Carp fashions Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(2), Surat

ITA 4312/AHD/2007

• Counselvise Citation: 431220514 RSA 2007
• Duration Of Justice: 4 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 05-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Unexplained cash credit; Depreciation; Income from undisclosed sources; Corroborative evidences; Condonation of delay
• Section: 80HHC; 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. MOHAN ALAN KAMONY, AM) ITA NO.4312/AHD/2007 A.Y .: 2004-05 CARP FASHIONS PVT. LTD., M-4,METRO TOWER, NEAR KINNERY CINEMA, RING ROAD, SURAT VS THE INCOME TAX OFFICER, WARD 1 (2), AAYAKAR BHAVAN, MAJURA GATE, SURAT PA NO. AAACC 9474 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI HARDIK VORA, AR RESPONDENT BY SHRI B. L. YADAV, DR DATE OF HEARING: 12-12-2011 DATE OF PRONOUNCEMENT: 16-12-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, SURAT DATED 17 TH SEPTEMBER, 2007 FOR ASSESSMENT YEAR 2004-05. 2. ACCORDING TO THE OFFICE, THE APPEAL IS TIME BARR ED BY 3 DAYS. THE ASSESSEE IN THE APPLICATION FOR CONDONATION OF DELAY EXPLAINED THAT THE APPEAL PAPERS WERE DISPATCHED ON TIME BY S PEED POST AND IN BETWEEN THERE WAS SATURDAY AND SUNDAY AND DUE TO DE LAY BY POSTAL AUTHORITIES THE APPEAL PAPERS COULD NOT REACH THE O FFICE OF THE TRIBUNAL WELL IN TIME. IT IS, THEREFORE, PRAYED THA T NOMINAL DELAY OF 3 DAYS MAY BE CONDONED. THE LEARNED DR HAS NO OBJECTI ON FOR CONDONATION OF DELAY IN FILING THE APPEAL. CONSIDER ING THE EXPLANATION OF THE ASSESSEE AND SUBMISSIONS OF THE PARTIES, WE FIND THAT THE ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 2 ASSESSEE IS ABLE TO EXPLAIN THE DELAY IN FILING THE APPEAL PAPERS. WE ACCORDINGLY, CONDONE THE NOMINAL DELAY IN FILING TH E APPEAL. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES ON MERITS, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. 4. ON CONCISE GROUND NO.1, THE ASSESSEE CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE O F RS.7,55,782/- ON ACCOUNT OF HIGHER DEPRECIATION CLAIMED ON MACHINERY PURCHASE UNDER TUF SCHEME OF THE GOVERNMENT. IN THE ASSESSMENT ORD ER THE AO HAS STATED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TEXTURISING AND TWISTING OF YARN. PERUSAL OF STATEM ENT OF DEPRECIATION SHOWED THAT THE ASSESSEE HAD CLAIMED HIGHER DEPRECI ATION AT THE RATE OF 50% ON THE MACHINERY AND PLANT STATED TO BE UNDE R TUF SCHEME. ON THE COST / WDV OF RS.30,23,120/- THE ASSESSEE HA D CLAIMED DEPRECIATION AT THE RATE OF 50% AMOUNTING TO RS.15, 11,564/-. THE AO ASKED THE ASSESSEE AS TO HOW THE ASSESSEE WAS FULFI LLING THE CONDITIONS UNDER THE TUF SCHEME. IN RESPONSE TO QUE RY OF THE AO HE REPLIED THAT HIGHER DEPRECIATION HAS BEEN CLAIMED B ECAUSE AS PER ENTRY NO.III(6) IN APPENDIX, HIGHER DEPRECIATION IS APPLICABLE TO WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE I NDUSTRY SINCE THE ASSESSEE'S INDUSTRY IS A TEXTILE PROCESSING INDUSTR Y, THEREFORE HIGHER DEPRECIATION IS AVAILABLE, THE AO DID NOT ACCEPT THIS EXPLANATION AND STATED THE ACTIVITY OF THE ASSESSEE IS TO PROCE SS THREAD WHICH IS A RAW MATERIAL FOR WEAVING SECTOR WHEREAS AS PER THE INCOME-TAX RULES HIGHER DEPRECIATION UNDER TUF SCHE ME IS ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 3 AVAILABLE FROM WEAVING ACTIVITY ONWARDS AND PRIOR T O THAT. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE HAS REPEATED THE SUBMISSION MADE BEFORE THE AO. NOTHING NEW HAS BEEN STATED AND THEREFORE THE SUBMISSION IS NOT REPEATED AGAIN. 5. THE LEARNED CIT(A) DISMISSED THIS GROUND OF APPE AL OF THE ASSESSEE. HIS FINDINGS IN PARA 2.3 AND 2.4 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATIONS OF THE A.O. THE ONLY IS SUE IS WHETHER THE ASSESSEES TEXTURISING AND TWISTING PROCESS IS COVERED BY THE ENTRY AT BLOCK III (6) OF APPENDIX-I OF THE DEPRECIATION TABLE. THE BLOCK III (6) STATES AS UNDER: 'MACHINERY AND PLANT, USED IN WEAVING, PROCESSING GARMENT SECTOR OF TEXTILE INDUSTRY, WHICH IS PURCHASED UNDER TUFS ON OR AFTER THE 1 ST DAY OF APRIL, 2001 HUT BE/WE THE 1 ST DAY OF APRIL 2002 AND IS PUT TO USE BEFORE THE 1 ST DAY OF APRIL, 2004', 2.4 FROM THE ABOVE IT IS SEEN THAT THE ENTRY STARTS WIT H MACHINERY AND PLANT USED IN WEAVING AND THEN PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRY. THIS CLEARLY SHOWS THAT PRODUCTION OF YEARN AND PROCESSI NG OF YEAN IS DEFINITELY NOT COVERED UNDER THIS PROVISION . THE MINISTRY OF TEXTILES AND BANKS MAY BE GIVING FUNDS AND HELP IN THE FORM OF EASY LOANS UNDER TUFS BUT THE INCOME-TAX RULES IS CLEARLY NOT GIVING HIGHER DEPRE CIATION TO YARN MANUFACTURER. TEXTURISING AND TWISTING OF Y ARN IS ALSO A PROCESS ON YARN MAKING IT SUITABLE FOR WEAVI NG. IN THE PRESENT CASE, THE PROVISIONS OF BLOCK III(6) AR E VERY CLEAR THAT PRODUCTION AND PROCESSING OF YARN ARE NO T COVERED BUT THE BENEFITS STARTS FROM WEAVING AND AF TER WEAVING ALL PROCESSES OF GARMENT SECTOR AND TEXTILE INDUSTRY. IF THE PARLIAMENT INTENDED TO GIVE THE BE NEFIT TO ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 4 YARN MANUFACTURER OR TO YARN PROCESSING UNITS THE R ULE WOULD HAVE CLEARLY PROVIDED SO. THE WORD WEAVING WOULD NOT HAVE BEEN USED IN THE BEGINNING. AS DECID ED BY THE SUPREME COURT IN THE CASE OF IPCA LABORATORI ES [226 ITR 521], AN INCENTIVE PROVISION HAS TO BE STR ICTLY INTERPRETED AND IF THE WORDINGS OF THE SECTION IS C LEAR, THEN BENEFITS WHICH ARE NOT AVAILABLE CANNOT BE CONFERRE D BY IGNORING OR MISINTERPRETING WORDS IN THE SECTION. I N THE PRESENT CASE THE APPELLANT IS TRYING TO TAKE THE BE NEFIT EVEN THOUGH IT IS NOT AVAILABLE. THE APPELLANT IS C ARRYING OUT A PROCESS ON THE YARN WHICH IS PRIOR TO WEAVING . THEREFORE, THE DEPRECIATION DISALLOWED BY THE A. O. IS CORRECT. IN VIEW OF THE ABOVE, THESE GROUNDS OF APP EAL ARE DISMISSED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ISSUE IS NOW COVERED BY SEVERAL DECISIONS OF ITAT, AHMEDA BAD BENCH. COPIES OF ORDERS ARE FILED IN THE PAPER BOOK IN SUP PORT OF THE CONTENTION. HE HAS SUBMITTED THAT MACHINERY WAS PUR CHASED UNDER THE TUF SCHEME OF THE GOVERNMENT AND PUT TO USE BEF ORE THE SPECIFIED PERIOD. THE BANKER HAS GRANTED ADVANCE UN DER THE TUF SCHEME. HE HAS, THEREFORE, SUBMITTED THAT THE CASE IS COVERED BY THE TUF SCHEME. HE HAS SUBMITTED THAT AFTER TEXTURISING AND TWISTING ASSESSEE UTILIZES THE YARN FOR THE PURPOSE OF WEAVING AND TH EREBY MANUFACTURING CLOTHS. THEREFORE, THE MACHINERIES AR E USED IN WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE I NDUSTRY. HE HAS RELIED UPON THE ORDER OF ITAT AHMEDABAD BENCH IN TH E CASE OF GIRDHAR FIBERS PVT. LTD. VS DCIT IN ITA NO.1582/AHD /2008 DATED 23-07-2010 COPY OF WHICH IS FILED AT PAGE 26 OF THE PAPER BOOK. 7. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE DECISIONS CITED BY THE ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 5 LEARNED COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND ARE CLEARLY DISTINGUISHABLE. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THE CASE OF GIRDHAR FIBERS PVT. LTD. (SUPRA) IN WHICH IN PARA 4 AND 5 IT WAS HELD AS UNDER: 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE ORDER OF THE TRIBUNAL IN SEVERAL CASES PARTICULARLY IN THE CASE OF AGARWAL RAYONS PVT. LTD. (SUPRA) IN WHICH THE SUBMI SSIONS OF THE PARTIES AND FINDINGS OF THE TRIBUNAL ARE REPROD UCED AS UNDER: 5. THE LD. A.R. SUBMITTED THAT TRIBUNAL HAS TAKEN A VIEW THAT TEXTURISING AND TWISTING ACTIVITIES ARE P ART OF THE PROCESSING AND ARE COVERED UNDER APPENDIX-1 PART-A, III AT SR.NO.6 WHICH HAS BEEN REFERRED TO BY A.O. ON PA GE-4 OF THE ASSESSMENT ORDER. HE REFERRED TO THE FOLLOWI NG JUDGEMENTS IN SUPPORT OF HIS CONTENTION:- 1. MAVIN TEXTURISERS PVT. LTD. VS. DCIT [ ITA NO.10 44/AHD/07] 2. NANGALIA SYNTHETICS PVT. LTD. VS. DCIT[ITA NO.22 13/AHD/08] 3. BIPINCHANDRA MOHANLAL GAJJAR VS. ITO [ ITA NO. 3128/AHD/08 4. FAIRDEAL FILAMENTS LTD. VS. DCIT [ ITA NO. 870 /AHD/07 ] 6. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT FA CTS IN THE CASE OF THE PRESENT ASSESSEE ARE DIFFERENT T HAN THE FACTS IN THE CASE OF JUDGEMENTS REFERRED TO BY LD. A.R. HE MADE FOLLOWING SUBMISSIONS ON PLAIN READING OF THE PROVISIONS OF RULE-5 VIS-A - VIS ASSETS IDENTIFIED FOR DEPRECIATION @ 50% IT COU LD BE SEEN THAT MACHINERY & PLANT USED IN WEAVING, ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 6 PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRY, WHICH IS PURCHASED UNDER TUFS ON OR AFTER 1 ST DAY OF APRIL,2001, BUT BEFORE THE LST DAY OF APRIL,2004 AND IS PUT TO USE BEFORE THE 1STDAY OF APRIL,2004 I S ELIGIBLE FOR DEPRECIATION OF HIGHER RATE ( @ 50%) A S AGAINST NORMALLY ALLOWED DEPRECIATION @ 25%. ON GOING THROUGH THE DECISION OF HONBLE ITAT, AHMEDABAD RELIED UPON BY THE APPELLANT (NO.2 TO 5), THE NATURE OF BUSINESS ACTIVITY OF THE APPELLANT IS LIS TED AS UNDER: SR.NO. NAME OF APPELLANT. NATURE OF BUSINESS. 1. MAVIN TEXTURISERS PVT. LTD. MANUFACTURING OF YA RN & CLOTH. 2. NAGALIA SYNTHETICS PVT. LTD. -DO- 3. BIPINCHANDRA MOHANLAL GAJJAR. MANUFACTURING OF YARN & ART SILK CLOTH. 4. FAIRDEAL FILAMENTS LTD. MANUFACTURING OF GREY FABRICS, SIZING, TEXTILE RISING AND TWISTING OF YARN. 5. AGARWAL RAYONS P. LTD. MANUFACTURING OF YARN. FROM THE ABOVE TABLE FOLLOWING INFERENCES COULD BE DRAWN. 1. ALL THE FOUR APPELLANTS WERE ENGAGED IN THE COMP OSITE ACTIVITY OF MANUFACTURING OF YARN AND ART SILK CLOT H. 2. THEY HAD SEPARATE UNIT FOR MANUFACTURING OF YARN & ART SILK CLOTH. 3. THE YARN MANUFACTURED BY THEM WAS USED FOR CAPTI VE CONSUMPTION OF THE APPELLANTS THEMSELVES TO MANUFAC TURE ART SILK CLOTH. 4. THERE WAS PERFECT BACKWARD AND FORWARD LINKAGE BETWEEN MANUFACTURING PROCESS OF YARN AND ART SILK CLOTH. IN LIGHT OF THE ABOVE INFERENCES WHAT ONE COULD SAFELY CONCLUDE IS BENEFIT OF DEPRECIATION AT HIGHE R RATE ALLOWED BY THE HONBLE ITAT., AHMEDABAD IS TO ALL T HOSE APPELLANTS WHICH HAD WEAVING FACILITY ON THEIR OWN AND USED MANUFACTURED YARN FOR THEIR OWN CAPTIVE CONSUMPTION. THIS, NO DOUBT, QUALIFIES TO DEPRECIAT ION AT ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 7 HIGHER RATE (@ 50%) BEING MACHINERY & PLANT USED IN WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILES. HOWEVER, IN THE CASE OF APPELLANT, THE BUSINESS ACTIVITY CARRIED OUT IS ONE AND ONLY MANUFACTURING OF YARN. MANUFACTURING OF YARN IS DIFFERENT AND DISTINGUISHA BLE FROM THE WEAVING ACTIVITY. THE LEGISLATURES INTENTION IS CRYSTAL CLEAR VIS-- VIS ALLOWING DEPRECIATION OF HIGHER RATE TO ONLY THOSE ASSESSEES IN WHOSE CASES MACHINERY AND PLANT WAS PURCHASED UNDER TUF SCHEME AND USED FOR WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE. THE LEGIS LATURES INTENT IS FURTHER EVIDENCE FROM THE FACT THAT IT HA S RESTRICTED THE BENEFIT OF HIGHER RATE OF DEPRECIATI ON TO WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE ONLY. IMPLIED IN IT IS THAT THERE ARE OTHER SECTORS IN TE XTILE INDUSTRY, IN WHOSE CASE THIS BENEFIT WAS NOT ALLOWE D. IT IS ALSO SUBMITTED THAT AS COULD BE SEEN ELSEWHER E IN THE I.T. ACT THAT WHEREVER AND WHENEVER CERTAIN SPECIAL BENEFITS IN THE FORM OF DEDUCTIONS, EXEMPTIONS, ALLOWANCES ETC., ARE CONFERRED TO ANY CLASS OR CLAS SES OF APPELLANTS, THE ACT IS CATEGORICAL IN CLASSS OR CLA SSES OF APPELLANTS WHO ARE ELIGIBLE TO AVAIL THE SPECIAL BE NEFITS. ONE SUCH EXAMPLE IS EXPORT BENEFIT AVAILABLE TO APP ELLANT EXPORTING GOODS OUT OF INDIA U/S. 80HHC. THE PROVIS ION OF SEC. 80HHC ALSO SPECIFIES ALLOWABILITY OF DEDUCTION U/S. 80HHC TO SUCH SUPPORTING MANUFACTURER SUBJECT TO FULFILLMENT OF CERTAIN SPECIFIC TERMS AND CONDITION S. ABOVE FACTS SQUARELY APPLICABLE TO APPEAL UNDER CONSIDERA TION. IT IS ALSO HUMBLY SUBMITTED THAT THE VIEW EXPRESSE BY THE SUPREME COURT IN THE CASE OF IPCA LABORATORI ES (266 ITR-521) WHICH CAN ACT AS GUIDING FORCE IN TH E INSTANT CASE ALSO. THE SUPREME COURT OPINED IN ITS ORDER (SUPRA) THAT AN INCENTIVE PROVISION HAS TO BE STRIC TLY INTERPRETED AND IF THE WORDINGS OF THE SECTION IS C LEAR, THEN BENEFITS WHICH ARE NOT AVAILABLE CANNOT BE CONFERR ED BY IGNORING OR MISINTERPRETING WORDS IN THE SECTION. ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 8 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORDS. IN OUR CONSIDERED VIEW THE FACTS OF THE PRESENT CASE AND FACTS IN THE CASE OF REFERRED TO BY THE LD. A. R. PARTICULARLY IN THE CASE OF NANGALIA SYNTHETICS PVT . LTD., ARE SIMILAR. IN THAT CASE THE TRIBUNAL HAS OBSERVED AS UNDER:- 7. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH T HE PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF ITAT AHMEDABAD D BENCH IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR VS. ITO,WD-6(1), SURAT IN ITA NO. 3128/AHD/2008 DATED 18-02-2009 RELATING TO A.Y. 2005-06.THE ISSUE RAISED BY THE ASSESSEE IN THIS AP PEAL IS SIMILAR TO THAT OF THE CASE OF BIPINCHANDRA MOH ANLAL GAJJAR (SUPRA), WE HOLD THAT SINCE ADMITTEDLY, THE TWISTING MACHINE WAS USED BY WEAVING SECTOR OF TEXTILE INDUS TRY, DEPRECIATION ON THE SAID MACHINERY @ 50% SHOULD BE ALLOWED. WE ACCORDINGLY, ALLOW THE GROUND OF APPEAL . 8. THE LD. D.R. HAS SOUGHT TO DISTINGUISH THE AUTHORITIES REFERRED TO BY THE LD. A.R. ON THE GROU ND THAT THERE WAS A NEXUS OF BACKWARD AND FORWARD LINKAGES OF THE ACTIVITIES. THERE WAS A COMPOSITE ACTIVITY IN T HESE CASES. WHEREAS IN THE CASE OF THE PRESENT ASSESSEE IT IS ONLY MANUFACTURING OF YARN AND NO WEAVING CARRIED O UT. HOWEVER, DISTINCTION SOUGHT TO BE MADE BY THE LD. D .R. IS ARTIFICIAL AND DOES NOT CONFIRM TO THE LANGUAGE USE D IN THE RULES. IN FACT, TEXTURISING AND TWISTING ACTIVITIES ARE PART OF PROCESSING. IT IS INCORRECT ON THE PART OF THE A.O. TO HOLD THAT LANGUAGE USED IN THE RULE CONFINE PROCESSING O F CLOTH ONLY AND NOT TEXTURISING AND TWISTING OF THE YARN. THE LANGUAGE USED IN RULE -6 OF BLOCK 3 OF APPENDIX -1 OF DEPRECIATION TABLE READS AS UNDER:- MACHINERY AND PLANT, USED IN WEAVING PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRY, WHICH IS ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 9 PURCHASED UNDER TUFS.. FROM THIS IT CANNOT BE READ THAT WEAVING AND PROCESSING IS PROVIDED BY CLOTH SO AS TO INFER THAT IT IS ONLY WEAVING AND PROCESSING OF CLOTH WHOSE MACHINERIES ARE ENTITLED FOR HIGHER DEPRECIATION. THE WORDS USED ARE WEAVING, PROCESSING AND GARMENTS SECTOR OF TEXTILE INDUSTRY. 9. IN OTHER WORDS, WEAVING, PROCESSING AND GARMENTS SECTOR ARE PART OF TEXTILE INDUSTRIES WHICH IS A LA RGER GROUP. IN THIS TEXTILE INDUSTRY, THE WEAVING PROCESSING AN D GARMENT SECTOR ARE COVERED IN RESPECT OF WHOSE MACHINERIES, THE HIGH RATE OF DEPRECIATION IS PROVI DED. THUS THE WORD PROCESSING WOULD INCLUDE TEXTURISING AND TWISTING OF YARN WHICH IS FINALLY USED IN TEXTILE I NDUSTRY. THUS RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T HE TRIBUNAL WE ALLOW THE CLAIM OF THE ASSESSEE. 10. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. 5. BY FOLLOWING THE ABOVE ORDER, WE SET ASIDE THE O RDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITIO N. 9. BY FOLLOWING THE ABOVE ORDER, WE SET ASIDE THE O RDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. G ROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 10. ON GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.12,850/- ON ACCOUNT OF DISCOUNT NOT ACCOUNTED FO R. THIS IS REGARDING DISCOUNT GIVEN TO THE ASSESSEE BY ITS SUP PLIER AFTER THE YEAR WHICH ACCORDING TO THE ASSESSEE HAS BEEN ACCOUNTED FOR IN THE SUBSEQUENT YEAR. IN THE ASSESSMENT ORDER THE AO HAS STATED THAT THE ASSESSEE HAD PURCHASED YARN FROM GARDEN SILK MILLS LTD. THE AO ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 10 OBTAINED COPIES OF TRANSACTIONS U/S 133(6) FROM GAR DEN SILK MILLS LTD. AND ON COMPARISON FOUND THAT THERE WAS SOME DISCREP ANCY IN THE BALANCES. EVEN AFTER THE ASSESSEE HAD TRIED ITS BES T TO RECONCILE THE BALANCES THE AMOUNT OF RS.12,850/- REMAINED UN-RECO NCILED. THE AO STATED THAT ON FURTHER VERIFICATION IT WAS FOUND TH AT THE ASSESSEE HAS NOT CREDITED THE ACCOUNT BY THE AMOUNT OF REBATE OF RS.12,850/- RECEIVED FROM GARDEN SILK MILLS LTD. THE AO THEREFO RE ASKED THE ASSESSEE AS TO WHY THE SAME BE NOT ADDED. THE ASSES SEE DID NOT FURNISH ANY REPLY AND THEREFORE THE AO HAS ADDED AS SUM OF RS.12,850/- AS INCOME OF THE YEAR. DURING THE APPEL LATE PROCEEDINGS THE ASSESSEE HAS STATED THAT THEIR BOOKS ARE CORREC T. THIS AMOUNT IS IN RESPECT OF YEAR END DISCOUNT ALLOWED BY GARDEN S ILK MILLS LTD. FOR YARN PURCHASES BY THE ASSESSEE DURING THE YEAR. IT HAS BEEN STATED THAT THIS YEAR END DISCOUNT ALLOWED BY THE SUPPLIER REMAINS AT THEIR SOLE DISCRETION AND SINCE THERE WAS UNCERTAINTY THE REFORE THE SAME WAS NOT SHOWN DURING THE YEAR. THE ASSESSEE FURTHER STATED THAT IT IS A VERY PETTY AMOUNT AND THE AO SHOULD NOT HAVE ADDE D THE SAME. 11. THE LEARNED CIT(A) CONFIRMED THE ADDITION AND H IS FINDINGS IN PARA 3.3 ARE REPRODUCED AS UNDER: 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. EVEN THOUGH THE AMOUNT I S PETTY IT DOES NOT MEAN THAT THE ADDITION SHOULD NOT BE MADE. THE YEAR END DISCOUNT FOR WHATEVER IT MAY BE HAS BEEN ALLOWE D TO THE ASSESSEE DURING THE YEAR BY THE SUPPLIER AND THEREF ORE THE SAME SHOULD HAVE BEEN ACCOUNTED DURING THE YEAR ONL Y. JUST BECAUSE THE ASSESSEE HAS CLAIMED THAT IT HAS BEEN S HOWN IN THE NEXT YEAR DOES NOT MEAN THAT THIS INCOME BECOME S THE INCOME OF THE NEXT YEAR. SINCE THE DISCOUNT HAS BEE N GIVEN ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 11 DURING THE YEAR BY THE FIRM, THEREFORE IT IS THE IN COME OF THE CURRENT YEAR ONLY. HENCE THE ADDITION MADE BY THE A O IS CORRECT AND THIS GROUND OF APPEAL IS DISMISSED. 12. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE AO GAVE A SPECIFIC NOTICE TO THE ASSESSEE SEEKING RECONCILIAT ION OF THE ISSUE BUT THE ASSESSEE DID NOT FURNISH ANY REPLY BEFORE THE A O. IT IS ADMITTED FACT THAT THE ASSESSEE HAS NOT CREDITED THE DISCOUN T BY THE REBATE/DISCOUNT OF RS.12,850/- RECEIVED FROM THE CO NCERN PARTY. SINCE IT WAS INCOME OF THE ASSESSEE IN THE ASSESSMENT YEA R UNDER APPEAL, THEREFORE, IT SHOULD HAVE BEEN ACCOUNTED FOR IN THE ACCOUNTS OF THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL. THE L EARNED COUNSEL FOR THE ASSESSEE REFERRED TO PB 286 AND 287 WHICH I S COPY OF THE ACCOUNTS OF THE CONCERN PARTY M/S. GARDEN SILK MILL S LTD. AND SUBMITTED THAT WHATEVER AMOUNT WAS NOTED IN THE BOO KS OF ACCOUNTS OF THE ASSESSEE AGAINST THE CONCERN PARTY WAS PAID IN THE NEXT YEAR. THIS WOULD NOT ABSOLVE THE ASSESSEE FOR NOT SHOWING THE INCOME IN THE ASSESSMENT YEAR UNDER APPEAL. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE IN THE ORDER OF THE LEAR NED CIT(A). WE ACCORDINGLY DISMISS GROUND NO.2 OF THE APPEAL OF TH E ASSESSEE. 13. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.82,008/- ON ACCOUNT OF ESTIMATING HIGHER OIL GAI N IN PRODUCTION. THE AO STATED THAT FROM THE DETAILS FURNISHED BY TH E ASSESSEE IT HAS BEEN NOTED THAT THERE IS NO PURCHASE OF OIL CONTINU OUSLY FROM JULY 2003 TO OCTOBER 2003 WHEREAS THE ASSESSEE HAS SHOWN OIL GAIN OF 1.40% ONLY AS AGAINST THE OIL GAIN OF 1.62% IN THE CASE OF MARMO ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 12 TEXTURISING PVT. LTD. [ITA NO.338/AHD/1994] IN WHIC H CASE THE ITAT APPROVED THE NORMAL GAIN OF 1.62%. THE AO THEREFORE ASKED THE ASSESSEE TO FURNISH THE REASON AS TO WHY THE OIL GA IN IS LOW. THE ASSESSEE EXPLAINED THAT IT IS NOT COMPULSORY TO ADD OIL TO YARN BECAUSE IT DETERIORATES THE QUALITY OF FINISHED GOO DS. THE ASSESSEE STATED THAT THERE WAS NO PURCHASE OF OIL DURING THE MONTH OF JULY 2003 TO OCTOBER 2003 BECAUSE THEY HAVE TO PRODUCE T EXTURISED YARN AS PER CUSTOMERS DEMAND. IF THE CUSTOMERS WANT HIG H QUALITY OF YARN OIL CANNOT BE ADDED TO PRODUCE HIGH QUALITY OF YARN . THE AO DID NOT ACCEPT THIS REPLY BECAUSE TECHNICALLY ADDITION OF O PTIMUM OIL IS MANDATORY FOR PRODUCING TEXTURISED YARN. ACCORDING TO THE AO TECHNICALLY IT IS NOT POSSIBLE TO PRODUCE TEXTURISE D YARN WITHOUT ADDING OIL. THEREFORE, ACCORDING TO THE AO, THE ASSESSEE M UST HAVE PRODUCED OIL OUT OF THE BOOKS AND HAS ALSO SUPPRESS ED THE OIL GAIN CONSEQUENT TO THE ADDITION OF OIL ON THE YARN. THE AO HAS STATED THAT THE ITAT IN THE CASE OF MARMO TEXTURISING PVT. LTD. THE NORMAL OIL GAIN WORKS OUT TO 742.15 KGS. THE SALE VALUE OF THE SUPPRESSED PRODUCTION WOULD BE RS.82,008/- AT AVERAGE SELLING PRICE OF 110.50 PER KG. THE AO HAS THEREFORE MADE ADDITION OF RS.82 ,008/- AS UNACCOUNTED SALES FROM THE SUPPRESSED PRODUCTION. D URING THE APPELLATE PROCEEDINGS THE ASSESSEE REPEATED THE SUB MISSION MADE BEFORE THE AO SAYING THAT THE DECISION OF ITAT IN T HE CASE OF MARMO TEXTURISING PVT. LTD. IS NOT APPLICABLE. IT HAS BEE N STATED THAT IN EARLIER DAYS YARN COST RANGED BETWEEN RS.150/- TO RS.200/- PER KG. AND OIL COST WAS RS.25 TO RS.30 PER KG. AND THEREFORE THERE WAS GREAT TEMPTATION IN THOSE DAYS FOR HIGHER OIL APPLICATION EVEN AT THE COST OF QUALITY. IT HAS BEEN ARGUED THAT DURING THE CURRENT YEAR THE COST OF OIL ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 13 WAS BETWEEN RS.70 TO RS.90 PER KG. AND THE OIL COST RANGED BETWEEN RS.55 TO RS.65 PER KG. AND HENCE THERE IS NO JUSTIF ICATION FOR ADDING EXTRA OIL. 14. THE LEARNED CIT(A) FOLLOWING THE ORDER OF THE T RIBUNAL CONFIRMED THE ADDITION AND HIS FINDINGS IN PARA 5.3 OF THE APPELLATE ARE REPRODUCED BELOW: 5.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. AS STATED BY THE AO THE MINIMUM AMOUNT OF OIL WOULD BE REQUIRED FOR TEXTURISING YAR N. THE APPELLANT HAS AGREED THAT FOR CONTINUOUS FOUR MONTH S IT HAS NOT PURCHASE ANY OIL MEANING THEREBY THAT FOR CERTAIN M ONTHS IT HAS NOT AT ALL USED OIL. THE ARGUMENT OF THE APPELLANT GIVEN ABOVE CANNOT BE ACCEPTED BECAUSE FOR THE PURPOSE OF SMOOT H RUNNING OF THE THREAD IN THE MACHINE A MINIMUM AMOUNT OF AN TI-STATIC OIL HAS TO BE USED. SINCE IT HAS BEEN STATED TO BE 1.62 % BY THE ITAT IN THE CASE OF MARMO TEXTURISING PVT. LTD. (SU PRA), THEREFORE THE ADDITION MADE BY THE AO IS CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED. 15. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER OF THE TRIBUNAL PRONOUNCED SEVERAL YEAR BACK WAS FO LLOWED WHICH IS NOT PRACTICAL IN THE PRESENT CIRCUMSTANCES. HE HAS SUBMITTED THAT THE ASSESSMENT YEAR UNDER APPEAL IS 2004-05 AND WITHOUT POINTING OUT ANY DISCREPANCY IN THE ACCOUNTS OF THE ASSESSEE THE ADDITION SHOULD NOT HAVE BEEN MADE. HE HAS REFERRED TO THE ORDER OF THE TRIBUNAL IN THE CASE OF INDIAN POLYESTER LTD. VS ITO IN ITA NO. 2695/AHD/2008 (PB-1) IN WHICH ON IDENTICAL FACTS THE AD-HOC ADDIT ION HAS BEEN DELETED. ON THE OTHER HAND, THE LEARNED DR RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ALL PURCHA SES OF THE OIL NOT ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 14 NOTED IN THE BOOKS OF ACCOUNTS FOR FOUR MONTHS, THE REFORE, ADDITION IS LIABLE TO BE CONFIRMED. 16. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THE ISSUE IS COVERED BY THE ORDER OF ITAT, AHMEDABAD BE NCH IN THE CASE OF INDIAN POLYESTER LTD. (SUPRA) (PB-1) IN WHICH IN PARA 14 (PB-17) IT IS HELD AS UNDER: 14. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE A RE OF THE VIEW THAT ADDITION IS ENTIRELY UNJUSTIFIED. THE A O HAS RELIED UPON DECISION IN THE CASE OF MARMO TEXTURISING PVT. LTD. (SUPRA) WHICH PERTAINS TO ASSESSMENT YEAR 1990-91 AND A O HAS NOT BROUGHT ANYTHING ON RECORD AS TO HOW THE FACTS WERE COMPARABLE TO THE CASE OF THE ASSESSEE. THE A O HAS NOT POINTED OUT ANY OTHER DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND DETAILS MAINTAINED ON THIS ISSUE. THE ASSESSEE FILED SPECIFIC REPLY BEFOR E THE A O AND ALSO FILED LIST OF 4 COMPARABLE CASES IN WH ICH OIL GAIN WAS SHOWN AT 1.08 TO 1.34%. THE A O HAS MENTIONED THIS FACT BUT INSTEAD OF CONSIDERING OTHE R CASES, THE A O HAS PREFERRED THE OLD DECISION WITHO UT GIVING ANY REASONS. SINCE IN OTHER COMPARABLE CASES , THE YIELD IS ALMOST SIMILAR OR LESSER TO THE CASE O F THE ASSESSEE, THEREFORE, IN THE ABSENCE OF ANY SPECIFIC DEFECTS POINTED OUT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WE ARE OF THE VIEW AD HOC ADDITION IS UNJUSTIFIED. WE ACCORDINGLY, SET ASIDE THE ORDERS O F AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. T HIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL WE SET AS IDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITIO N. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 15 17. ON GROUND NO.4, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.8.75,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT . IN THE ASSESSMENT ORDER THE AO HAS STATED THAT THE PERUSA L OF THE DETAILS OF UNSECURED LOANS SHOW THAT IN SEVERAL CASES CASH HAS BEEN DEPOSITED BY THE RESPECTIVE DEPOSITORS IN THEIR ACCOUNT ON TH E VERY SAME DAY ON WHICH THE DRAFT WAS ISSUED IN FAVOUR OF THE ASSESSE E. THE AO HAS PREPARED A TABLE IN RESPECT OF SIX PARTIES IN PARA 7.1 ON PAGE 10 OF THE ASSESSMENT ORDER AND IN RESPECT OF SOME OTHER S EVEN PARTIES IN PARA 7.4 ON PAGE 12 OF THE ASSESSMENT ORDER. BOTH T HESE TABLES ARE REPRODUCED AS UNDER: SR. NO. NAME AMOUNT IN (RS.) REMARKS 1 DAMJIBHAI BACHUBHAI RANPARIA 120000 NOT ASSESSED TO TAX AND AS PER 7/12 LAND HOLDING 4.21 ACRE ONLY. 2 MANSUKHLAL BACHUBHAI RANPARIA 120000 NOT ASSESSED TO TAX AND AS PER 7/12 LAND HOLDING 5.08 ACRE ONLY. 3 CHHANGANBHAI BACHUBHAI RANPARIA 120000 NOT ASSESSED TO TAX AND AS PER 7/12 LAND HOLDING 1-15- 34 SQ, MTR. ONLY 4 DHIRAJBHAI BACHUBHAI RANPARIA 100000 NOT ASSESSED TO TAX AND AS PER 7/12 LAND HOLDING 5,08 ACRE ONLY 5 GIRDHARBHAI BACHUBHAI RANPARIA 100000 NOT ASSESSED TO TAX AND AS PER 7/12 LAND HOLDING 7.26 ACRE ONLY 6 MADHAVJIBHAI BACHUBHAI RANPARIA 100000 NOT ASSESSED TO TAX AND AS PER 7/12 LAND HOLDING 6.13 ACRE ONLY ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 16 SR. NO. NAME AMOUNT IN (RS.) REMARKS 1 BACHUBHAI RUDABHAI RANPARIA 30000 NOT ASSESSED TO TAX AND NO SUPPORTING 2 BHIKHABHAI HARJIBHAI VAGADIA 20000 NOT ASSESSED TO TAX AND NO SUPPORTING 3 JATINKUMAR ARVINDBHAI RAKHOLIA 75000 NOT ASSESSED TO TAX AND AS PER XEROX COPY OF PASSBOOK, LOAN GIVEN BY PRE-DEPOSIT OF CASH 4 CHANDRAVADAN L. VASOYA 20000 NO SOURCE OF CASH DEPOSITED IN THE BANK COULD BE PRODUCED 5 HARSHAN A. RAKHOLIA 30000 NO SOURCE OF CASH DEPOSITED IN THE BANK COULD BE PRODUCED 6 JAYANTIBHAI M. PATEL 30000 NO SOURCE OF CASH DEPOSITED IN THE BANK COULD BE PRODUCED 7 DITINBEN K. RAKHOLIA 30000 NO SOURCE OF CASH DEPOSITED IN THE BANK COULD BE PRODUCED TOTAL 235000 THE AO ASKED THE ASSESSEE VIDE ORDER SHEET ENTRY DA TED 08-11-2006, 15-11-2006, 20-11-2006 AND 22-11-2006 T O PROVE THE IDENTITY OF THE DEPOSITORS, GENUINENESS OF THE TRAN SACTIONS AND CREDITWORTHINESS OF THESE DEPOSITORS AND/OR TO PROD UCE THEM FOR PERSONAL EXAMINATION. THE ASSESSEE COULD NOT PRODUC E THEM BUT HAS FURNISHED COPIES OF LAND RECORDS I.E. 7/12 SHOWING SOME LAND HOLDING IN THE NAME OF THE RESPECTIVE DEPOSITORS. THE AO HA S STATED THAT JUST BECAUSE SOME PEOPLE HAVE LAND IT IS NOT CLEAR WHETH ER THE LAND WAS CULTIVATED OR NOT, WHETHER THE LAND WAS HAVING IRRI GATION FACILITIES OR NOT, WHETHER THERE HAS BEEN EARNING OUT OF THE LAND FROM WHICH THESE PEOPLE COULD HAVE SAVED AND DEPOSITED, WHAT WAS THE FAMILY SIZE OF DEPOSITORS AND THEIR HOUSEHOLD EXPENSES AND THEREFO RE WHETHER ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 17 THESE DEPOSITORS HAD THE CAPACITY TO LEND SUCH AMOU NTS AS STATED ABOVE. THE AO HAS STATED THAT IT CAN BE VERIFIED FR OM THE RECORD THAT AFTER PROVIDING SEVERAL OPPORTUNITIES THE ASSESSEE NEITHER PRODUCED THEM NOR PRODUCED ANY EVIDENCE AND SIMPLY STATED TH AT THESE PARTIES WERE LIVING IN SAURASHTRA AREA AND THEREFORE THEY C ANNOT BE PRODUCED. VIDE ORDER SHEET ENTRY DATED 15-11-2006, 20-11-2006 AND 22-11-2006 THE AO HAD FINALLY ASKED THE ASSESSEE TO PROVE THESE LOANS BY DOCUMENTARY EVIDENCE AND BY PRODUCING THES E PERSONS WITH SUPPORTING EVIDENCES. THE ASSESSEE FAILED TO DO SO AND THEREFORE THE AO STATED THAT BY MERELY SUBMITTING THE CONFIRMATIO N LETTERS, EVIDENCE OF LAND HOLDING IN 7/12 THE ONUS OF THE ASSESSEE IS NOT DISCHARGED IN RESPECT OF PROVING THE CREDITORS. THE AO HAS THEREF ORE MADE AN ADDITION U/S 68 IN RESPECT OF THE PARTIES SHOWN IN THE FIRST TABLE. IN RESPECT OF THE SEVEN PARTIES MENTIONED IN THE SECON D TABLE ABOVE, THE AO HAS STATED THAT THE ASSESSEE HAS SIMPLY FURNISHE D ACCOUNT CONFIRMATION LETTERS FROM THESE DEPOSITORS AND CLAI MED THAT THE AMOUNTS ARE RECEIVED BY ACCOUNT PAYEE CHEQUES. IN S UPPORT THE ASSESSEE HAS FURNISHED COPIES OF BANK PASSBOOK OF T HESE DEPOSITORS. ON VERIFICATION OF THESE BANK PASSBOOKS IT WAS FOUN D THAT CASH HAS BEEN DEPOSITED IN THE BANK ACCOUNT OF THESE DEPOSIT ORS AND IMMEDIATELY FUNDS WERE RECEIVED BY THE ASSESSEE COM PANY BY WAY OF CHEQUES FROM THESE ACCOUNTS. THE ACCOUNTS OF DEP OSITORS MENTIONED AT SR. NO.1, 2 AND 3 OF SECOND TABLE ARE NOT ASSESSED TO TAX AND IN RESPECT OF REMAINING CASES NO SOURCE OF CASH COULD BE PRODUCED. THERE IS NO EXPLANATION ABOUT THEIR CREDI TWORTHINESS AND HENCE MERELY ON THE BASIS OF ACCOUNT CONFIRMATION A ND BANK PASSBOOK NEITHER THE DEPOSIT IS PROVED NOR IS THE C REDITWORTHINESS ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 18 PROVED. THE AO HAS STATED THAT THEREFORE THE ASSESS EE HAS FAILED TO DISCHARGE THE ONUS OF ALL THE 13 PARTIES AND THEREF ORE HE MADE ADDITION U/S 68 OF THE IT ACT AMOUNTING TO RS.8,95, 000/-. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE STATED THAT THE DEPOSITORS WERE VILLAGERS AND HAVING AGRICULTURAL INCOME AND LIVING IN REMOTE VILLAGES AND THEREFORE THE COST OF CALLING THEM FROM SUCH DI STANT PLACES WOULD HAVE BEEN QUITE PROHIBITIVE. IT WOULD BE VERY INCON VENIENT TO THEM TO COME TO SURAT LEAVING THEIR WORK AT FARMS. IT HAS B EEN STATED THAT TO PRODUCE THE DEPOSITORS OF RS.20,000/- AND RS.30,000 /- IT WOULD BE SHEER WASTAGE OF TIME AND MONEY AND THEREFORE THESE PARTIES WERE NOT PRODUCED. IT HAS BEEN STATED THAT IF THE AO HAD REALLY INSISTED THEY WOULD HAVE PRODUCED THEM. IT HAS BEEN STATED T HAT IN RESPECT OF FIRST SIX DEPOSITORS THE ASSESSEE HAD SUBMITTED CON FIRMATION FROM THESE PARTIES AND COPIES OF 7/12 AND THEREFORE THE INITIAL BURDEN WAS DISCHARGED. IN RESPECT OF SEVEN OTHER PARTIES SHOWN IN THE SECOND TABLE IT HAS BEEN STATED THAT THEY HAVE DEPOSITED V ERY SMALL AMOUNTS AND THEREFORE THEY SHOULD HAVE BEEN ACCEPTED. IN RE SPECT OF JATINKUMAR ARVINDBHAI RAKHOLIA WHO HAS GIVEN A LOAN OF RS.75,000/-, IT HAS BEEN STATED THAT HE IS A CLOSE RELATIVE OF T HE DIRECTOR AND THE FACT HE HAS DEPOSITED CASH IN HIS BANK CAN BE A GRO UND OF SUSPICION OF GENUINENESS BUT IT IS NOT FINAL GROUND FOR DISAL LOWANCE. IN RESPECT OF CHANDRAVADAN VOSOYA IT HAS BEEN STATED THAT HE I S ASSESSED TO TAX FOR SEVERAL YEARS AND FOR SUCH PERSON GIVING A LOAN OF RS.20,000/- SHOULD NOT BE DOUBTED. HE HAS DEPOSITED A CASH OF O NLY RS.8,000/- IN THE BANK ACCOUNT. IN RESPECT OF DEPOSITORS AT SR. 5 TO 7 IN THE ASSESSMENT ORDER IN TABLE 2 IT IS STATED THAT THE L OANS ARE QUITE SMALL OF RS.30,000/- EACH AND SUCH SMALL AMOUNTS SHOULD N OT HAVE BEEN ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 19 DOUBTED. FROM THE SUBMISSION OF THE ASSESSEE IT IS CLEAR THAT THE ASSESSEE HAS REPEATED THE SUBMISSION ABOVE BY SAYIN G THAT THERE WAS NO SUFFICIENT TIME TO PRODUCE THE DEPOSITORS. 18. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE FINDINGS OF THE AO DEL ETED THE SMALL ADDITION OF RS.20,000/- IN RESPECT OF CHANDRAVADAN L. VOSOYA, HOWEVER, CONFIRMED THE SUBSTANTIAL ADDITION ON WHIC H THE ASSESSEE IS IN APPEAL. THE FINDINGS OF THE LEARNED CIT(A) IN PA RA 6.5.1 AND 6.5.2 OF THE APPELLATE ORDER ARE REPRODUCED BELOW: 6.5.1 I HAVE CONSIDERED THE SUBMISSION MADE BY TH E ASSESSEE AND OBSERVATION OF THE APPELLANT. FROM THE ABOVE SUBMISSION AS WELL AS OBSERVATION OF THE AO IT IS C LEAR THAT THE APPELLANT HAS MISERABLY FAILED IN DISCHARGING ITS O NUS TO PROVE THE IDENTITY OF THE PERSON, GENUINENESS OF THE TRAN SACTION AS WELL AS CREDITWORTHINESS. SIMPLY GIVEN CONFIRMATION LETTERS FROM THE PARTIES AND GIVEN THEIR BANK ACCOUNTS NEITHER P ROVE IDENTITY OF THE PARTIES NOR THEIR CREDITWORTHINESS. IN RESPE CT OF FIRST SIX PARTIES IN THE FIRST TABLE THE LOAN AMOUNT RECEIVED IS RS.1 LAC TO RS.1.2 LACS FROM EACH PARTY. NONE OF THE SIX PARTIE S ARE ASSESSED TO TAX. THE ONLY DOCUMENT GIVEN IS THE CON FIRMATION LETTER AND 7/12 HOLDING CONFIRMATION. NONE OF THESE DOCUMENTS PROVE THE IDENTITY OF THE LOAN GIVER AS WELL AS THE IR CREDITWORTHINESS. WHETHER THESE PEOPLE HAD MONTHLY SAVINGS FROM THE SALE PROCEEDS IS NOT AT ALL ESTABLISHED. O N THE CONTRARY THE AO HAS GIVEN ENOUGH OPPORTUNITIES FROM 8.11.06 TO 22.11.06 FOR PRODUCING THE EVIDENCE AND/OR THE PART IES. THE AO INSISTED ON PRODUCTION OF THE PARTIES ONLY WHEN THE EVIDENCE WAS COMING. THE APPELLANT HAS FILED COPIES OF BANK ACCOUNT WHICH SHOWS THAT CASH HAS BEEN DEPOSIT4ED IN THEIR ACCOUNT JUST BEFORE THE ISSUE OF CHEQUES/DD. THIS CLEARLY S HOWS THAT NONE OF THESE PARTIES HAD CREDITWORTHINESS AND THE ASSESSEE HAD FAILED TO LEAD EVIDENCE TO SHOW THAT THEY HAD CREDITWORTHINESS AND THEREFORE THE DEPOSIT IN CASH IS NOT ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 20 RELIABLE. IN THE ABSENCE OF SUCH EVIDENCE THE ADDIT ION MADE IN RESPECT OF THE SIX PARTIES IS ABSOLUTELY CORRECT. 6.5.2 IN RESPECT OF OTHER SEVEN PARTIES CONTAINED IN THE SECOND TABLE, IT IS SEEN THAT THE FIRST THREE PARTI ES ARE NOT ASSESSED TO TAX AND THE FACTS ARE SAME THAT THERE I S CASH DEPOSIT IN THE BANK ACCOUNT. HENCE THE SAME ARGUMEN T AS ABOVE APPLIES TO THESE PARTIES. IN RESPECT OF PARTY AT SR. NO.3 JATIN KUMAR RAKHOLIA, THE APPELLANT HAS FURTHER STA TED THAT HE IS A CLOSE RELATIVE OF THE DIRECTOR AND HAS ADMITTED T HAT THERE IS A CASH DEPOSIT IN THE BANK ACCOUNT BUT STILL HAS STAT ED THAT THE ADDITION SHOULD NOT BE MADE. AS STATED ABOVE IN RES PECT OF FIRST THREE PARTIES I.E. BACHUBHAI RUDABHAI RANPARIA, BHI KHABHAI HARJIBHAI VAGADIA AND JATINKUMAR ARVINDBHAI RAKHOLI A, THE APPELLANT HAS FAILED TO ESTABLISH THE IDENTITY AS W ELL AS CREDITWORTHINESS AND HENCE THE ADDITION MADE BY THE AO IS CORRECT. IN RESPECT OF THE PARTY AS SR. NO.4 I.E. C HANDRAVADAN L. VASOYA, THE APPELLANT HAS STATED THAT THE LOAN AMOU NT IS ONLY RS.20,000/- AND AMOUNT DEPOSIT4ED WAS ONLY RS.8,000 /-. THIS PARTY IS ASSESSED TO TAX. CONSIDERING THE SMALLNESS OF AMOUNT AND AMOUNT DEPOSITED AND THE FACT THAT HE IS ASSESS ED TO TAX, THE ADDITION OF RS.20,000/- IN RESPECT OF CHANDRAVA DAN L.VASOYA IS DELETED. IN RESPECT OF THE OTHER THREE PARTIES AT SR. NO.5 TO 7 THE APPELLANT HAS SIMPLY STATED THAT THES E ARE SMALL AMOUNTS AND THEREFORE THE DEPOSITS SHOULD NOT BE DO UBTED. THIS CANNOT BE AN ARGUMENT. THE APPELLANT HAS NOT P RODUCED EVIDENCE OF IDENTITY, GENUINENESS OF TRANSACTION AS WELL AS CREDITWORTHINESS AND THEREFORE SINCE THE APPELLANT HAS FAILED TO SO, THE ADDITION MADE IN RESPECT OF THESE THREE PAR TIES IS CONFIRMED. IN VIEW OF THE ABOVE OUT OF ADDITION OF RS.8,95,000/-, ADDITION OF RS.8,75,000/- IS CONFIRMED AND THE APPE LLANT GETS RELIEF OF ONLY RS.20,000/-. THESE GROUNDS ARE THERE FORE PARTLY ALLOWED. 19. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT IN THE CASE OF FIRST SIX PARTIES LAND HOLDING RECORDS WERE PRODUCED OF THE CREDITORS AND IN THE REMAINING CASES CONFIRMATIONS WERE FILED ALONG ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 21 WITH THEIR BANK STATEMENT, THEREFORE, ONUS UPON THE ASSESSEE TO PROVE GENUINE CREDIT HAS BEEN DISCHARGED. HE HAS SU BMITTED THAT IN THE CASE OF JATINKUMAR ARVINDBHAI RAKHOLIA, HARSHAB EN A. RAKHOLIA AND DITINABEN K. RAKHOLIA THEIR TOTAL DEPOSITS AND THE OPENING BALANCES WERE MORE THAN THE AMOUNT OF THE CREDIT, T HEREFORE, ADDITION SHOULD NOT HAVE BEEN MADE IN THEIR CASES. HE HAS A LSO SUBMITTED THAT THE ASSESSEE IS WILLING TO PRODUCE ALL THE CRE DITORS BEFORE THE AO IF THE GROUND IS SET ASIDE TO THE FILE OF THE AO FO R RECONSIDERATION. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ORISSA CORPORATION, 159 ITR 78 AND THE DECI SION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ROHINI BU ILDERS, 256 ITR 360. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS FAILED TO PROVE THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINE SS AND GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE HAS NOT PRODUCED ANY OF THE CREDITORS BEFORE THE AO FOR VERIFICATION OF THE TRANSACTION. ONLY CONFIRMATIONS WERE FILED WHICH COULD NOT BE SUBJECTED TO VERIFICA TION, THEREFORE, ONUS UPON THE ASSESSEE IS NOT DISCHARGED. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD. THE AO MADE REPEATED REQUESTS TO THE ASSESS EE TO PROVE IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANS ACTIONS AND CREDITWORTHINESS OF THE CREDITORS. THE ASSESSEE DID NOT PRODUCE ANY SUFFICIENT AND COGENT EVIDENCE BEFORE THE AO TO PRO VE ANY OF THESE CONDITIONS. THE AO ALSO DIRECTED THE ASSESSEE TO PR ODUCE THE CREDITORS FOR PERSONAL EXAMINATION BUT NONE HAS BEE N PRODUCED FOR EXAMINATION BEFORE THE AO. COPIES OF LAND REVENUE R ECORDS WERE ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 22 PRODUCED BUT IT WAS NOT PROVED WHETHER THE LAND WAS UNDER CULTIVATION, WHETHER ANY ACTUAL EARNING HAS BEEN MA DE BY THE DEPOSITORS. THEIR SIZE OF FAMILY AND ANNUAL INCOME AS SALE OF AGRICULTURAL PRODUCE WAS ALSO NOT FILED BEFORE THE AO. THE ASSESSEE ALSO SUBMITTED BEFORE THE AO THAT THE DEPOSITORS CO ULD NOT BE PRODUCED. IN CASE OF THE REMAINING DEPOSITORS SIMPL Y CONFIRMATIONS HAVE BEEN FILED. NO SOURCE OF CASH DEPOSITS IN THE BANK ACCOUNT COULD BE PRODUCED. EVEN, IN CASE OF AGRICULTURISTS NO SOURCE OF DEPOSIT OF CASH IN THEIR BANK ACCOUNT BEFORE ISSUE OF DRAFT HAS BEEN FILED. IT IS SETTLED LAW THAT FOR PROVING GENUINE C REDITS U/S 68 OF THE IT ACT, THE BURDEN IS UPON THE ASSESSEE TO PROVE IDENT ITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS O F THE TRANSACTIONS IN THE MATTER. MOST OF THE PARTIES ARE NOT ASSESSED TO TAX AND HAVE NOT PROVED THEIR CAPACITY TO ADVANCE ANY AMOUNT TO THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE AO WAS JUSTIFIED IN DIRECTI NG THE ASSESSEE TO PRODUCE ALL THE CREDITORS BEFORE HIM FOR PERSONAL E XAMINATION IN ORDER TO FIND OUT THE TRUTH IN THE TRANSACTION. HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE DEPOSITORS BEFORE THE AO DESPITE GIV ING OPPORTUNITY. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHAR ATI PVT. LTD. VS CIT, 111 ITR 951 HELD AS UNDER: IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE INCOME-TAX OFFICER FOUND THAT THE ASSESSEE HAD SHOWN RS.20,000 AS LOAN IN ITS BOOKS TAKEN FROM TWO PARTIES. THE ASSESSEE PRODUCED THE ALLEGED CONFIRMATORY LETTERS FROM THOSE PARTIES BEFORE THE INCOME-TAX OFFICER IN SUPPORT OF THE TWO LOANS. THE INCOME-TAX OFFICER SERVED NOTICES UNDER SECTION 131 OF THE INCOME TAX ACT, 1961, ON THE ALLEGED CREDIT ORS AND SINCE THOSE NOTICES CAME BACK UNSERVED, THE ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 23 INCOME-TAX OFFICER TREATED THE LOAN AS ASSESSEES INCOME FROM UNDISCLOSED SOURCES. THE APPELLATE ASSISTANT COMMISSIONER DISMISSED THE ASSESSEES APPEAL ON THE GROUND THAT THE ASSESSEE COULD NOT EVEN ESTABLISH THE IDENTITY OF THE PARTIES. ON FURT HER APPEAL BY THE ASSESSEE, THE APPELLATE TRIBUNAL HELD THAT MERE FILING OF CONFIRMATORY LETTERS DID NOT DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE AND THERE WAS NO MATERIAL ON THE RECORD TO ESTABLISH TH E IDENTITY OF THE CREDITORS: HELD, THAT THE TRIBUNAL HAD TAKEN ALL THE RELEVANT FACTS INTO CONSIDERATION AND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL THAT THE LOANS REPRESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES WAS NOT PERVERSE OR UNREASONABLE. 20.1 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS UNITED COMMERCIAL AND INDUSTRIAL CO. (P) LTD., 187 ITR 596 HELD AS UNDER: THE PRIMARY ONUS LIES ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CREDITS IN ITS ACCOUNT. IT IS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA FACIE THE IDENTITY OF HIS CREDITORS, THE CAPACITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. ONLY WHEN THESE THINGS ARE PROVED BY THE ASSESSEE PRIMA FACIE AND ONLY AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH THE AFORESAID FACTS DOES THE ONUS SHIFT O N TO THE DEPARTMENT. IT IS NOT ENOUGH TO ESTABLISH THE IDENTITY OF THE CREDITORS. MERE PRODUCTION OF THE CONFIRMATION LETTERS BEFORE THE INCOME-TAX OFFICER WOULD NOT BY ITSELF PROVE THAT THE LOANS HAVE BEEN OBTAINED FROM THOSE LOAN CREDITORS OR THAT THEY HAV E CREDIT-WORTHINESS. HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL MISDIRECTED ITSELF IN HOLDING THAT THE TRANSACTIONS WERE GENUINE SIMPLY BECAUSE SOME OF THE ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 24 TRANSACTIONS WERE MADE BY CHEQUES. THE ASSESSEE HAD FAILED TO PROVE THE CREDIT-WORTHINESS OF THE ALLEGED LENDERS. A NUMBER OF OTHER ASSESSEES HAD ALSO ADMITTED THAT LOANS OBTAINED FROM THESE BANKER S AGAINST HUNDIS WERE NOT GENUINE AND SUCH HUNDI LOANS REALLY REPRESENTED THEIR OWN CONCEALED INCOME . THE ASSESSEE HAD NOT DISCHARGED ITS BURDEN OF PROVING THAT THE LOANS IN QUESTION WERE GENUINE. 20.2 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF M/S. PRECISION FINANCE PVT. LTD., 208 ITR 465 HELD THAT EVEN THE LOAN THROUGH BANK CANNOT BE ACCEPTED AS GENUINE UNLESS THE IDENT ITY AND CREDITWORTHINESS OF THE CREDITORS ARE PROVED. MERE PAYMENT OF ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR CAN IT M AKE A NON- GENUINE TRANSACTION GENUINE. 21. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE FINDINGS OF THE AUTHORITIES BELOW IT IS SPECIFICALLY CLEAR THAT NONE OF THE DEPOSITORS WAS PRODUCED FOR EXAMINATION BEFORE THE AO. NO EVID ENCE OF EARNING OF ANY INCOME OUT OF CULTIVATION WAS FILED. NO EVID ENCE HAS BEEN FILED TO PROVE SOURCE OF THE CASH DEPOSITS PRIOR TO ISSUE OF DRAFTS/CHEQUES. ONLY CONFIRMATIONS WERE FILED WITHOUT SUPPORTING EV IDENCES. SINCE NO SOURCE OF DEPOSIT OF CASH HAS BEEN PROVED, THEREFOR E, THE ASSESSEE FAILED TO PROVE THE CONDITIONS SECTION 68 OF THE IT ACT. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE VIEW NO INTERFEREN CE IS CALLED FOR IN THE MATTER. THE LEARNED COUNSEL FOR THE ASSESSEE LA STLY ARGUED THAT IN THE CASE OF 3 DEPOSITORS I.E. JATINKUMAR ARVINDB HAI RAKHOLIA, HARSHABEN A. RAKHOLIA AND DITINABEN K. RAKHOLIA DEP OSITS IN THEIR CASES , OPENING BALANCES WERE MORE THAN THE AMOUNT OF THE C REDIT. BUT IT IS NOT EXPLAINED WHY THE SOURCE OF THE CASH DEPOSITS I N THE BANK ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 25 ACCOUNTS COULD NOT BE PRODUCED BEFORE THE AO. THE T OTALITY OF THE FACTS AND CIRCUMSTANCES NOTED BY THE AUTHORITIES BE LOW LEAD TO THE POINT THAT IT IS A MANAGED AFFAIR OF THE ASSESSEE T O OBTAIN CASH CREDITS / DEPOSITS FROM THE UNACCOUNTED AMOUNT THROUGH THESE CREDITORS. THE HONBLE SUPREME COURT IN THE CASE OF DURGA PRASAD M ORE, 82 ITR 540 AND SUMATI DAYAL, 214 ITR 801 HELD THAT THE COURTS AND TRIBUNAL HAVE TO JUDGE THE EVIDENCES BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES AFTER CONSIDERING T HE SURROUNDING CIRCUMSTANCES. WHEN THIS TEST IS APPLIED TO THE FACTS OF THE CASE, IT IS CLEAR THAT THE ASSESSEE FAILED T O PROVE GENUINE CREDITS IN THE MATTER. THUS, NO INTERFERENCE IS CAL LED FOR IN THE MATTER. THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY OF TH E CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. SINCE THE ASSESSEE HAS SHOWN INABILITY TO PRODUCE T HE CREDITORS BEFORE THE AUTHORITIES BELOW, THEREFORE, NO PURPOSE WOULD SERVE EVEN TO REMAND THE MATTER AT THIS STAGE TO THE FILE OF T HE AO AND THAT TOO WITHOUT ANY JUSTIFICATION. THE DECISIONS CITED BY T HE LEARNED COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THIS CASE. DISMIS. 22. NO OTHER POINT IS ARGUED OR PRESSED. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- ITA NO.4312/AHD/2007 CARP FASHIONS PVT. LTD. VS ITO, WARD -1(2), SURAT 26 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD