Pneumax Pneumatic India P.Ltd, Noida V. DCIT, Circle-2, Noida

ITA 4203/DEL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3715 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 01-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Assessee Lawyers: SD KAPILA ADV SHRI RR MAURYA; BHUVAN
• Keywords: Depreciation; Transfer pricing; Business expenditure; Opportunity of being heard; Principle of natural justice; International transaction; Set aside
• Section: 143(3); 251; 145; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 4203/DEL/2018 ASSESSMENT YEAR: 2013-14 M/S. PNEUMAX PNEUMATIC INDIA P. LTD., D-82, HOSIERY COMPLEX, PHASE-II EXTENSION, NOIDA VS. DCIT, CIRCLE-2, NOIDA PAN :AADCP4421G (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL THE ASSESSEE IS DIRECTED AGAINST ORDE R DATED 28/03/2018 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-I, NOIDA [IN SHORT THE LD. CIT(A)] FOR THE ASSESSMENT YEAR 2013-14, RAISING FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E: - APPELLANT BY SHRI S.D. KAPILA, ADV.; SHRI R.R. MAURYA, ADV. & SHRI BHUVAN MAHAJAN, ADV. RESPONDENT BY SHRI SULEKHA VERMA, CIT(DR) DATE OF HEARING 05.09.2019 DATE OF PRONOUNCEMENT 26.11.2019 2 ITA NO.4203/DEL/2018 I) THE LD. CIT (APPEAL) ERRED IN LAW IN MAKING EN HANCEMENT OF INCOME UNDER SECTION 251(2) OF THE ACT ON ISSUES, W HICH HAD ALREADY BEEN INVESTIGATED AND FOUND SATISFACTORY BY THE ASS ESSING OFFICER. II) THE LD. CIT (APPEAL) ERRED IN LAW IN PASSING A PERVERSE, LACONIC AND SELF-CONTRADICTORY ORDER FOR MAKING ADDITION OF RS. 15,28,51,640/- (4,51,21,897+ 10,77,29,743) IN UTTER DISREGARD OF THE VOLUMINOUS EVIDENCE, WHICH WAS TENDERED TO THE ASSESSING OFFICER IN RESPONSE TO HIS QUESTIONNAIRE DT 12.01.2 016 AND SHOW- CAUSE NOTICE DT 23.02.2018 ISSUED BY THE LD. CIT(AP PEAL). III)THE LD. CIT (APPEAL) ERRED IN PASSING THE IMPU GNED ORDER IN BREACH OF THE PRINCIPLES OF NATURAL JUSTICE BY ISSU ING SHOW-CAUSE NOTICE DT. 23.02.2018 WITHOUT CONVEYING REASON FOR THE PROPOSED ADDITIONS AND ALSO BY NOT CONSIDERING THE APPELLANT S EXPLANATION SUBMITTED TO HIM ON 15.3.2018. IV) THE LD. CIT (APPEAL) ERRED IN MAKING ADDITIO N OF RS. 4,51,21,897/- AS UNEXPLAINED 'CASH IN HAND' THOUGH IT FORMED PART OF CLOSING BANK BALANCE AS REPORTED IN AUDITED FINA NCIAL STATEMENTS FOR WHICH CONFIRMATION WERE DULY PLACED ON RECORD B EFORE THE LD. CIT (APPEAL) AND THE ASSESSING OFFICER. 2. (I) THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEAL) ERRED IN MAKING FURTHER ADDITION OF RS. 10 ,77,29J43/- BY TREATING 50% OF OUTSTANDING TRADE LIABILITY AS PER BALANCE SHEET OF THE APPELLANT AS ITS INCOME. (II) WITHOUT PREJUDICE, THE LD. CIT (APPEAL) ERR ED IN PASSING A SELF- CONTRADICTORY ORDER BY TREATING 50% OF OUTSTANDING TRADE LIABILITY OF THE APPELLANT AS BOGUS THOUGH TREATING THE FOREIGN EXCHANGE LOSS ON ITS REVALUATION AS BUSINESS EXPENDITURE. (III) WITHOUT PREJUDICE, THE LD. CIT (APPEAL) ER RED IN NOT ADJUSTING THE OPENING BALANCE OF TRADE LIABILITIES BROUGHT FORWAR D FROM 31.3.2012 INCLUDED IN THE CLOSING BALANCE OF TRADE LIABILITIE S AS ON 31.3.2013. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (APPEAL) ERRED IN INITIATING PENALTY PROCEEDING UNDER SECTION 271(L)( C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR ADD FRESH GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE WAS ENGAGED IN MANUFACTURING AND TRADING OF PNEUMATIC P RODUCTS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMP ANY CLAIMED TO HAVE IMPORTED GOODS FROM ITS SISTER CONCERNS AND REPORTED INTERNATIONAL TRANSACTIONS IN THE RETURN OF INCOME FILED ON 3 ITA NO.4203/DEL/2018 30/11/2013, DECLARING CURRENT YEAR LOSS OF 26,34,469/-. IN THE SCRUTINY ASSESSMENT COMPLETED ON 30/03/2016 UNDER S ECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT), THE ASSESSING OFFICER MADE AN ADDITION OF 33,93,027/- FOR FOREIGN CURRENCY FLUCTUATION EXPENSES BEING ON HIGHER SIDE AND 5,45,475/- FOR ABNORMAL INCREASE IN OFFICE MAINTENA NCE EXPENSES. ON FURTHER APPEAL, THE LEARNED CIT(A) THOUGH DELETE D BOTH THESE ADDITIONS, BUT HE ENHANCED THE INCOME OF THE ASSES SEE BY WAY OF MAKING FOLLOWING TWO ADDITIONS: 1. ADDITION OF 10,77,29,743/- FOR CREATION OF BOGUS LIABILITIES OF PURCHASES FROM SISTER CONCERNS IN IT ALY. 2. ADDITION OF RS. 4,51,21,897/-FOR DIFFERENCE IN CASH BALANCE AVAILABLE IN BANK AS WELL AS IN BOOKS OF AC COUNTS. 2.1 IN THE GROUNDS OF THE APPEAL RAISED BEFORE THE TRI BUNAL, THE ASSESSEE IS AGGRIEVED MAINLY BY THE ABOVE TWO ADDIT IONS MADE BY THE LEARNED CIT(A). IN GROUND NO. 1(I), THE ASSESSE E HAS CHALLENGED THE ORDER OF LEARNED CIT(A) IN ENHANCING THE INCOME UNDER SECTION 251(2) OF THE ACT. IN GROUND NO. 1(II ) AND (III), THE ASSESSEE HAS RAISED THE ISSUE OF BREACH OF PRINCIPL E OF NATURAL JUSTICE FOR NOT CONSIDERING THE SUBMISSION OF THE AS SESSEE AS WELL AS DISREGARD OF VOLUMINOUS EVIDENCE TENDERED BEFORE THE ASSESSING OFFICER. THE GROUND NO. 1(IV) RELATES TO ADDITION OF 4,51,21,897/- FOR UNEXPLAINED CASH IN HAND. THE GRO UND NOS. 2(I) AND 2(II) RELATES TO ADDITION OF 10,77,29,743/- FOR TREATING 50% OF OUTSTANDING TRADE PAYABLE LIABILITY AS BOGUS. 3. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILED P APER-BOOKS IN FIVE VOLUMES ALONG WITH THE SUPPLEMENTARY PAPER- BOOK AND 4 ITA NO.4203/DEL/2018 SUBMITTED THAT LD. CIT(A) HAS MADE ADDITION ON THE BASIS OF INCORRECT APPRECIATION OF FACTS AND ERRONEOUS COMPU TATION OF AVAILABILITY OF THE CASH DURING FINANCIAL YEAR 2012 -13 AND ERRED IN NOT TAKING INTO ACCOUNT OPENING BALANCE OF TRADE RE CEIVABLES AND NOT MAKING ADJUSTMENT FOR OTHER NON-CASH EXPENDITUR ES LIKE DEPRECIATION, FOREX LOSS BOOKED ETC. THE LD. COUNSE L SUBMITTED THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN ENHANCI NG THE INCOME OF THE ASSESSEE ON THE ISSUES WHICH HAS ALREADY BEEN I NVESTIGATED BY THE ASSESSING OFFICER AND FOUND SATISFACTORY BY HIM . 4. ON THE MERIT OF THE ADDITION, THE LD. COUNSEL OF THE ASSESSEE REFERRED TO VARIOUS PAGES OF THE PAPER BOOK AND SUB MITTED THAT THE LEARNED CIT(A) HAS WRONGLY COMPUTED AVAILABILIT Y OF THE CASH IN BOOKS OF ACCOUNT AT RS. 2.11 CRORE AS AGAINST AV AILABILITY OF RS 6.43 CRORES. THE LD. COUNSEL ALSO SUBMITTED THAT TH E LEARNED CIT(A) IS NOT JUSTIFIED IN MAKING ADDITION FOR OUTS TANDING LIABILITIES IN ABSENCE OF ANY WAIVER OF LIABILITY I N THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT EVEN THE CURRENT L IABILITY RAISED IN THE YEAR UNDER CONSIDERATION IS A GENUINE ONE AN D WHICH HAS BEEN REPAID BY THE ASSESSEE IN SUBSEQUENT ASSESSMEN T YEAR AND SUCH REMITTANCE HAS BEEN FULLY ACCEPTED BY THE ASSE SSING OFFICER IN SUBSEQUENT ASSESSMENT YEAR UNDER SECTION 143 (3) ORDERS. THE WRITTEN SUBMISSION FILED BY THE LD. COUNSEL OF THE ASSESSEE IS REPRODUCED AS UNDER: 1) COMMENTS ADVERSE FINDING OF CIT(A) IN PARAGRAPH 13 OF THE ORDER: A. CIT(APPEAL) ERRONEOUSLY COMPUTES THE CASH AVAILA BILITY DURING F.Y. 2012-13 AS FOLLOWS:- RS. IN CRORES (ROUNDED) I) TOTAL RECEIPTS DURING THE YEAR (NOTED 15-17 OF ACCOUNTS AT PG. 74- 14.37 5 ITA NO.4203/DEL/2018 75/VIL-I) II) CL. BL. OF TRADE RECEIVABLE ON 31.03.2013 (-)6.03 CASH AVAILABLE TO BUSINESS 8.35 III) LESS: CASH PAID OUT BY ASSESSEE (-)6.23 IV) NET CASH AVAILABLE ON 31.03.2013 2.11 V) CASH IN BANK ON 31.03.2013 AS PER ACCOUNTS 4.51 ANALYSIS OF TRADE RECEIVABLES AS PER ACCOUNTS: B. CORRECT POSITION : AS PER ACCOUNTS I) TOTAL RECEIPTS DURING F.Y. 2012-13 14.37 II) ADD: OP. BL. OF TRADE RECEIVABLES ON 01.04.2012 (+) 4.32 III) LESS: CL. BL. OF TRADE RECEIVABLES ON 03.03.2013 (NOE 12 TO ACCOUNTS AT PG. 73/VOL-I) (- )1.71 (-)1.71 CASH GENERATED DURING THE YEAR 12.66 LESS: CASH PAID OUT* (-)6.23 CASH AVAILABLE ON 31.03.2013 (SUBJECT TO ADJUSTMENT) 6.43 *NOTE:- THE CIT(A) HAS MADE BASIC ERROR IN NOT TAKI NG INTO ACCOUNT THE OPENING BALANCE OF TRADE RECEIVABLES AND ALSO N OT MAKING ADJUSTMENT FOR OTHER NON CASH EXPENDITURE LIKE DEPR ECIATION, FOREX LOSS BOOKED ETC. C. ADJUSTMENTS ARE ALSO REQUIRED TO BE MADE IN RESP ECT OF INCREASE/DECREASE IN INVENTORIES, LOANS & ADVANC ES, OTHER CURRENT & NON-CURRENT ASSETS & OTHER CURRENT LIAB ILITIES & PROVISIONS (PI. REF. NOTES 4-23 OF ACCOUNTS AT PG. 68-8O/V0I.-I). THE RECONCILIATION STATEMENT CLEARLY SHOWS THAT CASH A ND CASH EQUIVALENT DURING THE YEAR WAS AS ON 31.3.2013 WAS OF RS. 6.91 CRORES. (NET INCREASE IN CASH 2.85 CR. + O. PI. 4.0 6 CR.) (PG. 52/SUPP. PB). (PG. 74/VOL- I) D. ANOTHER ADVERSE OBSERVATION OF THE CIT(A) IS: THERE WAS ABSOLUTELY NO JUSTIFICATION OF HAVING SU CH HUGE CASH IN HAND IDLE WHEN THE APPELLANT WAS SADDLED WITH ENORM OUS LIABILITIES NOTE 29 AT PG. 85/VOL.-I CLARIFIES THE REASON FOR D ELAY IN PAYMENT TO THE AES AS FOLLOWS:- 6 ITA NO.4203/DEL/2018 THE COMPANY HAS INCURRED LOSS OF RS.,2,403,915 (PY : RS. 9,283,378) DURING THE YEAR AND HAS ACCUMULATED LOSS ES AS AT MARCH 31, 2013 OF RS. 20,839,091 9PY: RS. 18,435,176) AGA INST THE PAID UP CAPITAL OF RS. 17,000,000 (PY: RS. 17,000,000) W HICH WAS RESULTED IN EROSION OF COMPANY NET WORTH. THE COMPA NY PROPOSES TO FUNDS ITS OPERATIONS FOR THE YEAR ENDED MARCH 31, 2 014 PRIMARILY FROM THE SUPPORT BY HOLDING COMPANY, WHICH WILL ENA BLE IT TO SETTLE ITS OBLIGATIONS AS AND WHEN THEY FALL DUE AND OPERA TE AS A GOING CONCERN. THE HOLDING ITALIAN COMPANY PROVIDED THE FINANCIAL CUSHION TO THE ASSESSEE COMPANY SO THAT IT DOES NOT LACK COMPETITI ON AND IS ABLE TO COMPLETE AGAINST THE CHEAPER CHINESE PRODUCTS. 2) ERRONEOUS OBSERVATIONS IN PARAGRAPH 19 OF CIT(A ) ORDER:- THE LD. CIT(A) STATES THAT THE APPELLANT HAS NOT PR OVIDED ANY EVIDENCE IN RESPECT OF PURCHASE OF GOODS IMPORTED F ROM PNEUMAX SPA ITALY, (THE PARENT COMPANY). THIS IS A BASELESS AND FACTUALLY INCORRECT ALLEGATION. IN PARA 2 OF HIS ORDER, THE AO STATES: THE ASSESSEE HAS FURNISHED VARIOUS DETAILS DURING THE ASSESSMENT PROCEEDINGS. BOOKS OF ACCOUNT OF THE ASSESSEE COMPA NY WERE AUDITED U/S 44AB OF THE I. T. ACT, 1961 AND COPY OF AUDIT REPORT WAS ALSO FURNISHED. THE ASSESSEE PRODU CED COMPLETE HOOKS OF ACCOUNTS ALONG WITH LEDGERS, BILLS & VOUCH ERS WHICH WERE EXAMINED ON TEST BASIS AND RETURNED BACK.' (PG. 19/AM) A) COPY OF FOREIGN EXPORETERS INVOICES ALONG WITH COST SHEET ON SAMPLE BASIS (REFER PAGE 840 TO 1025 ON PAPER BOOK VOLUME-IV). I) CUSTOM HOUSE AGENT BILL, II) CUSTOM DULY CHALLNS, III) BILL OF FREIGHT BY SHIPPING AGENT, IV) CUSTOMS BILL OF ENTRY, V) FOREIGN CONSIGNERS INVOICE. AES CONFIRMATION IS AT PG.411-12/VOL-II. VI) STATEMENT OF IMPORTS IS AT PG. 1047/VOL.-V VII) BANK STATEMENT & CONFIRMATION ARE AT PG. 157- 164 & 197-99/VOL-II B) IT IS ILLOGICAL ON THE PART OF CIT(APPEAL) TO AL LOW DEDUCTION OF FOREX FLUCTUATION LOSS BOOKED BY THE ASSESSEE ON TH E VERY IMPORTS, AND THEN TURN AROUND AND SAY NO EVIDENCE OF IMPORTS / PURCHASES 7 ITA NO.4203/DEL/2018 WAS FURNISHED. ACCEPTANCE OF FOREIGN EXCHANGE LOSS WORK-SHEETS BY LD. CIT (A) IN PARA 7 OF HIS ORDER CLEARLY PROVES T HAT HE ACCEPTED THE FACT THAT THE APPELLANT HAD IMPORTED GOODS FROM PNE UMAX SPA ITALY, WHICH WAS SUBJECT TO DUTY. THESE WORKSHEETS WERE FU RNISHED TO THE AO/CIT(A) AS ANNEXURE TO ASSESSEES LETTER DT. 19.1 .2016 ADDRESSED TO AO (PG. 157-62/VOL-II). IT IS ENCLOSED AS ANNEXU RE 2 AT PG. 20-27OF THIS SYNOPSIS. APPELLANT COMPANY HAD SUBMITTED DETAILS OF GOODS IM PORTED, EXCHANGE RATE ON THE DATE OF IMPORT AND THE ACTUAL PAYMENT ON THE GOODS IMPORTED AND RECORD OF THE EXCHANGE LOSS BOOK ED FOR THE DIFFERENCE IN EXCHANGE RATE. THE CONSIGNERS INVOIC ES WERE DULY BACKED WITH COST SHEET, BILL OF ENTRY, AND CUSTOM D UTY CHALLANS. COMPLETE DETAILS OF BANK ACCOUNT AND CONFIRMATION W ERE ALSO FURNISHED TO THE AO. DETAILS OF GOODS IMPORTED ON CIF BASIS AND EXPENDIT URE IN FOREIGN CURRENCY ARE GIVEN IN NOTE 24 OF THE AUDITED ACCOUN TS AT PG. 80/VOL- I. ALSO IN FORM 3CD U/S 44AB AT PG. 112, 131,138 & ALSO FORM 3CEB AT PG. 148/VOL.-I. 3) IN PARA 20 OF HIS ORDER OBSERVES THAT THE APPEL LANT WAS KEEPING R.S. 4,12,40,698 IN ITS CURRENT ACCOUNT WHI CH IS BEYOND COMPREHENSION . HE THEN HOLDS IN PARA 21 OF THE OR DER THAT FROM THE IRREGULARITIES IN THE CONDUCT OF BUSINESS OF TH E APPELLANT IT IS CLEAR THAT THE APPELLANT HAS BEEN CREATING BOGUS LI ABILITIES ID ITS BOOKS OF ACCOUNTS IN FAVOUR OF THE SISTER CONCERN A ND HAS BEEN WAITING FOR AN OPPORTUNE MOMENT TO REMIT THE MONEY TO ITALY IT MAY BE NOTED THAT THE CIT(A) HAS NOT REJECTED TH E AUDITED ACCOUNT U/S 145 OF THE ACT; HUT BECAUSE OF THE WAY BUSINESS IS CONDUCTED BY THE ASSESSEE, HE TREATS THE OUTSTANDING LIABILITIES AS BOGUS. HE DOES NOT EXPLAIN AS HOW LIABILITIES ON ACCOUNT OF L OANS & PURCHASE OF THE GOODS IMPORTED FROM THE AE ARE BOGUS. IN THIS C ONNECTION, ATTENTION IS INVITED TO NOTES 24-28 OF ACCOUNTS GIV ING DETAILS OF THE IMPUGNED INTERNATIONAL TRANSACTIONS. (PG. 80-84/VOL -I). SHOW-CAUSE NOTICE U/S 251 IS AT PG. 1048/VOL-V. IT MAY ALSO BE NOTED THAT THE ASSESSEE COMPANY IN R ESPONSE DT. 15.3.2018 TO SHOW CAUSE NOTICE EXPLAINED TO THE CIT (A) AS TO HOW IT DISCHARGED THE OUTSTANDING LIABILITIES OF RS. 17 CR ORES UPTO 20.11.2015 IN THE SUBSEQUENT YEARS (PG. 1050 AT 105 8/VOL- VR. W. PG. 684-839/VOL- V). THE ASSESSEE COMPANY ALSO FURN ISHED DETAILS AND DOCUMENTARY EVIDENCE OF THE REMITTANCES MADE TH ROUGH THE BANKS (PG. 684-839/VOL-IV). THESE REMITTANCES WERE FULLY ACCEPTED IN SUBSEQUENT ASSESSMENT U/S 143(3) PG. 53/SUPP. PB . THE PARENT COMPANY ALSO DID NOT CHARGE INTEREST ON THE OUTSTAN DING PAYABLE BY THE ASSESSEE COMPANY. 8 ITA NO.4203/DEL/2018 4) IN PARAGRAPH 22 OF THE ORDER THE CIT (A) HAS HEL D THAT THE APPELLANT HAS INCURRED BOGUS LIABILITY IN FAVOUR OF SISTER CONCERN AND ACCORDINGLY DISALLOWED 50% AMOUNT OF OUTSTANDING LI ABILITY OF RS 21,54,59,486 ON ADHOC BASIS WITHOUT MAKING ADJUSTME NT FOR OPENING LIABILITIES OF RS. 15.30 CRORES (PG. 69/V OL-I). AD-HOC 50% DISALLOWANCE AND ALLEGING THE ENTIRE SUM OF OUTSTAN DING TRADE LIABILITY IS SELF-CONTRADICTORY. 5) SIMILARLY, THE AD-HOC ADDITION OF CLOSING BANK B ALANCE RS. 4.51 CRORES IS ARBITRARY AND WITHOUT BASIS. 5. THE LD. DR, ON THE OTHER HAND, REFERED TO THE POWE R OF THE COMMISSIONER OF APPEALS UNDER SECTION 251(1) OF THE ACT AND SUBMITTED THAT CIT(A) HAS MADE ADDITION IN RESPECT OF THE SOURCE OF THE INCOME ALREADY DECLARED BY THE ASSESSEE IN T HE RETURN OF INCOME AND THUS IN VIEW OF THE FOLLOWING DECISIONS THE LEARNED CIT(A) HAVING COTERMINOUS OF THE ASSESSING OFFICER, HE WAS JUSTIFIED IN ENHANCING THE INCOME : 1. JUTE CORPORATION OF INDIA VERSUS CIT 187 ITR 688 (S C) 2. CIT VS NIRBHERAM DELURAM 224 ITR 610 (SC) 3. CIT VS GOEL DIE CAST LTD 297 ITR 72 ( P & H) 6. ON THE MERIT OF THE CASE, SHE SUBMITTED THAT IN VIE W OF THE COMPUTATION OF THE CASH AVAILABILITY AND OTHER DOCU MENTS IN RESPECT OF OPENING TRADE RECEIVABLES ETC. FILED BY THE ASSESSEE NEED VERIFICATION AT THE HAND OF THE ASSESSING OFFI CER AND, THEREFORE, THE MATTER MAY BE RESTORED BACK TO THE F ILE OF LEARNED CIT(A) OR TO THE ASSESSING OFFICER FOR DECIDING AFR ESH. 7. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES A ND PERUSED THE RELEVANT MATERIAL ON RECORD. AS FAR AS GROUND OF THE ASSESSEE RELATED TO CHALLENGE TO THE ACTION OF THE LEARNED CIT(A) IN 9 ITA NO.4203/DEL/2018 ENHANCING THE INCOME OF THE ASSESSEE IS CONCERNED, WE FIND THAT THE CIT(A) ISSUED SHOW CAUSE NOTICE UNDER SECTION 2 51(2) OF THE ACT PROPOSING TO ENHANCE THE INCOME ON THE ISSUES R AISED IN THE SAID NOTICE. AFTER CONSIDERING THE SUBMISSION OF TH E ASSESSEE, HE REJECTED THE OBJECTION OF THE ASSESSEE. THE RELEVAN T PART OF THE FINDING OF THE LEARNED CIT(A) IS REPRODUCED AS UNDE R: 8. IN THE COURSE OF THE ADJUDICATION OF THE APPEAL OF THE APPELLANT SERIOUS DISCREPANCIES IN THE ACCOUNTS OF THE APPELL ANT WAS NOTICED HAVING SERIOUS BEARING ON THE TOTAL INCOME OF THE A PPELLANT. THEREFORE, A NOTICE U/S 251(2) R/W 251 (1 )(A) OF I .T. ACT, 1961 ASKED THE APPELLANT TO SHOW CAUSE WHY ITS INCOME LIABLE T O TAX BE NOT ENHANCED ON THE ISSUES RAISED IN THE SAID NOTICE AN D THE APPELLANT HAVING RECEIVED THE SAID NOTICE FILED A WRITTEN BRI EF CONTESTING THE SAID NOTICE AND JUSTIFYING THE CORRECTNESS OF ITS F INANCIAL RESULTS AS DISCLOSED BY IT IN ITS RETURN OF INCOME. 9. THE APPELLANT ON THE ISSUE OF THE JURISDICTION O F THIS OFFICE TO TAKE UP THE ISSUE OF ENHANCEMENT OF THE INCOME LIABLE TO TAX STATED THAT THIS OFFICE HAS NO JURISDICTION TO ENHANCE THE INCO ME OF THE APPELLANT. THE RELIANCE WAS PLACED ON THE LAW LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF CIT VS. SHAPOORJI PALLANJI MI STRY 44 ITR 891 SC! AND THE LAW LAID DOWN BY HON'BLE DELHI HIGH CO URT IN THE CASE OF CIT VS. SARDARILAL & CO. (2001) 251 ITR 864 DEL HI' AND SOUGHT THE FILING OF THE NOTICE ISSUED TO THE APPELLANT U/ S 251(2) QUA ENHANCEMENT OF ITS INCOME LIABLE TO TAX. 10. THE RELIANCE BEING PLACED BY THE APPELLANT ON T HE AUTHORITIES OF THE HON'BLE APEX COURT AND HON'BLE DELHI HIGH COURT IS OF NO HELP. THE SAID AUTHORITIES ARE IN RESPECT OF A NEW SOURCE OF INCOME AND NOT THE EXISTING SOURCE OF INCOME. THE INSTANT NOTICE U /S 251(2) WAS ISSUED IN RESPECT OF THE SAME BUSINESS OF THE APPEL LANT WHICH WAS CONSIDERED BY THE ID. AO IN THE IMPUGNED ASSESSMENT ORDER. WHAT WAS BEING ASKED TO BE EXPLAINED WAS NOT THE NEW SOU RCE OF INCOME BUT THE DISCREPANCIES NOTICE IN RESPECT OF THE SAME SOURCE OF INCOME WHICH WAS CONSIDERED BY THE LEARNED AO. 8. WE FIND THAT THE LEARNED CIT(A) HAS FOLLOWED THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS KAN PUR COAL 10 ITA NO.4203/DEL/2018 SYNDICATE (1964) 53 ITR 225 (SC) ON THIS ISSUE AND LD. COUNSEL OF THE ASSESSEE COULD NOT REBUT BEFORE US THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE. IN CIT VS. KANPUR COAL SYNDICA TE (SUPRA) THREE JUDGE BENCH OF THE HONBLE SUPREME COURT DIS CUSSED THE SCOPE OF S. 31(3)(A) OF THE INDIAN IT ACT, 1922, WH ICH IS ALMOST IDENTICAL TO S. 251(1)(A). THE HONBLE SUPREME COUR T HELD AS UNDER: 'IF AN APPEAL LIES, S. 31 OF THE ACT DESCRIBES THE POWERS OF THE AAC IN SUCH AN APPEAL. UNDER S. 31(3)(A), IN DISPOSING OF SUCH AN APPEAL, THE AAC MAY, IN THE CASE OF AN ORDER OF ASS ESSMENT, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; U NDER CL. (B) THEREOF HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE ITO TO MAKE A FRESH ASSESSMENT. THE AAC HAS, THEREFORE, PL ENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER I S CONTERMINOUS WITH THAT OF THE ITO. HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FILED TO DO.' 8.1 WE ALSO FIND THAT HONBLE SUPREME COURT ON THE ISS UE OF THE POWER OF LEARNED CIT(A) IN ENHANCING THE INCOME, IN THE CASE OF JUTE CORPORATION OF INDIA (SUPRA), REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KANPUR COAL S YNDICATE (SUPRA) HAS OBSERVED AS UNDER: THE ABOVE OBSERVATIONS ARE SQUARELY APPLICABLE IN THE INTERPRETATION OF S. 251(1)(A) OF THE ACT. THE DECL ARATION OF LAW IS CLEAR THAT THE POWER OF THE AAC IS CO-TERMINOUS WIT H THAT OF THE ITO, AND IF THAT IS SO, THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT OR DER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE ITO . NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DOES NOT PLA CE ANY RESTRICTION OR LIMITATION ON THE EXERCISE OF APPELLATE POWER. E VEN OTHERWISE, AN APPELLATE AUTHORITY WHILE HEARING THE APPEAL AGAINS T THE ORDER OF A SUBORDINATE AUTHORITY, HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS, IF ANY, PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISI ON, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHI CH THE 11 ITA NO.4203/DEL/2018 SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON AND NONE WAS PLACED BEFORE US TO JUS TIFY CURTAILMENT OF THE POWER OF THE AAC IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATI ON OF THE ORDER OF ASSESSMENT PASSED BY THE ITO. 8.2 THE HONBLE SUPREME COURT IN THE CASE OF CIT VS NI RBHERAM DELURAM (SUPRA) HAS OBSERVED AS UNDER: 3. HAVING REGARD TO THE DECISION IN JUTE CORPORATION OF INDIA LTD. (SUPRA), IT MUST BE HELD THAT THE HIGH COURT WAS IN ERROR IN HOLDING THAT THE APPELLATE POWER CONFERRED ON THE AAC UNDER S. 251 WAS CONFINED TO THE MATTER WHICH HAD BEEN CONSIDERED BY THE ITO AND THE AAC EXCEEDED HIS JURISDICTION IN MAKING AN ADDI TION OF RS. 2,30,000 ON THE BASIS OF THE OTHER 10 ITEMS OF HUND IS WHICH HAD NOT BEEN EXPLAINED BY THE ASSESSEE. THIS MEANS THAT EVE N IF QUESTION NO. 2 IS ANSWERED IN THE AFFIRMATIVE, QUESTIONS NOS . 1 AND 3 MUST BE ANSWERED IN THE NEGATIVE. THE APPEAL IS, THEREFORE, ALLOWED, THE IMPUGNED JUDGMENT OF THE HIGH COURT IN SO FAR AS IT RELATES TO QUESTION NOS. 1 AND 3 IS SET ASIDE AND THE SAID QUE STIONS ARE ANSWERED IN THE NEGATIVE, I.E., IN FAVOUR OF THE RE VENUE AND AGAINST THE ASSESSEE. NO ORDER AS TO COSTS. 8.3 IN THE CASE OF GOEL DIE CAST LTD. VS COMMISSIONER OF INCOME-TAX (APPEALS) AND ANR (SUPRA) , THE HONBLE PUNJAB AND HARYANA HIGH COURT HAS OBSERVED AS UNDER: A PERUSAL OF THE ABOVE EXTRACTED PROVISIONS OF S. 251 OF THE ACT, WHICH DEFINES POWERS OF THE CIT(A), IT IS EVIDENT T HAT APPELLATE AUTHORITY HAS BEEN GIVEN POWERS TO CONFIRM, REDUCE, ENHANCE OR ANNUL ASSESSMENT. THE ONLY PRE-CONDITION MENTIONED FOR EXERCISING THE POWERS TO ENHANCE THE INCOME IS THAT THE SAME C OULD BE DONE ONLY AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARIN G TO THE ASSESSEE. THERE IS NO RESTRICTION UNDER THE ACT THA T THE INFORMATION, WHICH COULD FORM BASIS FOR ENHANCEMENT OF INCOME, C OULD NOT BE SOURCED FROM THE AO. THE ENOUGH SAFEGUARD FOR EXERC ISING OF SUCH POWERS IN THE FORM OF PRINCIPLE OF NATURAL JUSTICE HAS BEEN PROVIDED. 6. AN IDENTICAL ISSUE WAS CONSIDERED BY A DIVISION BEN CH OF KERALA HIGH COURT IN POPULAR AUTOMOBILES VS. CIT (1990) 89 CTR (KER) 248 : (1991) 187 ITR 86 (KER) WHEREIN IT WAS HELD AS UN DER : 12 ITA NO.4203/DEL/2018 'IT WAS CONTENDED BEFORE US THAT IT IS OPEN TO THE CIT(A) TO ENHANCE THE ASSESSMENT SUO MOTU. THE QUESTION THAT WAS MOOTED WAS THAT THE CIT(A) WAS NOT OBLIGED TO DO SO , ON A MOTION MADE BY THE ITO IN THAT REGARD. IN OTHER WOR DS, IT WAS ARGUED THAT THE POWER VESTED IN THE CIT(A), EVE N TO ENHANCE AN ASSESSMENT , IS A SUO MOTU DISCRETIONARY POWER AND THE ITO HAS NO RIGHT TO DEMAND THE EXERCISE OF THAT POWER IN ANY PARTICULAR CASE. WE SEE NO FORCE IN TH IS PLEA. IN KNIGHT VS. IRC (1974) 49 TC 179 (CA), AT P. 212, ST AMP L.J. SAID : 'THE OTHER FACT WHICH IT WAS SUBMITTED LED TO THE C ONCLUSION THAT THE DETERMINATION OF THE GENERAL COMMRS. WAS A NULLITY WAS THE FACT THAT THE INSPECTOR OF TAXES INVITED THE GENERAL COM MRS. TO INCREASE THE FOUR ESTIMATED ASSESSMENTS, NOT MERELY TO THE F IGURE WHICH HAD BEEN AGREED, BUT IN THE CASE OF TWO OF THE YEARS OF ASSESSMENT IN QUESTION BY TREATING THE MONEY IN THE MOTHERS ACCO UNT AS DERIVED FROM THE APPELLANTS TRADE, AND ADDUCED EVIDENCE IN SUPPORT OF THE SUBMISSION THAT THEY OUGHT TO BE SO TREATED. THIS S UBMISSION IS BASED ON THE PROVISIONS OF S. 52(2) OF THE IT ACT, 1952, WHICH IT IS URGED IMPLIEDLY PRECLUDES EVIDENCE IN SUPPORT OF AN INCREASED ASSESSMENT BEING PRODUCED BY THE INSPECTOR OF TAXES : AND SEE THE OBSERVATIONS OF LORD DIPLOCK IN IN RE VANDERVELLS TRUSTS (1970) 46 TC 341, AT P. 372 ; (1971) AC 912, AT P. 942 (HL). IT WOULD BE ANOMALOUS IF THE GENERAL COMMRS., HAVING POWER UNDE R S. 52(6) TO MAKE AN INCREASED ASSESSMENT, HAD NO POWER TO ADMIT OR INVITE EVIDENCE ADDUCED ON BEHALF OF THE CROWN, WHO ALONE WOULD HAVE AN INTEREST TO ADDUCE IT, DESIGNED TO ENABLE THE GE NERAL COMMRS. TO EXERCISE THE POWER WHICH PARLIAMENT HAS CONFERRED U PON THEM. IT WOULD ALSO BE ANOMALOUS IF THE CROWN, ADDUCING EVID ENCE IN SUPPORT OF AN EXISTING ASSESSMENT, WAS PRECLUDED BY THE EFFECT OF S. 52(2) FROM ADDUCING EVIDENCE OF THE TAXPAYERS T RUE INCOME BECAUSE IT WOULD THEREBY BE ADDUCING EVIDENCE LEADI NG TO AN INCREASED ASSESSMENT'. SIMILARLY, IN WAY VS. UNDERDOWN (H.M. INSPECTOR OF TAXES) (1974) 49 TC 215, 231 (CA), IN DISPOSING OF A PETITION SIM ILAR TO THE ONE RAISED HEREIN, PLOWMAN J. STATED AS FOLLOWS : EVEN IF IT IS RIGHT THAT THE INSPECTOR CAN ONLY GIV E REASONS IN SUPPORT OF THE ASSESSMENT AND IS NOT ENTITLED TO ARGUE THAT IT SHOULD BE INCREASED, THE COMMRS. UNDOUBTEDLY HAVE POWER UNDER S. 52(6) TO INCREASE ASSESSMENTS, AND IT MAY BE THAT THE INSPEC TOR IN THE PRESENT CASE WAS DOING NO MORE THAN REMINDING THE C OMMRS. WHAT THEIR JURISDICTION WAS. IN THE LIGHT OF THE ABOVE DECISIONS, WE HOLD THAT I T IS OPEN TO THE ITO TO BRING TO THE NOTICE OF THE CIT(A) ANY LAPSE OR O MISSION OR ERROR IN 13 ITA NO.4203/DEL/2018 THE ASSESSMENT AND INVITE THE APPELLATE AUTHORITY T O EXERCISE THE POWER VESTED IN HIM TO ENHANCE THE ASSESSMENT OR TA KE OTHER STEPS TO UNDO THE HARM OR ERROR. IT IS IDLE TO CONTEND TH AT THOUGH THE CIT(A) CAN EXERCISE THE POWER TO ENHANCE THE ASSESS MENT EVEN SUO MOTU, SUCH A POWER CANNOT BE EXERCISED WHEN THE OCC ASION FOR THE EXERCISE OF SUCH POWER IS ON AN ALERT MADE BY THE I TO OR BROUGHT TO HIS NOTICE BY THE ITO (ASSESSING AUTHORITY). THE IT O CANNOT PREFER AN APPEAL AGAINST HIS OWN ASSESSMENT. IT MAY BE THA T IT IS OPEN TO HIM EITHER TO RECTIFY THE ORDER UNDER S. 154 OF THE ACT OR INITIATE PROCEEDINGS FOR REASSESSMENT, IF IT IS JUSTIFIED IN LAW, OR REQUEST THE CIT TO EXERCISE HIS SUO MOTU POWER OF REVISION UNDE R S. 263 OF THE IT ACT. IT IS ALSO OPEN TO THE ITO TO POINT OUT THE ERROR OR OMISSION AND REQUEST THE CIT(A), BEFORE WHOM THE APPEAL FILE D BY THE ASSESSEE IS PENDING, TO TAKE REASONABLE STEPS TO SE E THAT A TRUE AND PROPER ASSESSMENT IS RENDERED IN THE CASE. THE POWERS AFORESAID ARE CONCURRENT. WE HOLD THAT THE ITO HAD LOCUS STANDI OR RIGHT TO ALERT THE CIT(A) AND BRING TO HIS NOTICE T HAT S. 37(3A) OF THE ACT IS APPLICABLE IN THE INSTANT CASE AND THAT AN E NHANCEMENT IN DISALLOWANCE IS CALLED FOR ON THAT ACCOUNT'. 7. KEEPING IN VIEW THE PLAIN LANGUAGE OF S. 251 OF THE ACT AND THE INTERPRETATION GIVEN TO IT BY KERALA HIGH COURT IN POPULAR AUTOMOBILES CASE (SUPRA), WE ARE OF THE VIEW THAT POWER TO ENHANCE INCOME CAN BE EXERCISED BY THE CIT(A) EVEN ON AN INFORMATION FURNISHED BY THE AO. 8.4 IN THE FACTS OF THE INSTANT CASE BEFORE US, THE AD DITION HAS BEEN MADE IN RESPECT OF SOURCE OF INCOME SHOWN IN T HE RETURN OF INCOME AND THE OPPORTUNITY HAS BEEN PROVIDED TO THE ASSESSEE BY WAY OF ISSUE SHOW CAUSE NOTICE BY THE LEARNED CIT(A ). IN VIEW OF THESE FACTS, WE DO NOT FIND ANY VIOLATION OF THE PR INCIPLE OF NATURAL JUSTICE. IN OUR OPINION, THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE IS WELL REASONED AND WE DO NOT FIN D ANY ERROR IN THE SAME. ACCORDINGLY, WE UPHOLD THE AUTHORITY OF T HE LEARNED CIT(A) IN ENHANCING THE INCOME. THE GROUNDS OF APPE AL OF THE ASSESSEE IN THIS RESPECT ARE ACCORDINGLY DISMISSED. 9. AS FAR AS ISSUE OF MERIT OF THE ADDITION IS CONCER NED, WE FIND THE LEARNED CIT(A) HAS OBSERVED AS UNDER: 14 ITA NO.4203/DEL/2018 13. PER MERITS, IT WAS FOUND THAT THE APPELLANT H AD ENORMOUS OUTSTANDING LIABILITIES OF RS. 15,30,51,417/- BEIN G THE TRADE PAYABLES AT THE BEGINNING OF THE ACCOUNTING PERIOD AND WHICH INCREASED TO RS. 21,54,59,486/- AT THE TIME OF CLOS URE OF THE ACCOUNTING PERIOD. IT WAS SEEN THAT THE APPELLANT W AS NOT PAYING FOR ITS PURCHASES AND ALMOST 60% OF THE PURCHASES WAS K EPT OUTSTANDING AND WHICH CAUSE THE PILE UP OF HUGE TRA DE PAYABLES. IT WAS FURTHER FOUND THAT AGAINST THE CONSUMPTION OF INVENTORIES OF RS.8,18,18,269/- THE APPELLANT WAS KEEPING A HUGE S TOCK OF INVENTORY FOR RS. 6,45,53,883/- WHICH WAS ALMOST 60 % OF THE INVENTORIES CONSUMED BY THE APPELLANT. LIKEWISE, OU T OF THE TOTAL RECEIPTS OF RS. 14.37,98,408/- THE APPELLANT HAS SH OWN TRADE RECEIVABLES OF RS. 6,03,17,764/- WHICH MEANT A THAT THE CASH RECEIVED IN THE BUSINESS WAS ONLY RS. 8,34,80,644/- . OUT OF THIS CASH RECEIVED THE APPELLANT PAID RS. 6.23.41.326/- IN CASH. THEREFORE, THE APPELLANT SHOULD HAVE WITH IT A CASH AVAILABILITY OF RS. 2,11,39,318/-. FURTHER, THE APPELLANT HAS SHOWN HUG E AMOUNT OF CASH AVAILABLE WITH IT AS CASH IN HAND OF RS. 6,62, 61,215/-. THERE WAS ABSOLUTELY NO JUSTIFICATION OF HAVING SUCH HUGE CASH IN HAND IDLE WHEN THE APPELLANT WAS SADDLED WITH ENORMOUS L IABILITIES. THE ACCOUNTS SUBMITTED BY THE APPELLANT WITH THE RETURN OF INCOME AND BEFORE THE LD. AO DID NOT EXPLAIN WHY THE APPELLANT WAS HAVING SUCH HUGE CASH IN HAND WHEN IT WAS HAVING FAR MORE BIGGER LIABILITIES TO DISCHARGE AND WHY THE CASH IN HAND W AS NOT UTILIZED TO DISCHARGE THE LIABILITIES OF THE APPELLANT. THE ACC OUNTS ALSO DID NOT EXPLAIN FROM WHERE THE ADDITIONAL CASH IN HAND OF R S. 4,51,21,897/- IN THE BOOKS OF ACCOUNTS OF THE APPELLANT WHEN THE CASH AVAILABLE WAS RS. 6,62,61,215/- AGAINST THE ACTUAL CASH AVAIL ABILITY AS PER THE ACCOUNTS OF THE APPELLANT WAS ONLY RS. 2,11,39, 318/-. 14, THE LD. COUNSEL FOR THE APPELLANT SOUGHT TO EXP LAIN THAT OUT OF TOTAL TRADE PAYABLES OF RS. 21,54,59,486/- AN AMOUN T OF RS. 21,22,07,061/- WAS PERTAINING TO THE RELATED FOREIG N CONCERNED M/S PNEUMAX SPA ITALY WHILE THE REMAINING WAS IN RESPEC T OF UNRELATED PARTIES. A DETAILED BREAK UP OF THE OUTSTANDING OF THE RELATED FOREIGN PARTY WAS ALSO SHOWN. IT WAS STATED THAT BECAUSE OF THE TOUGH COMPETITION GIVEN BY THE CHINESE CONCERNS THE APPEL LANT WAS NOT ABLE TO PAY TO ITS SISTER CONCERNS IN ITALY, IT WAS STATED THAT THERE WAS NO IRREGULARITY IN THE HUGE OUTSTANDING OF SIST ER CONCERN. 15. IT WAS STATED THAT THE HIGH QUANTUM OF INVENTOR Y WAS KEPT TO COMPLETE WITH THE CHINESE CONCERN AND FOR THAT REAS ON THE STOCK OF INVENTORIES WAS VERY HIGH. IT WAS FURTHER STATED TH AT THE NATURE OF THE BUSINESS OF THE APPELLANT REQUIRED THAT LARGE N UMBER OF ITEMS WERE KEPT WITH THE APPELLANT AS STOCK IN TRADE AND THERE WAS NO IRREGULARITY IN THE SAME. 15 ITA NO.4203/DEL/2018 16. IT WAS CONTESTED THAT THE AVAILABILITY OF CASH WITH THE BUSINESS OF THE APPELLANT AS COMPUTED BY THIS OFFICE WAS INC ORRECT AND THE CORRECT FIGURES WERE CLAIMED TO BE CURRENT ACCOUNT BALANCE OF RS. 4,12,40,698/- AND SHORT TERM DEPOSITS OF RS. 2,50,2 0,517/-. IT WAS FURTHER STATED THAT MOST OF THE LIABILITIES WERE IN RESPECT OF THE SISTER CONCERNS OF THE APPELLANT AND THE MAJOR PART OF WHI CH WAS SUBSEQUENTLY DISCHARGED BY THE APPELLANT. 9.1 THE ASSESSEE IN ITS WRITTEN SUBMISSIONS HAS RAISED THE ISSUE THAT OPENING BALANCE OF TRADE RECEIVABLES HAS NOT B EEN TAKEN INTO ACCOUNT BY THE LEARNED CIT(A) AND ALSO NO ADJUSTMEN T HAS BEEN MADE FOR OTHER NON-CASH EXPENDITURE LIKE DEPRECIATI ON, FOREX LOSS BOOKED, ETC. THE LEARNED CIT(DR) HAS SUBMITTED THAT ISSUE NEEDS VERIFICATION AT THE END OF LOWER AUTHORITIES. WE AR E IN AGREEMENT WITH THE LEARNED DR BECAUSE THIS IS A MATTER OF FAC TUAL VERIFICATION ON THE BASIS OF FINANCIAL STATEMENT OF EARLIER YEAR AS WELL AS FINANCIAL STATEMENT OF THE YEAR UNDER CONSI DERATION. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE LEARNE D CIT(A) ON THE ISSUE OF ADDITION OF 4,51,21,897/- AND RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT(A) FOR DECIDING AFRESH A FTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE ASS ESSEE AS WELL AS TO THE ASSESSING OFFICER. THE GROUND NO. 1(IV) O F THE APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. AS FAR AS THE ISSUE OF ADDITION FOR 50% OUT OF TRA DE PAYABLES IS CONSIDERED, THE LD. CIT(A) OBSERVED AS UNDER : 19. ADMITTEDLY, THE APPELLANT HAS BOOKED HUGE AMO UNT OF LIABILITIES FROM ITS SISTER CONCERN, M/S PNEUMAX SPA ITALY. THE APPELLANT HAS BROUGHT NOTHING ON RECORD TO JUSTIFY THE INCURRING OF SUCH HUGE LIABILITIES TO ITS SISTER CONCERN. THE PROOF OF THE GOODS ACTUALLY HAVING BEEN PURCHASED BY THE APPELLANT FROM ITS SISTER CON CERN IN ITALY WERE NOT PLACED ON RECORD. NO DOCUMENTARY EVIDENCE THAT THE SAID GOODS WHICH WERE SHOWN TO HAVE BEEN TRADED BY THE APPELLA NT FROM ITS 16 ITA NO.4203/DEL/2018 SISTER CONCERN HAD ACTUALLY REACHED THIS COUNTRY FR OM ITALY WERE FURNISHED. NO DETAILS OF CUSTOM DUTY, ETC., PAID WE RE FURNISHED EITHER. THE APPELLANT ALSO NOT BROUGHT ANY MATERIAL ON RECORD THAT THE LIABILITIES WERE INCURRED FROM ITS SISTER CONCE RN IN THE EXIGENCIES OF ITS BUSINESS. SOME VAGUE ARGUMENTS WERE ADVANCED LIKE TOUGH COMPETITION BY THE CHINESE CONCERN. THESE ARGUMENTS ARE TOO GENERAL IN NATURE TO SUPPORT THE CASE OF THE APPELL ANT. 10.1 THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT NO A DDITION COULD BE MADE IN THE YEAR UNDER CONSIDERATION IN RE SPECT OF OPENING TRADE PAYABLES IN ABSENCE OF LIABILITY WAVE D OFF BY THE ASSESSEE IN TERMS OF SECTION 41(1) OF THE ACT. IN O UR OPINION, THIS IS SETTLED PRINCIPLE AND NO ADDITION CAN BE MADE IN RESPECT OF THE TRADING LIABILITY OF THE EARLIER YEARS EXCEPT UNDER SECTION 41(1) OF THE ACT. AS FAR AS THE LIABILITY OF THE CURRENT YEA R IS CONCERNED, THE LEARNED CIT(A) HAS OBSERVED THAT NO DOCUMENTARY EVI DENCE IN SUPPORT OF PURCHASES FROM THE SISTER CONCERN WERE F ILED BEFORE HIM. BEFORE US, THE LEARNED COUNSEL HAS FILED SAMPL E COPY OF EVIDENCE IN SUPPORT OF IMPORT OF GOODS FROM THE SIS TER CONCERN. IN OUR OPINION, MERE SAMPLE COPY OF DOCUMENTARY EVIDEN CE FOR ONE TRANSACTION OF IMPORT, IS NOT SUFFICIENT TO DECIDE THE ISSUE IN DISPUTE WHETHER THE PURCHASES IN REFERENCE ARE BOGU S AS HELD BY THE LEARNED CIT(A) AND THE ASSESSEE SHOULD PRODUCE DOCUMENTARY EVIDENCE IN SUPPORT OF ALL THE PURCHASES MADE DURIN G THE YEAR UNDER CONSIDERATION. WE ARE OF THE CONSIDERED OPINI ON THAT THIS ISSUE NEEDS VERIFICATION BY THE LOWER AUTHORITIES. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE AND RESTORE THE MATTER BACK TO THE FILE OF THE LEAR NED CIT(A) FOR DECIDING AFRESH IN ACCORDANCE WITH LAW, AFTER AFFOR DING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE ASSESSEE AS WELL AS THE 17 ITA NO.4203/DEL/2018 ASSESSING OFFICER. THE GROUNDS OF APPEAL ARE ACCORD INGLY ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER, 2019. SD/- SD/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 TH NOVEMBER, 2019. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI