SHINE STAR IMPEX P.LTD, MUMBAI V. DCIT CEN CIR (42), MUMBAI

ITA 4349/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3294 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2015
• Court: TRIBUNAL
• Department Lawyers: UDAY BHASKAR JAKKE
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Income from undisclosed sources; Corroborative evidences; Accommodation entries; Onus to prove; Retraction; Revenue expenditure
• Section: 143(3); 133A; 147; 131; 69; 6; 12; 2; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ./ I.T.A. NO S . 4347 & 4348/MUM/2015 ( / ASSESSMENT YEAR S : 2008 - 09 & 2009 - 10 ) SUNSHINE IMPORT & EXPORTS PVT. LTD. 28/3, SHREE RAMNIWAS, 1 ST BHATWADI, OPERA HOUSE, MUMBAI - 400 004 / VS. DY. CIT, CENTRAL CIRCLE (42), MUMBAI ./ ./ PAN/GIR NO. AALC S 1023 K ( / APPELLANT ) : ( / RESPONDENT ) & ./ I.T.A. NOS.4349 & 4350/MUM/2015 ( / ASSESSMENT YEARS: 2008 - 09 & 2009 - 10) S HINE STAR IMPEX PVT. LTD. 28/3, SHREE RAMNIWAS, 1 ST BHATWADI, OPERA HOUSE, MUMBAI - 400 004 / VS. D Y. CIT, CENTRAL CIRCLE (42), MUMBAI ./ ./ PAN/GIR NO. AALCS 3998 R ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIMAL PUNMIYA WRITTEN SUBMISSION / RESPONDENT BY : SHRI UDAY BHASKAR JAKKE / DATE OF HEARING : 19.7.2016 / DATE OF PRONOUNCEMENT : .9.2016 / O R D E R PER R. C. SHARMA, A. M.: THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) , MUMBAI FOR THE A.YS. 2008 - 09 AND 2009 - 10, IN THE MATTER OF ORDER PASSED U/S. 143(3) R/W S. 147 OF THE ACT. 2 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) 2. COMMON GROUNDS HAVE BEEN RAISED BY BOTH THE ASSESSEE S IN BOTH THE YEARS UNDER CONSIDERATION, THEREFORE, ALL THE APPEALS ARE HEARD TOGETHER AND ARE NOW DECIDED BY THIS CONSOLIDATED ORDER. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF IN CASE OF SUNSHINE IMPORT & EXPORTS PVT. LTD. , ARE THAT DURING THE YEAR S UNDER CONSIDERATION, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSIN ESS OF MANUFACTURE AND TRADING IN PRECIOUS AND SEMI PRECIOUS STONES AND JEWELLERY IN THE NAME AND STYLE OF M/S SHINESTAR IRNPEX PVT. LTD. THE ASSESSEE COMPANY HAS TWO DIRECTORS NAMELY MR. PARAS J AIN AND MR. SAURABH GARG. ASSESSEE IS MAINLY ENGAGED IN THE I MPORT OF DIAMONDS AND SALES IN LOCAL MARKET TO EXPORTERS WHO EXPORT THE GOODS. THE IMPORT OF DIAMONDS IS DON E THROUGH CUSTOM AUTHORITIES AND BANK ING CHANNELS IN INDIA. THERE HAS BEEN A SURVEY ACTION U/ S 133A OF THE INCOME TAX ACT, 1961 ON THE PREMISES OF THE ASSESSEE COMPANY IN THE MONTH OF DECEMBER, 2008 BY THE INVESTIGATION WING OF MUMBAI. A STATEMENT OF MR. PARAS JAIN WHO WAS THE MAIN PROMOTER AND DIRECTOR OF THE COMPANY , WAS RECORDED WHEREIN HE HAS CATEGORICALLY STATE D THE TRUE BUSINESS OF THE COMPANY. ON PERUSAL OF TH E STATEMENT OF MR. PARAS JAIN, WE FOUND THAT HE HAS NEVER ADMITTED THAT THE COMPANY WAS ENGAGED IN ACCOMMODATION BUSINESS OF PURCHASE AND SALES OF GOODS. THE DUTIES AND RESPONSIBILITIES OF BOTH THE DIRECTORS ARE CLEARLY DEMARCATED AND PERF ORM ACCORDINGLY. MR. PARAS JAIN LOOKS AFTER AND IS INVOLVED IN THE IMPORT, PURCHASE AND SALES OF DIAMONDS FROM VARIOUS FOREIGN PARTIES AND LOCAL CUSTOMERS/SUPPLIERS FOR AN ON BEHALF OF THE COMPANY. MR. SAURABH GARG USED TO LOOK AFTER THE ADMINISTRATION AND ACCOUNTING FUNCTION OF THE COMPANY. MR. SAURABH GARG WAS NOT AWARE OF PURCHASE AND SALES OF THE GOODS FROM VARIOUS PARTIES. HIS JOB WAS TO 3 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) ACCOMPLISH ADMINISTRATIVE WORK FOR THE COMPANY. MR. SAURABH GARG HAS NEITHER CONTACTED THE FOREIGN PARTIES FROM WHOM IMPORT WAS MADE NOR WAS HE EVER INVOLVED IN THE LOCAL PURCHASE AND SALES OF GOODS DURING THE F IN ANCIAL YEAR WHILE FRAMING THE ASSESSMENT T HE AO ASSUMED THAT THE ASSESSEE IS IN BUSINESS OF PROVIDING ACCOMMODATION BILLS. HENCE, THE BUSINESS IS NOT GENUINE A ND ACCORDINGLY COMPUTED THE ADHOC COMMISSION INCOME AFTER REJECTING BOOKS OF ACCOUNTS. THE AO REJECTED THE ASSESSEES BOOKS OF ACCOUNT AND ESTIMATED COMMISSION ON PURCHASE AS WELL AS SALES. THE A.O. HAS ALSO TREATED THE INTEREST INCOME AS INCOME FROM OTHE R SOURCES. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE A.O. 4 . AT THE OUTSET THE LD. AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN THE CASE OF MOREWEL IMPEX PVT. LTD. VS. ITO IN ITA NO. 6992/MUM/2010 , 7799/MUM/2011 AND 5640/MUM/2012 , DATED 14.10.2015, WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES THE TRIBUNAL HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. THE PRECISE OBSERVATION OF THE TRIBUNAL WAS AS UND ER: 2 . IN ALL THE THREE YEARS, THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT AND CONSEQUENT ESTIMATION OF INCOME. 3. THE FACTS RELATING TO THE ISSUE CITED ABOVE ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN DIAMONDS. THE REVENUE CARRIED OUT A SURVEY OPERATION U/S 133 A OF THE ACT ON 07 - 07 - 2008 AT THE BUSINESS PREMISES OF THE ASSESSEE. THE REVENUE ALSO CARRIED OUT SURVEY OPERATIONS IN THE HANDS OF OTHER CONCERNS NAMED M/S BASANT DIA JEWELS AND M/S MOX DIAM. CONSEQUENT TO SURVEY OPERATIONS, THE ADIT (INV) RECORDED A STATEMENT U/S 131 OF THE ACT FROM SRI BASANT JAIN, PROPRIETOR OF M/S BASANT DIA JEWELS, WHEREIN HE ADMITTED THAT HIS BUSINESS CONCERN IS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES IN RESPECT 4 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) OF IMPORT/PURCHASE AND SALE OF DIAMONDS. HE ALSO DESCRIBED THE MODUS OPERANDI FOLLOWED IN THIS REGARD. IT APPEARS THAT AN IDENTICAL STATEMENT WAS GIVEN BY M/ S MOX DIAM ALSO. CERTAIN SPECIFIC REPLIES GIVEN IN THE ABOVE SAID STATEMENTS ABOUT THE MODUS OPERANDI FOLLOWED WERE CONFRONTED WITH ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY NAMED SHRI RAMESH L JAIN AND HE ALSO CONFIRMED THAT THE STATEMENT GIVEN IN THE CASES OF M/S BASANT DIA JEWELS AND M/S MOX DIAM. THE SAID REPLY GIVEN BY SHRI RAMESH L JAIN WAS ENDORSED BY HIM IN THE STATEMENT RECORDED FROM HIM ON 18.7.2008 AND THE SAME IS EXTRACTED BELOW: - 'I HAVE GONE THROUGH THE STATEMENT OF SHRI BASANT D JAIN RECO RDED U/S 131 OF THE INCOME TAX ACT, 1961 DATED 09 - 07 - 2008 DULY ENDORSED BY SHRI NITESH T JAIN PARTNER OF M/S MOX DIAM AND I REAFFIRM THAT THE MODUS OPERANDI REVEALED AND EXPLAINED AND DISCUSSED BY SHRI BASANT D JAIN AND DULY ENDORSED BY ME AND SHRI NITESH T JAIN, PARTNER OF M/S MOX DIAM WAS THE MODUS OPERANDI ADOPTED BY US FOR PROVIDING ACCOMMODATION BILLS TO VARIOUS INTERESTED PARTIES IN THE MARKET. I ALSO STATE FURTHER THAT IN TERMS OF OUR LETTER DATED 10/7/2008 WE VIZ., SHRI BASANT D JAIN AND SHRI NITESH T JAIN & MYSELF INDIVIDUALLY CONFIRMED THE STATEMENT GIVEN IN THIS REGARD ON 09/07/2008 AS BEING CORRECT AND TRUE AND WE STAND BY IT.' ACCORDINGLY, THE ASSESSING OFFICER ENTERTAINED THE VIEW THAT THE PURCHASES AND SALES SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HEREIN ARE NON - EXISTENT AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT. ACCORDINGLY THE ASSESSING OFFICER ESTIMATED THE COMMISSION INCOME RECEIVABLE ON PROVIDING ACCOMMODATION BILLS AT 2% OF THE SALES REPORTED BY THE ASSESSEE FOR ALL THE YEARS UNDER CONSIDERATION. AFTER ALLOWING DEDUCTION OF 20% TOWARDS ESTIMATED EXPENSES, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME OF THE ASSESSEE AS UNDER: - ASSESSMENT YEAR RETURNED INCOME ASSESSED INCOME 2007 - 08 60,858 11,00,639 2008 - 09 1,69,571 1,34,11,231 2009 - 10 ( - ) 10,79,210 1,33,93,130 4. IN THE SWORN STATEMENT, SHRI BASANT D JAIN HAD STATED THAT THE DIAMONDS ARE IMPORTED IN THE NAME OF HIS CONCERN ON BEHALF OF SOME OTHER DEALERS AND SALES ARE MADE ON BEHALF OF OTHERS, I.E., THOUGH THE PURCHASES AND SALES ARE CARRIED OUT IN THE NAME OF HIS CONCERN, THEY ARE DONE ON BEHALF OF OTHERS. THE PAYMENTS MADE AND PAYMENTS RECEIVED BY WAY OF CHEQUES ARE COMPENSATED BY WAY OF CASH. IN THIS PROCESS, THEY WI LL GET COMMISSION ONLY @ 0.2% IN RESPECT OF IMPORTED DIAMONDS AND @ 0,05% IN RESPECT OF LOCALLY SOURCED DIAMONDS. 5 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) 5. IT IS PERTINENT TO NOTE THAT THE SURVEY OFFICIALS DID NOT UNEARTH ANY INCRIMINATING MATERIAL DURING THE COURSE OF SURVEY OPERATIONS NOR DI D THEY FIND ANY DEFECTS IN THE BOOKS OF ACCOUNT. THE DIRECTOR SHRI RAMESH L JAIN RETRACTED FROM THE STATEMENT GIVEN BY HIM BY FILING AN AFFIDAVIT ON 20 - 08 - 2008, I.E., WITHIN ONE MONTH OF GIVING STATEMENT AFFIRMING THE MODUS OPERANDI EXPLAINED BY OTHER BUS INESSMEN. IN THE AFFIDAVIT, SHRI RAMESH L JAIN HAS STATED THAT SURVEY OFFICIALS ENTERED HIS OFFICE PREMISES AT 1.30 PM ON 07 - 07 - 2008 AND THEY LEFT THE OFFICE AT 3.00 AM ON 09 - 07 - 2008. HE WAS FORCED TO ACCEPT THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSE E AS THAT OF PROVIDING ACCOMMODATION BILLS ONLY. IT IS FURTHER STATED THAT HIS CONCERN I.T.A. NO.6992/M/2010, 4 7799/M/11 AND 5640/M/2012 WAS NOT INDULGING IN PROVIDING ACCOMMODATION BILLS, BUT ACTUALLY CARRYING ON BUSINESS TRANSACTIONS. 6. SUBSEQUENTLY, ANOTHER STATEMENT WAS RECORDED FROM SHRI RAMESH L JAIN ON 21 - 02 - 2009 DURING THE COURSE OF ASSESSMENT PROCEEDING FOR AY 2007 - 08, WHEREIN ALSO HE STOOD BY THE AVERMENTS MADE IN THE AFFIDAVIT. 7. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEED INGS, ISSUED COMMISSION U/S 131(D) OF THE ACT TO THE ASST. DIRECTOR OF INCOME TAX (INV.), SURAT IN ORDER TO VERIFY THE PURCHASES AND SALES RECORDED BY THE ASSESSEE. HOWEVER, THE DEPUTY DIRECTOR OF INCOME TAX REPORTED THAT THE CONCERNED PARTIES ARE NOT AVAI LABLE IN THE GIVEN ADDRESSES. WHEN THE REPORT GIVEN BY THE DEPUTY DIRECTOR OF INVESTIGATION WAS CONFRONTED WITH THE ASSESSEE, IT FILED THE LEDGER ACCOUNT COPIES DULY CONFIRMED BY THE CONCERNED PARTIES, COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FILED BY T HEM IN ORDER TO ESTABLISH THE GENUINENESS OF THE PURCHASE AND SALES TRANSACTIONS. HOWEVER, THE AO CHOSE TO REJECT ALL THESE DOCUMENTS, BUT PLACED RELIANCE ON THE STATEMENT RECORDED FROM SHRI BASANT JAIN, WHICH WAS ORIGINALLY CONFIRMED BY SHRI RAMESH L JAIN . ACCORDINGLY, THE ASSESSING OFFICER REJECTED THE BOOK RESULTS AND ESTIMATED THE INCOME @ 2% OF SALES VALUE AS STATED EARLIER, EVEN THOUGH THE COMMISSION FOR ACCOMMODATION BILLS WAS STATED AS 0.20% FOR IMPORTED DIAMONDS AND @ 0.05% ON THE LOCALLY SOURCED D IAMONDS. 8. THE LD CIT(A) HELD THAT THE DOCUMENTS RELATING TO CONCERNED PARTIES FURNISHED BY THE ASSESSEE ARE COOKED UP DOCUMENTS, SINCE THE DDI HAD REPORTED THAT SUCH PARTIES DID NOT EXIST AT THE GIVEN ADDRESSES. ACCORDINGLY HE HELD THAT THE ASSESSING OF FICER HAS RIGHTLY REJECTED THOSE DOCUMENTS. HE FURTHER HELD THAT THE DOCUMENTS FURNISHED BY THE ASSESSEE ARE EXACTLY AS PER THE MODUS OPERANDI ADMITTED DURING THE COURSE OF SURVEY OPERATIONS AND STATEMENT RECORDED U/S 131 OF THE ACT. ACCORDINGLY THE LD CIT (A) HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ESTIMATING 6 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) THE COMMISSION INCOME AT 2% OF THE SALES VALUE. AGGRIEVED, THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. A CAREFUL PERUSAL OF THE RECORD WOULD SHOW THAT THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE STATEMENT GIVEN BY SHRI BASANT JAIN, PROPRIETOR OF M/S BASANT DIA JEWELS, WHICH WAS ORIGINALLY ENDORSED BY THE ASSESSEE. THE AO HAS FURTHER PLACED RELIANCE ON THE REPORT GIVEN BY THE DDIT (I NV.) TO THE EFFECT THAT THE SUPPLIERS AND CUSTOMERS OF THE ASSESSEE WERE NOT AVAILABLE IN THE GIVEN ADDRESS. APART FROM THIS, IT IS A FACT THAT THE AO HAS NOT BROUGHT ON RECORD ANY OTHER MATERIAL TO SUPPORT HIS CONCLUSIONS. 10. WE HAVE EARLIER NOTICED THA T THE DIRECTOR OF THE ASSESSEE COMPANY HAS RETRACTED FROM THE STATEMENT OF CONFIRMATION GIVEN BY HIM EARLIER WITHIN A PERIOD OF ONE MONTH BY FILING AN AFFIDAVIT. IN THE SAID AFFIDAVIT, IT HAS BEEN CLEARLY STATED THAT THE SURVEY OFFICIALS ENTERED HIS OFFICE PREMISES AT 1.30 PM ON 07 - 07 - 2008 AND THEY LEFT THE OFFICE AT 3.00 AM ON 09 - 07 - 2008. FURTHER, IT WAS STATED THAT HE WAS FORCED TO ACCEPT THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AS THAT OF PROVIDING ACCOMMODATION BILLS ONLY. HENCE, IN OUR VIEW, THE ASSESSING OFFICER COULD NOT HAVE PLACED RELIANCE ON THE STATEMENT GIVEN BY THE DIRECTOR OF THE ASSESSEE FOR THE FOLLOWING REASONS: - (A) THE SURVEY OFFICIALS ARE NOT ENTITLED TO RECORD STATEMENT ON OATH DURING THE COURSE OF SURVEY OPERATIONS U/S 133 A OF THE ACT . ( SEE. DCIT VS. PREMSONS (2009)(ITAT MUMBAI) (B) THE STATEMENT RECORDED DURING THE COURSE OF SURVEY OPERATIONS DO NOT HAVE EVIDENTIARY VALUE AND HENCE THE SAME CANNOT BE USED AS EVIDENCE IN TH E ASSESSMENT PROCEEDINGS. (SEE CIT VS. KHADER KHAN SONS (2012)(25 TAXMANN.COM 413)(SC) (C) THE ASSESSEE HAS RETRACTED THE STATEMENT GIVEN DURING THE COURSE OF SURVEY OPERATIONS WITHIN ONE MONTH BY FILING AFFIDAVIT. THE SUBMISSIONS MADE IN THE AFFIDAVIT HAS NOT BEEN FOUND FAULT WITH. (D) THE AO EXAMINED THE DIRECTOR OF THE ASSESSEE U/S 131 OF THE ACT SUBSEQUENT TO FILING OF AFFIDAVIT, BUT THE ASSESSEE HAS WITHSTOOD BY THE AVERMENTS MADE IN THE AFFIDAVIT. THE AO COULD NOT CONTROVERT SUBMISSIONS MADE IN THE AFFIDAVIT AS WELL AS IN THE SWORN STATEMENT. (E) DURING THE COURSE OF SURVEY PROCEEDINGS, THE OFFICIALS DID NOT FIND ANY INCRIMINATING MATERIAL AND THE ASSESSING OFFICER ALSO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DID NOT FIND ANY DEFECT IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. (F) THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIATE THE AVERMENTS MADE DURING THE COURSE OF SURVEY OPERATIONS. 7 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) (G) THE DURATION OF SURVEY OPERATIONS SUPPORT THE CASE OF THE ASSESS EE THAT HE WAS CONSTRAINED TO GIVE ADMISSION. HENCE THE SUBSEQUENT RETRACTION MADE WITHIN A PERIOD OF ONE MONTH SHOULD BE GIVEN DUE WEIGHT, MORE PARTICULARLY IN VIEW OF THE FACT THAT THE SURVEY OFFICIALS DID NOT UNEARTH ANY INCRIMINATING DOCUMENTS DURING T HE COURSE OF SURVEY OPERATIONS. 11. THE ASSESSING OFFICER HAS ALSO PLACED RELIANCE ON THE REPORT GIVEN BY THE DDIT (INV.), WHEREIN HE HAD STATED THAT THE CUSTOMERS/SUPPLIERS OF THE ASSESSEE WERE NOT AVAILABLE IN THE GIVEN ADDRESSES. WHEN THE REPORT GIVEN BY THE DDIT WAS CONFRONTED WITH THE ASSESSEE, IT HAS FURNISHED FOLLOWING DOCUMENTS TO THE ASSESSING OFFICER: - (A) LEDGER ACCOUNT COPIES DULY CONFIRMED BY THE CONCERNED PARTIES. (B) COPIES OF INCOME TAX RETURN FILED BY THEM. HOWEVER, WE NOTICE THAT THE ASS ESSING OFFICER CHOSE NOT TO EXAMINE THOSE DOCUMENTS AND HE CHOSE TO PLACE FULL RELIANCE ON THE REPORT GIVEN BY THE DDIT. WE ARE NOT ABLE TO APPRECIATE THE SAID ACTION OF THE ASSESSING OFFICER. WHEN THE ASSESSEE WAS CONFRONTED WITH THE REPORT GIVEN BY THE D DIT, IN OUR VIEW, THE ASSESSEE CAN AT BEST CONTROVERT THE SAME BY FILING THE DOCUMENTS AVAILABLE WITH IT. FURTHER, WHEN THE ASSESSEE HAS FILED THE I.T.A. NO.6992/M/2010, 7 7799/M/11 AND 5640/M/2012 COPIES OF INCOME TAX RETURNS FILED BY THE CONCERNED PARTIE S, THE ASSESSING OFFICER COULD HAVE VERY WELL CROSS VERIFIED THE SAME. THE AO COULD HAVE ALSO ENFORCED THE ATTENDANCE OF THOSE PARTIES BY ISSUING SUMMONS TO THEM. WE ARE UNABLE TO UNDERSTAND AS TO WHY THE ASSESSING OFFICER COULD NOT CARRY OUT THOSE KIND OF EXAMINATION, WHEN THEY ARE WELL WITHIN HIS POWERS. HENCE, IN OUR VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN IGNORING THE EVIDENCES FURNISHED BY THE ASSESSEE IN ORDER TO ESTABLLISH THE GENUINENESS OF THE PARTIES. WE NOTICE THAT THE LD CIT(A) HAS ALSO DISMISSED THESE DOCUMENTS BY OBSERVING THAT THEY ARE COOKED UP DOCUMENTS BY MAKING GENERAL OBSERVATIONS, I.E., WITHOUT ACTUALLY ESTABLISHING THAT THE ABOVE SAID DOCUMENTS WERE BOGUS IN NATURE. IT IS NOT KNOWN AS TO HOW THE COPIES OF INCOME TAX RETURNS COU LD BE CONSIDERED TO BE A COOKED UP DOCUMENTS. THUS, WE NOTICE THAT THE SAID OBSERVATIONS MADE BY THE LD CIT(A) ARE BASELESS, NOT SUPPORTED BY ANY EVIDENCES AND ARE MERE SURMISES. HENCE WE ARE UNABLE TO SUSTAIN HIS CONCLUSIONS. 12. WE FURTHER NOTICE THAT T HE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS. THE PURCHASES AND SALES RECORDED THEREIN HAVE NOT BEEN FOUND FAULT WITH, I.E., NO DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. HENCE, WE ARE OF THE VIEW THAT THERE IS NO GROUND AVAILABLE WITH TH E ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNT. ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF 8 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) ACCOUNT AND CONSEQUENTLY, IN OUR VIEW, THE BOOK RESULTS SHOULD HAVE BEEN ACCEPTED. ACCORDINGLY, WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION OR PROPER GROUND WARRANTING THE ESTIMATION OF PROFITS IN THE ASSESSEE'S HAND IN ALL THE THREE YEARS UNDER CONSIDERATION. 13. IN VIEW OF THE ABOVE, WE ARE UNABLE TO SUSTAIN THE ORDERS PASSED BY LD CIT(A) IN ALL T HE THREE YEARS UNDER CONSIDERATION. ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY THE LD CIT(A) AND DIRECT THE ASSESSING OFFICER I.T.A. NO.6992/M/2010, 8 7799/M/11 AND 5640/M/2012 TO DELETE THE INCOME ESTIMATED BY HIM FOR ALL THE THREE YEARS UNDER CONSIDE RATION AND ACCEPT THE BOOK RESULTS DECLARED BY THE ASSESSEE. 5 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL IN THE CASE OF MOREWEL IMPEX PVT. LTD. (SUPRA) WHEREIN FACTS ARE SIMILAR TO THE FACTS OF THE ASSE SSEES CASE. IN THE CASE OF SUNSHINE IMPORT & EXPORTS PVT. LTD., WE FOUND THAT THERE HAS BEEN A SURVEY ACTION U/S. 133A OF THE INCOME TAX ACT, 1961 ON THE PREMISES OF THE ASSESSEE COMPANY IN THE MONTH OF DECEMBER, 2008 BY THE INVESTIGATION WING OF MUMBAI. A STATEMENT OF MR. PARAS JAIN WHO WAS THE MAIN PROMOTER AND DIRECTOR OF THE COMPANY WAS RECORDED WHEREIN HE HAS CATEGORICALLY STATED THE TRUE BUSINESS OF THE COMPANY. ON PERUSAL OF THE STATEMENT OF MR. PARAS JAIN, YOU WILL OBSERVE THAT HE HAS NEVER ADMITTE D THAT THE COMPANY WAS ENGAGED IN ACCOMMODATION BUSINESS OF PURCHASE AND SALES OF GOODS. THE COMPANY HAS TWO DIRECTORS NAMELY MR. PARAS JAIN AND MR. SAURABH GARG. THE DUTIES AND RESPONSIBILITIES OF BOTH THE DIRECTORS ARE CLEARLY DEMARCATED AND PERFORM ACCO RDINGLY. MR. PARAS JAIN LOOKS AFTER AND IS INVOLVED IN THE IMPORT, PURCHASE AND SALES OF DIAMONDS FROM VARIOUS FOREIGN PARTIES AND LOCAL CUSTOMERS/SUPPLIERS FOR AN ON BEHALF OF THE COMPANY. MR. SAURABH GARG USED TO LOOK AFTER THE ADMINISTRATION AND ACCOUNT ING FUNCTION OF THE COMPANY. MR. SAURABH GARG WAS NOT AWARE OF PURCHASE AND SALES OF THE GOODS FROM VARIOUS PARTIES. HIS JOB WAS TO ACCOMPLISH ADMINISTRATIVE WORK FOR THE COMPANY. MR. 9 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) SAURABH GARG HAS NEITHER CONTACTED THE FOREIGN PARTIES FROM WHOM IMPORT WAS MADE NOR WAS HE EVER INVOLVED IN THE LOCAL PURCHASE AND SALES OF GOODS DURING THE FINANCIAL YEAR. IN THE MONTH OF JANUARY 2009, AFTER A LAPSE OF 20 - 25 DAYS OF THE SURVEY, MR. SAURABH GARG WAS CALLED IN SCINDIA HOUSE, MUMBAI AND WAS FORCED TO SIGN THE STATEMENT AS MENTIONED IN THE ORDER OF THE AO. FURTHERMORE, SOME DISPUTES AROSE BETWEEN MR. PARAS JAIN AND MR. SAURABH GARG AFTER THE SURVEY ACTION. DUE TO ANIMOSITY AMONG BOTH THE DIRECTORS, MR. SAURABH GARG MADE SUCH A STATEMENT KNOWING WELL ENOUGH THAT SUCH A STATEMENT WOULD NOT AFFECT HIM. HENCE, THERE ARE BASICALLY TWO DIRECTORS WHEREIN THE MAIN DIRECTOR NAMELY MR. PARAS JAIN HAS NEVER ADMITTED ANY ACCOMMODATION PURCHASES AND SALES WHEREAS THE OTHER DIRECTOR NAMELY MR. SAURABH GARG HAS ADMITTED THE ACC OMMODATION BUSINESS ENTRIES. 6 . IT IS A WELL SETTLED LAW THAT STATEMENT RECORDED DURING THE COURSE OF SURVEY UNDER SECTION 133A HAS NO EVIDENTIARY VALUE UNLESS SUPPORTED BY CORROBORATIVE EVIDENCES . WHATEVER STATEMENT IS RECORDED UNDER SECTION 133A OF THE INCOME - TAX ACT IS NOT GIVEN ANY EVIDENTIARY VALUE FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW. IN THIS CONNECTION, RELIANCE CAN BE PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: ACIT VS DR. J. MOHAN ITAT CHENNAI ITA NOS. 575 TO 582/ (MDS)/ 2011 ACIT VS. SMT. M. MAHESWARI, ITAT CHENNAI ITA NOS. 583 TO 589/(MDS)/2011 PAUL MATHEUIS AND SONS V. CIT [2003] 263 ITR 101 (KER.) CIT V. S. KHADER KHAN SON (300 ITR 157)(MAD) ASHOK MANILAL THAKKAR V. ACIT (279 ITR(AT)143) (AHMEDABAD) 7 . IN SUPPORT OF THE PREPOSITION THAT SECTION 133A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH, RELIANCE CAN BE PLACED ON THE FOLLOWING DECISIONS: 10 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) CIT V S. S. KHADER KHAN SON (2012 25 TAXMANN.COM 413) SC PAUL MATHEWS & SONS VS. CIT [2003] 129 TAXMANN 416 [KER.] DCIT VS. PREMSONS [2010] 130 TIJ 139 [MUM] 8. AS PER VERDICT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. S. KAHDER KHAN & SONS, 300 ITR 157, SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON OATH, HENCE, MERE STATEMENT RECORDED DURING SURVEY HAS NO EVIDENTIARY VALUE AND ANY SUCH ADDITION CANNOT BE MADE, WITHOUT BRINGING ON RECORD CORROBORATIVE MATERIALS. THE HONBLE S UPREME COURT FURTHER OBSERVED THAT THIS VIEW IS CLEARLY SUPPORTED BY CBDT CIRCULAR DATED 10 TH MARCH, 2003. ACCORDINGLY IT WAS HELD THAT NO ADDITION CAN BE MADE MERELY ON THE BASIS OF STATEMENT RECORDED DURING SURVEY U/S.133A. FUTHERMORE, ANY STATEMENT WITH OUT ANY CORROBORATIVE EVIDENCE CANNOT BE USED FOR MAKING AN ADDITION ESPECIALLY WHEN SUCH STATEMENTS ARE MADE DURING THE SURVEY PROCEEDINGS. FOR THIS PURPOSE, RELIANCE CAN BE MADE ON THE FOLLOWING JUDICIAL PRONOUNCEMENT. I. S ARJAN SINGH VS. CWT 175 ITR 9 1 [DELHI] IN THIS CASE THE ASSESSEE IS HAVING ONE PROPERTY AT AURANGZEB ROAD, NEW DELHI. THE ASSESSEE HAD INDICATED SOME VALUE IN THE WEALTH TAX RETURN. THE WTO REFERRED THE MATTER TO A VALUER AND ACCEPTED THE VALUE DETERMINED BY THE VALUATION OFFICER. TH E ASSESSEE APPEALED TO THE AAC THAT THE VALUATION OFFICER HAD, INTER ALIA, NOT DEDUCTED 50 PERCENT OF THE UNEARNED INCREASE TO BE PAID TO THE LAND AND DEVELOPMENT OFFICER ON TRANSFER, IN ARRIVING AT THE VALUATION. THE AAC REJECTED THE CONTENTION BUT THE TR IBUNAL HELD THAT AFTER 1951, THIS PAYMENT BECAME OBLIGATORY AND THE SAID AMOUNT HAS TO BE ALLOWED AS A DEDUCTION IN ARRIVING AT THE VALUATION OF THE PROPERTY IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN CWT VS. SIKAND (P. N.) (1977) 107 ITR 922. CONSEQUENTLY, THE TRIBUNAL DIRECTED THE WTO 'TO RECOMPUTE THE VALUE OF THE PROPERTY IN DIFFERENT YEARS IN THE LIGHT OF THE ABOVE DIRECTIONS' BUT INDICATED THAT THE RECOMPUTED VALUE WILL NOT BE LESS THAN THAT RETURNED BY THE ASSESSEE IN THOSE YEAR S. AGAINST THIS, THE ASSESSEE HAD PREFERRED AN APPEAL IN HC RAISING THE QUESTION THAT LITHE TRIBUNAL ERRED IN LAW IN HOLDING THAT THE VALUATION OF THE PROPERTY COMPUTED IN ACCORDANCE WITH THE DIRECTION OF THE TRIBUNAL BE NOT LESS THAN THAT RETURNED BY THE ASSESSEE ITSELF. 11 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) HON'BLE HIGH COURT HAD HELD THAT A VALUATION LOWER THAN THAT RETURNED MAY BE THE CORRECT VALUE. AN ADMISSION IS AN IMPORTANT PIECE OF EVIDENCE, BUT IT IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO SHOW THAT IT IS INCOR RECT. II. COMMISSIONER OF INCOME TAX VS. DHINGRA METAL WORKS 328 ITR 384 [DELHI] ON 14TH SEPT., 2004, A SURVEY UNDER S. 133A OF THE ACT WAS CONDUCTED ON THE ASSESSEE'S BUSINESS PREMISES. DURING THE COURSE OF SURVEY, THE TAX OFFICIALS NOTICED SOME D ISCREPANCIES IN STOCK AND CASH IN HAND. DURING THE SAID SURVEY, ASSESSEE SURRENDERED AN AMOUNT OF RS. 99,50,000/ - AND OFFERED THE SAME FOR THE PURPOSES OF TAXATION. THE ADDITIONAL INCOME OFFERED INCLUDED A SUM OF RS. 45,00,000 ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AND OFFERED BY ONE OF THE PARTNERS OF THE ASSESSEE AS ADDITIONAL INCOME. SUBSEQUENTLY, THE ASSESSEE VIDE ITS LETTER DT. 29TH NOV., 2004, CONTENDED THAT THE STATEMENT ABOUT STOCK WAS INCORRECT AND THAT THE IMPUGNED DISCREPA NCY HAD BEEN RECONCILED AS IT WAS ONLY A MISTAKE. CONSEQUENTLY, THE RESPONDENT - ASSESSEE WITHDREW THE OFFER OF ADDITIONAL INCOME FOR TAXATION ON ACCOUNT OF EXCESS STOCK. ON 31ST DEC., 2007, THE AO PASSED THE ASSESSMENT ORDER WHEREIN HE DID NOT ACCEPT THE PLEA OF THE ASSESSEE THAT EXCESS STOCK DURING THE COURSE OF SURVEY HAD BEEN RECONCILED. THE AO RELIED UPON THE STATEMENT OF ONE OF THE PARTNERS OF THE ASSESSEE GIVEN DURING THE COURSE OF SURVEY UNDER S. 133A OF THE ACT AND CONCLUDED THAT THE EXPLANATION/RE TRACTION BY THE ASSESSEE WAS AN AFTERTHOUGHT AND HAD NO ELEMENT OF TRUTH. CIT (A) AS WELL AS ITAT HAD DELETED THE ADDITION. DEPARTMENT HAD PREFERRED AN APPEAL IN HC. HC HELD THAT WHERE THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE DISCREPANCY IN STOCK FOUND DU RING THE SURVEY, ADDITION COULD NOT HAVE BEEN MADE BY THE AO SOLELY ON THE BASIS OF THE STATEMENT MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY. III. PAUL MATHEWS & SONS VS. COMMISSIONER OF INCOME TAX 263 ITR 101REVISION - ERRONEOUS AND PREJUDICIAL ORDE R - ASSESSMENT VIS - A - VIS DISCLOSURE DURING SURVEY - SEC. 133A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH - THUS, THE STATEMENT ELICITED DURING THE SURVEY OPERATION HAS NO EVIDENTIARY VALUE - ITO DID NOT ACCEPT THE INCOME DECLARED BY THE ASSESSEE AFTER THE SURVEY IN A MECHANICAL WAY, BUT APPLIED HIS MIND TO VARIOUS ASPECTS OF THE MATTER BEFORE COMPLETING THE ASSESSMENT - ADVANCES ADMITTEDLY RECEIVED BY THE ASSESSEE FROM TWO PARTIES HAVE BEEN EXPLAINED PARTLY AND THE UNEXPLAINED AMOUNT IS TELESCOPED IN THE INCOME ALREADY DISCLOSED. HENCE, NO SEPARATE ADDITION WAS MADE - ALLEGED ADMISSION IN THE STATEMENT OF THE MANAGING PARTNER WAS ONLY A QUALIFIED ONE AND THE ASSESSEE HAD CLEARLY EXPLAINED THE SAME TO THE AO BY COGENT MATERIALS - ORDER PASSED BY THE AO CANNOT B E SAID TO 12 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) BE ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE - CLT NOT JUSTIFIED IN INVOKING POWERS UNDER S. 263. IV. ASSISTANT COMMISSIONER OF INCOME TAX VS. SMT. USHA RANI TALLA 6 ITR (TRIB) 37. ASSESSMENT - UNDISCLOSED INCOME ADDITION - SUST AINABILITY - SURVEY OPERATIONS IN THE BUSINESS PREMISES OF PARTNERSHIP FIRM CARRYING BUSINESS IN JEWELLERY - DISCREPANCY FOUND IN THE STOCK AND CASH FOUND- ASSESSEE BEING THE WIFE OF THE PARTNER SUMMONED AND HER STATEMENT RECORDED - BASED ON THE STATEMENT MADE B Y HER AMOUNTS SURRENDERED DURING SURVEY ADDED TO INCOME OF ASSESSEE NOTWITHSTANDING THE SUBSEQUENTLY RETRACTION OF THE STATEMENT STATING THAT IT WAS MADE IN A DISTURBED MIND - ON APPEAL CIT(A) HOLDING THAT THERE BEING NO EVIDENCE REGARDING UNDISCLOSED INCOME , ADDITION MADE ONLY ON THE BASIS OF STATEMENT GIVEN IN A STATE OF CONFUSION AND LATER RETRACTED, COULD NOT BE SUSTAINED EITHER IN PART OR AS A WHOLE - ON FURTHER APPEAL HELD THAT A STATEMENT IS RECORDED UNDER S. 133A IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIO USLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORIZED TO ADMINISTER OATH AND TO TAKE, ANY SWORN STATEMENT WHICH ALONE LENDS EVIDENTIARY VALUE AS CONTEMPLATED UNDER THE LAW - BASIS FOR ADDITION WAS THE STATEMENT OF THE ASSESSEE WITHOUT ANY CORROBORATIVE MATE RIAL OR EVIDENCE ON RECORD NO MATERIAL BROUGHT ON RECORD BY THE AO TO SUBSTANTIATE THAT ANY EXPENDITURE ON RENOVATION WAS INCURRED BY THE ASSESSEE NOR THE AO MADE ANY REFERENCE TO THE DVO TO FIND OUT THE CORRECT STATE OF AFFAIRS - NO ADDITION WARRANTED IN TH E HANDS OF THE ASSESSEE MERELY BECAUSE SHE SIGNED THE STATEMENT ACCEPTING THE SAME. V. CLT VS. P BALASUBRAMANIAN 354 ITR 116 [MADRAS] SURVEY - STATEMENT RECORDED U/S 133A - NO CORROBORATION - ADDITION - DELETION THEREOF - SURVEY WAS CONDUCTED AT ASSESSEE'S PRE MISES - 900 GMS OF GOLD WAS FOUND DURING SURVEY - ASSESSEE'S STATEMENT THAT IT HAD 2100 GMS OF GOLD WHICH WAS GIVEN TO THREE PERSONS WAS RECORDED - AO MADE ADDITION OF 3000 GMS OF GOLD - CIT(A) FURTHER MADE ADDITION OF UNACCOUNTED CASH FOUND IN SURVEY AND INTEREST EARNED ON UNACCOUNTED INVESTMENTS BASED ON ASSESSEE'S STATEMENT - TRIBUNAL DELETED ADDITIONS MADE BY CLT(A)- HELD, ASSESSEE, IN HIS EXPLANATION, HAD STATED THAT REMAINING 2100 GMS HAD BEEN GIVEN TO 3 ASARIS- OFFICERS HAD NOT VERIFIED WHETHER GOLD WAS AVAILA BLE WITH SAID ASARIS NOR CHOSE TO EXAMINE THEM- STATEMENT RECORDED DURING SURVEY OPERATION U/S 133A MAY BE A RELEVANT MATERIAL, BUT IN ABSENCE OF FURTHER MATERIALS TO SUBSTANTIATE SAME, SUCH STATEMENT RECORDED U/S 133A CAN HARDLY BE BASIS FOR ASSESSMENT - DU RING SURVEY, 900GMS GOLD WAS FOUND IN ASSESSEE'S PREMISES AND STATEMENT OF ASSESSEE WAS SUPPORTED ONLY TO THAT EXTENT - STATEMENT OF ASSESSEE IN RESPECT OF REMAINING GOLD WAS NOT SUBSTANTIATED - IN SO FAR AS UNACCOUNTED CASH, ASSESSEE TRIED TO EXPLAIN BY STATI NG THAT HE HAD SOLD A LAND AND CONSIDERATION WAS 13 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) DEPOSITED IN BANK AND WAS WITHDRAWN AND DURING COURSE OF SURVEY, DEPARTMENT CAME ACROSS SAID CASH - SURVEY WAS ON 29.10.2002 AND WITHDRAWAL OF MONEY FROM BANK WAS A FEW DAYS BEFORE SEARCH - EVEN THOUGH SAID AMOU NT WAS NOT DISCLOSED IN HIS BOOKS, ASSESSEE TRIED TO EXPLAIN SAME- SO FAR AS ADDITION OF INTEREST EARNED ON UNACCOUNTED INVESTMENT IN MONEY LENDING BUSINESS WAS CONCERNED, ENHANCEMENT WAS BASED ONLY ON STATEMENT RECORDED FROM ASSESSEE - NO OTHER MATERIAL OR INFORMATION WAS AVAILABLE THAT ASSESSEE INVESTED IN MONEY LENDING BUSINESS AND EARNED INTEREST - THUS, ADDITION WAS BASED ON ONLY ROUGH ESTIMATE - CIT{A) MADE ENHANCEMENT TO INCOME DETERMINED BY ASSESSING OFFICER BASED ON UNSWORN STATEMENT OBTAINED U/S. 133A, IN ABSENCE OF OTHER MATERIALS - THUS, TRIBUNAL HAD RIGHTLY SET ASIDE ORDER OF CIT (A). VI. ITO VS. VIJAY KUMAR KESAR 327 ITR 497 [CHHATTISGARH] INCOME FROM UNDISCLOSED SOURCES - ADDITION UNDER S. 69 - ADDITION ON THE BASIS OF STATEMENT RECORDED DURING SURVEY - ASSESSEE SURRENDERED THE CASH AND VALUE OF EXCESS STOCK FOUND DURING SURVEY FOR TAXATION BUT DID NOT OFFER ANY SUCH AMOUNT IN HIS RETURN - HE PRODUCED HIS UPDATED BOOKS OF ACCOUNT AND OTHER PRIMARY RECORDS DURING THE ASSESSMENT PROCEEDINGS TO EXPLAIN THE CA SH AND STOCK FOUND AT THE TIME OF SURVEY BUT THE AO REJECTED THE SAME SOLELY ON THE GROUND THAT THE ASSESSEE HAD MADE CONFESSIONAL STATEMENT DURING THE SURVEY PROCEEDINGS AND SURRENDERED INCOME FROM UNDISCLOSED SOURCES IN THE FORM OF CASH AND EXCESS STOCK AND SUCH PRIMARY EVIDENCE WAS PRODUCED AFTER CONSIDERABLE PERIOD - ON APPEAL, CIT(A) ACCEPTED THE EXPLANATION OFFERED BY THE ASSESSEE AND THE BOOKS OF ACCOUNT PRODUCED BY HIM AS THE ENTRIES IN THE BOOKS WERE SUPPORTED BY PRIMARY EVIDENCE - CIT(A) ALSO ACCEPTED THE EXPLANATION THAT THE STATEMENTS WERE MADE BY THE ASSESSEE WITHOUT UNDERSTANDING THE IMPORT OF THE SAME AS HE WAS UNDER STRESS DUE TO THE DEATH OF HIS DAUGHTER - ORDER PASSED BY CIT(A) HAS BEEN CONFIRMED BY THE TRIBUNAL- FINDINGS RECORDED BY BOTH THE AUT HORITIES CANNOT BE TERMED PERVERSE OR CONTRARY TO RECORD - CONFESSION MADE BY THE ASSESSEE DURING SURVEY PROCEEDINGS IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO ESTABLISH THAT THE SAME WAS NOT TRUE AND CORRECT BY FILING COGENT EVIDENCE - ADDITIONS RIGH TLY DELETED. VII. CLT VS. MRS DORIS S LUIZ 96 ITR 646 [KERALA] THE STAND TAKEN BY THE ASSESSEE WAS THAT THE MONEY IN QUESTION IS IN THE NATURE OF TRUST MONEY, NOT IMPRESSED WITH THE CHARACTER OF REVENUE RECEIPT. ON A CAREFUL ANALYSIS OF THE POSITION, ON E IS SATISFIED THAT THE MONEY WAS BEING HELD BY THE ASSESSEE IN CONFIDENCE FOR THE BENEFIT OF THE STUDENTS GOING FOR OVERSEAS TRAINING AND EMPLOYMENT AND, AS SUCH, IT IS NOT A TAXABLE ITEM IN HER HANDS. THE MONEY RECEIVED HAS NO PROFIT - MAKING QUALITY ABOUT IT, AND IT CONTINUES TO BE THE MONEY OF THE STUDENTS FOR WHICH THE ASSESSEE IS ACCOUNTABLE TO THE STUDENTS. THE ASSESSEE ALL ALONG HAS BEEN IN THE BONA FIDE BELIEF THAT THE 14 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) SURPLUS AMOUNT IN HER HANDS UNDER THE ABOVE ACCOUNT WAS IN THE NATURE OF A TRUST F UND REFUNDABLE OR RETURNABLE TO THE PARTY. RELIANCE WAS PLACED VERY MUCH BY THE LAC ON THE ADMISSION OF THE ASSESSEE THAT RS. 22,000 WAS NOT REFUNDED TO THE STUDENTS. IT IS STATED THAT SHE AGREED TO THE SAID AMOUNT OF RS. 22,000 BEING TREATED AS INCOME. IT IS WORTHWHILE TO REMEMBER IN THIS CONNECTION THAT DURING ALL THE RELEVANT YEARS THE ASSESSEE HAD TAKEN THE CONSISTENT STAND THAT THE DEPOSITS WERE RETURNABLE TO THE PERSONS CONCERNED AFTER MEETING THE EXPENSES, AND THE SURPLUS, THEREFORE, SHOULD NOT BE AS SESSED AS INCOME. DURING THE YEAR IN QUESTION SHE HAPPENED TO MAKE THE ADMISSION UNDER A MISCONCEPTION OF THE ATTENDANT FACTS AND CIRCUMSTANCES. IN SPITE OF THE ADMISSION IT IS INCUMBENT ON THE DEPARTMENT OF ESTABLISH BY RELEVANT PROOF THAT THE AMOUNT IN Q UESTION WAS INCOME IN THE HANDS OF THE ASSESSEE. THE ADMISSION WAS WRONG AND IT WAS FOR THE DEPARTMENT TO PROVE POSITIVELY ON OTHER MATERIAL THAT THERE WAS CONCEALMENT OF INCOME. BEING A QUASI - CRIMINAL PROCEEDING, THE BURDEN IS ENTIRELY ON THE DEPARTMENT. APART FROM THE SO - CALLED ADMISSION, THERE IS NO MATERIAL TO HOLD THAT THE INCOME WAS CONCEALED. FURTHER HON'BLE SE IN CASE OF PULLANGODE RUBBER PRODUCE CO LTD VS. STATE OF KERALA & ANR 91 ITR 18 HAD HELD THAT AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT. IN THIS CASE THE ASSESSEE HAD INCURRED AN AMOUNT OF RS. 79,680/ - FOR THE CULTIVATION, UPKEEP OR MAINTENANCE OF IMMATURE PLANTS. THE SAME HAS BEEN CAPITALIZED IN THE BOOKS OF ACCOUNTS. HOWEVER, AT THE TIME OF AGRICULTURAL INCOME TAX ASSESSMENT, THE SAME HAS BEEN TREATED AS REVENUE EXPENDITURE AND DEDUCTED IN THE COMPUTATION. THE SAME WAS DENIED TO THE ASSESSEE. THE MATTER U LTIMATELY TRAVELLED TO SE. SE HELD THAT 'IT IS NO DOUBT TRUE THAT ENTRIES IN THE ACCOUNT BOOKS OF THE ASSESSEE AMOUNT TO AN ADMISSION THAT THE AMOUNT IN QUESTION WAS LAID OUT OR EXPENDED FOR THE CULTIVATION, UPKEEP OR MAINTENANCE OF IMMATURE PLANTS FROM WH ICH NO AGRICULTURAL INCOME WAS DERIVED DURING THE PREVIOUS YEAR. AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT. ' 9 . IN T HIS CASE, WE FOUND THAT THE SURVEY PARTY DID NOT FIND ANY INCRIMINATING EVIDENCE/MATERIAL THAT CAN ESTABLISH THE STAND TAKEN BY THE AO ALLEGING THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ACCOMMODATION BILLS. EVEN AFTER SEARCHING THE ENTIRE PREMISES OF THE ASSESSEE, NOTHING AGAINST THE ASSESSEE WAS FOUND AND THERE IS NO PROOF IN POSSESSION OF THE AO TO SUBSTANTIATE THE CONCLUSION ARRIVED AT IN THE ASSESSMENT ORDER. 15 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) 10 . THERE IS NO DISPUTE TO THE FACT THAT NO INCRIMINATING EVIDENCE WAS FOUND ON THE DAY OF THE SURVEY WHICH IS A TESTIMONY TO THE FACT THAT STATEMENT OF MR. PARAS JAIN WAS TO BE CONSIDERED. MERELY ON THE BASIS OF THE STATEMENT OF ANOTHER DIRECTOR, THAT ALSO AFTER A LAPSE OF 20 - 25 DAYS OF THE SURVEY, WITHOUT HAVING ANY PROOF AT ALL, CANNOT BE THE BASIS FOR ADDITION OR EVEN FOR THAT MATTER, BRINGING INTO ASSESSMENT ANY AMOUNT WITHOUT SUPPORTING EVIDENCE. IN CONNECTION WITH THE ABOVE JUDICIAL PRONOUNCEMENTS IT IS CLEAR THAT THE STATEMENT RECORDED U/S. 133A OF THE ACT CANNOT BE TAKEN ON OATH AND T HEREFORE IT CANNOT BE SAID TO HAVE AN EVIDENTIARY VALUE. ACCORDINGLY ADDITION MADE ON THE BASIS OF STATEMENT IS NOT SUSTAINABLE. 1 1 . WITH REGARD TO THE NATURE OF ASSESSEES BUSINESS, WE FOUND THAT THE IMPORT OF DIAMONDS UNDERGOES APPRAISAL PROCESS BY THE APPRAISERS APPOINTED BY THE CUSTOM AUTHORITIES. THE OFFICERS APPOINTED BY GOVERNMENT OF INDIA VERIFY PHYSICALLY EACH AND EVERY PARCEL OF DIAMONDS IN ORDER TO ASCERTAIN THE QUALITY, QUANTITY, RATE, VALUE AND PLACE OF ORIGIN VISA VIS DECLARED BY THE IMPORTE RS. ALL THE TRANSACTION OF PURCHASE, SALES, IMPORT WAS MADE THROUGH CROSS ACCOUNT PAYEE CHEQUES AND NOT A SINGLE PAYMENT MADE TO ANY PARTY BY WAY OF CASH. ALL THE PURCHASE AND SALES TRANSACTIONS ARE CARRIED OUT WITH REPUTED PARTIES OF THE DIAMOND TRADE AND ALL THE PAYMENT RECEIVED FROM DEBTORS ARE THROUGH CROSS ACCOUNT PAYEE CHEQUES AND ALL PAYMENT MADE TO CREDITORS ARE THROUGH CROSS ACCOUNT PAYEE CHEQUES. 1 2 . FURTHERMORE, THE AO CANNOT ALLEGEDLY CONSIDER THE IMPORTS OF GOODS AS PROVIDING ACCOMMODATION BIL L IN THE MARKET WHEN PHYSICAL DELIVERY OF GOODS WERE CONFIRMED BY THE OTHER ARM OF GOVERNMENT AUTHORITIES I.E. CUSTOM AUTHORITIES. WE FOUND THAT IN THE REGULATION 16 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) OF THE CUSTOMS ACT 1962, WHEN THE GOODS ARE IMPORTED IN THE COUNTRY, THE GOODS ARE CHECKED AN D AUTHORIZED BY THE CUSTOM OFFICERS BEFORE THE GOODS CAN BE TAKEN FOR DOMESTIC CONSUMPTION. SINCE, THE GOODS HAVE BEEN CLEARED BY THE RESPECTIVE AUTHORITIES AND CUSTOM DUTY THEREON HAS BEEN PAID, THE CLAIM OF THE A.O. REGARDING NO ACTUAL IMPORT OF GOODS IS UNJUST. 1 3 . FURTHER , FROM THE RECORD WE FOUND THAT THE A SSESSEE IS MAINLY ENGAGED IN THE IMPORTS OF DIAMONDS AND SALES IN LOCAL MARKETS TO EXPORTERS WHO EXPORT THE GOODS. THE IMPORT OF DIAMONDS IS DONE THROUGH CUSTOMS AUTHORITIES AND BANKING CHANNEL IN INDIA . THE IMPORT OF DIAMONDS UNDERGOES APPRAISAL PROCESS BY THE APPRAISERS APPOINTED BY THE CUSTOM AUTHORITIES. THE OFFICERS APPOINTED BY GOVERNMENT OF INDIA VERIFY PHYSICALLY EACH AND EVERY PARCEL OF DIAMONDS IN ORDER TO ASCERTAIN THE QUALITY, QUANTITY, RATE, VALUE AND PLACE OF ORIGIN VISA VIS DECLARED BY THE IMPORTERS. FURTHER, ALL THE TRANSACTION OF PURCHASE, SALES, IMPORT IS MADE THROUGH CROSS ACCOUNT PAYEE CHEQUES AND NOT A SINGLE PAYMENT MADE TO ANY PARTY BY WAY OF CASH. ALL THE PURCHASE AND SALES TR ANSACTIONS ARE CARRIED OUT WITH REPUTED PARTIES OF THE DIAMOND TRADE AND ALL THE PAYMENT RECEIVED FROM DEBTORS ARE THROUGH CROSS ACCOUNT PAYEE CHEQUES AND ALL PAYMENT MADE TO CREDITORS ARE THROUGH CROSS ACCOUNT PAYEE CHEQUES. THE LD. AO CANNOT ALLEGEDLY CO NSIDER THE IMPORTS OF GOODS AS PROVIDING ACCOMMODATION BILL IN THE MARKET WHEN PHYSICAL DELIVERY OF GOODS WERE CONFIRMED BY THE OTHER ARM OF GOVERNMENT AUTHORITIES I.E. CUSTOM AUTHORITIES. FROM THE RECORD WE FOUND THAT THE SALES WERE MADE TO REPUTED EXPORT ERS WHO ARE ASSESSED TO TAX AND THEIR IDENTITIES ARE KNOWN TO INCOME TAX DEPARTMENT. THE CUSTOMERS ARE REGISTERED UNDER STATE VAT LAWS. THE COMPANY HAS RECEIVED PAYMENTS AGAINST SALES PROCEEDS BY ACCOUNT PAYEE CHEQUES. THE 17 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) COMPANY HAS ALSO PURCHASED DIAMON DS FROM LOCAL PARTIES TO WHOM PAYMENT WERE MADE BY ACCOUNT PAYEE CHEQUES. FROM THE RECORD WE ALSO FOUND THAT TO DISCHARGE THE ONUS OF PROVING TRANSACTION AS GENUINE AND TO SUBSTANTIATE THAT ALL PURCHASES AND SALES MADE ARE GENUINE THE ASSESSEE HAVE SUBMITT ED FOLLOWING DOCUMENTS AND SUBMISSIONS ON TIME TO TIME WHICH WA S IGNORED BY A.O. WHILE MAKING THE REASSESSMENT: A. COPIES OF BANK STATEMENT FOR THE RELEVANT YEARS B. LEDGER COPIES OF VARIOUS PURCHASES PARTIES FOR A.Y. 2008 - 09 AND 2009 - 10. C. THE XEROX COPIES OF PUR CHASES INVOICES OF PARTIES FOR A.Y. 2008 - 09 AND 2009 - 10. D. THE RELEVANT COPIES OF THE DAILY STOCK REGISTER. E. CONFIRMATION FROM VARIOUS SALE PARTIES. F. DETAILS OF INTEREST RECEIVED FROM VARIOUS PARTIES. G. DETAILS OF UNSECURED LOAN ALONG WITH CONFIRMATION. THESE D OCUMENTS PROVE THAT THE ASSESSEE IS NO T ENGAGED IN THE ISSUING THE ACCOMMODATION BILLS AND ACTING AS A DUMMY FOR IMPORTING DIAMONDS BILLS. THUS, THE CONTENTION OF THE LD. AO THAT THE BILLS ISSUED BY THE ASSESSEE ARE ALL ACCOMMODATION BILL IS WRONG. JUST ON THE BASIS OF THE STATEMENT RECORDED HE CANNOT COME TO THE CONCLUSION THAT THE ASSESSEE HAS ISSUED ACCOMMODATION BILLS AND REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. 1 4 . THE ASSESSEE HAS ALSO FILED QUANTITATIVE TALLY OF PURCHASE OF IMPORT AND SALES. AL SO MAINTAINED PROPER BOOKS OF ACCOUNTS AND FILED ALL THE DETAILS BEFORE THE A.O. AND THE CIT(A). 15 . SO FAR AS THE GROUND TAKEN FOR REOPENING IS CONCERNED, WE DO NOT FIND ANY MERIT , AS REASONABLE BELIEF WAS FRAMED BY THE A.O. ON THE BASIS OF THE SURVEY. A CCORDINGLY, WE UPHOLD THE REOPENING OF THE ASSESSMENT. 18 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) 1 6 . IN VIEW OF THE ABOVE DISCUSSION, AND ALSO FOLLOW ING THE JUDICIAL PRONOUNCEMENTS IN THE CASE OF MOREWEL IMPEX PVT. LTD. (SUPRA) BY THE CO - ORDINATE BENCH IN ITS ORDER DATED 14.10.2015, WE DIRECT TH E A.O. TO DELETE THE INCOME AS ESTIMATED BY HIM FOR BOTH THE YEARS UNDER CONSIDERATION AND ACCEPT THE BOOK RESULTS DECLARED BY THE ASS ESSEE . 17 . WITH RESPECT TO THE INTEREST INCOME OFFERED BY THE ASSESSEE AS BUSINESS INCOME, THE A.O. TREATED THE SAME AS INCOME FROM OTHER SOURCES . FROM THE RECORD WE F OU ND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE OFFERED INTEREST INCOME UNDER B USINESS HEAD BECAUSE THE ASSESSEE W AS GETTING CREDIT PERIOD FOR 30 TO 150 DAYS FROM BUYERS. HOWEVER, THE SALES PROCEE DS ARE RECEIVED ON SALE ITSELF. THEREFORE THE ASSESSEE HAS IDLE BUSINESS FUNDS WHICH IS USED IN TEMPORARY LOAN AND BALANCE IS IN BANK ACCOUNT ON THE SAME APPELLANT HAD EARNED INCOME AND SAME IS OFFERED UNDER THE BUSINESS HEAD. HOWEVER, THE AO ASSESSED THE SAME AS 'INCOME FROM OTHER SOURCE'. THE LD. AO FAILED TO CONSIDER THAT INCOME ARISE FROM BUSINESS FUND IS ASSESSABLE UNDER THE BUSINESS. T HE ISSUE UNDER CONSIDER A TI O N IS SQUARELY COVERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. LOK HOLDIGNS [2009] 308 ITR 356 (BOM) , WHEREIN IT WAS HELD THAT INTEREST RECEIVED ON DEPOSITS MADE OUT OF ADVANCE MONEY SO RECEIVED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS IS LIABLE TO BE TAXED AS BUSINESS INCOME . FURTHERMORE , THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF TIRUPATI WOOLLEN MILLS LTD. (1992) 193 ITR 252 (CAL) HELD THAT INTEREST ARISING FROM DEPOSITS MADE OUT OF BUSINESS FUNDS LYING IDLE, IS INCOME FROM BUSINESS AND NOT FROM OTHER SOURCES. CONSEQUENTLY ANY EXPENDITURE RELATING TO THE BUSINESS CAN BE DEDUCTED FROM THAT. 19 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) 1 8 . RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DIRECT THE A.O. TO ASSESS THE INTEREST INCOME AS INCOME FROM BUSINESS . 1 9 . IN TH E CASE OF SHINE STAR IMPEX PVT. LTD., WHEREIN FACTS AND CIRCUM STANCES ARE SIMILAR, WE FOUND THAT THE SALES WERE MADE TO REPUTED EXPORTERS WHO ARE ASSESSED TO TAX AND THEIR IDENTITIES ARE KNOWN TO INCOME TAX DEPARTMENT. THE CUSTOMERS ARE REGISTERED UNDER STATE VAT LAWS. THE COMPANY HAS RECEIVED PAYMENTS AGAINST SALES PROCEEDS BY ACCOUNT PAYEE CHEQUES. THE COMPANY HAS ALSO PURCHASED DIAMONDS FROM LOCAL PARTIES TO WHOM PAYMENT WERE MADE BY ACCOUNT PAYEE CHEQUES. 20 . NO DOUBT, THE INITIAL BURDEN TO PROVE THAT THE TRANSACTION IS GENUINE IS ON THE ASSESSEE. HOWEVER, ONCE THE ASSESSEE HAS DISCHARGED ITS DUTY OF PROVING THE GENUINENESS OF THE TRANSACTION, THE BURDEN SHIFTS ON TO THE REVENUE TO PROVE THAT THE TRANSACTIONS ARE OF ACCOMMODATION BILLS. HOWEVER, THE LD. AO HAS NO MATERIAL IN POSSESSION TO PROVE THAT THE TRANSACTI ONS OF THE ASSESSEE ARE BOGUS. SUCH HAS BEEN OPINED BY THE LD. AO ON THE STATEMENT RECODED U/S.131 OF THE ACT WHICH IS RETRACTED BY THE ASSESSEE AND A STRONG SUSPICION THAT THE ASSESSEE IS ENGAGED IN ISSUI NG OF ACCOMMODATION BILLS. THE FACT THAT SUSPICION HOWEVER STRONG CANNOT TAKE PLACE OF THE EVIDENCE. THE PARTIES WITH WHOM ASSESSEE'S TRADE ARE INCOME TAX ASSESSEE'S AND DULY FILES THEIR RETURNS. THIS ITSELF PROVES THAT THE PURCHASE AS WELL AS SALE PARTIES DO EXIST AND MOREOVER ALL THE TRANSACTIONS DONE WI TH THEM ARE SETTLED THROUGH CROSS ACCOUNT PAYEE CHEQUES AND THE SAME TRANSACTIONS ARE APPEARING IN THEIR BOOKS OF ACCOUNTS. 20 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) 2 1 . IN THE NATURE OF TRADE, THE ASSESSEE IS INVOLVED, DIAMONDS ARE IMPORTED BY THE ASSESSEE FROM OUTSIDE COUNTRIES WHICH PASSES TH ROUGH CUSTOM - FRONTIERS. AND BE FORE THE PHYSICAL POSSESSION OF SUCH DIAMONDS IS TAKEN, THE CUSTOM AUTHORITIES CHECK THE QUALITY OF EACH DIAMOND BEFORE THE HAND OVER TO TH E CONCERNED IMPORTER OF HIS AGENT. 22 . IN THIS CASE ALSO THE A SSESSEE MAINTAINED BO OKS OF ACCOUNT, QUANTITATIVE DETAILS. ASSESSEE FILED ALL THE RELEVAN T DETAILS BEFORE THE LD. AO AND CIT (A): BUT THE SAME IS NOT CONSIDERED. IT IS WELL SETTLED LAW THA T WHEN, A QUANTITATIVE TALLY THEN, NO ADDITION IS CALLED FO R. 2 3 . THE RELIANCE OF LAW IS BASED ON THE FACTS AND EVIDENCE, RATHER ON THE ASSUMPTION AND PRESUMPTION. WITHOUT HAVING ANY FACT JUST ON THE BASIS OF STATEMENT AND THE PRESUMPTION THE ASSESSING OFFICER IS NOT AUTHORIZED TO MAKE ANY ADDITION . MORE OVER, EVEN THE ACCOUNTS OF PARTIES TO W HOM TRANSACTIONS OF PURCHASE AND SALES ARE MADE ARE DULY AUDITED. HENCE, BY REJECTING THE ASSESSEE'S CONTENTIONS SHALL LEAD TO REJECTING THE TREATMEN T GIVEN TO THE PARTIES ACCOUNTS ALSO , AN ATTEMP T TO DO SO WOUL D BE ERRONEO US. 2 4 . THE ACTION OF THE AO TO REJECT THE BOOKS OF ACCOUNTS MERELY ON THE BASIS OF STATEMENT SIGNED BY THE ASSESSEE DURING THE SURVEY IS BAD IN LAW. THERE SHOULD BE SOME VALID REASON TO REJECT THE BOOKS OF ACCOUNTS WHICH THE INCOME TAX OFFICER HAS NOT GIVEN AND HENCE REJECTION OF BOOKS OF ACCOUNTS IS NOT JUSTIFIED. THE ASSESSEE H AS GOT ITS BOOKS OF ACCOUNTS AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT, BEING ONE OF THE PRE - REQUISITES. THE VERY PURPOSE OF GETTING THE ACCOUNTS AUDITED BY A QUALIFIED CA IS TO ASCERTAIN THE AUTHENTICITY AND R ELIABILITY OF THE DOCUMENTS AND IN THE EVENT ANY DISCREPANCY ARISES, THE 21 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) SAME CAN BE BROUGHT TO THE KNOWLEDGE OF THE ASSESSEE AS A CONSEQUENCE OF WHICH EITHER THE ERROR APPAR ENT IS RECTIFIED OR THE AUDITORS VIDE ITS AUDIT REPORT M AKES AN EXCLUSIVE MENTION OF TH E SAME T O GIVE A TRUE AND A FAIR PICTURE OF THE BUSINESS. HENCE WHEN THE ACCOUNTS ARE AUDITED, IT LEADS TO THE INFERENCE THAT DUE SKILL AND EXPERTISE HAS BEEN EXERCISED IN ASSESSING THE ACCOUNTS AND NO MATERIAL DISCREPANCY HAS BEEN NOTICED EITHER ON T HE FACT OF IT OR OTHERWISE. BY RISING DOUBT ON CONDUCT OF BUSINESS AND THE TRANSACTIONS RECORDED THEREIN ONLY FRUSTRATES THE VERY PURPOSE OF CARRYING/ CONDUCTIN G AUDITS BY QUALIFIED PERSONNEL. 2 5 . SO FAR AS THE DISALLOWANCE OF EXPENSES ARE CONCERNED, THE L D. CIT (A) CONFIRM THE REJECTION OF BOOKS OF ACCOUNT ONLY ON STATEMENT OF ANOTHER DIRECTOR. IT IS GENERAL RULE THAT BOOKS OF ACCOUNT CANNOT BE REJECTED WITHOUT FINDING ANY DISCREPANCY IN BOOKS OF ACCOUNT. ASSESSEE S BOOKS OF ACCOUNTS ARE AUDITED AND NO DEF ECT WAS F OUNDS . HENCE, TH E BOOKS OF ACCOUNT REJECTED IN ASSESSEE CA SE IS UNWARRANTED. FURTHER, THE ASSESSEES BOOKS ARE NOT ONLY SUBJECT TO TAX AUDIT ARE ALSO AUDITED UNDER MAHARASHTRA VALUE ADDED TAX, COMPANY ACT. AND FURTHER THE GOODS VERIFIED BY CUSTOM AUTHORITIES UNDER CUSTOM LAW. THUS, THE ASSESSEE COMPLIED WITH 4 LAWS AND EVERY DEPARTMENT ACCEPTED THE GENUINENESS OF TRANSACTION. HENCE, THE SAME CANNOT BE SET ASIDE ON MERE ASSUMPTION BASIS. AFTER GOING THROUGH THE VARIOUS EXPENSES SO INCURRED BY THE AS SESSEE, WE FOUND THE AO FAILED TO CONSIDER THAT UNDER BUSINESS HEAD EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS ALLOWABLE EXPENDITURE. FURTHER, FOR TAKING EXCESS COMMISSION RATE OF 2% THE AO STATE THAT THERE IS MORE RISK INVOLVE S AND FOREIGN CURRENCY IS ALSO INVOLVED. THEN THE AO HAS TO ALLOW THE FOREIGN CURRENCY LOSS ALSO BECAUSE IT IS ARISES DUE TO IMPORTS AND IT IS ARISES DUE TO INCREASE AND D ECREASE IN VALUE OF CURRENCY ON WHICH ASSESSEE DOES 22 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) NOT HAVE ANY CONTROL. ASSESSEE HA S TO SUFFER THAT LOSS. FURTHER THE EXPENSES SO INCURRED WERE IN NATURE OF BUSINESS . AFTER GOING THROUGH THE VARIOUS EXPENSES SO INCURRED BY THE ASSESSEE, WE FOUND THAT THESE ARE BASIC EXPENSES WITHOUT THESE BUSINESSES CANNOT BE RUN. FOR DOING BUSINESS ASSE SSEE NEED TO INCUR BANK CHARGES, BROKERAGES, ELECTRICITY OF OFFICE, OFFICE EXPENSES SALARY, IMPORT EXPENSES, FOREIGN TRAVELING EXPENSES, EXCHANGE LOSS ETC. HENCE, THESE ARE REQUIRED TO BE ALLOW ED AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINE SS. AS THE FACTS AND CIRCUMSTANCES IN CASE OF BOTH THE ASSESSEES ARE SAME IN BOTH THE YEARS UNDER CONSIDERATION, FOLLOWING THE REASONING DISCUSSED ABOVE, WE SET ASIDE THE ORDERS OF BOTH THE LOWER AUTHORITIES AND DIREC T THE A.O. TO ASSESS THE RETURNED INCO ME. WE DIRECT ACCORDINGLY. 2 6 . RESPECTFULLY F OLLOWING THE REASONING GIVEN HEREINABOVE I N THE CASE OF SHINE STAR IMPEX PVT. LTD., WE DO NOT FIND ANY REASON FOR THE ADDITION SO MADE BY THE A.O. ACCORDINGLY , WE SET ASIDE THE ORDERS OF BOTH THE LOWER AUTHORI TIES. 2 7 . IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 9 , 201 6 SD/ - SD/ - ( S ANDEEP GOSAIN ) ( R. C. SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI ; / DATED : 09 . 0 9 .201 6 . . ./ ROSHANI , SR. PS 23 ITA NO S . 4347 TO 4350/MUM/2015 (A.YS. 2008 - 09 & 2009 - 10) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI