMMON GROUNDS ARE INVOLVED IN THES E APPEALS, THESE APPEALS ARE BEING ADJUDICATED THROUGH THIS CONSOLID ATED ORDER. WE HOWEVER, PREFER TO ADJUDICATE THESE APPEALS ONE AFTER THE OT HER. ITA NO.403 OF 2007: 2. THE MAIN CONTROVERSY RAISED IN THIS APPEAL IS WI TH REGARD TO THE ADDITION OF ` 60,50,058/- TOWARDS UNACCOUNTED SALE OF 375.780 K.L . OF MGO (MARINE GAS OILS) TO INELIGIBLE VESSELS. THE BRIEF FACTS BORNE OUT FROM THE RECORD ARE THAT THE SEARCH AND SEIZURE OPERATION WA S CONDUCTED ON 27.8.2003 AND NOTICE U/S 153A WAS ISSUED SUBSEQUENTLY IN RESP ONSE TO WHICH RETURN WAS FILED ON 28.4.2005 SHOWING AGAIN THE SAME INCOME OF ` 15,66,910/-. THE ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 2 ASSESSEE IS ONE OF THE FACILITATOR APPOINTED BY THE TRAWLERS OPERATORS TO IMPORTS MGO AND/OR HSD (HIGH SPEED DIESEL) ON THEIR BEHALF. THE ASSESSEE BEING A FACILITATOR IMPORTED MGO/HSD AND SUPPOSED T O SUPPLY THE SAME TO ELIGIBLE VESSELS. THE VESSELS IN WHICH MGO/HSD IS IMPORTED IS OTHERWISE CALLED BUNKER AND THE MGO/HSD IS SOLD IN THE HIGH S EA. THE ACTIVITY OF THE HIGH SEA OR THE MID SEA BUNKERING THUS INVOLVES PRO VIDING MGO AND HSD TO EXPORTING FISHING VESSELS BEYOND 24 NAUTICAL MILES IN INTERNATIONAL WATERS. THIS ACTIVITY HAS BEEN PERMITTED BY THE GOVERNMENT OF INDIA AND SALES ARE MADE IN HIGH SEA SO THAT BENEFITS OF SALES TAX AND CUSTOM DUTIES ETC. ARE GIVEN TO MAKE THE FISHING INDUSTRY COMPETITIVE. TH E FISHING TRAWLERS HAVE TO QUALIFY ON CERTAIN PARAMETERS TO BE ELIGIBLE TO BUY OIL IN THE HIGH SEA FROM THE FACILITATORS AND SUCH VESSELS ARE CALLED ELIGIBLE V ESSELS. ALLEGATIONS IN THIS CASE ARE THAT THE FACILITATOR INCLUDING THE ASSESSE E WERE ALSO SELLING OIL IN THE HIGH SEA TO INELIGIBLE VESSELS THEREBY FLOUTING THE SCHEME OF GOVERNMENT AND MAKING THEREBY HIGHER GAINS. 3. THE ACTIVITY OF MID SEA BUNKERING WAS INVESTIGAT ED AND EXAMINED BY THE A.O. AS WELL AS THE CUSTOM AUTHORITIES. THE A. O. HAS FOUND THAT THE ASSESSEE HAS MISUSED ITS POSITION AS A FACILITATOR OF IMPORTING OILS TO SELL IT IN HIGH SEAS TO INELIGIBLE VESSELS AND THEREBY MADE HU GE GAINS. THE A.O. FOUND THAT MGO OF 375.780 K.L. WAS SOLD BY THE ASSESSEE T O INELIGIBLE MECHANIZED FISHING BOATS. WHILE ARRIVING AT CONCLUSION, THE A .O. HAD DISCUSSED IN DETAIL VARIOUS ENQUIRIES AND INFORMATION GATHERED. THE AS SESSING OFFICERS FINDING AND DISCUSSION MADE IN THE ASSESSMENT ORDER IN NUT SHELL AS REPRODUCED BY THE CIT(A) ARE AS UNDER: I. CUSTOMS AUTHORITIES HAVE INVESTIGATED AND CONCL UDED THAT THE ASSESSEE HAS MADE SALE OF MGO TO THE TUNE OF 375.78 0 K.L. WAS SUPPLIED BY THE ASSESSEE TO INELIGIBLE VESSELS AND AGREED TO PA Y DUTY ON THE SAME SINCE SUPPLY WAS NOT MADE TO ELIGIBLE VESSELS. II. CUSTOMS AUTHORITIES RECORDED STATEMENT OF SRI S.K. AGARWAL, MANAGING DIRECTOR OF THE ASSESSEE COMPANY ON 19.8.2 003 WHO STATED THAT 375.78 K.L. WAS SUPPLIED BY THE ASSESSEE TO INELIGI BLE VESSELS AND AGREED TO PAY DUTY ON THE SAME SINCE SUPPLY WAS NOT MADE TO E LIGIBLE VESSELS. III. CUSTOMS AUTHORITIES RECORDED A STATEMENT OF S RI B.S.R. MURTHY, MANAGER (FINANCE) OF THE ASSESSEE COMPANY ON 8.8.20 03 WHO STATED THAT 375.78 K.L. MGO/HSD WAS SUPPLIED TO INELIGIBLE VESS ELS THROUGH MFV ANJANA ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 3 & MFV AKHILA. CUSTOMS AUTHORITIES ALSO RECORDED ST ATEMENT OF B. NAGABHUSHANAM, BUNKER CLERK ON 11.8.2003 WHO CONFIR MED SUPPLIES MADE BY THE ASSESSEE COMPANY TO INELIGIBLE VESSELS IN VI EW OF INSTRUCTIONS OF PRESIDENT OF AIFI. SIMILAR STATEMENT WAS RECORDED FROM SRI RAMESH, BUNKER MANAGER ON 20.8.2003. IV. STATEMENT WAS RECORDED FROM P.C. APPA RAO, PR ESIDENT OF A.P. MECHANISED FISHING BOATS OPERATORS ASSOCIATION, VI SAKHAPATNAM WHO STATED THAT THEIR ASSOCIATION HAS PURCHASED 350 K.L. OF MG O FROM THE ASSESSEE AND PAYMENTS MADE BY CASH. THE RELEVANT PORTION OF THE STATEMENT HAS BEEN EXTRACTED BY THE ASSESSING OFFICER IN THE ASSESSMEN T ORDER. V. STATEMENT WAS ALSO RECORDED FROM SRI T. RAGHUNA TH REDDY, PRESIDENT OF AIFI ON 11.10.2003 WHO CONFIRMED THE A BOVE FACTS AND STATED THAT THE RAT WAS FIXED AT ` 1.5 PER LITRE MORE THAN THE RATE FOR ELIGIBLE TRAWLERS. VI. STATEMENTS WERE RECORDED FROM END USERS OF MGO NAMELY, Y. YELLA RAO, SRI A. SURYANARAYANA, SRI K. ANTONY JOSE, SRI CH. SANYASI AND SRI P.V. APPA RAO, DURING 4.11.2003 AND 5.11.2003. ALL OF T HEM ARE CONFIRMED TO HAVE PURCHASED MGO/HSD FROM THE ASSESSEE AND PAID ` 16.10 PER LITRE OF MGO. VII. CUSTOMS AUTHORITIES QUANTIFIED SALE OF MGO TO INELIGIBLE VESSELS AT 375.780 K.L. DURING THE PERIOD 13.1.2003 TO 30.1.20 03. THE PRICE OF MGO PER LITRE SOLD TO INELIGIBLE VESS ELS IS ` 16.10 AND SINCE CASH HAS BEEN RECEIVED FOR SUCH SALES AND THE SALES HAVE NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER HAS ARRIVED AT A SALE VALUE OF ` 60,50,058/- (375.780 X ` 16.10). SINCE THE SALE PROCEEDS HAVE NOT BEEN BROUGHT TO THE BOOKS OF ACCOUNTS, THE ASSESSING OFF ICER HAS ADDED THE ENTIRE AMOUNT AS UNDISCLOSED INCOME. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) AND OBJECTED THE ADDITION WITH THE SUBMISSION THAT THE STATEMENTS OB TAINED FROM VARIOUS PERSONS BY THE CUSTOM AUTHORITIES WERE NOT EVEN CON FRONTED TO THE ASSESSEES AND THE SAME STATEMENTS WERE USED BY THE A.O. AS A CONCLUSIVE EVIDENCE TO MAKE THE ADDITIONS. THE A.O. HAS ALSO PLACED A REL IANCE UPON THE STATEMENT OF THE MANAGING DIRECTOR WHO HAS NO IDEA ABOUT THE SALE OF MGO TO INELIGIBLE VESSELS. THE INVESTIGATION WING OF THE DEPARTMENT COULD NOT FIND ANY INCRIMINATING MATERIAL TO SUGGEST THE SALE OF OIL T O INELIGIBLE VESSELS AND THIS ASPECT WAS NOT EXAMINED BY THE A.O. WHILE MAKING AN ADDITION. IT WAS ALSO ARGUED IN THE ALTERNATIVE IF THE SALES TO INELIGIBL E VESSELS WERE EFFECTED THROUGH TRAWLERS MFV AJANTA & MFV AKHILA, SALES MAD E TO THESE VESSELS WOULD BE REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES AND HENCE SALE ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 4 TO INELIGIBLE VESSELS THROUGH MFV AJANTA AND AKHILA WOULD NOT IMPACT THE SALE TURNOVER REFLECTED IN THE BOOKS OF ACCOUNTS. IT WAS ALSO STATED THAT THE OWNER OF THESE TWO VESSELS HAVE DENIED ANY TRANSACT ION WITH THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE CUSTOM AUTHORITIES D ID NOT FIND ANY INCRIMINATING MATERIAL EITHER WITH THE ASSESSEE COM PANY OR WITH THE OTHER COMPANY THROUGH WHOSE VESSELS THE SALE HAVE BEEN EF FECTED TO INELIGIBLE VESSELS. 5. THE CIT(A) RE-EXAMINED THE ISSUE AND HAS NOTED T HAT THE A.O. HAS ISSUED A SHOW CAUSE NOTICE DATED 27.7.2005 TO THE A SSESSEE THROUGH WHICH RELEVANT FACTS WERE BROUGHT TO THE NOTICE OF THE AS SESSEE. HOWEVER, THE ASSESSEE HAS TAKEN A GROUND THAT REPORTS OF THE CUS TOM AUTHORITIES WERE NOT GIVEN TO THE ASSESSEE AND THE ENQUIRIES MADE BY THE CUSTOM AUTHORITIES AND THE STATEMENT RECORDED WERE NOT GIVEN TO THE ASSESS EE BEFORE DRAWING ADVERSE CONCLUSION. THE CIT (A) ACCORDINGLY DIRECT ED THE A.O. TO PROVIDE ALL RELEVANT MATERIAL TO THE ASSESSEE TO SEEK CLARIFICA TION AND THERE AFTER SUBMIT A REMAND REPORT. ACCORDINGLY, THE A.O. SUBMITTED THE REMAND REPORT DATED 14.5.2007 WHICH WAS EXAMINED BY THE CIT(A) AND HAS OBSERVED THAT THE PREPONDERANCE OF FACTS, DETAILED ENQUIRIES MADE BY THE CUSTOM AUTHORITIES, VARIOUS STATEMENTS RECORDED BY THE CUSTOM AUTHORITI ES FROM VARIOUS STAKE HOLDERS, THE STATEMENT RECORDED FROM THE M.D. OF TH E ASSESSEE COMPANY AND HIS OFFER OF PAYMENT OF DUTIES ON ACCOUNT OF SALE T O INELIGIBLE VESSELS SUPPORTS THE CONCLUSION OF THE A.O. THAT SALES HAVE BEEN MAD E TO INELIGIBLE VESSELS IN CASH. THE CIT(A) ACCORDINGLY CONFIRMED THE ADDITIO N MADE BY THE A.O. FOR AN AMOUNT OF ` 60,50,058/-. 6. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE IMPUGNED ADDITION HAS BEEN MADE ON THE BASIS OF THE EVIDENCE COLLECTED BY THE CUSTOM AUTHORITIES FROM O THER PERSONS AND EVEN WITHOUT CONFRONTING THE SAME TO THE ASSESSEE. IT I S A SETTLED POSITION OF LAW THAT IF THE AUTHORITIES INTEND TO USE SOME EVIDENCE AGAINST THE ASSESSEE ATLEAST THE SAME SHOULD BE CONFRONTED TO THE ASSESS EE FOR SEEKING HIS COMMENTS. IN THE INSTANT CASE, THE EVIDENCE COLLEC TED BY THE CUSTOM AUTHORITIES WAS TREATED AS A CONCLUSIVE EVIDENCE WI THOUT MAKING ANY ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 5 INDEPENDENT ENQUIRY BY THE REVENUE AUTHORITIES. TH E DOCUMENT WHICH IS A LOOSE SHEET CONTAINING SOME DETAILS OF TRANSACTIONS WAS FOUND FROM K.G.R. EXPORTS DURING THE COURSE OF SEARCH ON 4.6.2003 AND NOT FROM THE ASSESSEES. THE M.D. OF THE ASSESSEE WAS EXAMINED AND HE CATEGO RICALLY STATED THAT HE IS NOT INVOLVED IN THIS TYPE OF ACTIVITIES. THE LD. C OUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION THAT IN CUSTOM PROCEE DINGS, THE DUTY IMPOSED BY THE CUSTOM AUTHORITIES FOR VIOLATIONS WERE KNOCKED DOWN BY THE COMMISSIONER CUSTOM (APPEAL). ONCE THE EVIDENCE CO LLECTED BY THE CUSTOM AUTHORITIES WAS NOT CONSIDERED TO BE CONCLUSIVE FOR CONFIRMING THE CUSTOM DUTY IMPOSED BY THE CUSTOM AUTHORITIES, THE SAID EV IDENCE OUGHT NOT TO HAVE BEEN TAKEN INTO ACCOUNT BY THE INCOME TAX AUTHORITI ES FOR MAKING AN ADDITION. SINCE THE ADDITIONS WERE MADE ON THE BAS IS OF A DUMB DOCUMENT AND WITHOUT MAKING A PROPER ENQUIRY, THE SAME DESER VES TO BE DELETED. 7. THE LD. D.R. ON THE OTHER HAND BESIDES HEAVILY R ELYING UPON THE ORDER OF THE CIT(A) HAS INVITED OUR ATTENTION TO THE FACT S THAT DURING THE COURSE OF SEARCH, CUSTOM AUTHORITIES HAVE FOUND INCRIMINATING EVIDENCE THAT THE ASSESSEE HAS SOLD THE MGOS TO INELIGIBLE VESSELS AN D THESE FACTS WERE ALSO ADMITTED BY THE MANAGING DIRECTOR OF THE ASSESSEE A ND THE PRESIDENT OF AP MECHANISED FISHING BOAT OPERATORS ASSOCIATION, SHRI P.C. APPARAO. DURING HIS EXAMINATION MR. P.C. APPARAO HAD ADMITTED THAT THERE ARE ABOUT 540 BOATS IN THIS SECTOR WHICH WERE NOT HAVING PERMISSI ON TO GET THE SUBSIDIZED MGO. THEREFORE, THE ASSOCIATION HAS PURCHASED THE MGO FROM THE ASSESSEE TO THE TUNE OF ABOUT 350 K.L. AND HAVE MADE THE PAY MENTS AGAINST THESE PURCHASES PURELY IN CASH. THE CIT(A) CALLED A REMA ND REPORT FROM THE ASSESSING OFFICER WITH A DIRECTION TO FIRST SUPPLY THE ALL RELEVANT MATERIAL TO THE ASSESSEE AND SEEK CLARIFICATION THEREOF AND THERE A FTER SUBMIT A REMAND REPORT. THE ASSESSING OFFICER EXAMINED THE STATEME NTS OF THE VARIOUS PERSONS IN THE LIGHT OF SEIZED MATERIAL AND HAS MADE OUT A CASE THAT ASSESSEE HAS MADE SALES OF 375.780 K.L. MGO TO INELIGIBLE VESSEL S DURING THE PERIOD 13.1.2003 TO 30.1.2003 WHICH WAS NOT REFLECTED IN T HE BOOKS OF ACCOUNTS. THE RATE PER LITRE WAS CONSIDERED TO BE ` 16.10PS. AND HE ACCORDINGLY WORKED OUT THE UNACCOUNTED TURN OVER AT ` 60,50,058/-. SINCE THE REVENUE HAS BROUGHT THE ENORMOUS EVIDENCE ON RECORD TO ESTABLIS H UNACCOUNTED SALE ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 6 MADE BY THE ASSESSEE TO INELIGIBLE VESSELS, THE ADD ITION IS CALLED FOR IN THE HANDS OF THE ASSESSEES. 8. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE R IVAL CONTENTIONS AND ORDER OF THE LOWER AUTHORITIES, WE FIND THAT ENQUIR Y IN THIS INSTANT CASE HAS BEEN INITIATED ON THE BASIS OF THE EVIDENCE COLLECT ED BY THE CUSTOM AUTHORITIES FROM DIFFERENT PARTIES WHO WERE ENGAGED IN THE SAME LINE OF BUSINESS. THE A.O. AS WELL AS CUSTOM AUTHORITIES HAVE RECORDED ST ATEMENT OF VARIOUS PERSONS IN WHICH THEY HAVE ADMITTED THE UNACCOUNTED SALES OF MGO TO INELIGIBLE VESSELS. THE PRESIDENT OF A.P. MECHANIS ED FISHING BOAT OPERATORS ASSOCIATION WAS ALSO EXAMINED AND IN HIS STATEMENT, HE ADMITTED THE SALE OF MGO TO INELIGIBLE VESSELS BY THE ASSESSEE COMPANY. THE PRACTICE ADOPTED BY THEM WAS ALSO EXPLAINED. THE MANAGING DIRECTOR AND THE MANAGER (FINANCE) MR. B. NAGABHUSHANAM (BUNKER CLERK) MR. RAMESH (BUN KER MANAGER) OF THE ASSESSEE COMPANY WERE ALSO EXAMINED BY THE DEPARTME NT. 9. THE LD. COUNSEL FOR THE ASSESSEE HAS RAISED THE MAIN DISPUTE WITH REGARD TO THE CONFRONTATION OF THE EVIDENCE COLLECT ED BY THE REVENUE AUTHORITIES TO THE ASSESSEE. IN THIS REGARD, IT WA S CONTENDED THAT THE ASSESSING OFFICER HAS MADE A REFERENCE OF A SHOW CA USE LETTER DATED 27.7.2005 THROUGH WHICH THE RELEVANT MATERIAL WAS A LLEGED TO BE CONFRONTED TO THE ASSESSEE. BUT IN FACT NO MATERIAL WAS CONFR ONTED TO THE ASSESSEE. THEREFORE, WITHOUT CONFRONTING THE SAME IT CANNOT B E RELIED ON FOR MAKING AN ADDITION. SIMILAR WAS THE POSITION WITH REGARD TO THE STATEMENT OF DIFFERENT PERSONS COLLECTED AND RELIED ON. FROM A CAREFUL PE RUSAL OF THE ORDER OF THE AUTHORITIES BELOW, IT IS NOT CLEAR WHETHER THE RELE VANT MATERIAL WAS SUPPLIED TO THE ASSESSEES AND HE WAS EVER AFFORDED TO CROSS EXA MINE THE PERSONS WHOSE STATEMENT WAS RECORDED AT HIS BACK IN ORDER TO ASCE RTAIN THE VERACITY OF THE STATEMENT. ON EARLIER OCCASION, THE REVENUE WAS DI RECTED TO PRODUCE EITHER THE ASSESSMENT RECORD OR TO THE SHOW CAUSE LETTER D ATED 27.7.2005 BUT IT WAS NOT PLACED BEFORE US. IN THE LIGHT OF THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THERE IS ENORMOUS EVIDENCE ON RECORD WHIC H SUPPORTS THE CASE OF THE ASSESSING OFFICER BUT IT IS NOT CLEAR FROM THE RECORD WHETHER THAT EVIDENCE WAS EVER CONFRONTED TO THE ASSESSEE. WE THEREFORE, OF THE VIEW THAT THIS ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 7 ISSUE REQUIRES A FRESH ADJUDICATION BY THE ASSESSIN G OFFICER AFTER CONFRONTING ALL RELEVANT MATERIAL TO THE ASSESSEES AND ALSO AFT ER ALLOWING THE ASSESSEE TO CROSS EXAMINE ALL THE PERSONS WHOSE STATEMENT THE A SSESSING OFFICER INTEND TO RELY FOR MAKING AN ADDITION. ACCORDINGLY, WE SET A SIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH THE DIRECTION TO RE- ADJUDICATE THE ISSUE AFRESH AFTER AFFORDING AN OPPO RTUNITY OF BEING HEARD TO THE ASSESSEES WITH REGARD TO THE RELEVANT MATERIAL. ASSESSEE MAY ALSO BE AFFORDED AN OPPORTUNITY TO CROSS EXAMINE THE WITNES SES/PERSONS WHOSE STATEMENT THE ASSESSING OFFICER INTEND TO RELY FOR MAKING AN ADDITION. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT THE ASSESSEE H AS CLAIMED THAT IT HAS MAINTAINED QUANTITY DETAILS OF PURCHASES AND SALES EFFECTED DURING THE YEAR UNDER CONSIDERATION AND THEY HAVE BEEN RECONCILED W ITH THE QUANTITY OF OPENING STOCK AND CLOSING STOCK. ACCORDINGLY IT WA S CLAIMED THAT THERE IS NO SCOPE FOR MAKING SALES OUTSIDE THE BOOKS OF ACCOUNT . IF THE CLAIM OF THE ASSESSEE WITH REGARD TO THE QUANTITY DETAILS IS PRO VED TO BE CORRECT, THEN THERE IS MERIT IN THE SAID CONTENTION OF THE ASSESS EE. HOWEVER, THE ISSUE INVOLVED HERE RELATES TO THE SALES EFFECTED TO INEL IGIBLE TRAWLERS, MEANING THEREBY THERE IS A CHANCE TO SELL THE MGO OIL AT A HIGHER RATE. IN THE ASSESSMENT ORDER, IT IS MENTIONED THAT THE SELLING RATE FIXED FOR INELIGIBLE TRAWLERS WAS MORE BY RS.1.50 PER LITRE. ACCORDINGL Y, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE QUANTITY DETAILS OF OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK. IF THE SAME IS FOUND TO BE TALLYING AND IF ASSESSEE IS NOT ABLE TO SUBSTANTIATE HIS STAND THAT IT HAS NOT MADE SALES T O INELIGIBLE TRAWLERS, THEN THE ADDITION SHOULD BE RESTRICTED TO THE MAXIMUM EX TENT OF THE EXTRA PROFIT THAT WAS MADE ON THE SALES EFFECTED TO THE INELIGIB LE TRAWLERS, I.E. RS.1.50 PER LITRE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICE R TO RE-EXAMINE THE ISSUE IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE, AFTER GIVI NG DUE OPPORTUNITY TO THE ASSESSEE. 10. THE NEXT GROUND RAISED IN THE ASSESSEES APPEAL IS WITH REGARD TO THE ADDITION OF ` 8,54,000/-, BUT IN THE ORDER OF THE CIT(A), THE ISS UE INVOLVED IS ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 8 WITH REGARD TO THE ADDITION OF ` 8,64,000/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES. IN THAT REGARD, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSE E HAS SHOWN THE RECEIPT OF ` 8,64,000/- FROM M/S. KANCHANAGANGA SEA FOODS LIMITE D ON 11.10.2002 WHEREAS IN THE LATERS BOOKS OF ACCOUNTS, SUCH AMOU NT HAS NOT BEEN REFLECTED. THE ASSESSEE EXPLAINED BEFORE THE A.O. THAT THE SAID AMOUNT WAS REFLECTED IN THE BOOKS OF M/S. ANJANA MARINE EXPORT S PVT. LIMITED, A SISTER CONCERN OF M/S. KANCHANAGANGA SEA FOODS LIMITED AND RECEIVED THROUGH M/S. SENTINEL CAPITAL LIMITED. THE A.O. FOUND THAT THER E ARE MANY TRANSACTIONS BETWEEN THE ASSESSEE COMPANY AND M/S. SENTINEL CAPI TAL LIMITED AND DESPITE CONFIRMATION GIVEN BY M/S. SENTINEL CAPITAL LIMITED , THE A.O. DID NOT ACCEPT THE ARGUMENT THAT THERE IS A CLERICAL MISTAKE IN CR EDITING THE AMOUNT IN THE ACCOUNT OF M/S. KANCHANAGANGA SEA FOODS LIMITED AND ACCORDINGLY ADDED THE AMOUNT TO THE TOTAL INCOME OF THE ASSESSEES. THE A .O. FURTHER OBSERVED THAT IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE G IVER OF MONEY I.E. CREDITOR OF ` 8,64,000/- HAS NOT BEEN ESTABLISHED. THEREFORE, TH E AMOUNT IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 11. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WITH THE SUBMISSION THAT THE SAID AMOUNT WAS PROPERLY RECORD ED BY THE OTHER PARTY M/S. ANJANA MARINE EXPORTS, EXCEPT THAT DATES WERE NOT TALLYING WITH THE DATE RECORDED BY THE ASSESSEE AND M/S. ANJANA MARINE EXP ORTS LIMITED. THE DIFFERENCE IN RECORDING THE DATES OF PAYMENTS WAS B ECAUSE THE DATE WAS IMMEDIATELY RECORDED BY OTHER PARTY I.E. THE PURCHA SER AFTER REQUESTING THE FINANCIER BY WAY OF JOURNAL ENTRY AND THE ASSESSEE RECORDED THAT ONLY AFTER RECEIPT OF PAYMENT. IT WAS FURTHER CONTENDED THAT THE AMOUNT REPRESENTS SALE VALUE OF OIL SUPPLY BY THE ASSESSEE TO M/S. AN JANA MARINE EXPORTS LIMITED AND THE AMOUNT WAS RECEIVED BY A DEMAND DRAFT. A C OPY OF LETTER RECEIVED FROM M/S. SENTINEL CAPITAL LIMITED WAS ALSO FILED B EFORE THE CIT(A) CLARIFYING THE ERRORS IN THE ENTRIES IN THE BOOKS OF ACCOUNTS. THE CIT(A) EXAMINED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF EVIDENCE PLAC ED BEFORE HIM AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, HE FINALLY DELETED THE ADDITIONS. WHILE DELETING THE ADDITIONS, CIT(A) HA S OBSERVED THAT IN ANY CASE, IF IT IS A CASH CREDIT, THE CASH CREDIT WOULD BE EL IGIBLE FOR TELESCOPING INTO THE ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 9 SALE PROCEEDS OUTSIDE THE BOOKS OF ACCOUNTS AMOUNTI NG TO ` 60,50,058/-. THE ASSESSEE HAS AN OBJECTION TO THESE OBSERVATIONS OF THE CIT(A). WHEN CIT(A) HAD DELETED THE ADDITIONS, THE OBSERVATIONS WERE NOT CALLED FOR. THESE OBSERVATIONS WERE MADE BY THE CIT(A) FOR THE SAFER SIDE IF THE ADDITIONS ARE SUSTAINED THEN TELESCOPING SHOULD BE ALLOWED AGAINST THE SALE PROCEEDS RECEIVED BY THE ASSESSEES OUTSIDE THE BOOK S OF ACCOUNTS. WE DO NOT FIND ANY INFIRMITY IN THESE OBSERVATIONS OF CIT (A). MOREOVER, THIS DELETION WAS NOT CHALLENGED BY THE REVENUE IN THEIR APPEAL. THEREFORE, ASSESSEE WOULD NOT BE AFFECTED WITH THESE OBSERVATIONS IN AN Y CASE. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE CONFIRM THE SAME. ITA 416 OF 2007: 12. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE DELETION OF ADDITION OF ` 34,80,000/- MADE ON ACCOUNT OF UNACCOUNTED PURCHASE OF 200 MT MGO AND WERE SOLD OUTSIDE THE BOOKS OF ACCOUNTS. 13. THE FACTS IN BRIEF BORNE OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE A.O. NOTICED THAT AS PER INVOICE NO.2159 DATED 24.12.2002, 500 MT OF MGO WAS PURCHASED FROM INSPAN PTE LIMITED, WHILE AS PER THE MATERIAL OBTAI NED FROM THE CUSTOM DEPARTMENT, SIMILAR INVOICE UNDER THE SAME INVOICE NUMBER AND THE DATE SHOWED THAT ASSESSEE PURCHASED 700MT OF MGO FROM TH E SAID M/S. INSPAN PTE LIMITED. THUS THE ASSESSING OFFICER NOTICED TH AT THERE IS A DIFFERENCE OF 200 MT OF MGO IN TWO INVOICES WITH IDENTICAL NUMBER S. THE ASSESSING OFFICER HAS ALSO FOUND OUT CERTAIN OTHER DISCREPANCIES LIKE IN THE INVOICE FOR 700 MT MGOS, THE STAMP OF SBI SINGAPORE IS AVAILABLE, WHER EAS IN OTHER INVOICE FOR 500 MT MGO, NO STAMP IS AVAILABLE. THE A.O. FURTHE R NOTICED THAT IN BOTH THE INVOICES, THE SIGNATURE OF THE AUTHORIZED SIGNATORI ES ALSO DIFFERS. THE A.O. ALSO REFERRED TO ANOTHER LOOSE SHEET ACCORDING TO W HICH 1400 MT OF MGO WAS PURCHASED RELATING TO INVOICE NO.2159 AND 2160 BOTH DATED 24.12.2002, ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 10 WHEREAS, THE ASSESSEE HAS SHOWN ONLY 1200 MT OF MGO UNDER THESE TWO INVOICES. ACCORDINGLY, THE ASSESSING OFFICER CONCL UDED THAT ASSESSEE HAS ACTUALLY PURCHASED 700 MT OF MGO, VIDE INVOICE NO.2 159 AND PAID FOR THAT, WHEREAS IT HAS ACCOUNTED FOR ONLY 500 MT OF MGO VID E INVOICE NO.2159. THE ASSESSING OFFICER HAS FURTHER CONCLUDED THAT THESE UNACCOUNTED PURCHASES OF 200 MT MGO INCLUDING GROSS PROFIT NEED TO BE TAXED AS THE PURCHASES ARE DEEMED TO HAVE BEEN SOLD OUTSIDE BOOKS OF ACCOUNTS AND TAKING THE VALUE PER LITRE AT RS.15/-, THE ASSESSING OFFICER HAS COM PUTED UNACCOUNTED TURNOVER AT RS.34,80,000/- AND ADDED THE SAME TO THE TOTAL I NCOME OF THE ASSESSEE. 14. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WITH THE SUBMISSION THAT THE A.O. HAS IGNORED THE EXPLANATIO NS AND THE DETAILS FURNISHED BY THE ASSESSEE. IT WAS SUBMITTED THAT T HE ORIGINAL INVOICE FOR 700 MT OF MGO WAS REVISED AS 500 MT OF MGO FOR WHIC H DETAILS AND DOCUMENTS WERE SUBMITTED BEFORE THE AO. IN VIEW OF THE FACT THAT OUT OF 700 MT OF MGO, A QUANTITY OF 200 MT OF MGO WAS FOUND TO BE IN BAD STATE AND IN NON-USABLE CONDITION. HENCE THE SUPPLIER M/S. INSP AN PTE LIMITED HAS SUPPLIED ONLY 500 MT OF MGO ONLY AGAINST THE INOICE NO.2159 AND ACCORDINGLY THE SAID SUPPLIER SENT A REVISED INVOICE FOR 500 MT OF MGO DIRECTLY TO THE BANKERS OF THE ASSESSEE INSTEAD OF ROUTING THROUGH SBI, SINGAPORE. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD NO EVIDENCE WHATSOEVER THAT THE ASSESSEE PURCHASED MORE QUANTITY THAN THAT RECO RDED AND ALSO HAD NO EVIDENCE THAT ANY PAYMENT WAS MADE FOR THE SAID EXC ESS QUANTITY. IT WAS ALSO SUBMITTED THAT IT IS HIGHLY IMPOSSIBLE AND IMP RACTICAL TO PURCHASE THE MGO OUTSIDE THE BOOKS OF ACCOUNTS, SINCE THE SAID M ATERIAL IS TO BE IMPORTED FROM OUTSIDE INDIA AND PAYMENTS ARE TO BE EFFECTED THROUGH BANKING CHANNELS. 15. THE CIT RE-EXAMINED THE ISSUE AND BEING CONVINC ED WITH THE EXPLANATIONS OF THE ASSESSEE, THE CIT(A) DELETED TH E ADDITION WITH THE FOLLOWING OBSERVATION: 06.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT DURING APPEAL HEARING AS WELL AS SUBMISSIONS MADE B EFORE THE ASSESSING OFFICER. THE FACT OF SUPPLY OF 500 MT OF MGO ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 11 INSTEAD OF ORIGINALLY INTENDED AMOUNT OF 700 MT OF MGO HAS BEEN CONFIRMED BY THE SUPPLIER M/S INSPAN PTE LTD A S PER THEIR LETTER DT. 21.01.2003. M/S INSPAN PTE LTD IN THEIR LETTER DT. 21.02.2003 ADDRESSED TO THE KARUR VYSYA BANK LT D HAS ENCLOSED THE REVISED INVOICES FOR PAYMENT RATHER TH AN ROUTING THROUGH STATE BANK OF INDIA, SINGAPORE. MER ELY BECAUSE THERE WAS VARIATION IN THE AMOUNTS MENTIONE D UNDER SAME INVOICE NUMBER THE ASSESSING OFFICER COU LD NOT REACH A CONCLUSION THAT THERE HAVE BEEN PURCHASES O UTSIDE THE BOOKS OF ACCOUNT WITHOUT CORROBORATING EVIDENCE S. THE ASSESSEES SUBMISSIONS THAT THE ORIGINAL INVOICE HA S BEEN AMENDED SINCE LESSER QUANTITY OF MGO WAS ACTUALLY R ECEIVED CANNOT SIMPLY BE DISBELIEVED AND TERMED AS SELF-SER VING DOCUMENT. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIALS OR EVIDENCE ON RECORD THAT THE ORIGINAL I NVOICE NO. 2159 DT. 24.12.2002 HAS NOT BEEN REVISED OR THE REV ISED INVOICE IS A FORGED ONE. THE ASSESSING OFFICER HAS ALSO NOT FOUND OUT HOW THE PAYMENTS HAVE BEEN MADE FOR THE UNACCOUNTED PURCHASES. THE CONCLUSIONS OF THE ASSES SING OFFICER HAVE NO LEGS TO STAND. IN ANY CASE IF THERE IS PURCHASE OUTSIDE THE BOOKS OF ACCOUNT THE MONEY INV ESTED IN UNACCOUNTED PURCHASES IS CAPABLE OF BEING TELESC OPED INTO EARLIER AMOUNT OF RS.60,50,058/- WHICH WAS ASS ESSED AS UNDISCLOSED INCOME GENERATED OUTSIDE THE BOOKS OF A CCOUNT AS SUCH CASH TO SUCH AN EXTENT WAS AVAILABLE TO THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT FOR UNACCOUNTED PURCHA SES, IF ANY. IN VIEW OF THE DISCUSSIONS MADE, I HOLD THAT T HE ASSESSING OFFICER HAS NOT ESTABLISHED THAT UNACCOUN TED PURCHASES FOR AN AMOUNT OF RS.34,80,000/- WAS MADE AND EVEN IF IT IS MADE THE SAME HAS TO BE TELESCOPED IN TO THE AMOUNT OF RS.60,50,058/- WHICH WAS ADDED TO THE TOT AL INCOME ON ACCOUNT OF SALE TO INELIGIBLE VESSELS. AC CORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE AMO UNT OF RS.34,80,000/-. 16. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE US WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS MADE OUT A CASE FROM THE DOCUMENTS FOUND FROM THE POSSESSION OF THE ASSESSEE S. IF THE ASSESSEES CONTENTION IS ACCEPTED, THEN THERE WOULD HAVE BEEN SOME CORRESPONDENCE EXCHANGED IN THAT REGARD. NOTHING IS PLACED BY THE ASSESSEE IN SUPPORT OF HIS CONTENTION THAT 200 MT OF MGO WAS FOUND TO BE IN BA D STAGE AND IN NON- USABLE CONDITION. ONCE THE ASSESSEE HAS RECEIVED 7 00 MT OF MGO OUT OF WHICH 200 MT WAS FOUND TO BE IN NON-USABLE CONDITIO N, IT MUST HAVE BEEN RETURNED BACK TO THE SELLER AND FOR THE SAME, SOME DOCUMENTARY EVIDENCE ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 12 MUST BE AVAILABLE WITH THE ASSESSEE. BUT NOTHING I S PLACED ON EITHER BEFORE THE TRIBUNAL OR BEFORE THE LOWER AUTHORITIES. THE CIT(A) HAD DELETED THE ADDITION WITHOUT APPRECIATING THE EVIDENCE COLLECTE D BY THE ASSESSING OFFICER. 17. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF RECORD, WE FIND THAT THE ASSESSING OFFICER HAS NOTI CED THAT THERE WERE TWO INVOICES WITH SAME DATE AND INVOICE NUMBER IN WHICH THE MGOS OF DIFFERENT QUANTITIES WITH DIFFERENT AMOUNTS WERE MENTIONED. THE INVOICE WITH NUMBER 2159 THAT WAS ACCOUNTED IN THE BOOKS OF THE ASSESSE E SHOWED A QUANTITY OF 500 MT, WHEREAS THE INVOICE NO.2159 COLLECTED FROM THE CUSTOMS DEPARTMENT SHOWED A QUANTITY OF 700 MT. THE ASSESSEE EXPLAINE D THAT THE INVOICE NO.2159 WAS RAISED ORIGINALLY FOR 700 MT. HOWEVER, AT THE TIME OF MAKING ACTUAL SUPPLY TO THE TRAWLERS IN THE HIGH SEAS, ONL Y 500 MT OF MGO WAS SUPPLIED AND THE BALANCE WAS REJECTED AS IT WAS IN BAD SHAPE. ACCORDINGLY THE SUPPLIER M/S INSPAN PTE LTD, HAS SENT A REVISED INVOICE FOR 500 MT WITH THE SAME INVOICE NUMBER AND DATE. IN SUPPORT OF IT S CONTENTIONS, THE ASSESSEE HAS PLACED COPIES OF FOLLOWING CORRESPONDE NCES IN THE PAPER BOOK. (A) LETTER DATED 21-01-2003 WRITTEN BY M/S INSPA PT D LTD TO THE ASSESSEE. (B) LETTER DATED 21-01-2003 WRITTEN BY M/S INSPAN P TE LTD TO THE BANKER OF THE ASSESSEE. (C) LETTER DATED 21-01-2003 WRITTEN BY THE ASSESS EE TO ITS BANKERS. A CAREFUL PERUSAL OF THESE DOCUMENTS CLEARLY BRINGS OUT THE FACT SUBMITTED BY THE ASSESSEE. IN THE ABOVE DOCUMENTS, BOTH THE SUPP LIER AND THE ASSESSEE ARE REFERRING TO THE AMENDMENT MADE TO THE INVOICE NO.2159. IN THE LETTER ADDRESSED TO THE BANKERS, THE ASSESSEE HAS SPECIFIC ALLY REQUESTED THE BANKERS NOT TO ACCEPT THE EARLIER INVOICE FOR 700 MT, BUT T O ACCEPT AMENDED INVOICE FOR 500 MT. IN VIEW OF THE ABOVE, WE FIND NO MERIT IN THE IMPUGNED ADDITION OF RS.34.80 LAKHS MADE BY THE ASSESSING OFFICER. T HE OBSERVATIONS OF LEARNED CIT(A) WITH REGARD TO TELESCOPING OF THIS R ELIEF AGAINST THE ADDITION RELATING TO SALE MADE TO INELIGIBLE TRAWLERS IS, IN OUR VIEW, UNWARRANTED WHEN ITA NO403 416/V/2007 SAGARIKA SEA CRAFTS L:TD., VSKP . 13 THE ABOVE SAID ADDITION IS DELETED ON MERITS. ACCO RDINGLY WE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION O F RS.34.80 LAKHS. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11.8.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 11 TH AUGUST, 2011 COPY TO 1 M/S. SAGARIKA SEA CRAFTS LIMITED, 3A, BLOCK A SEADOLL APARTMENTS, MAHARANIPETA, BEACH ROAD, VISAKHAPATNAM-530 002 2 JCIT, CENTRAL CIRCLE - 1, VISAKHAPATNAM 3 THE CI T, HYDERABAD 4 THE CIT (A) - I, HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM